2011 (11) TMI 710 - AT - Income Tax

Summary

Issues Involved: Dispute over expenses incurred for completing a flat for benefit u/s 54F of the Income Tax Act.

Summary:

Issue 1: Consideration of Expenses for Benefit u/s 54F

The assessee sold a residential flat and invested the proceeds in a new property. Dispute arose over the expenses incurred before completion of the new flat for claiming deduction u/s 54F. The AO did not consider the additional expenditure of &8377; 43.00 lacs as part of the cost of the new flat, stating it was for improvement. The CIT(A) upheld this decision, stating the supplementary agreements were not part of the cost of acquisition. The Tribunal, however, found the claim justified as the expenses were necessary for making the flat habitable. The matter was remanded to the AO for verification.

Issue 2: Verification of Expenditure

The Tribunal noted that all expenditure incurred for acquisition of the new flat before taking possession should be considered as part of the cost. The claim of engaging other contractors for finishing work was found reasonable, as suggested by the builder. The Tribunal emphasized the need to verify the genuineness of the expenditure to prevent any inflation of costs. The order of the CIT(A) was set aside, and the matter was remanded to the AO for a fresh order after necessary examination.

Conclusion

The Tribunal allowed the appeal of the assessee for statistical purposes, emphasizing the need for verification of expenses before considering them for deduction u/s 54F.