2018 (6) TMI 282 - AT - Income Tax

Denial of deduction claimed u/s. 54/54F - AO rejected assessee s claims on the ground that the assessee has made a new claim of exemption u/s 54F without filing revised return - Held that - Hon ble Supreme Court in GOETZE (INDIA) LIMITED VERSUS COMMISSIONER OF INCOME-TAX 2006 (3) TMI 75 - SUPREME COURT clearly stated that the power of AO is restricted to admit a new claim only if such claim is made by filing revised return of income. However, in the same decision, the Court further reiterated that the findings of the Court in any way does not impinge the powers of the appellate authorities to admit new claim if necessary facts regarding such claim is already available before the AO. In this case, admittedly, all necessary facts required for deduction u/s 54F are already available before the AO as the assessee has made a claim u/s 54 - since the provisions of section 54 / 54F are beneficial provisions, which need to be construed liberally so as to allow the benefit, if other conditions specified in the said sections are fulfilled. Hence, we are of the considered view that the AO was erred in not allowing assessee s claim of deduction u/s 54F. Hence, we set aside the issue to the file of the AO and direct him to admit assessee s alternate claim of deduction u/s 54F and allow such claim if assessee has fulfilled all conditions specified therein. - Appeal filed by the assessee is allowed, for statistical purpose.

Summary

Issues:
1. Denial of deduction claimed under sections 54/54F of the Income Tax Act.
2. Entitlement to deduction under sections 54/54F based on original return of income and revised return.

Issue 1: Denial of deduction claimed under sections 54/54F of the Income Tax Act

The appellant, an individual engaged in trading and dealing in listed securities, filed a return of income for AY 2010-11, declaring total income. The assessment was completed under section 143(3) of the Act, disallowing exemption claimed under sections 54/54F towards long-term capital gain from the sale of property. The appellant contended that by virtue of an allotment letter, she acquired the right to obtain conveyance of immovable property, constituting a capital asset. The CIT(A) dismissed the appeal, stating that the appellant did not fulfill the conditions for deduction under sections 54/54F. The CIT(A) observed that the appellant did not sell a residential house, a primary requirement for deduction under section 54. The appellant argued that the CIT(A) erred in confirming the rejection of the deduction claimed under sections 54/54F based on the technical ground of not filing a revised return. The ITAT held that the AO erred in not allowing the appellant's claim of deduction under section 54F, directing the AO to admit the alternate claim of deduction under section 54F if all specified conditions were fulfilled.

Issue 2: Entitlement to deduction under sections 54/54F based on original return of income and revised return

The appellant raised the issue of entitlement to deduction under sections 54/54F based on the original return of income and the revised return. The CIT(A) upheld the denial of the deduction claimed under sections 54/54F, emphasizing the technicality of not making the claim through a revised return. The appellant argued that the law laid down by the Supreme Court did not restrict the appellate authorities from deciding the issue, despite limiting the AO's power to admit new claims without a revised return. The ITAT noted that the appellant initially claimed deduction under section 54 but later claimed deduction under section 54F during assessment proceedings. The AO rejected the claim under section 54F for not filing a revised return. The ITAT held that the AO erred in denying the appellant's claim solely on the ground of not filing a revised return, as all necessary facts for deduction under section 54F were already available before the AO. The ITAT emphasized the liberal construction of beneficial provisions like sections 54/54F and directed the AO to admit and allow the appellant's claim under section 54F if all conditions were met.

In conclusion, the ITAT allowed the appeal filed by the appellant, setting aside the denial of the deduction claimed under sections 54/54F of the Income Tax Act for the assessment year 2010-11.