2015 (9) TMI 698 - AT - Income Tax

Entitlement to exemption u/s 54 - assessee contended that as the assessee had acquired the under construction flat within 3 years from the date of transfer of ancestral property thus she had rightly claimed exemption u/s 54 - Held that - The assessee in this case had booked the under construction house and made the initial payment of ₹ 5 lakh to the developer before the expiry of stipulated period two years meant for the purchase of an already built up house and had further paid the entire capital gain money for the purchase of under construction house and the possession of the constructed house was also delivered to him within the stipulated period of 3 years, therefore the events in the intervening period are immaterial as the ultimate purpose of the beneficial provision is acquiring of a residential house by the assessee. The case of the assessee fits into the requirements of the beneficial provisions of section 54F read with the CBDT Circulars as noted above for treating the same as construction of the house, entitling her the benefit of exemption from tax. Our above view finds strength in the decision of the Hon ble Karnataka High Court in the case of CIT & Anr. Vs. Sambandam Udaykumar 2012 (3) TMI 80 - KARNATAKA HIGH COURT - Decided in favour of assessee. Assessee herself had withdrawn her claim before the AO as contented by DR - Held that - As find from the record that the assessee before the AO had never stated that she had purchased an already built house. It was stated before the AO that she had purchased an underconstruction house. The date of allotment and that of the payments made and thereafter delivery of the possession of the house has never been disputed by the AO. Despite given all the explanation, the AO was not satisfied and therefore the assessee being a household lady and not aware of the provisions of the I.T. Act had withdrawn the claim, which seems to be under pressure. Even otherwise, the legal claim to which the assessee is otherwise entitled to, can not be denied to her when she had given sufficient explanation regarding the same before the AO, which, in our view, is quite convincing and justified. - Decided in favour of assessee.

Summary

Issues:
- Disallowance of exemption u/s. 54F of the Income Tax Act by the AO.
- Upholding of disallowance by the CIT(A).
- Claim of exemption u/s. 54F before the Tribunal.
- Interpretation of provisions of section 54F and relevant CBDT Circulars.
- Re-agitation of claim before appellate authority.
- Withdrawal of claim by the assessee before the AO.

Analysis:
The appeal was filed by the assessee against the CIT(A)'s order confirming the disallowance of exemption u/s. 54F of the Income Tax Act made by the Assessing Officer (AO) for the Assessment Year 2010-11. The assessee claimed exemption for the purchase of a flat, but the AO raised a demand as the purchase was made after two years from the sale of the old property. The CIT(A) upheld the disallowance stating the flat purchased was ready for occupation, not under construction, and the claim was withdrawn before the AO. The Tribunal heard arguments where the assessee contended the purchase was within the stipulated period and the capital gains accrued in the previous financial year. The Tribunal noted the agreement for the under-construction house was made within the required period, and the possession was received on time. The CBDT Circulars were referred to, emphasizing the liberal interpretation of section 54F for promoting residential house construction. The Tribunal cited a Karnataka High Court decision supporting the assessee's claim under section 54F.

The Tribunal found the assessee entitled to claim exemption u/s. 54F as the purchase of the under-construction house and possession were within the specified period. The AO's dissatisfaction despite explanations and the withdrawal of claim by the assessee were considered in light of the circumstances. The Tribunal highlighted the legal entitlement of the assessee to the claim, supported by convincing explanations provided earlier. As a result, the appeal filed by the assessee was allowed, granting the exemption u/s. 54F of the Income Tax Act.