Tribunal upholds capital gain, denies exemption under section 10(37), orders recalculation of TDR cost

The Tribunal dismissed all appeals, upholding the addition for short-term capital gain and rejection of exemption under section 10(37). The argument regarding the assessment order being in the deceased person's name was rejected. The AO was directed to recalculate the cost of acquisition for TDR.

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Issues Involved:
1. Addition made on account of capital gain on the sale of TDRs.
2. Rejection of exemption under section 10(37) of the I.T. Act.
3. Assessment order passed in the name of the deceased person.
4. Adoption of assessable value of land over the fair market value for computing capital gain.

Detailed Analysis:

1. Addition Made on Account of Capital Gain on the Sale of TDRs:
The assessee filed returns for AYs 2013-14 and 2014-15, declaring total income at Nil. The case was selected for scrutiny, and the assessment order was passed under sections 143(3) r.w.s. 147 of the I.T. Act. It was observed that the assessee sold TDR of 2,684.74 sq.mtrs for Rs.1,41,62,000/- during AY 2013-14. The Assessing Officer (AO) alleged that the assessee failed to offer this for short-term capital gain and made an addition of Rs.1,24,97,449/-, rejecting the claim that it was exempt under section 10(37). The AO made this addition on the ground that the holding period of TDR was less than 3 years, thereby attracting short-term capital gain. The Ld.CIT(A) confirmed this addition, and the assessee appealed.

2. Rejection of Exemption Under Section 10(37) of the I.T. Act:
The assessee argued that the land surrendered to KBMC was urban agricultural land and that the acquisition was compulsory, qualifying for exemption under section 10(37). The provision requires that the land be used for agricultural purposes for two years preceding the transfer and that the acquisition be compulsory. The assessee failed to provide documentary evidence to prove the land's agricultural use or compulsory acquisition. The Tribunal found no justification in holding that the assessee is eligible for exemption under section 10(37) and upheld the decision of the lower authorities.

3. Assessment Order Passed in the Name of the Deceased Person:
The assessee's legal representative contended that the assessment order should be quashed as it was passed in the name of the deceased person, who passed away on 28/07/2018. The Ld.DR argued that there was no record of the legal heirs intimating the AO about the demise. The Tribunal observed that the assessee was alive during the assessment proceedings, notices were served, and he replied. The Tribunal found no merit in this ground and dismissed it.

4. Adoption of Assessable Value of Land Over Fair Market Value for Computing Capital Gain:
The assessee raised an additional ground regarding the AO's adoption of the assessable value of land (Rs.62 lakhs) as the cost of acquisition of TDR instead of the fair market value. The Tribunal directed the AO to calculate the cost of acquisition for deduction purposes by following the decision in the case of Atul G Puranik vs ITO. This additional ground was partly allowed.

Conclusion:
The Tribunal dismissed all the appeals, upholding the lower authorities' decision on the addition made for short-term capital gain and the rejection of exemption under section 10(37). The Tribunal also found no merit in the argument that the assessment order was passed in the name of the deceased person. However, it directed the AO to recompute the cost of acquisition for TDR.

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