2018 (10) TMI 1891 - AT - Income Tax

LTCG or STCG - gains arising on transfer of trade mark - AO had considered the gains arising on transfer of the trade mark to be short term in nature whereas the Tribunal found it otherwise - HELD THAT - As decided in own case 2016 (5) TMI 1549 - ITAT CHENNAI allowing the claim of the assessee that the gains arising on transfer of the trade mark was long term in nature. We do not find any reason to interfere with the order of the Ld.CIT(A) in this regard. Deduction u/s.54F - such claim was denied by the AO considering the assessee to be owning more than one residential property when he transferred the trade mark - CIT(A) had on the other hand found that one of the two properties was a commercial one and hence assessee was justified in claiming deduction u/s.54F - HELD THAT - What we find is that neither the Ld.AO nor the Ld.CIT(A) had carefully not gone through the conveyance deeds through which the assessee had acquired the residential houses. AO had simply stated that letting out of a flat to a company for conducting its business did not change the nature of the flat. Ld.CIT(A) on the other hand went by the pre-amble of the Conveyance Deed. We are therefore of the opinion that the question whether the assessee owned more than two residential properties and whether one of such property could be considered as commercial flat and could be excluded for application of Sec.54F of the Act requires a fresh look by the AO. We set-aside the order of the lower authorities and remit the question whether assessee was eligible to claim deduction u/s.54F of the Act back to the file of the AO for fresh consideration in accordance with law.

Summary

Issues:
1. Delay in filing appeal by Revenue.
2. Nature of receipt on transfer of intangible asset.
3. Eligibility of deduction u/s.54F of the Income Tax Act.
4. Interpretation of residential property as commercial for deduction u/s.54F.

Analysis:
1. The appeal was filed by the Revenue with a delay of 3 days, which was condoned by the Tribunal after acceptable reasons were shown. The grounds raised included the disagreement with the order of the ld.CIT(A) and the treatment of receipt of Rs. 16.49 crores as Long Term Capital Gain. The Tribunal admitted the appeal despite the delay.

2. The issue of the nature of receipt on the transfer of the intangible asset, a trade mark, was discussed. The Tribunal referred to a previous order related to co-owners of the same trade mark, where it was established that the gains arising from the transfer were long term in nature. The Tribunal upheld the decision of the ld.CIT(A) regarding the treatment of gains as long term capital gains.

3. Regarding the eligibility of deduction u/s.54F of the Act, the AO denied the claim based on the assessment that the assessee owned more than one residential property. However, the ld.CIT(A) found that one of the properties was commercial, justifying the deduction claim. The Tribunal noted discrepancies in the assessment and remitted the question of eligibility for deduction back to the AO for a fresh examination.

4. The interpretation of a residential property as commercial for the purpose of deduction u/s.54F was a key point of contention. The Tribunal found that a thorough review of the conveyance deeds was necessary to determine if the property could be excluded as a commercial flat. The Tribunal set aside the lower authorities' orders and directed the AO to reevaluate the eligibility for the deduction in accordance with the law.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, emphasizing the need for a detailed reassessment of the eligibility for deduction u/s.54F based on the nature of the residential properties owned by the assessee.