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2016 (1) TMI 711 - AT - Income TaxEntitlement to exemption u/s 54F - contiguous units - first floor is divided into different residential units - exemption to be allowed to one unit or entire area - Held that - The CIT(A) directed the AO to conduct an enquiry and allow the exemption in respect of one residential unit. In case, the assesse is using the entire first floor area for the purpose of her self-occupation then, AO is directed to allow the deduction in respect of entire first floor. In case on enquiry, it is found that the area in first floor is divided into different residential units then, deduction may be allowed to the extent of cost of acquisition of one residential unit as per the choice of assesse. Therefore, we are of the opinion that the CIT(A) rightly allowed the claim of exemption u/s 54F and his order does not require any interference. Hence, we inclined to upheld the order of CIT(A) and reject the revenue ground. - Decided against the revenue.
Issues:
1. Validity of reassessment and chargeability of capital gains 2. Claim of exemption u/s 54F for entire capital gains Analysis: Issue 1: Validity of reassessment and chargeability of capital gains The appeal was filed by the revenue against the order of the Ld. Commissioner of Income-Tax (Appeals) for the assessment year 2008-09. The assessee entered into a joint development agreement with a builder, but claimed that no transfer took place during the relevant assessment year. The Assessing Officer (AO) issued a notice u/s 148, and after multiple correspondences, completed the assessment determining a taxable income. The assessee challenged the assessment order before the CIT(A), raising objections to the reassessment and chargeability of capital gains. The CIT(A) allowed exemption u/s 54F for one residential unit based on the development agreement. The revenue contended that since the assessee did not make any claim before the AO, she could not claim the benefit at the appellate stage. However, the ITAT held that the CIT(A) had the power to entertain the claim of deductions/exemptions based on facts existing at the time of assessment. The ITAT upheld the CIT(A)'s decision to allow the exemption u/s 54F for one residential unit. Issue 2: Claim of exemption u/s 54F for entire capital gains The assessee claimed to have converted the entire first floor into one residential unit for self-occupation. The CIT(A) relied on a special bench decision and allowed the exemption u/s 54F for a single residential unit. The ITAT analyzed the legislative intent behind the use of the words "a" and "any" in relevant sections and concluded that the exemption under sections 54 and 54F was intended for investment in one single residential house only. The CIT(A) directed the AO to allow the exemption in respect of one residential unit. The ITAT upheld the CIT(A)'s decision, stating that the order did not require any interference, and dismissed the revenue's appeal. In conclusion, the ITAT upheld the CIT(A)'s decision to allow exemption u/s 54F for one residential unit and dismissed the revenue's appeal.
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