2026 (1) TMI 1478 - AT - Income Tax

Capital gains treatment for sale of flats after JV transfer and denied 54B/54F deductions, restored for recomputation.

Disallowance of deduction under sections 54B and 54F in relation to sale of flats and subsequent capital gain taxation is examined. The document states ... Disallowance of deduction u/s 54B - additional claim before the appellate authorities - Alternate claim for deduction under section 54F - assessee has already availed deduction u/s 54B in assessment years 2014-15, 2015-16 and 2016-17 - assessee during the year has again claimed the deduction u/s 54B of the Act on account of purchase of agricultural land which is after a period of 2 years since the date of transfer as per JV agreement and as per the transfer of capital asset in stock in trade is dated 20.01.2011 and the assessee has purchased the agricultural land on 23.03.2017 HELD THAT:- It is an admitted fact that the assessee is neither entitled to any deduction either u/s 54B or u/s 54F. The assessee is liable for capital gain tax on the income that arose on the sale of flats during the impugned assessment year i.e. assessment year 2017-18. It is the submission of assessee that once the assessee has entered into a registered JV agreement on 20.01.2011 the asset was transferred and the share of the assessee being 34% of the constructed area is the capital asset in the hands of the assessee and the same is liable for capital gain. Since the land sold was an agricultural land, the capital gain in the hands of the assessee during the assessment year 2011-12 does not arise. However, when the flats are sold during the impugned assessment year, the capital gain has to be computed by deducting the cost of acquisition from the sale price and the resultant capital gain, if any, is liable to tax. We hold that the assessee is entitled to raise an additional claim before the appellate authorities and the appellate authorities have the jurisdiction to entertain such a new claim. Since the Assessing Officer in the preceding years has already given a finding that the date of transfer of the land as per the JV agreement is 20.01.2011, therefore, the transfer of the land has taken place in assessment year 2011-12. Further, the flats were handed over to the assessee on 23.12.2014 as per the occupancy certificate. Thus, the market value of the share of the assessee towards the flats is the cost of acquisition in the assessment year 2015-16. Once the assessee sells the same in assessment year 2017-18, the capital gain that can be brought to tax is the difference between the sale price and the cost of acquisition. Since the assessee has filed a revised computation for determination of the correct tax liability on account of capital gain, therefore, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to verify the computation of long term capital gain and determine the correct tax liability in the hands of the assessee. grounds raised by the assessee are accordingly allowed for statistical purposes. Issues: (i) Whether the assessee was entitled to deduction claimed under section 54B (and alternatively section 54F) in respect of capital gains arising from the sale of flats; (ii) Whether the Tribunal has jurisdiction to entertain the assessee's alternate/new claim and whether the matter should be restored to the Assessing Officer for recomputation of capital gain.Issue (i): Entitlement to deduction under section 54B (and alternatively section 54F) on the capital gains in the assessment year 2017-18.Analysis: The Tribunal examined the facts that a registered joint venture agreement dated 20.01.2011 effected transfer/conversion of land (date of transfer), that the assessee had earlier availed deductions under section 54B in earlier assessment years, and that the agricultural land purchases relied upon for claiming section 54B exemption were made beyond the two-year period prescribed by section 54B. The Tribunal also considered the claim for section 54F as an alternate plea and the authorities' findings regarding conversion/transfer dates, allotment/possession (occupancy certificate) and earlier assessments.Conclusion: In favour of Revenue.Issue (ii): Jurisdiction of the appellate authority/Tribunal to entertain a revised computation or new/alternate claim raised during appellate proceedings and the appropriate remedy.Analysis: The Tribunal considered precedents on the appellate authority's power under section 254 to admit and entertain new legal claims or alternative pleas and the discretion to admit such claims. Applying those principles to the facts including the finding that transfer occurred by JV in 2011 and that flats were allotted/handed over with an occupancy certificate in 2014 the Tribunal found that the correct taxable capital gain for AY 2017-18 should be recomputed by the Assessing Officer by treating the assessee's share in the flats as the cost of acquisition for the relevant earlier year, and that the assessee is entitled to have the revised computation examined.Conclusion: In favour of Assessee.Final Conclusion: The Tribunal held that although the assessee was not entitled to the claimed exemption under section 54B (or section 54F) as presented, the appellate forum has jurisdiction to entertain the alternate claim and directed restoration of the matter to the Assessing Officer for verification and recomputation of long term capital gain in accordance with law; the appeal is allowed for statistical purposes.Ratio Decidendi: The appellate authority/Tribunal has jurisdiction under section 254 to entertain new or alternate claims raised on appeal and, where appropriate on the facts, may remit the issue to the Assessing Officer for fresh determination of tax liability including recomputation of capital gains consistent with findings on date of transfer and cost of acquisition.