2019 (1) TMI 890 - AT - Income Tax

Entitled for deduction u/s. 54F - residential house purchased beyond the two years prescribed limit u/s. 54F(1) - assessee should have purchased a new house on or after 9th Nov, 2011 on or before 8th Nov, 2014, however, the assessee has purchased residential house property on 16th Sep, 2015 which was beyond the two years prescribed limit u/s. 54F(1) - Held that - In the case of the assessee also the property in question could not be purchased because of unavoidable circumstances as the first party seller of the property was expired before execution of the sale deed because of legal proceedings related to the clearance of tile of the property there was delay in execution of final sale deed as elaborated supra in this order. We consider that the assessee has only invested an amount of ₹ 30 lacs as explained above in this order within the stipulated period prescribed in the provision of section 54F of the act, therefore, we restrict the deduction u/s. 54F of the act to the amount of ₹ 30 lacs as final agreement could not be executed because of unavoidable circumstances in the form of pending legal proceedings due to sudden demise of the first party seller of the property. Accordingly the appeal of the assessee is partly allowed. Disallowance of claim of depreciation & business expenses - Held that - We have heard the rival contention on this issue and find that it is very clear that the assessee has only earned from stitching during the year under consideration and assessee has failed to substantiate its claim with relevant supporting material therefore, we do not find any error in the decision of the Ld.CIT(A). Accordingly the appeal of the assessee on this issue is dismissed.

Summary

Issues involved:
1. Rejection of exemption under section 54F and disallowance of expenses by AO.
2. Failure to consider submissions and evidence by CIT(A) regarding impugned additions.
3. Disallowance of exemption claimed under section 54F by CIT(A).
4. Denial of claim of depreciation and business expenses by CIT(A).

Detailed analysis:
1. The assessee's appeal for the assessment year 2013-14 was based on the rejection of exemption under section 54F of Rs. 41 lakhs and disallowance of expenses amounting to Rs. 1,88,706 by the Assessing Officer. The CIT(A) upheld these rejections, leading to the appeal before the Appellate Tribunal ITAT AHMEDABAD. The assessing officer contended that the assessee did not fulfill the conditions for exemption under section 54F due to delayed completion of the conveyance deed for the purchase of a new residential house after the stipulated time period. The Tribunal considered the explanation provided by the assessee regarding the delay, which was due to the death of the seller, and restricted the deduction under section 54F to the amount actually invested within the prescribed period, thereby partly allowing the appeal.

2. The issue of failure to consider submissions and evidence by the CIT(A) regarding the impugned additions was raised by the assessee. The Tribunal observed that the CIT(A) did not adequately consider the bona fide reasons for the delay in completing the conveyance deed, which was crucial for claiming the exemption under section 54F. The Tribunal referred to a relevant Supreme Court judgment in a similar case to support the assessee's contention that the delay was due to unavoidable circumstances, such as legal proceedings and the death of the seller. Based on these considerations, the Tribunal partly allowed the appeal by restricting the deduction to the amount invested within the prescribed period.

3. The CIT(A) confirmed the disallowance of the exemption claimed under section 54F by the assessee, citing the delayed completion of the conveyance deed beyond the statutory period specified in the Act. The Tribunal, after considering the facts and circumstances of the case, including the reasons for the delay, held that the assessee was entitled to the deduction under section 54F for the amount actually invested within the stipulated time frame. The Tribunal's decision was influenced by the peculiar facts of the case, similar to a Supreme Court judgment, where relief was granted due to unavoidable circumstances leading to delayed execution of the sale deed. Consequently, the Tribunal partly allowed the appeal by restricting the deduction to the amount invested within the prescribed period.

4. The CIT(A) had disallowed the claim of depreciation and business expenses amounting to Rs. 1,21,639 and Rs. 67,067, respectively. The Tribunal, after hearing both sides, found that the assessee failed to substantiate its claim with relevant supporting material, particularly in relation to the income earned from stitching during the relevant year. As a result, the Tribunal upheld the decision of the CIT(A) regarding the disallowance of these claims, leading to the dismissal of the assessee's appeal on this issue.