Shri I. Seshagiri Rao Vs ITO (ITAT Hyderabad)
The issue under consideration is whether the capital gains will be applicable where assessee signed a release deed waiving all his rights, title and interests in the property?
During the assessment, the A.O. found that the assessee had entered into a release deed and also a supplementary release deed by which assessee has released his rights in the property and has also received the entire sale consideration. It was noted that the assessee has received entire sale consideration and in his return of income, the assessee has declared the capital gain and has claimed exemption under section 54F of the Act. Therefore, AO held that there is a transfer during the relevant PY and capital gain arising therefrom is liable to tax during the relevant AY. With regard to claim of exemption under section 54F of the Act, the AO held that the assessee is eligible for an exemption to the extent of Rs.34,00,750/- and the balance of capital gain of Rs.44,55,770/- was brought to tax.
ITAT state that the assessee and others have entered into release deed, wherein it is stated that the private company M/s Asrani Inns & Resorts P Ltd. had purchased a property at Boggulkunta and the entire sale consideration was paid by the company and that the names of other purchasers were included and shown as purchasers in the sale deed merely for the sake of convenience and that none of the purchasers have any beneficiary rights, title/interest therein. Further, assessee himself has declared the capital gain in his return of income and has claimed exemption u/s 54F of the Act. Therefore, irrespective of the date when the release deed has been registered, there is a transfer of shares. Therefore, ITAT finally state that the Capital gain will be levied in this case. Hence appeal filed by the assessee is rejected.
FULL TEXT OF THE ITAT JUDGEMENT
1. This is assessee’s appeal for A.Y. 2003-04 against the order of Ld.CIT(A)- 9, Hyderabad dated 08.01.2016.
2. Brief facts of the case are that the assessee, an individual and a dealer in submersible pump sets and GI pipes, filed his return of income for A.Y. 2003-04 on 30.09.2003 admitting total income at Rs.98,740/- being income from business. The assessee also worked out ‘nil’ income from long term capital gains on sale of shares by claiming that the capital gain has been spent for acquisition of a residential house and the balance which has not been so utilized was deposited in the bank account. Therefore he claimed the entire capital gain to be exempt from tax u/s.54 of the Act. Meanwhile, there was a survey action u/s 133A of the Income Tax Act, 1961 (the Act) on 09.09.2004, during the course of which, two documents relating to the claim of capital gain were found. The documents were : (i) Copy of sale deed dated 07.04.2003 for purchase of terrace rights of an area of 4000 sq.ft. of Vinita Mansion on plot no.5 survey no.70 & 71, situated at Boosereddyguda, West Maredpally, Secunderabad, for Rs.7,00,000/- from Sri S.Yadaiah. (ii) Receipt dated 7.5.2003 given by Sri S.Yadiah for having received from the assessee Rs.2,50,000/- through DD no.734973 and cash of Rs.50,000/- towards full and final settlement of terrace rights as discussed in the document.
2.1. A statement of the assessee was also recorded during the course of survey, in which, assessee submitted that he held 7000 shares of M/s.Asrani-Inns and Resorts and the same were disposed of in 2002 from which the assessee gained some capital gain. When asked whether assessee has paid tax on such capital gains, the assessee replied that he has invested part of the capital gain in acquiring a pent house having 4000 sq.ft. at Vinila Apartments, West Maredpally, Secunderabad for Rs.7 lakhs, part of which was paid in cash and part of it through DD from his account no.1007 in Indian Bank in 2002 and that the DD was given to Mr.K.Yadiah, builder of the apartment. Assessee submitted that he has constructed the walls, plastering, slab, pipe fitting, electrification, flooring etc. and the work was carried on from end of 2002 till end of 2003 and that he had spent a sum of Rs.65 lakhs for these purposes. The assessee also submitted that he has the bills, but they were misplaced. When asked about credit of the sale consideration, the assessee submitted that he had deposited the same in Sindh Urban Co-Operative Bank Ltd. P.G.Road Branch, in S.B.A/c no.1824. When the assessee was asked to explain the investment in residential house, the assessee, vide letter dated 24.09.2004, stated that an amount of Rs.35,41,967/- was spent on construction of the pent house on Vinila Mansion and this was in addition to the basic cost of Rs.7 lakhs paid to the builder. The assessee also furnished the details of the total sale consideration of Rs.98 lakhs received on sale of shares and with regard its utilization, the assessee furnished the following details:
