Inherited jewellery aged 30-40 years qualifies for LTCG treatment, full section 54 exemption allowed despite spouse co-ownership

ITAT Delhi allowed the assessee's appeal regarding treatment of jewellery sale proceeds. The tribunal held that inherited jewellery aged 30-40 years should be treated as LTCG, not STCG, considering cultural customs and family status. Revenue authorities should have accepted valuation reports and witness statements. The tribunal also allowed full exemption u/s 54 for new house purchase despite 50% ownership by spouse, noting the assessee made entire investment and TDS deduction. Following precedent in Satya Narain Patni case, both additions were deleted and appeal allowed.

---

---

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Treatment of long-term capital gain on jewelry as short-term capital gain.
3. Disallowance of exemption under Section 54 for new residential house purchased in the name of the assessee's wife.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The assessee filed an appeal with a delay of 250 days, explaining that the delay was due to the mistaken filing of the appeal before the CIT(A) instead of the Tribunal. The appeal was filed within the permissible time frame after the CIT(A) dismissed it as not maintainable. The Tribunal found that the delay was neither intentional nor deliberate and condoned the delay, allowing the appeal to proceed.

2. Treatment of Long-term Capital Gain on Jewelry as Short-term Capital Gain:

The assessee sold jewelry for Rs. 20,10,008 and declared it as long-term capital gain (LTCG), claiming a deduction under Section 54/54F. The Revenue treated it as short-term capital gain (STCG) due to the lack of documentary evidence proving the jewelry's long-term possession. The Tribunal noted that the jewelry was ancestral and that both the assessee's wife and the jeweler confirmed the sale of inherited jewelry. The Tribunal criticized the Revenue for not considering the valuation report or referring the matter to the District Valuation Officer (DVO). Citing the Rajasthan High Court's judgment in CIT, Alwar Vs. Satya Narain Patni, the Tribunal held that the jewelry should be considered LTCG and allowed the deduction under Section 54, thereby deleting the addition of Rs. 20,10,008.

3. Disallowance of Exemption under Section 54 for New Residential House:

The assessee invested the sale proceeds from another property into a new residential house registered in his wife's name. The Revenue disallowed the exemption under Section 54, attributing 50% of the house to the wife. The Tribunal noted that the entire investment, including stamp duty and TDS, was borne by the assessee and reflected in his bank statements and Form 26AS. The Tribunal referred to multiple judgments, including those from the Delhi High Court, which upheld that the benefit under Section 54/54F is available even if the new property is registered in the name of the spouse. The Tribunal found merit in the assessee's claim and allowed the exemption, deleting the addition of Rs. 80,14,041.

Conclusion:

The Tribunal allowed the appeal, condoning the delay in filing, treating the jewelry sale as LTCG, and granting the exemption under Section 54 for the new residential house purchased in the name of the assessee's wife. The order was pronounced in the open court on 29th August 2024.

---