TaxTMI 
TaxTMI 
2026 (3) TMI 797
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....claiming such exemption. 2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored?" 3. The brief facts of the case are that the assessee is an individual who filed his return of income for Assessment Year 2017-18 on 05.08.2017 declaring total income of Rs.20,89,430/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee had declared long-term capital gain on sale of a residential house and had claimed exemption under section 54 as well as section 54EC of the Income-tax Act, 1961 ("the Act"). 4. The Assessing Officer asked the assessee to substantiate the claim of exemption under section 54 and section 54EC of the Act. In response, the assessee submitted that the property sold during the year originally belonged to L.K. Nandwana, the father of the assessee, and that after his demise a family trust namely L.K. Nandwana Family Trust was created under his will in the year 1984. The assessee along with his brothers were beneficiaries of the said trust. The tr....
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....f section 49 of the Act were clearly applicable. The assessee submitted that the period of holding of the previous owner and the trust should be included while determining the nature of the capital asset. The CIT(A) examined the factual background and observed that the property was originally owned by Late Shri L.K. Nandwana who had created a family trust and vested the property in the said trust in the year 1984. Upon dissolution of the trust, the property was transferred to the assessee on 04.02.2017 and was subsequently sold on 10.02.2017. The CIT(A) held that in view of Explanation 1(b) to section 2(42A) read with section 49(1)(iii) of the Act, the period of holding of the previous owner is required to be included in determining the period of holding of the asset in the hands of the assessee. Therefore, the CIT(A) held that the property constituted a long-term capital asset and not a short-term capital asset as held by the Assessing Officer. 9. With respect to Grounds of Appeal Nos.5 and 6 relating to exemption under section 54 of the Act, the CIT(A) held that once the asset is treated as a long-term capital asset being a residential property, the assessee would be eligible ....
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....ital asset becomes the property of the assessee by way of succession, inheritance or devolution, the cost of acquisition shall be deemed to be the cost for which the previous owner acquired the property. 17. In the present case, it is undisputed that the property originally belonged to Late Shri L.K. Nandwana (father of the assessee) and thereafter vested in the family trust created under his will. Upon dissolution of the trust, the property devolved upon the beneficiaries including the assessee. Therefore, the provisions of section 49(1)(iii) of the Act are clearly attracted and consequently the period of holding of the previous owner as well as the trust is required to be included for determining the nature of the capital asset. 18. This legal position has been affirmed by the Hon'ble Supreme Court in CIT v. Manjula J. Shah (2012) 204 Taxman 42 (SC) wherein it was held that where the property is acquired through inheritance or similar modes specified under section 49(1), the period of holding of the previous owner must be taken into consideration for determining whether the asset is long-term or short-term. Similar view has been taken in CIT v. Arun Shungloo Trust (2012) 20....
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....e constituted a long-term capital asset and therefore the capital gain arising from its transfer was rightly treated as long-term capital gain by the learned CIT(A). Accordingly, the ground raised by the Revenue on this issue is dismissed. 22. With respect to the issue relating to investment in bonds under section 54EC of the Act, the assessee has invested part of the capital gains in specified bonds eligible under section 54EC of the Act within the prescribed time period. The Revenue has not brought any material on record to demonstrate that the investment in bonds was not made in accordance with the provisions of section 54EC. Therefore, we find no infirmity in the order of the CIT(A) allowing the exemption claimed under section 54EC of the Act. The ground raised by the Revenue on this issue is also dismissed. 23. However, with regard to the exemption claimed by the assessee under section 54 of the Act, we find that the assessee has only placed on record an Agreement for Purchase dated 13.02.2017 entered into with the builder for purchase of a residential flat. No documentary evidence such as final conveyance deed or registered purchase deed evidencing the actual purchase o....