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2019 (8) TMI 1735 - AT - Income TaxDeduction u/s. 54F - only objection that assessee has sold two commercial properties with two distinct sale deeds and made investment in one residential property to claim exemption u/s. 54 of the total capital gain received on sale of two commercial properties and it is not allowable because it is not permissible u/s. 54F - HELD THAT - As decided in SMT. KG. RUKMINIAMMA 2010 (8) TMI 482 - KARNATAKA HIGH COURT as referring the use of term a in respect of both the properties i.e. the original property on whose sale long term capital gain has arisen and also to the new property in which investment has been made after such sale to claim such deduction u/s. 54/54F of the IT Act. Hon'ble Karnataka High Court has specifically held that with regard to the original property on sale of which the long term capital gain has arisen i.e. the original asset, the term used is a long term capital asset buildings or lands and being a residential house. Based on this, this was the finding of Hon'ble Karnataka High Court in this para that the term a residential house used in section 54 makes it clear that it is not to convey the meaning that it refers to a single residential house. Hence in our considered opinion, the issue in the present case is squarely covered in favour of the assessee and against the revenue by this judgment of Hon'ble Karnataka High Court and respectfully following the same, we hold that the authorities below were not justified in rejecting the claim of the assessee for deduction u/s. 54F on this basis that the assessee has sold two commercial properties and claimed deduction u/s. 54F. There is no other objection of the authorities below regarding the assessee s eligibility for deduction u/s. 54F of the IT Act. But still we feel it proper to restore back this matter to the file of AO to quantify and allow deduction u/s. 54F of the IT Act as per law. If it is found that the assessee has purchased a new eligible residential house property within prescribed time, then it should be held that the assessee is eligible for deduction u/s. 54F and deduction should be quantified and allowed as per law. - Appeal filed by the assessee is allowed for statistical purposes.
Issues Involved:
1. Eligibility for deduction under section 54F of the Income Tax Act in case of sale of two commercial properties and investment in one residential property. 2. Disallowance of loss claimed from a house property. Analysis: Issue 1: Eligibility for deduction under section 54F: The appeal was filed by the assessee against the order of the ld. CIT(A)-4, Bangalore dated 08.03.2019 for Assessment Year 2012-13. The AO contended that the assessee is not eligible for deduction u/s. 54F as the capital gain arose from the sale of two commercial properties purchased separately. The AO referred to sections 54 and 54F of the IT Act, stating that deduction is allowable for capital gain arising from the transfer of a long term capital asset. The AO concluded that since the capital gain arose from the sale of two properties, the assessee is not eligible for deduction u/s. 54/54F. The ld. AR of the assessee cited Tribunal orders and a judgment of the Hon'ble Karnataka High Court to support the claim for deduction. The ld. CIT(A) upheld the disallowance, stating that the exemption under sec. 54F is restricted to one transaction and disallowed the exemption claimed on the sale of two properties amounting to ?56,22,000. Analysis Continued: The Tribunal noted that the assessee sold two commercial properties with two distinct sale deeds and aimed to invest in one residential property to claim exemption u/s. 54F. The Tribunal referred to a judgment of the Hon'ble Karnataka High Court, which clarified that the term "a residential house" in section 54 does not refer to a single residential house but allows for plural interpretation. The Tribunal held that the authorities were not justified in rejecting the claim for deduction u/s. 54F based on the sale of two commercial properties. The Tribunal ordered the matter to be restored to the AO to quantify and allow the deduction u/s. 54F as per law, provided the assessee purchased an eligible residential house property within the prescribed time. Issue 2: Disallowance of loss claimed from a house property: The assessee raised a ground regarding the disallowance of a loss of ?37,249 from a house property. The AO disallowed the loss claimed by the assessee as no notional income was offered from a vacant let-out property. The ld. CIT(A) agreed with the AO's observation, stating that the assessee was not entitled to claim a loss on this property. Conclusion: The Tribunal allowed the appeal for statistical purposes, holding that the authorities were not justified in rejecting the claim for deduction u/s. 54F based on the sale of two commercial properties. The Tribunal ordered the matter to be sent back to the AO to quantify and allow the deduction as per law if the assessee had purchased an eligible residential house property within the prescribed time. Additionally, the disallowance of the loss claimed from a house property was upheld by the ld. CIT(A).
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