DCIT Vs Pritibala Harshad Ajmera (ITAT Kolkata)
Relinquishment of Tenancy Right is Capital Gain- 54 & 54F Can Be Claimed Simultaneously
Assessee filed return declaring income of ₹1.44 crore. Case was selected for scrutiny. AO, noting non-compliance, completed assessment u/s 144 & added ₹3.15 crore as LTCG, denying exemption u/s 54/54F. CIT(A), after calling remand report, allowed exemption holding assessee eligible, as new residential property was purchased from entire sale/tenancy proceeds.
Revenue contended that assessee held more than one residential house (Flats 4A & 5A, Dwarka, Kolkata) on date of transfer (31.03.2014 – MoU relinquishing tenancy right). This violated condition of s.54F that assessee should not own more than one house other than new property. Therefore, exemption u/s 54F wrongly allowed.
CIT(A) noted that Sale of Flat 4A was on 02.05.2014 & tenancy right was relinquished only on 01.08.2014, when full consideration was received. On that date, assessee owned only Flat 5A. New residential flat was purchased on 02.09.2014 for ₹4.23 crore using sale/tenancy proceeds. Relinquishment of tenancy right is a “capital asset transfer,” taxable under capital gains, not “income from other sources” (SC in D.P. Sandu Bros. Chembur Pvt. Ltd., 273 ITR 1). Hence, exemption u/s 54 (for sale of Flat 4A) & s.54F (for tenancy right transfer) was valid. Remand report by AO itself partly accepted deduction u/s 54.
