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2013 (10) TMI 776 - AT - Income TaxDeduction u/s 54F of the Income Tax Act Construction after the date of transfer of capital asset Held that - Transfer with respect to 4 flats by means of registered sales deed took place in FY 2008-09 relevant to AY 2009-10 - Building was constructed between 1.2.2007 and 23.10.2008 and the BU permission was granted by AMC on 23.10.2008 meaning thereby that no construction activity took place after 23.10.2008. For grant of deduction u/s 54F in case of construction of a residential house, the condition is that the assessee has within a period of three years after the date of transfer of long term asset, constructed a residential house. In the present case, since the construction took place prior to the date of transfer, CIT(A) has rightly appreciated the facts and by his well reasoned order held that Assessee is not eligible for deduction u/s 54F - Ld. A.R. could not bring any decision of any High Court in support of his contention where it has been held that even the construction of residential house before the date of transfer would be eligible for deduction u/s 54F Decided against the Assessee.
Issues Involved:
1. Rejection of deduction claim under Section 54F. 2. Addition of Rs. 2,00,000/- as unexplained expenditure. 3. Addition of Rs. 1,00,000/- as undisclosed income from the sale of scrap. 4. Treatment of Rs. 64,34,143/- as business income by the Revenue. Issue-wise Detailed Analysis: 1. Rejection of Deduction Claim under Section 54F: The Assessee claimed a deduction of Rs. 58,87,176/- under Section 54F for investment in a residential house from the Long Term Capital Gain (LTCG) arising from the sale of land. The CIT(A) rejected this claim, noting that the Assessee did not meet the conditions for the deduction. Specifically, the Assessee failed to complete the construction of the residential house within three years from the date of transfer of the asset. The CIT(A) observed that the transfer of the flats took place between September 2008 and January 2009, while the construction was completed by October 2008. Therefore, the construction did not occur within the stipulated period post-transfer. The Tribunal upheld this decision, stating that the Assessee could not provide any High Court decisions supporting the claim that pre-transfer construction qualifies for Section 54F deduction. 2. Addition of Rs. 2,00,000/- as Unexplained Expenditure: The AO added Rs. 2,00,000/- to the Assessee's income, considering it as unexplained expenditure for the demolition of the old bungalow. The CIT(A) confirmed this addition, arguing that demolition involves costs, which were not disclosed by the Assessee. The Tribunal, however, found that the AO's estimation lacked tangible evidence and directed the deletion of this addition. 3. Addition of Rs. 1,00,000/- as Undisclosed Income from the Sale of Scrap: The AO added Rs. 1,00,000/- as income from the sale of timber, steel, copper, etc., generated from the demolition of the old bungalow. The CIT(A) upheld this addition, dismissing the Assessee's claim that these materials were reused in the new construction. The Tribunal found that the AO and CIT(A) did not base their conclusions on tangible evidence and directed the deletion of this addition as well. 4. Treatment of Rs. 64,34,143/- as Business Income by the Revenue: The AO treated the income from the sale of flats as business income, arguing that the Assessee's activities constituted an adventure in the nature of trade. The CIT(A) disagreed, stating that the Assessee was not engaged in any business activity at the time of converting the bungalow into flats. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue could not provide any contrary evidence to support its claim. Thus, the addition of Rs. 64,34,143/- as business income was deleted. Conclusion: The Tribunal upheld the CIT(A)'s decision to reject the Assessee's claim for deduction under Section 54F and confirmed the deletion of Rs. 64,34,143/- as business income. However, it directed the deletion of the additions of Rs. 2,00,000/- as unexplained expenditure and Rs. 1,00,000/- as undisclosed income from the sale of scrap. The Assessee's appeal was partly allowed, and the Revenue's appeal was dismissed.
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