2014 (8) TMI 952 - AT - Income Tax

Exemption under section 54F - Revision of assessment - contravention of 'proviso (a) to sub section (1) of section 54F - Held that - It is not at all clear from the order under section 154 how the proviso to section 54F (1) has been contravened in this case. The assessee has categorically stated that the residential house at Kalkaji and the plot of land at Faridabad had been purchased out of the sale consideration of the land sold. Section 54F lays down that the exemption for investment in a new residential house is not allowable if the assessee is already the owner of 'more than one residential house, other than the new asset'. - assessee is the owner of only one residential house, purchased on 17.12.2007, well within the time of two years after the date on which the transfer took place. We find that Ld. CIT(A) has rightly observed that no case can be made out for denial of exemption under section 54F as the assessee has purchased the residential house in accordance with the provisions. Certainly the assessee was not entitled to the exemption under section 54F of the balance amount of ₹ 1,00,29,500/- for purchase of land, and the said claim was withdrawn during the assessment proceedings. It should also be stated that withdrawal of exemption under section 54F is certainly outside the scope of section 154, and there is no mistake apparent from the record which could have been rectified by the Assessing Officer. After carefully examining the facts of this case, the disallowance of the claim of exemption under section 54F in the order under section 154 was rightly deleted by the Ld. CIT(A). - Decided against Revenue.

Summary

Issues:
1. Interpretation of provisions of section 54F of the Income Tax Act regarding exemption for investment in residential properties.
2. Validity of withdrawal of exemption under section 54F by the Assessing Officer.
3. Assessment of long term capital gains and eligibility for exemption under section 54F.

Analysis:
1. The main issue in this case revolved around the interpretation of section 54F of the Income Tax Act, which provides for exemption on capital gains for investment in residential properties. The Revenue contended that the assessee purchased a second new residential property within one year of the transfer of the original assets, contravening the provisions of section 54F. However, the assessee argued that he had purchased the properties in accordance with the law. The Assessing Officer initially accepted the revised claim of exemption but later withdrew it under section 154, alleging a contravention of the proviso to section 54F(1).

2. The validity of the withdrawal of exemption under section 154 was challenged by the assessee before the Ld. CIT(A), who extensively examined the issue and concluded that there was no basis for denying the exemption under section 54F. The Ld. CIT(A) observed that the assessee had purchased the properties within the stipulated time frame and in compliance with the provisions of section 54F. It was noted that the withdrawal of exemption under section 154 was beyond its scope, and there was no apparent mistake that warranted rectification by the Assessing Officer.

3. The assessment of long term capital gains and the eligibility for exemption under section 54F were crucial aspects of the case. The assessee had disclosed long term capital gains on the sale of land and claimed exemption under section 54F for investment in two new residential properties. The Assessing Officer initially allowed the exemption but later withdrew it under section 154. The appellate tribunal upheld the order of the Ld. CIT(A) and decided the issue against the Revenue, affirming that the assessee was entitled to the exemption under section 54F for the properties purchased within the specified period.

In conclusion, the appeal filed by the Revenue was dismissed, and the cross objection by the Assessee was also dismissed as infructuous. The judgment emphasized the importance of adhering to the provisions of the Income Tax Act, particularly in cases involving exemptions and capital gains, and highlighted the significance of a thorough examination of facts and legal requirements in such matters.