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2020 (3) TMI 1271 - AT - Income TaxClaim of deduction u/s. 54F - proportionate deduction - According to the Ld. counsel the amount of deduction can be restricted to the amount of capital gain or the cost of new property whichever is less only under the provisions of Section 54 and not under Section 54F - HELD THAT - The entire amount of deduction calculated on proportionate basis is fully eligible to be claimed as deduction from capital gains. As noted that this issue has been considered exactly on identical facts in the case of Humayun Suleman Merchant 2016 (9) TMI 70 - BOMBAY HIGH COURT Assessing Officer has rightly restricted the disallowance to the extent of investment made by the assessee in purchase of new asset and thus rightly computed the exemption U/S. 54F of the Act proportionately to the amount invested - no infirmity in the orders of the lower authorities and accordingly uphold the same.
Issues:
Appeal against CIT(A) order restricting deduction U/s. 54F of the Income Tax Act. Interpretation of Section 54F vs. Section 54 provisions. Claiming full deduction under Section 54F. Applicability of previous court decisions. Compliance with Section 54F(4) regarding utilization of capital gains. Analysis: The appeal arose from the CIT(A)'s decision affirming the Assessing Officer's restriction of the deduction claimed under Section 54F of the Income Tax Act. The original assessment was conducted by the AO, where the sale consideration was admitted under Section 50C of the Act, and the exemption under Section 54F was limited. The assessee argued that the deduction should not be restricted to the investment in the new property, citing the Hon'ble Karnataka High Court's decision in Gouli Mahadevappa vs. ITO. The CIT(A) upheld the computation of deduction made by the Assessing Officer, referring to the Bombay High Court's ruling in Humayun Suleman Merchant vs. CCIT. The Tribunal was approached by the assessee against the CIT(A)'s decision. During the Tribunal hearing, the counsel for the assessee contended that the deduction under Section 54F cannot be restricted to the investment made in the new property, citing the provisions of Section 54F and comparing them with Section 54. The Tribunal noted that the issue had been addressed by the Bombay High Court in the Humayun Suleman Merchant case, where it was held that the deduction can be limited to the amount invested in the new asset. The Tribunal found no fault in the lower authorities' orders and upheld the restriction on the deduction to the extent of the investment made by the assessee in purchasing the new asset. Furthermore, the Tribunal addressed the compliance with Section 54F(4) regarding the utilization of capital gains before the date of filing the income tax return. The Tribunal noted that the entire amount subject to capital gain had not been utilized for the construction of the new house or deposited in notified bank accounts before the filing of the return of income. Referring to the interpretation of the Gauhati High Court, the Tribunal concluded that the Assessing Officer correctly restricted the disallowance to the investment made by the assessee in the new asset, upholding the computation of exemption under Section 54F proportionately to the amount invested. In conclusion, the Tribunal dismissed the appeal of the assessee, affirming the decisions of the lower authorities. The order was pronounced in an open court on 13th March 2020 in Chennai.
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