September 28, 2022
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ITAT comes to rescue of taxpayer over filing error

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MUMBAI: The Mumbai bench of the Earnings Tax Appellate Tribunal (ITAT) has frowned upon a “hyperpedantic method” adopted by an I-T officer in denying a long-term capital good points (LTCG) exemption claimed by a non-resident taxpayer. The rejection was merely as a result of she quoted a improper part in her I-T returns in opposition to her declare.
Underneath the I-T Act, two key sections — part 54 and 54-F — present for an exemption from long-term capital good points arising on sale of an asset (this unique asset might be shares, tenancy rights or residential property) if an funding is made in a home property.
If the funding within the new home property exceeds the value obtained on sale of the unique asset, then there isn’t a residual sum that may be topic to tax as long-term capital good points.

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Within the case earlier than the ITAT, the taxpayer held ‘tenancy rights’ in a residential house within the tony space of Warden Highway in South Mumbai. She surrendered these rights for a sum of about Rs 4. 8 crore. This whole sum, together with an extra quantity of Rs 56. 8 lakh, was invested by her in the direction of buy of a brand new residential flat in Decrease Parel. She was entitled to exemption underneath part 54-F, which is accessible when the sale consideration of belongings (apart from a residential home) is invested in a home property. Nevertheless, in her I-T returns, for the monetary yr 2016-17, she claimed exemption underneath part 54. Underneath this part, if your complete long-term capital good points arising on sale of a residential property are invested in one other home property, there isn’t a tax incidence. Thus, her declare was denied by the I-T officer. Whereas the Commissioner (Appeals) issued an order in her favour, the I-T officer filed an enchantment with the tax tribunal.
The ITAT bench — composed of judicial member Anikesh Banerjee and vicepresident Pramod Kumar —said of their order that, on this case, a declare for exemption was rightly made, however solely a improper part was quoted whereas making such a declare. “That is qualitatively completely different from making a recent declare through the course of evaluation,” they defined. The members of the ITAT held, “The funding that the taxpayer has made within the new flat is rather more than your complete sale consideration of the tenancy rights.
Subsequently, no matter be stated to be the character of the long-term capital asset (the unique asset that was bought), the funding of the sale proceeds in the home entitles the taxpayer to the exemption of the long-term capital good points. ”

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