2018 (3) TMI 1791 - AT - Income Tax

Deduction u/s.54F - CIT(A) restricting the claim of deduction by excluding the portion of the residential building which was used for business purpose - HELD THAT - On the plain reading of the provisions of Section 54F of the Act, we do not find any bar on the assessee as how he has to put to use the new residential property constructed / purchased by him for claiming the benefit of deduction U/s.54F of the Act. Section 54F of the Act only stipulates that the assessee should have constructed / purchased a residential house within the stipulated time in order to claim the benefit of deduction. This proposition is fortified by the decision of various Judicial forum enumerated herein below. The Delhi Bench of the Tribunal in the case Mahavir Prasad Gupta Vs. JCIT 2005 (10) TMI 231 - ITAT DELHI-G has held that the use of the property is not a relevant criteria to consider the eligibility for claiming benefit U/s.54F of the Act. The only criterion is whether the assessee has constructed / purchased a residential house with in the stipulated period mentioned in the Act. Also see SHRI SHYAMLAL TANDON VERSUS INCOME TAX OFFICER, WARD 7(4), HYDERABAD 2014 (4) TMI 867 - ITAT HYDERABAD Thus we hereby direct the Ld.AO to grant the benefit of deduction U/s. 54 of the Act to the assessee for the entire value of the building constructed without looking into as to how the Residential property was utilized by the assessee. - Decided against revenue.

Summary

Issues:
1. Assessee's appeal regarding deduction U/s.54F of the Act.
2. Revenue's appeal challenging the exemption granted U/s.54F of the Act.

Assessee's Appeal Analysis:
The assessee appealed against the order restricting the deduction U/s.54F of the Act from ?3,38,76,455 to ?2,10,76,603, excluding the portion of the residential building used for business purposes. The case involved the assessee, earning income from business and share trading, filing a return for the assessment year 2013-14. Initially processed under U/s.143(1), scrutiny under CASS led to an assessment under U/s.143(3) where the AO computed Long Term Capital Gain at ?2,29,14,340, considering the building's value used for residential purpose only. On appeal, the CIT(A) found that a portion of the building was used for commercial purposes and granted a deduction of ?2,10,77,603 U/s.54F, differing from both the AO's and assessee's calculations.

Revenue's Appeal Analysis:
The Revenue appealed against the CIT(A)'s decision to grant exemption U/s.54F of the Act. The brief facts highlighted the assessee's income sources and the assessment details. The CIT(A) proportionately calculated the value of the property used for residential purpose and allowed a deduction accordingly, leading to a revised Long Term Capital Gain amount. The assessee argued for the deduction on the entire building constructed for residential purposes, citing judicial precedents. The DR supported the AO's decision. The Tribunal analyzed Section 54F, emphasizing the requirement to construct/purchase a residential house within the stipulated time for claiming the deduction, irrespective of how the property is utilized. Citing judicial decisions, the Tribunal directed the AO to grant the deduction for the entire building constructed, disregarding its specific usage by the assessee.

In conclusion, the Tribunal allowed the assessee's appeal, directing the AO to grant the deduction for the entire building, rendering the Revenue's appeal groundless. The judgment highlighted the interpretation of Section 54F and the precedence set by judicial authorities, emphasizing the eligibility for deduction based on the construction/purchase of a residential property within the specified period, without consideration of its actual use by the assessee.