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2018 (3) TMI 1098 - AT - Income TaxLTCG - Disallowing benefit of investment made u/s 54F for purchase of residential house - two adjacent properties purchased - non deposition of sale consideration in capital gain account scheme in accordance with scheme of section 54F(2) - Held that - Prior to the amendment of the provisions of section 54F vide Finance Act 2014 with effect from 01.04.2015, the two adjacent properties would be considered as single residential house for the purpose of deduction under section 54F. Similar view has been taken in the case of CIT vs. D. Ananda Basappa (2008 (10) TMI 99 - KARNATAKA HIGH COURT) and held that two flats purchased side by side are eligible for deduction u/s 54F of the Act. As in the case of Abhijit Bhandar vs. CIT (2017 (6) TMI 602 - MADRAS HIGH COURT) has held that benefit under section 54 for purchase of two adjacent flats as single residential unit cannot be denied. Accordingly, we are of the considered view that in the absence of denial of fact that these two properties are adjacent to each other and to be used by the assessee for his residential purposes, the benefit under section 54F cannot be denied merely because the assessee has purchased two houses. As regards the non deposit of the amount in the Capital Gain Account Scheme, we note that the assessee has sold the agricultural land on 30th November, 2012 and the house was purchased on 30.10.2014. Therefore, the investment made by the assessee is within two years from the sale of the existing asset and is not beyond the stipulated period as provided under section 54F of the Act. When the assessee has invested the amount within the stipulated period as provided under the provisions of section 54F, then the substantial requirement as per section 54F(1) is satisfied. - Decided in favour of assessee
Issues Involved:
1. Legality of the demand created by the AO. 2. Disallowance of benefit under Section 54F for the purchase of a residential house. 3. Rebuttal of the agreement for purchase of a constructed residential house. 4. Treatment of two houses as a single residential unit. 5. Consideration of sale consideration at DLC value versus actual sale consideration. Issue-wise Detailed Analysis: 1. Legality of the Demand Created by the AO: The assessee challenged the legality and justification of the demand created by the AO. The appeal sought to declare the order passed by the AO as illegal and unjustified based on the facts and circumstances of the case. 2. Disallowance of Benefit Under Section 54F for the Purchase of a Residential House: The primary issue raised was the disallowance of deduction under Section 54F concerning the investment made in the house purchased on 13.10.2014. The AO noted that the assessee claimed deductions under Section 54F and Section 54B against the long-term capital gain from the sale of agricultural land. While the AO allowed the deduction for the residential house No. 784 and agricultural land, the deduction for house No. 784A was denied due to non-deposition of the sale consideration in the Capital Gain Account Scheme before the due date of filing the return of income under Section 139. The CIT (A) confirmed this disallowance, treating the two houses as separate units and noting the non-compliance with the deposit requirement. 3. Rebuttal of the Agreement for Purchase of a Constructed Residential House: The assessee argued that the agreement dated 19.01.2013 for purchasing house No. 784A was rebutted due to non-fulfillment of the condition to deliver possession within ten months. The CIT (A) confirmed the AO's decision without providing cogent reasons, which the assessee claimed was arbitrary and unjustified. 4. Treatment of Two Houses as a Single Residential Unit: The assessee contended that both houses (No. 784 and 784A) constituted a single residential unit as per family requirements. The AO and CIT (A) treated them as separate units, denying the deduction under Section 54F for house No. 784A. The assessee relied on various judicial precedents, including decisions from the Hon'ble Jurisdictional High Court and other High Courts, which held that adjacent properties used as a single residential unit qualify for deduction under Section 54F. The Tribunal agreed with the assessee, noting that the two adjacent properties should be considered a single residential unit for the purpose of Section 54F deduction. 5. Consideration of Sale Consideration at DLC Value Versus Actual Sale Consideration: The assessee argued that the AO erred in taking the sale consideration at the DLC value of ?2,10,58,043/- instead of the actual sale consideration of ?2,01,00,000/-. The CIT (A) confirmed the AO's order, which the assessee sought to declare as illegal. Conclusion: The Tribunal concluded that the assessee was eligible for deduction under Section 54F for the investment made in the house purchased on 13.10.2014. It held that the two adjacent properties should be considered a single residential unit, and the non-deposit of the amount in the Capital Gain Account Scheme did not disqualify the assessee from the deduction, provided the investment was made within the stipulated period. The appeal of the assessee was allowed, and the order was pronounced in the open court on 13/03/2018.
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