2022 (8) TMI 1265 - AT - Income Tax

Tribunal directs AO on sale consideration, deductions, and tax credits for assessment years.

Mr. Rahil Mahesh Kumar Nizamuddin Versus Deputy Commissioner of Income-tax International Taxation Circle 1 (2) Bengaluru

The appeal was partly allowed by the Tribunal. The Tribunal directed the AO to consider the sale consideration as reflected in Form No.26AS for the ... Computation of capital gain on transfer of property - Adoption of sales consideration as reflected in form No.26AS - HELD THAT:- Assessee made it clear in the written submission that the sale consideration to be considered at Rs.18,54,25,000/- as per amount reflected in form No.26AS relating to assessment year 2014-15. In our opinion, the argument of assessee’s counsel is to be verified with reference to the form No.26AS filed before us. Accordingly, we direct the AO to consider sales consideration as reflected in form No.26AS relating to assessment year 2014-15 for the purpose of computation of capital gain on transfer of property at Pujanahalli, Devanahalli village, Bengaluru district. This ground of the appeal of the assessee is allowed. No claim by the assessee in the original return of income filed - Disallowance towards the development charges paid to Bengaluru Development Authority and brokerage charges paid while computing the capital gain in the hands of the assessee - AO disallowed this claim of the assessee on the reason that this has not been claimed in the original return of income filed by the assessee - CIT(A) confirmed the disallowance - HELD THAT:- As held by Hon’ble Supreme Court in the case of Goetz (India) Ltd. [2006 (3) TMI 75 - SUPREME COURT] wherein the assessee filed the return of income for the relevant assessment year without claiming a particular deduction, later on, it sought to claim the deduction by way of a letter addressed to the AO the deduction disallowed by the AO on the ground that there was no provision under the Act to make amendment in the return of income by making an application at the assessment stage without revising the return of income. However, the same is allowed by the Hon’ble Supreme Court. Being so, the Tribunal being the second appellate authority in this case and there is no restriction on the power of Tribunal to entertain such claim. Accordingly, we direct the AO to allow this claim as claimed by assessee. This ground of appeal of assessee is allowed. Non-granting of deduction u/s 54F in respect of investment in purchase of a residential building in Newton MA, USA - CIT-A observed that the assessee not claimed exemption for investment in house property located in USA in the return of income - HELD THAT:- Non-claiming of deduction in the return of income filed by the assessee, in our opinion, judgement of Hon’ble Supreme Court in the case of Goetz (India) Ltd. [2006 (3) TMI 75 - SUPREME COURT] applied as the Tribunal is not precluded in entertaining the claim of the assessee before the appellate proceedings. Accordingly, we allow the claim of assessee u/s 54F of the Act in respect of investment made in property situated in Newton MA, USA. This ground of appeal of the assessee is allowed. Long-term capital gain arising out of the JDA - whether it is assessable in the year in which the development agreement entered into or in the relevant subsequent year in which the area duly developed and constructed giving the share of the assessee and land ownership has been handed over to the assessee - HELD THAT:- In the present case, there is no transfer of land per say vide JDA dated 31.1.2014 and developer only got right to construct and the ownership of property as such does not get transferred to him to the developer on execution of JDA. The assessee has to receive Rs.7.5 crores as refundable deposit, out of this assessee has received in this assessment year an amount of Rs.3.75 crores and balance Rs.3.25 crores to be received by assessee within 4 months from the date of execution of JDA dated 31.1.2014 and another balance Rs.50 lakhs shall be to the first party at the time of handing over the superbuilt up area of 10,337 sq.ft. to the owners. Being so, the capital gains as a result of this JDA can arise only at point of receipt of consideration by the assessee and not on the date of JDA. More so, in the absence of any act in furtherance of contract by the developer, it cannot be held that transfer did took place u/s 2(47)(v) of the Act in the assessment year under consideration. Being so, we are of the opinion that capital gain arising out of the impugned JDA dated 31.1.2014 to be taxed in the assessment year 2015-16 only and not in assessment year 2014-15. More so, it is already subject to tax in the assessment year 2015-16 and