2022 (7) TMI 1202 - AT - Income Tax

Tax Tribunal: Appeal Dismissed, Assessee's Appeal Allowed on Key Points

The DCIT Circle-6 Jaipur Versus Shri Goverdhan Prasad Singhal And (Vice-Versa)

The DCIT Circle-6 Jaipur Versus Shri Goverdhan Prasad Singhal And (Vice-Versa) - TMI Issues Involved:1. Deduction under Section 54F of the Income Tax Act, 1961.2. Adoption of value under Section 50C of the Income Tax Act, 1961.3. Classification of gain from sale of building as short-term capital gain under Section 50 of the Income Tax Act, 1961.4. Computation of notional rent on old unusable house properties.Detailed Analysis:1. Deduction under Section 54F of the Income Tax Act, 1961:The department contended that the assessee was not eligible for deduction under Section 54F as the assessee owned more than one house property. The CIT(A) allowed the deduction, noting that the properties in question were held as stock-in-trade and not as capital assets. The properties were old, unusable, and not fit for habitation, and the assessee had purchased a new house property within the specified period. The Tribunal agreed with the CIT(A), emphasizing that the properties held as stock-in-trade cannot be considered as capital assets for the purpose of Section 54F. Therefore, the ground raised by the department was dismissed.2. Adoption of value under Section 50C of the Income Tax Act, 1961:The department argued that the CIT(A) erred in allowing relief to the assessee by considering a lesser value under Section 50C. The assessee contended that the stamp duty value exceeded the fair market value and that the AO failed to refer the matter to the District Valuation Officer (DVO) as required under Section 50C(2). The CIT(A) upheld the AO's action in adopting the stamp duty value but directed the AO to adopt the correct stamp duty value for the buildings. The Tribunal found that the AO should have referred the matter to the DVO upon the assessee's objection and concluded that the CIT(A) was not justified in confirming the AO's action. The Tribunal directed the AO to adopt the actual sale consideration for computing capital gains, allowing the assessee's appeal and dismissing the department's corresponding ground.3. Classification of gain from sale of building as short-term capital gain under Section 50 of the Income Tax Act, 1961:The assessee argued that the gain from the sale of the building should be treated as long-term capital gain since the building was kept as an investment for more than three years and no depreciation was claimed. The AO and CIT(A) treated the gain as short-term under Section 50, as the building was part of a block of assets on which depreciation had been claimed. The Tribunal noted that the building was excluded from the block of assets and treated as an investment asset from the assessment year 2013-14. The Tribunal found merit in the assessee's contention and held that the provisions of Section 50 were not applicable, thus allowing the assessee's ground.4. Computation of notional rent on old unusable house properties:The AO added notional rent to the assessee's income, relying on the decision in CIT vs Ansal Housing Finance & Leasing Co. Ltd. The assessee contended that the properties were old, dilapidated, and not fit for habitation. The CIT(A) directed the AO to compute the Annual Letting Value (ALV) based on municipal value, standard rent, and fair rent. The Tribunal found that the decision in Ansal Housing Finance & Leasing Co. Ltd. was not applicable as the properties in question were not habitable. The Tribunal agreed with the assessee that the properties were not fit for letting out and allowed the assessee's ground.Conclusion:The Tribunal dismissed the department's appeal and allowed the assessee's appeal, providing relief on all contested grounds. The Tribunal emphasized the importance of referring valuation disputes to the DVO and clarified the treatment of properties held as stock-in-trade versus capital assets for tax purposes.