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2020 (5) TMI 205 - AT - Income TaxExemption u/s 54F - Taxing capital gain under the head business income and not giving benefit of exemption u/s 54F - as contended that the assessee was having property since last 20 years, the same held as investment therefore, eligible to claim benefit of long term capital gains and utilization of capital gains for purchase of house u/s 54F - HELD THAT:- Land was purchased by the assessee since long back as capita asset and was continuously hold by it for 20 years in case of Fateh Royal Residency and for 4-5 years in case of Fateh Hills as capital asset. There was no intention of assessee to trade for the land so purchased, contrary it was used for agricultural purposes continuously till the year of sale. Agricultural income so earned were offered in the return of income of respective years and accepted by the deptt. Similarly, the Fateh Hills property was acquired long back in the year 2010-11 as capital asset and was so held as capital asset in the balance sheet. Merely conversion of the agricultural land into non-agricultural land will not give rise to the taxable event until it is actually sold. Thus, the assessee has sold the capital asset held for long term, accordingly, gain arising from sale was eligible for deduction u/s 54F of the Act. Accordingly, we direct the A.O. to treat the property on sale of land as capital gains and given the benefit of exemption claimed by the assessee U/s 54F. Disallowance of expenditure towards development of property - A.O. has allowed 50% of the expenditure by stating that no supporting bills of expenditure were provided to him - HELD THAT:- It is clear from the findings of the ld. CIT(A) that he has totally discarded the observed of the A.O. for non-production of documentary evidence in support of the expenditure. However, in respect of giving this fact, the ld. CIT(A) has allowed on ad hoc basis only 40% of the expenditure so claimed was genuine and incurred for developing the property, therefore, eligible to be allowed as a deduction while computing capital gains on sale of this property amounting to ₹ 43,90,029/-. No justification in the order of the ld. CIT(A) for sustaining disallowance of 40% against the 50% disallowance made by the A.O., therefore, the A.O. is directed to allow full expenditure so incurred by the assessee. - Decided in favour of assessee.
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