SHRI NARESH JAIN, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, JAIPUR

ITA 159/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9188 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 11-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Set aside; Capital Gains
• Section: 143(3); 54F; 54EC; 55A; 48

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,A JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PA L RAO, JM VK;DJ VIHY LA- @ ITA NO. 159/JP/2019 FU/KZKJ.K O'KZ @ ASSESSMENT YEAR : 2015-16 SHRI NARESH JAIN D-275-A, TODARMAL MARG, BANI PARK, C-SCHEME, JAIPUR CUKE VS. THE ACIT CIRCLE-3 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAWPJ 8873 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VIJAY GOYAL, CA JKTLO DH VKSJ LS @ REVENUE BY : SHRI K.C. GUPTA, JCIT LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 06/08/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 11 /08/2020 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A), ALWAR DATED 18.12.2018 FOR THE A.Y. 2015-16 , IN THE MATTER OF ORDER PASSED BY THE A.O. 143(3) OF THE INCOME TAX A CT, 1961 (IN SHORT, THE ACT). THE GROUND TAKEN BY THE ASSESSEE READS AS UND ER. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW THE LD. CIT(A) ERRED IN SUSTAINING THE ACTION OF THE AO REG ARDING DISALLOWING THE BENEFIT OF CARRY FORWARD OF LONG TE RM CAPITAL LOSS OF RS.14,76,729/- ON THE SALE OF SHARES FOR THE CUR RENT YEAR. ITA159/JP/2019 SHR I NARESH JAIN VS ACIT, CIRCLE-3, JAIPUR 2 2.1 RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS P ERUSED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND FI LED HIS RETURN OF TOTAL INCOME ON 29-08-2015, DECLARING INCOME OF RS. 74,69 ,570/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD A COMME RCIAL PROPERTY BEING A SHOWROOM FOR A TOTAL CONSIDERATION OF RS. 1,40,00,0 00/-. THE INDEXED COST OF ACQUISITION WAS RS. 36,74,643/-. THE EXPENDITURE IN CONNECTION WITH TRANSFER OF PROPERTY WAS RS. 24,165/- AND THUS THE LONG TERM CAPITAL GAIN FROM SALE OF PROPERTY WAS RS. 1,03,01,192/-. THE AM OUNT OF SALE CONSIDERATION SO RECEIVED WAS TRANSFERRED TO CAPITA L GAIN ACCOUNT AND SUCH AMOUNT WAS USED FOR PURCHASES OF FLAT. THE ASSESSEE CLAIMED DEDUCTION OF RS. 1,03,01,192/- U/S 54F OF I.T. ACT. DURING THE Y EAR, THE ASSESSEE HAS SUFFERED LONG TERM CAPITAL LOSS OF RS. 14,76,730/- ON SALE OF SHARES WHICH THE ASSESSEE CLAIMED CARRIED FORWARD AS LONG TERM CAPITAL LOSS FOR THE CURRENT YEAR A.Y 2015-16. THE AO FIRSTLY SET OFF TH E LONG TERM CAPITAL LOSS SUFFERED FROM SHARES FROM THE LONG TERM CAPITAL GAI N FROM SALE OF COMMERCIAL PROPERTY AND AFTER INTRA-HEAD ADJUSTMENT THE AO COMPUTED NET LONG TERM CAPITAL GAIN AT RS. 88,24,461/- AND FROM THIS AMOUNT HE ALLOWED DEDUCTION U/S 54F AND DISALLOWED THE CARRY FORWARD THE LONG TERM CAPITAL LOSS OF RS. 14,76,729/- FOR THE CURRENT YEAR ON SAL E OF SHARES. ITA159/JP/2019 SHR I NARESH JAIN VS ACIT, CIRCLE-3, JAIPUR 3 2.2 BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEF ORE US. 2.3 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CA REFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE MAIN ISSUE IN THIS APPEAL IS WHETHER IT IS LAWFUL TO FIRST COMPUTE CAPITAL GAIN AFTER DOING INTRA HEAD ADJUSTMENTS AND WHETHER THE DEDUCTIONS U/S 54F SHOU LD BE ALLOWED FROM THE NET INCOME COMPUTED AFTER INTRA HEAD ADJUSTMENT S. THE LAW PRESCRIBES THE COMPUTATION OF INCOME IN RESPECT OF EACH SOURCE UNDER THE HEAD CAPITAL GAIN SEPARATELY WHICH SHOULD BE CALCULATED AFTER GIVING DEDUCTION UNDER SECTION 48 TO 55 OF THE ACT. 2.4 THE RELEVANT PROVISIONS OF SECTIONS 45(1), 54F AND 70 OF THE INCOME-TAX ACT, RELEVANT TO THE ASSESSMENT YEARS RE AD AS FOLLOWS:- '45(1) CAPITAL GAINS. ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL, SAVE AS OTHERW ISE PROVIDED IN SECTIONS 54, 54B, 54D, 54E, 54 EA, 54EA, 54 EB, 54F, 54G AND 54H, BE CHARG EABLE TO INCOME TAX UNDER THE HEAD 'CAPITAL GAINS', AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. 