2019 (3) TMI 577 - HC - Income Tax

Claim of deduction u/s 54F - evidence of construction of a new house property - substantial question of law - Power of High Court to sit in appeal over the factual findings -HELD THAT - The assessee had purchased 1 acre and 25 cents of nanja land. On 22.07.2011, she deposited ₹ 20,20,000/- in a capital gain scheme account, the total investment as on 22.07.2011 was ₹ 2.6 crores. Planning permission had been obtained on 04.07.2012 before the due date for filing return. The Tribunal, considering the report of the inspection, found that the assessee was entitled to deduction under Section 54F of the IT Act. The learned Tribunal, in effect and substance, found that the extent of land appurtenant to a building in a case involving sale of land and buildings was not a determining factor. Right of appeal is not automatic. Right of appeal is conferred by statute. When statute confers a limited right of appeal only in a case which involves substantial questions of law, it is not open to this Court to sit in appeal over the factual findings arrived at by the Appellate Tribunal. In this case, the learned Tribunal as also the Appellate Commissioner have concurred in their factual finding with which interference is not warranted under Section 260A of the Income Tax Act, 1961. The judgment relied upon by the learned counsel for the Revenue of the High Court of Punjab and Haryana in Jagwinder Singh vs. Commissioner of Income-tax, Appeals-II, Ludhiana 2014 (4) TMI 1177 - PUNJAB AND HARYANA HIGH COURT is distinguishable on facts. In the aforesaid case, there was no evidence of construction of a new house property. Appeal dismissed.

Summary

Issues Involved:
1. Validity of the deduction claimed under Section 54F of the Income Tax Act, 1961.
2. Compliance with the conditions for claiming deduction under Section 54F.
3. Determination of substantial questions of law under Section 260A of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of the Deduction Claimed under Section 54F of the Income Tax Act, 1961:
The respondent assessee, an advocate by profession, filed her return of income for the Assessment Year 2011-12, declaring a total income of ?21,53,760/-. The case was selected for scrutiny, and the Assessing Officer (AO) added ?2,15,56,250/- towards capital gains to the declared income. The assessee had sold immovable property and claimed a deduction under Section 54F of the IT Act, asserting that the capital gain chargeable to tax was 'Nil' due to investment in a new asset. The AO disallowed the claim, stating that no residential house had been constructed and completed within three years from the date of sale of the old asset. The AO also noted that the assessee obtained electricity under a commercial tariff, indicating a non-residential intention.

2. Compliance with the Conditions for Claiming Deduction under Section 54F:
The respondent assessee appealed to the Commissioner of Income Tax (Appeals), who allowed the appeal, citing genuine reasons for the delay in construction and subsequent developments indicating the investment was for a residential house. The Commissioner noted that the construction was completed within the stipulated time, and the temporary electricity connection was later changed to a domestic connection. The Appellate Commissioner found that the assessee had invested the capital gains in the purchase of land and deposited the amount in the Capital Gain Scheme Account within the stipulated period, thus complying with Section 54F. The Commissioner relied on precedents from the jurisdictional High Court, which held that the completion of construction within three years was not mandatory if the construction had commenced within the period.

3. Determination of Substantial Questions of Law under Section 260A of the Income Tax Act, 1961:
The Revenue appealed before the Income Tax Appellate Tribunal (ITAT), which upheld the Appellate Commissioner’s decision. The Tribunal found that the assessee had made the necessary investments and obtained planning permission before the due date for filing the return. The Tribunal concluded that the extent of land appurtenant to a building was not a determining factor in such cases. Under Section 260A, an appeal from an order of the Tribunal lies only on a substantial question of law. The High Court reiterated that an appeal is not automatic and must involve a substantial question of law, as defined in precedents like Sir Chunilal V. Mehta & Sons Ltd. vs. Century Spg. & Mfg. Co. Ltd. and Hero Vinoth Vs. Seshammal. The Court emphasized that it cannot interfere with concurrent factual findings unless there is a substantial question of law. The Court found no substantial question of law in the Revenue’s appeal and dismissed it, distinguishing it from the case cited by the Revenue, which lacked evidence of construction of a new house property.

Conclusion:
The appeal was dismissed, and the High Court upheld the decisions of the ITAT and the Appellate Commissioner, affirming the validity of the deduction claimed under Section 54F by the respondent assessee.