ITAT: CG Exemption U/S 54 Permitted for Taxpayer If Once Accepted for Co-Owner

The ITAT Ahmedabad Bench stated that when exemption claimed on Long Term Capital Gain via a co-owner has been accepted, then Capital Gain Exemption under tax section 54 of the Income Tax Act,1961 is permitted for the taxpayer.

The taxpayer was represented by Shri Parin Shah and the revenue was represented by Shri Atul Pandey.

Rasilaben Yogeshbhai Patel, the taxpayer would be involved in the business of the job work and the commission and incur the income via capital gain along with the additional sources. As part of the deal, the taxpayer sold the Municipal tenant of the property at Sharda Sahakari Gruh Mandal Ltd. for Rs. 1.9 crore, with only 50% ownership by the taxpayer. Due to the purchase of the new property, the taxpayer claimed an exemption of Rs. 35,14,071/- for LTCG.

Read Also: All About I-T Section 54B of Capital Gain on Land Transfer

AO revealed, the acquisition cost for a sold-out property that has been claimed via the taxpayer along with the purchase cost of the furniture for Rs 17.5 lakh (100%) including the construction cost. By disallowing some items from the acquisition cost, AO re-worked the capital gain value and exemption under section 54 of the act and added Rs 29,27,396.

The property was being sold and the new property was brought with the taxpayer with Shri Yogesh N Patel being 50% shareholder and 50% of the sale consideration received by him/ Yogesh N Patel.

The taxpayer has put on record a copy of the application on 22.12.2011 including a copy of the income return with the total income calculation of his co-worker who shows that the identical capital would gain and claim with the identical exemption. The co-owner return would have been accepted via the revenue under income tax section 143(1) of the Act.

A Coram of Shri Waseem Ahmed, an accountant member ruled “when the LTCG and exemption claimed by the co-owner has been accepted, then the assessee cannot be treated indifferently.”

ITAT considered the taxpayer’s contention, the identical LTCG provided the exemption which has been claimed via the co-owner would be accepted via the Revenue and the taxpayer would get qualified for the identical exemption. The taxpayer’s appeal was permitted.