2016 (7) TMI 538 - AT - Income Tax

Claim of deduction u/s 54F denied - assessee is not able to get the title of the flat registered in his name or unable to get the possession of the flat, which is under construction - Held that - It is a fact that the assessee has invested this amount of ₹ 18,60,000/- in purchase of residential house within the stipulated period prescribed u/s 54F of the Act. But, it is not in the assessee s hand to get the flat completed or to get the flat registered in his name, because it was incomplete. The intention of the assessee is very clear that he has invested almost the entire sale consideration of land in purchase of this residential flat. It is another issue that the flat could not be completed and the matter is pending before the Hon ble Bombay High Court seeking relief by the assessee by filing suit for direction to the Builder to complete the flat. It is impossible for the assessee to complete other formalities i.e. taking over possession for getting the flat registered in his name and this cannot be the reason for denying the claim of the assessee for deduction u/s 54 of the Act. In view of the above facts of the case, we are of the view that the assessee is entitled for deduction u/s. 54F of the Act, because the assessee has already invested a sum of ₹ 18.60 lakhs in the residential property under construction within the time limit prescribed u/s. 54F of the Act - Decided in favour of assessee.

Summary

Issues:
Appeal against disallowance of deduction u/s 54F of the Income Tax Act, 1961.

Detailed Analysis:

1. Background:
The appeal pertains to the disallowance of the claim of deduction u/s 54F of the Income Tax Act, 1961. The assessee sold a plot of land and invested in an under-construction flat to avail the deduction.

2. Grounds of Appeal:
The appellant challenged the order of the CIT (A) disallowing the deduction u/s 54F. The main contention was that the appellant complied with all requirements of section 54F by investing in a residential house under construction.

3. AO's Disallowance:
The Assessing Officer disallowed the claim as the property was incomplete, and the registered document was not filed by the assessee within the stipulated time. The CIT (A) upheld this decision based on the obligation of the assessee to ensure the eligibility of the under-construction building.

4. Tribunal's Analysis:
After considering the facts and contentions, the Tribunal noted that the assessee invested in an under-construction flat within the prescribed period. The assessee faced difficulties in completing the formalities due to disputes with the builder, leading to a civil suit filed by the assessee against the developer.

5. Decision and Rationale:
The Tribunal held that the assessee fulfilled the conditions of section 54F by investing in the residential property under construction. Despite being unable to register or possess the flat due to external factors, the assessee's intention to utilize the sale proceeds for the new property was evident. The Tribunal concluded that denial of deduction solely based on the incomplete status of the property would be unjust. Therefore, the assessee was deemed entitled to the deduction u/s 54F.

6. Outcome:
Consequently, the Tribunal allowed the appeal of the assessee, emphasizing the fulfillment of statutory conditions despite the inability to complete formalities due to external circumstances.

This detailed analysis highlights the key aspects of the judgment, including the grounds of appeal, the reasoning behind the disallowance, the Tribunal's assessment, and the final decision in favor of the assessee.