Tribunal rulings on deduction under Section 54F and sale consideration exclusion.

The Tribunal partly allowed the appeal in ITA No.2960/CHNY/2018, directing the AO to recompute the deduction under Section 54F and exclude the cost of land gifted to the Municipal Commissioner from the indexed cost of improvement. In ITA No.2961/CHNY/2018, the Tribunal allowed the Revenue's appeal, reversing the CIT(A)'s decision to include the additional sale consideration of Rs. 2 crores, upholding the AO's rectification order.

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Issues Involved:

1. Deletion of addition made by the AO on account of long-term capital gains.
2. Adoption of cost of acquisition and cost of improvement.
3. Allowance of additional sale consideration of Rs. 2 crores while computing long-term capital gain.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made by the AO on Account of Long-Term Capital Gains:

The primary issue in ITA 2960/CHNY/2018 pertains to the CIT(A) deleting the addition of Rs. 7,36,02,980/- made by the AO on account of long-term capital gains. The assessee claimed a deduction under Section 54 of the Income Tax Act for an amount of Rs. 6,97,60,030/- on long-term capital gain of Rs. 6,89,39,241/-. The AO disallowed the deduction on the grounds that the assessee failed to deposit the unutilized capital gains in the capital gains account within the due date of filing the return of income under Section 139(1), and the assessee had purchased/constructed multiple residential houses and a commercial building, which did not satisfy the conditions under Section 54F(1). The CIT(A) allowed the deduction, noting that the reinvestment in the new asset was within the due date of filing the return under Section 139(4), and the delay of 9 days was due to defects in the Power of Attorney.

2. Adoption of Cost of Acquisition and Cost of Improvement:

The AO adopted the cost of acquisition as on 01.04.1981 at Rs. 1,36,800/- based on the Sub-Registrar's report, whereas the assessee claimed an indexed cost of Rs. 48,60,759/-. The CIT(A) accepted the assessee's valuation based on the Registered Valuer's report, which estimated the fair market value as on 01.04.1981 at Rs. 30,000/- per ground, leading to an indexed cost of Rs. 20,99,200/-. Regarding the cost of improvement, the CIT(A) accepted the assessee's claims based on contractor bills for expenditures incurred in financial years 1994-95, 2003-04, and 2009-10, totaling an indexed cost of improvement of Rs. 1,88,67,255/-. However, the CIT(A) allowed the cost of land gifted to the Municipal Commissioner as indexed cost of acquisition, which the Tribunal did not accept, directing the AO to exclude this amount while computing the indexed cost of improvement.

3. Allowance of Additional Sale Consideration of Rs. 2 Crores:

In ITA No.2961/CHNY/2018, the issue revolves around the CIT(A) allowing an additional sale consideration of Rs. 2 crores while computing long-term capital gain, which the Revenue contested due to lack of evidence. The assessee claimed this amount through a rectification application after the completion of the assessment. The AO rejected the application under Section 154, stating that the case did not merit rectification. The CIT(A) accepted the additional sale consideration without substantial evidence. The Tribunal noted that the claim was made after the assessment and lacked factual support, ruling that it could not be entertained under Section 154. The Tribunal reversed the CIT(A)'s decision and upheld the AO's rectification order.

Conclusion:

The Tribunal partly allowed the appeal in ITA No.2960/CHNY/2018, directing the AO to recompute the deduction under Section 54F and exclude the cost of land gifted to the Municipal Commissioner from the indexed cost of improvement. In ITA No.2961/CHNY/2018, the Tribunal allowed the Revenue's appeal, reversing the CIT(A)'s decision to include the additional sale consideration of Rs. 2 crores, upholding the AO's rectification order.

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