2024 (9) TMI 727 - AT - Income Tax

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

Anil Bhardwaj Versus DCIT/ACIT International Tax, Office of ACIT-DCIT INT-TAX, Gurgaon

ITAT Delhi allowed the assessee's appeal regarding treatment of jewellery sale proceeds. The tribunal held that inherited jewellery aged 30-40 years ... LTCG u/s STCG - benefit u/s 54 - treatment of long-term capital gain on Jewellery as short-term capital gain - HELD THAT:- Considering the fact that the jewellery is claimed to be more 30 to 40 years old which were inherited/gifted by the Assessee’s relatives on various customary occasions and also considering the amount of the jewellery and the family structure and status of the assessee, it is quite reasonable as per the culture and customs of an Indian family to have the grammage of jewellery inherited by the assessee. Revenue Authorities should have considered the Valuation Report submitted by the Assessee and should have also been considered the statement of wife of the Assessee and the jeweler of the Assessee and ought to have considered as LTCG and even the benefit u/s 54 - Following the Judgment of Satya Narain Patni [2014 (5) TMI 1002 - RAJASTHAN HIGH COURT] and considering the above facts and circumstances, we delete the disallowance/addition accordingly we allow Ground No. 2 of the assessee. Disallowance of exemption u/s 54 being 50% share of the wife in the new house property - HELD THAT:- The entire investment has been made by the Assessee and the entire TDS has been deducted by the Assessee which was duly deposited to the Government and the full value of the purchase price was reflected in the Form No. 26AS of the Assessee for the year under consideration, by following the above ratio laid down by the Jurisdictional High Court and the Coordinate Bench of the Tribunal, we find merit in Ground No. 3 of the Assessee, accordingly, we allow the Ground of the Assessee by deleting the addition made by the A.O., wherein by disallowed the exemption u/s 54 of the Act. Appeal filed by the Assessee is 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.