Monday, January 6, 2014

Sec. 54 relief not available on transfer of tenancy rights

Where assessee was not owner of property but held mere tenancy rights in respect of property, exemption under section 54 was not allowable


a) The assessee had surrendered the tenancy rights in the property which resulted in capital gains liable to tax in her hands. While computing the taxable long-term capital gains on surrender of tenancy rights the assessee had claimed deduction under section 54.

b) Before the Assessing Officer (‘AO’), the assessee claimed that she was deemed owner of the property in terms of section 27(iiib), read with section 269UA(b). The AO, however, rejected the claim of the assessee under section 54 and allowed deduction under section 54F.

c) On appeal, the CIT (A) confirmed the action of the AO and held that as the tenancy right was a capital asset other than residential house, the AO has rightly granted the deduction under section 54F.

The Tribunal held as under:

1) It was clear from the facts of the case that the ground floor was taken on rent and the rights vested in assessee which were the tenancy rights;

2) Thus, the CIT(A) rightly gave the finding that the assessee was not the owner of the property but held mere tenancy rights in respect of the property;

3) The deemed ownership is relevant only in connection with computation of income from house property and not in relation to exemption under section 54;

4) The assessee was not entitled to exemption under section 54, thus, there was no error or illegality in the impugned order of CIT(A) - Meher R. Surti v. ITO [2013] 40 138 (Mumbai - Trib.)

An object to organize 'Maharaja Agrasen Jayanti' especially for Agarwal community isn't charitable in nature

Shree Maharaja Agrasen Jyanti organized mainly for Agarwal community, objects of assessee were meant for benefit of a particular community and, therefore, it was not eligible for registration.

The Tribunal held in favour of revenue as under:

1) The documents filed on record suggest that most of the objects of assessee were meant for the benefit of Agarwal community only;

2) There were certain other objects like establishment of hospital, dharamashala, library, etc., but the assessee since its inception has not carried out any such activities meant for the general public;

3) Since nothing has been provided by the assessee for relief of the poor, education or medical relief, the last provision in the definition of 'charitable purpose' would be considered, i.e., 'advancement of any other object of general public utility';

4) In the preceding year of making registration application, the assessee has mainly organized Shree Maharaja Agrasen Jayanti meant for Agarwal community only. It could not be treated having any charitable purpose for advancement of any other objects of general public utility;

5) Thus substantially the objects of the assessee are meant for the benefit of particular community only and rest of the objects have not been carried out by it since its inception;

6) Merely because dharamashala was created in religious place at Mathura, it could not be said that the dharamashala was meant for charitable or religious purpose. There should be something more to suggest its nexus with the religious or charitable purpose. Therefore, assessee was not eligible for registration under section 12AA - Shri Agrawal Sabha v. CIT [2013] 40 170 (Agra - Trib.)