54F. (1)[SUBJECT TO THE PROVISIONS OF SUB-SECTION (4 ), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY] , THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET, N OT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR [TWO YEARS] AFTER THE DATE ON WH ICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE [ CONSTRUCTED, A RESIDENTIAL HOUSE ] (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWIN G PROVISIONS OF THIS SECTION, THAT IS TO SAY, ITA159/JP/2019 SHR I NARESH JAIN VS ACIT, CIRCLE-3, JAIPUR 4 (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEAR S TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45 : 70. SET OFF OF LOSS FROM ONE SOURCE AGAINST INCOME FR OM ANOTHER SOURCE UNDER THE SAME HEAD OF INCOME. 1) SAVE AS OTHERWISE PROVIDED IN THIS ACT, WHERE T HE NET RESULT FOR ANY ASSESSMENT YEAR IN RESPECT OF ANY SO URCE FALLING UNDER ANY HEAD OF INCOME, OTHER THAN 'CAPITAL GAINS', IS A LOSS, THE ASSESSEE SHALL BE ENTITLED TO HAVE THE AMOUNT OF SUCH LOSS SET OFF AGAINST HIS INCOME FROM ANY OTHER SOURCE UNDER THE SAME HEAD. (2) WHERE THE RESULT OF THE COMPUTATION MADE FOR AN Y ASSESSMENT YEAR UNDER SECTIONS 48 TO 55 IN RESPECT OF ANY SHORT TERM CAPITAL ASSET IS A LOSS, THE ASSESSEE SHALL BE ENTITLED TO HAVE THE AMOUNT OF SUCH LOSS SET OFF AGAINST THE INCOME, IF ANY, AS ARRIVED AT UNDER A SIMILAR COMPUTATION MADE FOR THE ASSESSMENT YEAR IN RESPECT OF ANY OTHER CAPITAL ASSET. (3) WHERE THE RESULT OF THE COMPUTATION MADE FOR AN Y ASSESSMENT YEAR UNDER SECTIONS 48 TO 55 IN RESPECT OF ANY CAPITAL ASSET (OTHER THA N A SHORT TERM CAPITAL ASSET) IS A LOSS, THE ASSESSEE SHALL BE ENTITLED TO HAVE THE AMOUNT O F SUCH LOSS SET OFF AGAINST THE INCOME, IF ANY, AS ARRIVED AT UNDER A SIMILAR COMPUTATION M ADE FOR THE ASSESSMENT YEAR IN RESPECT OF ANY OTHER CAPITAL ASSET NOT BEING A SHORT TERM C APITAL ASSET.' THUS AS PER PROVISIONS OF SECTION 54F (1) ON FULFIL MENT OF CERTAIN CONDITIONS THE CAPITAL GAIN AROSE ON SALES OF SUCH ASSETS WILL NOT BE CHARGEABLE TO CAPITAL GAIN UNDER THE SECTION 45 OF THE ACT. THE S CHEME OF SECTIONS 45 TO 55A PROVIDE FOR THE COMPUTATION OF CAPITAL GAINS, A ND THE EFFECT HAS TO BE GIVEN FIRST TO THE PROVISION OF CAPITAL GAINS AS GI VEN UNDER THE ABOVE SCHEME AND THEN APPLY THE PROVISIONS OF SECTION 70. SECTION 70 WOULD COME INTO PLAY ONLY WHEN THE CAPITAL GAINS HAVE BEE N COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION S 45 TO 55A. THUS, IF, AFTER WORK OUT OF DEDUCTION U/S 54F IF THE CAPITAL GAIN AROSE ON SALE OF ITA159/JP/2019 SHR I NARESH JAIN VS ACIT, CIRCLE-3, JAIPUR 5 CERTAIN ASSETS IS NOT CHARGEABLE TO CAPITAL GAIN TH AN THE LOSS AROSE TO ASSESSEE ON SALES OF ANOTHER ASSETS CANNOT SET OFF FROM GAIN OF SUCH ASSETS. IT IS NOT NECESSARY THAT ONE SHOULD FIRST A PPLY SECTION 70(3) AND THEREAFTER ONLY, THE ASSESSEE COULD INVEST THE CAPI TAL GAIN ARISING FROM THE LONG TERM CAPITAL ASSET. 2.5 THIS ISSUE IS ALSO COVERED BY THE DECISION OF H ONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT, CIRCLE-XIV VS VIJAY M. M AHTANEY [2013] 35 TAXMANN.COM 228 (MAD) WHEREIN IT HAS BEEN HELD THAT (COPY AT PB 9-14):- SECTION 54EC, READ WITH SECTIONS 70 AND 74, OF THE INCOME-TAX ACT, 1961 - CAPITAL GAINS - NOT TO BE CHARGED ON INVESTMENT I N CERTAIN BONDS [SET OFF OF CAPITAL LOSS] - ASSESSMENT YEAR 2003-04 - WHETHE R, ASSESSEE CAN FIRST COMPUTE CAPITAL GAINS BY CLAIMING EXEMPTION UNDER S ECTION 54EC AND THEN APPLY PROVISIONS FOR SET OFF OF CAPITAL LOSS AS PER SECTIONS 70 AND 74 - HELD, YES [PARA 11] [IN FAVOUR OF ASSESSEE] 2.6 IN VIEW OF THE ABOVE DISCUSSIONS, WE SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DIRECT THE AO TO COMPUTE THE CAPITA L GAIN FROM SALE OF COMMERCIAL PROPERTY BY NOT DOING INTRA-HEAD ADJUSTM ENT FOR THE LOSS SUFFERED FROM SALE OF SHARES AND ALLOW TO CARRY FOR WARD THE LONG TERM CAPITAL LOSS OF RS. 14,76,729/- FOR THE CURRENT YEA R ON SALE OF SHARES. ITA159/JP/2019 SHR I NARESH JAIN VS ACIT, CIRCLE-3, JAIPUR 6 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 /08 /2020. SD/- SD/- FOT; IKY JKO JESK LH0 KEKZ (VIJAY PAL RAO) (RAMESH. C. SHARMA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11 /08/2020. *MISHRA . VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI NARESH JAIN, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE-3, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 159/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSTT. REGISTRAR