One Co-owner is eligible to claim exemption under LTCG in case claimed by other co-owner
Fact and Issue of the case
The assessee is an individual and engaged in the business of job work and commission and also deriving income from capital gain and other sources. The assessee during the year sold “Municipal Tenant” for the property bearing final plot No. 2,4,5 & 6 situated at Sharda Sahakari Gruh Mandal Ltd. for Rs. 1.9 crore in which assessee’s share was 50% only. The assessee worked out the long term capital gain of Rs. 35,14,071/- and same was claimed as exempted on account of purchase of new property for Rs. 36,96,525/-(being 50%).
The AO found that the cost of acquisition for sold out property claimed by the assessee include cost of purchase of furniture for Rs. 17.5 lakh (100%) in addition to cost of construction. Similarly cost of acquisition for new property purchased includes cost of construction of Rs. 17 lakh and other misc. expenses of Rs. 8,93,050/- only. As per the AO the cost of purchase of furniture cannot be made part of cost of acquisition of sold out property. Similarly, cost of construction for new property cannot be included in the amount of exemption under section 54 of the Act as the same is incurred for purchase of the new property. Likewise certain misc. expenses incurred for purchase of new property was not supported by documentary evidences. Thus the AO, re-worked the value of capital gain and exemption under section 54 of the Act and made addition of Rs. 29,27,396/-. Aggrieved, assessee preferred an appeal before the learned CIT-A, who confirmed the addition made by the AO. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before ITAT.
Observation of the court
The Tribunal has heard the rival contentions of both the parties and perused the materials available on record. The AO, reworked value of capital gain and exemption claimed under section 54 of the Act by disallowing certain items from the cost of acquisition. It is to be noted that property was sold and new property was purchased jointly by the assessee with Shri Yogesh N Patel being 50% shareholder and 50% of sale consideration was received by him/ Yogesh N Patel. The assessee has placed on record copy of application dated 22-12-2011 along with the copy of return of income with computation of total income of his co-owner who declared similar capital gain and claimed similar exemption. The return of the co-owner has been accepted by revenue under section 143(1) of the Act. Therefore, in our considered view when, the long term capital gain and exemption claimed by the co-owner has been accepted, then the assessee cannot be treated indifferently. In this regard we find support and guidance from the order of coordinate bench of this tribunal in case of M. Ambalal Desai v. ITO.
In view of the above elaborated factual and legal discussion, and respectfully following the finding of coordinate bench of this tribunal in aforesaid case. We accept the contention of ld. AR for the assessee that once, the similar LTCG offered and exemption claimed by the co-owner has been accepted by the Revenue, then the assessee is also entitled for similar relief. The tribunal found convincing force in the submissions of the learned AR for the assessee. Hence, the appeal of the assessee is allowed. So far as the objection of learned DR that in the case of co-owner, no scrutiny assessment was initiated, is concern, we find that this fact was brought by assessee at the earliest possible action. The Revenue has not taken any action for reopening the case of co-owner and thereby accepted the capital gain and exemption on same transaction, therefore, in our view, the assessee cannot be treated indifferently for similar transaction. Thus, the objection raised by the learned DR for the revenue is not acceptable to us. Hence, the ground of appeal of the assessee is hereby allowed.
The tribunal ruled in favour of the assessee and ruled that once the similar LTCG offered and exemption claimed by the co-owner has been accepted by the Revenue, then the assessee is also entitled for similar relief.Rasilaben-Yogeshbhai-Patel-Vs-I.T.O-ITAT-Ahmedabad