Tribunal allows exemption under section 54F for capital gain

The Tribunal ruled in favor of the assessee, allowing the appeal against the denial of exemption under section 54F of the Income-tax Act. It was determined that the amount received by the assessee was for transferring his right to occupy the property, constituting a capital asset. The Tribunal held that the assessee correctly treated the amount as long term capital gain and was eligible for the exemption. The lower authorities' decision was overturned, and the appeal was allowed on August 11, 2021.

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Issues:
Denial of exemption u/s 54F of the Income-tax Act, 1961.

Analysis:
The appeal was against the denial of exemption u/s 54F. The assessee entered into a development agreement regarding a property with M/s. Srishti Developers. The AO denied the exemption as the assessee was not the legal owner of the property. The CIT(A) upheld this decision.

Upon hearing both sides, it was noted that the property was in the name of the assessee's father, and the assessee had been residing there for over 10 years. The assessee agreed to vacate the premises in exchange for a sum of Rs. 60 lakhs from the developer. The MoU confirmed this payment. The Tribunal questioned the justification of treating the Rs. 60 lakhs as 'Income from other sources' and denying the exemption u/s 54F.

During a previous hearing, it was revealed that the assessee's father had accounted for the transaction of Rs. 60 lakhs. The total consideration of Rs. 2.70 crores was divided between the father and the assessee. The Tribunal concluded that the Rs. 60 lakhs received by the assessee was for transferring his right to occupy the property, constituting a capital asset. The AO's acceptance of the transaction in the father's assessment precluded disputing it in the assessee's case. The Tribunal held that the assessee correctly treated the amount as long term capital gain and was eligible for exemption u/s 54F.

The Tribunal overturned the lower authorities' decision, stating that even if the amount was not for the transfer of the right to occupy the property, it would be considered a gift, not taxable. The authorities failed to cite a specific clause of section 56 of the Act to support their characterization of the amount as income from other sources. The Tribunal ruled in favor of the assessee, allowing the appeal.

The assessee had offered capital gain for the unutilized amount from the capital gain account scheme for the subsequent assessment year. Consequently, the appeal was allowed, and the judgment was pronounced on August 11, 2021.

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