2013 (11) TMI 1744 - AT - Income Tax

Summary

Issues Involved:

1. Deletion of addition made on account of denial of relief u/s 54F.
2. Non-production of documentary evidence for construction of a new house.
3. Interpretation of the conditions laid down u/s 54F.

Summary:

1. Deletion of addition made on account of denial of relief u/s 54F:

The revenue appealed against the CIT(A)'s order deleting the addition of Rs. 46,66,562/- made by the AO on account of denial of relief u/s 54F. The AO had rejected the assessee's claim for deduction u/s 54F on the grounds that the assessee did not complete the construction of the residential house within three years from the date of sale of the property. The CIT(A) allowed the assessee's claim, citing the Karnataka High Court's decision in CIT v. Sambandam Udaykumar, which held that the completion of construction or occupation is not a requirement for claiming deduction u/s 54F, as long as the capital gain has been invested in the construction of a residential house.

2. Non-production of documentary evidence for construction of a new house:

The AO contended that the assessee failed to produce documentary evidence to show that there was a construction of a new house. The assessee's husband, in his statement recorded u/s 131, admitted that due to financial constraints, the construction could not be completed within the stipulated period. However, the CIT(A) accepted the assessee's evidence of progress in construction and photographs, and held that the assessee had commenced construction within the stipulated period, thus entitling her to the benefit of section 54F.

3. Interpretation of the conditions laid down u/s 54F:

The Tribunal upheld the CIT(A)'s order, agreeing that the essence of section 54F is whether the capital gain has been invested in constructing a residential house. The Tribunal noted that the assessee had invested the entire capital gain in purchasing the plot and had commenced construction within the stipulated period. The Tribunal emphasized that the Karnataka High Court's decision in Sambandam Udaykumar supports a liberal interpretation of section 54F, allowing the benefit even if the construction is not complete in all respects within the stipulated period. Consequently, the Tribunal dismissed the revenue's appeal and confirmed the CIT(A)'s order allowing the deduction u/s 54F.

Conclusion:

The appeal by the revenue was dismissed, and the order of the CIT(A) allowing the assessee's claim for deduction u/s 54F was confirmed. The Tribunal emphasized the liberal interpretation of section 54F, focusing on the investment of capital gain in the construction of a residential house rather than the completion of construction within the stipulated period.