2018 (6) TMI 155 - AT - Income Tax

Exemption u/s. 54F - computation of eligible exemption claim - Held that - The total cost of the new house claimed by the assessee is to the tune of ₹ 16,81,77,850/- as against ₹ 16 crore noted in the orders of the lower authorities. In our view, if the assessee is able to satisfy that spending of ₹ 81,77,850/- is also within the stipulated period and meets the other conditions prescribed u/s. 54F, the same deserves to be considered for computing the eligible exemption. Since this involves appreciation of factual aspects, for this purpose, we deem it fit and proper to restore the matter back to the Assessing Officer, who shall examine the said limited plea of the assessee and, thereafter compute the eligible exemption u/s. 54F of the Act as per law

Issues Involved:
1. Disallowance of deduction under Section 54F for payments made beyond the due date.
2. Allowance of exemption under Section 54F for multiple flats treated as a single residential unit.
3. Usage of borrowed funds for the purchase of new residential units.
4. Quantum of exemption allowable under Section 54F.

Detailed Analysis:

1. Disallowance of deduction under Section 54F for payments made beyond the due date:
The assessee's claim for deduction under Section 54F was disallowed by the CIT(A) for payments of ?50,00,000 and ?75,00,000 made beyond the due date of filing the return under Section 139(1). The CIT(A) noted that the payments were made after the stipulated date of 30.09.2009, and the assessee had not deposited any sum under the Capital gains scheme. Consequently, the exemption was limited to ?14,75,00,000 out of the total payment of ?16 crore.

2. Allowance of exemption under Section 54F for multiple flats treated as a single residential unit:
The primary issue was whether the acquisition of four flats constituted one residential house. The Assessing Officer initially disallowed the claim, arguing that the flats were independent residential units. However, the CIT(A), based on a remand report from the Assessing Officer confirming that the four flats had a common entrance and kitchen, treated them as a single residential unit. This decision was supported by the judgment of the Bombay High Court in the case of CIT vs. Devdas Naik, which held that multiple units with a single kitchen could be considered one residential house for Section 54F purposes.

3. Usage of borrowed funds for the purchase of new residential units:
The Assessing Officer objected to the use of borrowed funds for purchasing the new flats, claiming it disqualified the exemption under Section 54F. However, the CIT(A) rejected this objection, citing the Bombay High Court judgment in CIT vs. Dr. P S Parischa, which clarified that the source of funds is irrelevant as long as the new residential house is purchased within the specified period.

4. Quantum of exemption allowable under Section 54F:
The assessee contended that the total cost of the new house was ?16,81,77,850, not ?16 crore as noted by the lower authorities. The Tribunal acknowledged that if the assessee could prove the spending of ?81,77,850 within the stipulated period, it should be considered for exemption under Section 54F. Thus, the matter was remanded back to the Assessing Officer for verification and appropriate relief.

Conclusion:
The appeals by the Revenue were dismissed, and those by the assessee were partly allowed. The Tribunal upheld the CIT(A)'s decision that the four flats constituted a single residential unit and that the use of borrowed funds did not disqualify the exemption. However, the quantum of exemption was remanded to the Assessing Officer for verification of the additional amount claimed by the assessee. The same findings applied mutatis mutandis to the related appeals of another family member, with directions for the Assessing Officer to examine the additional claim similarly.

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