2011 (6) TMI 890 - AT - Income Tax

Deduction u/s 54F - Meaning of Residential House - CIT(A) deleted the addition which the AO had allowed in respect of only one unit by treating the units as two separate residential properties HELD THAT - We find that issue is squarely covered in favour of the assessee by the decision of the Hon ble Karnataka High Court in the case of COMMISSIONER OF INCOME-TAX VERSUS SMT. KG. RUKMINIAMMA 2010 (8) TMI 482 - KARNATAKA HIGH COURT , where it was held that, The context in which the expression a residential house is used in sec. 54 makes it clear that it was not the intention of the legislation to convey the meaning that it refers to a single residential house. As in the earlier part, the words used are buildings or lands which are plural in number and that is referred to as a residential house , the original asset. An asset newly acquired after the sale of the original asset also can be buildings or lands appurtenant thereto, which also should be a residential house . Therefore, the letter a in the context it is used should not be construed as meaning singular . But, being an indefinite article, the said expression should be read in consonance with the other words buildings and lands and, therefore, the singular a residential house also permits use of plural by virtue of sec. 13(2) of the General Clauses Act COMMISSIONER OF INCOME-TAX AND ANOTHER VERSUS D. ANANDA BASAPPA 2008 (10) TMI 99 - KARNATAKA HIGH COURT We do not find any infirmity or illegality in the order of the CIT(A) and hence, uphold the same - Decision in favour of Assessee. Portfolio Management Fees - CIT(A) deleting the addition - HELD THAT - ld. counsel of the assessee conceded that disallowance has been rightly made by the Assessing Officer. Hence, we allow this issue in favour of the Revenue.

Summary

Issues:
1. Whether the assessee is eligible for exemption under section 54F of the IT Act, 1961 for the construction of a new building on a property.
2. Whether the addition of portfolio management fees by the Assessing Officer is justified.

Analysis:

Issue 1:
The first issue raised in the appeal pertains to the eligibility of the assessee for exemption under section 54F of the IT Act, 1961 for the construction of a new building on a property. The Assessing Officer initially disallowed the exemption under section 54F, stating that the entire new property would not be eligible for deduction. The Assessing Officer allowed the exemption only for one unit, treating the two units as separate residential properties. However, the Ld. Commissioner of Income Tax (Appeals) held that the assessee is eligible for deduction under section 54 for all floors of the new building, relying on decisions of the Karnataka High Court. The Tribunal upheld the Ld. Commissioner's order, stating that the issue is covered in favor of the assessee by the decision of the Hon'ble Karnataka High Court. The Tribunal found no infirmity in the Ld. Commissioner's order and upheld the same.

Issue 2:
The second issue raised in the appeal concerns the addition of portfolio management fees by the Assessing Officer. The ld. counsel of the assessee conceded that the disallowance of the portfolio management fees was rightly made by the Assessing Officer. Consequently, the Tribunal allowed this issue in favor of the Revenue. Therefore, the appeal filed by the Revenue was partly allowed on this issue.

In conclusion, the Tribunal upheld the Ld. Commissioner of Income Tax (Appeals) order regarding the eligibility of the assessee for exemption under section 54F. However, the Tribunal allowed the Revenue's appeal partially concerning the addition of portfolio management fees. The decision was pronounced in open court on 07/6/2011 after the conclusion of the hearing.