The capital gains tax is attractive despite the signing by the assessor of a waiver waiving his beneficiary / title interests: ITAT

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ITAT - Capital gains tax - liable - Capital gains tax - Taxscan

The Income Tax Appeal Tribunal (ITAT), Hyderabad, recently ruled that the obligation to pay capital gains tax would attract despite the appraisee signing a waiver deed waiving all its rights, titles and interests in the property. The Court further clarified that the deduction provided for in section 54F of the Income Tax Act 1961 would still apply in such cases and that the unused portion of the capital gain is taxed only at the end of a period of three years in accordance with the relevant provisions.

The appraised, an individual, filed his income tax return in which he declared “zero” income from long-term capital gains on the sale of shares claiming that the capital gain had was spent on the acquisition of a dwelling house and that the balance had not been so used was deposited in the bank account. He further claimed the deduction of the full amount of the capital gain under Section 54F of the Income Tax Act.

In concluding the appraisal procedure, the appraiser found that the appraised had entered into a deed of discharge as well as an additional deed of discharge by which the appraised had waived his rights to the property and had also received the full amount. of the consideration for the sale. It was noted that the appraised received all of the consideration for the sale and in his income tax return the appraised declared the capital gain and requested exemption under section 54F of the Act. .

According to him, the appraised declared the long-term capital gain himself in his income tax return and requested the exemption under section 54F of the Act. Therefore, AO considered that there was a transfer in the relevant year and that the resulting gain was taxable in the relevant year. With regard to the request for exemption under section 54F of the law, the AO ruled that the appraised was eligible for an exemption up to Rs 34 00 750 / – and the balance of the gain in capital of 44 55 770 Rs. chargeable to tax.

Before the Court, the assessed person argued that the amount invested in the purchase / construction of a house up to the date of filing the income tax return should be allowed as a deduction and, in accordance with Article 54F, the amount can be invested in construction. of a house within a period of 3 years from the date of transfer of the original asset and the uninvested capital gain, if any, can only be taxed after the expiration of a period of three years.

Accepting the Ministry’s assertions, the Tribunal observed that the appraised and others entered into a release deed dated December 2002, in which it is stated that the private company M / s Asrani Inns & Resorts P Ltd. had purchased a property in Boggulkunta and that the full price of the sale has been paid by the company and that the names of the other buyers have been included and indicated as buyers in the deed of sale only for the sake of convenience and that ‘None of the buyers has any beneficiary, title / interest rights therein.

“The appraised and the other persons indicated as owners of the property in the deed of sale have signed this deed of renunciation and, therefore, there is no dispute over the ownership of the property which rests solely with the company. . Further, in affidavits filed in the PA High Court, the director of the company mentioned the release act and the dispute was between the AP government and the director of stamps and registration and not between the ‘assessed and others. In addition, the appraised himself reported the capital gain on his tax return and requested the u / s 54F exemption from the Act. Therefore, regardless of when the release deed was registered, there is a transfer of shares in the 2002-03 fiscal year with respect to the appraised, ”the Tribunal said.

With regard to the deduction, the Tribunal observed that “the appraised filed the details of these expenses with the Tribunal as further evidence. Therefore, I find it appropriate and appropriate to admit this additional evidence and return it to AO’s file for verification. After verification, the OA recalculates the exemption eligible under Article 54F of the Law and the unused capital gain is taxed in accordance with the provision of Article 54F of the Law.

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