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2020 (12) TMI 348 - AT - Income TaxDeduction u/s 54F - except for making submission that the construction of residential building started in the month of June,2014, the assessee did not furnish any proof in support of this claim such as vouchers and bills for purchase of construction materials, payment of labour charges, house construction account - HELD THAT - One may build a house consisting of four bedrooms (all in same or in different floors) or in such a manner than an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. The physical structuring of the new residential house, whether it is lateral or vertical, cannot come in the way of considering the building as a residential house. The fact that the residential house consists of several independent units cannot be permitted to act as an impediment to the allowance of the deduction u/s 54/54F. It is neither expressly nor by necessary implication prohibited. Assessee in principle, is entitled for deduction under section 54F in respect of investment made in impugned property subject to production of other relevant evidence by the assessee before the A.O. In the present case, the assessee has not filed relevant evidences for incurring the cost on new residential house before the A.O. Hence, we inclined to restore the issue to the file of A.O. for quantification purpose the deduction u/s 54F of the Act. The assessee is directed to produce all relevant evidences in support of the claim of deduction u/s 54F of the Act. Appeal of the assessee is allowed for statistical purposes.
Issues Involved:
1. Computation of Long-Term Capital Gains 2. Indexed Cost of Acquisition 3. Exemption under Section 54F of the Income Tax Act, 1961 4. Interest under Sections 234-A and 234-B of the Income Tax Act, 1961 Detailed Analysis: 1. Computation of Long-Term Capital Gains: The assessee contested the computation of long-term capital gains at ?1,73,90,462, arguing that the entire gross consideration received on the sale of property should not be treated as capital gains. The CIT(A) upheld the computation without considering the indexed cost of acquisition. 2. Indexed Cost of Acquisition: The assessee argued that the indexed cost of acquisition for the property sold should have been determined and allowed while computing capital gains. Since the property was held before 01/04/1981, the fair market value as of 01/04/1981 should have been adopted as the cost of acquisition, and the indexed cost should have been allowed as a deduction. This argument was not addressed by the CIT(A). 3. Exemption under Section 54F of the Income Tax Act, 1961: The main issue argued by the assessee was the disallowance of exemption under Section 54F. The assessee claimed to have constructed a residential house using the sale proceeds and provided evidence such as a valuation report, municipal tax paid receipts, and utility connections. However, the AO disallowed the claim due to a lack of supporting documents like the sanctioned plan, completion certificate, and detailed construction expenses. During appellate proceedings, additional documents were submitted, but the CIT(A) questioned the validity of these documents, especially the approval for utility connections without a sanctioned plan. The CIT(A) also noted that the valuation report indicated multiple residential units, making the assessee ineligible for exemption under Section 54F, which requires the construction of "a residential house." The assessee argued that the entire building should be considered a single residential unit for tax purposes, citing judgments from the Karnataka High Court and ITAT Bangalore. The Revenue countered that the amended provision of Section 54F, applicable from 01.04.2015, allows exemption only for one residential house. The Tribunal held that the assessee is entitled to exemption under Section 54F in principle, provided relevant evidence is produced. The case was restored to the AO for quantification of the deduction, with directions for the assessee to submit all necessary documents. 4. Interest under Sections 234-A and 234-B of the Income Tax Act, 1961: The assessee denied liability for interest under Sections 234-A and 234-B, arguing that the levy should be canceled based on the facts and circumstances of the case. This issue was not adjudicated in detail as the primary focus was on the Section 54F exemption. Conclusion: The appeal was allowed for statistical purposes, with the Tribunal directing the AO to reassess the deduction under Section 54F based on the submission of additional evidence by the assessee. The Tribunal emphasized a liberal interpretation of Section 54F to encourage the construction of new residential properties.
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