2018 (12) TMI 1312 - AT - Income Tax

Deduction u/s 54F - purchase of land with constructed shed measuring 100 sq.ft. of ACC sheet roofing and without electricity and water. - whether the Assessee can be said to have purchased a residential house - Held that - The fact that civic amenities were not available in the building constructed cannot be the basis to hold that the property in question is not a residential house. It was capable of being used as a residential house de hors these facilities. These facilities could come in due course and make the property more habitable. The section does not lay down any standards of habitation like existence of civic amenities etc. Besides the above, the undisputed factual position is that there was a constructed shed of 100 Sq.ft. with ACC sheet roofing with walls of brick and mortar and cement flooring and the Assessee s employee has been staying to look after the property. Since there was a person already living in the structure, it can be said that it was in a habitable condition even though basic amenities such as Electricity and water supply was not there. The Khate issued by the BBMP mentions the description of the property as residential property and determined annual value at ₹ 780/-. CIT(A) was justified in directing the AO to allow deduction u/s.54F of the Act to the Assessee. The order of CIT(A0 does not call for any interference. Consequently, the appeal by the revenue is dismissed.

Summary

Issues:
- Whether the CIT(A) was justified in allowing deduction u/s 54F of the Income Tax Act, 1961 to the assessee.

Analysis:
1. Facts and Circumstances: The assessee, an individual, sold a property and claimed a deduction u/s 54F of the Act for long term capital gain (LTCG) on the sale. The condition for the deduction is the purchase of a residential house within two years from the date of transfer.

2. AO's Observation: The Assessing Officer (AO) found that the property purchased was only a vacant land with a small constructed shed, which he deemed uninhabitable. He referred to a previous court case where a mud structure was not considered a residential house for a similar deduction.

3. CIT(A)'s Decision: The CIT(A) allowed the deduction, emphasizing that the property was described as residential in official documents. He cited precedents where habitability was not solely based on amenities like electricity and water, and a structure could be habitable without them. The CIT(A) interpreted the law liberally to promote residential construction.

4. Tribunal's Verdict: The Tribunal upheld the CIT(A)'s decision, noting that a constructed shed with an employee residing on the property indicated habitability. The Tribunal emphasized that the term "residential house" was not strictly defined in the Act, and the property's potential for residence was sufficient to meet the requirement.

5. Conclusion: The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order to allow the deduction u/s 54F of the Act to the assessee. The decision was based on the property's description as residential, the presence of a constructed shed, and the potential for habitation, even without certain amenities.

This detailed analysis highlights the key arguments, legal interpretations, and precedents considered in the judgment, leading to the final decision in favor of the assessee's claim for deduction under section 54F of the Income Tax Act.