cannot be brought to tax in the assessment year 2014-15, which amounts to double taxation. Accordingly, this ground of appeal of assessee is allowed. Deduction u/s 54 for assessment year 2015-16 in respect of assessee’s share of residential apartment under JDA dated 31.1.2014 - Since this ground is not related to assessment year 2014- 15, we are declined to entertain these grounds in the assessment year 2014-15. However, the assessee is at liberty to take appropriate remedy in the right assessment year, if so advised. These grounds are disposed of accordingly. Issues Involved:1. Validity of the CIT(A)'s order.2. Adoption of sale consideration for computing long-term capital gains.3. Disallowance of development and brokerage charges.4. Deduction under section 54F for investment in a residential building in the USA.5. Assessment year for long-term capital gains under the Joint Development Agreement (JDA).6. Deduction under section 54 for residential apartments under JDA.7. Tax credit for prepaid taxes.8. Consequential interest under sections 234B, 234D, and withdrawal of interest under section 244A.Detailed Analysis:1. Validity of the CIT(A)'s Order:The appellant claimed that the CIT(A)'s order was improper, illegal, unlawful, and opposed to law and facts. However, this ground was general and was not pressed during the hearing, thus dismissed as not pressed.2. Adoption of Sale Consideration for Computing Long-Term Capital Gains:The appellant contested the adoption of Rs.18,87,60,552/- as the sale consideration for computing long-term capital gains, arguing that the proportionate sale value received was only Rs.18,54,25,000/-. The Tribunal directed the AO to consider the sale consideration as reflected in Form No.26AS for the assessment year 2014-15, which was Rs.18,54,25,000/-. This ground of appeal was allowed.3. Disallowance of Development and Brokerage Charges:The appellant challenged the disallowance of Rs.18,15,000/- paid to the Bengaluru Development Authority for development charges and Rs.11,54,250/- for brokerage charges. The AO disallowed these claims as they were not made in the original return of income. The Tribunal, referencing the Supreme Court's decision in Goetz (India) Ltd., directed the AO to allow these claims, as the Tribunal is not precluded from entertaining such claims. These grounds of appeal were allowed.4. Deduction under Section 54F for Investment in a Residential Building in the USA:The appellant sought deduction under section 54F for an investment of Rs.8,74,20,000/- in a residential building in Newton, MA, USA. The AO and CIT(A) rejected this claim, interpreting the law to mean that the investment should be in a residential house in India. The Tribunal, however, referred to various judgments, including those of the Karnataka High Court and ITAT Bangalore, which held that there is no requirement for the residential house to be situated in India. The Tribunal allowed the appellant's claim for deduction under section 54F.5. Assessment Year for Long-Term Capital Gains under the Joint Development Agreement (JDA):The appellant argued that the long-term capital gains from the JDA dated 31.1.2014 should be assessed in the year 2015-16, as possession was delivered on 16.6.2014. The AO and CIT(A) assessed it for the year 2014-15. The Tribunal noted that the legal possession of the property was with the appellant in the year 2014-15, and the construction had not started. It concluded that the capital gain should be taxed in the assessment year 2015-16, as the transfer under section 2(47)(v) of the Act occurred only when possession was delivered. This ground of appeal was allowed.6. Deduction under Section 54 for Residential Apartments under JDA:The appellant claimed deduction under section 54 for the assessment year 2015-16 in respect of the residential apartment received under the JDA. The Tribunal declined to entertain this ground for the assessment year 2014-15, advising the appellant to seek appropriate remedy in the correct assessment year.7. Tax Credit for Prepaid Taxes:The appellant requested credit for prepaid taxes for the assessment year 2015-16. The Tribunal remitted this issue to the AO to verify the records and give the correct tax credit.8. Consequential Interest under Sections 234B, 234D, and Withdrawal of Interest under Section 244A:These grounds were noted as consequential and were to be computed accordingly.Conclusion:The appeal was partly allowed, with directions to the AO on specific grounds, including the adoption of sale consideration, allowance of development and brokerage charges, and the correct assessment year for capital gains under the JDA. The Tribunal also directed the AO to verify and give the correct tax credit for prepaid taxes.