2012 (5) TMI 744 - AT - Income Tax

Allowance of the claim of exemption u/s. 54F - Held that - Hon ble Supreme Court in the case of Vania Silk Mills P. Ltd. Vs Commissioner of Income-tax (1991 (8) TMI 2 - SUPREME Court) has laid down the principle that extinguishment of right on account of destruction or loss of asset does not amount to transfer as the assessee has invested the amount as per provisions of Sec. 54F in the residential house, the exemption cannot be denied. - Decided in favour of assessee.

Summary

Issues: Revenue's appeal against allowance of exemption u/s. 54F of the I.T. Act for assessment year 2007-08.

Analysis:
1. Facts of the Case: The appellant, an assessee, filed a return of income for the assessment year 2007-08, initially declaring total income at Rs. 19,90,049, later revised to Rs. 20,14,028. During assessment proceedings, it was discovered that the appellant had sold properties and claimed exemption u/s. 54F of the I.T. Act for investing in a new residential asset.

2. AO's Decision: The Assessing Officer (AO) denied the exemption claimed by the appellant under section 54F as the new residential asset, a bungalow in Juhu, was demolished within two years of purchase. The AO contended that the asset's demolition violated the provision that the new asset should not be transferred within three years to claim exemption.

3. CIT(A) Decision: The appellant appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who allowed the claim of exemption u/s. 54F. The CIT(A) held that the conditions for claiming exemption were met when the new asset was purchased. The demolition of the structure did not constitute a transfer, as per sub-section (3) of section 54F.

4. Appellate Tribunal's Decision: The Revenue challenged the CIT(A)'s decision before the Appellate Tribunal. The Tribunal, after hearing both parties, upheld the CIT(A)'s decision. The Tribunal found no error in the CIT(A)'s findings and confirmed the order, dismissing the Revenue's appeal.

5. Legal Precedent: The appellant cited a Supreme Court case, Vania Silk Mills P. Ltd. vs Commissioner of Income-tax, to support their argument that the destruction or loss of an asset does not amount to transfer. As the appellant had invested in the residential house as per Sec. 54F provisions, the exemption could not be denied.

6. Final Decision: The Appellate Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order allowing the exemption u/s. 54F for the appellant for the assessment year 2007-08. The order was pronounced on May 16, 2012.