2019 (6) TMI 835 - AT - Income Tax

Deduction u/s 54, 54F 54EC - capital gains arising out of a single transaction of sale of immovable property - no such claim was made in the return of income - HELD THAT - CIT(A) was of the opinion that this premise is not wholly correct as the assessee of its own accord had made a claim u/s 54E in the return of income. It did not foresee that the AO would not be convinced with the claim. The claim u/s 54F therefore originated only during the course of assessment proceedings during which the AO treated only part of the land as appurtenant to the building. AO made the disallowance following in the case of Asha George 2013 (1) TMI 545 - KERALA HIGH COURT . Even if such decision is accepted, the assessee cannot be denied of the deduction claimed u/s 54F to which it is entitled, as long as there is no dispute on the investment in new asset. CIT(A) observed that the proposition of the AO that both the deductions, u/s 54 and 54F cannot be given on the same property is bereft of merit as there is no such bar imposed statutorily in the Act. Both the sections only speak about investment in new property, a fact on which there is no dispute. There is no double claim on the same investment as the assessee has claimed the balance/spill over investment in the new flat as deduction u/s 54F. CIT(A) has rightly directed the AO to allow deduction u/s 54EC and also to compute eligible deduction u/s 54F on the balance investment in the flat/apartment and allow the same while computing long-term capital gains arising on the sale of impugned land capital asset. So far as the fresh claim u/s 54F is concerned, the objection of the AO that the assessee has not made such claim of deduction in the original return of income. Since various Courts have held that the appellate authorities have conferred upon the power to adjudicate and allow the legitimate claim, which was not claimed in the original return of income, the claim u/s 54F admitted by the ld. CIT(A) cannot be held as illegal. - Decided against revenue.

Summary

Issues Involved:
1. Eligibility of the assessee to claim deductions under sections 54, 54F, and 54EC of the Income Tax Act for capital gains arising from a single transaction of sale of immovable property.
2. The extent of land appurtenant to the building that qualifies for deduction under section 54.
3. The permissibility of claiming deductions under both sections 54 and 54F for the same property.
4. The validity of claiming section 54F deduction during assessment proceedings when not claimed in the original return of income.

Detailed Analysis:

1. Eligibility for Deductions under Sections 54, 54F, and 54EC:
The Revenue contended that the assessee could not claim deductions under sections 54, 54F, and 54EC for capital gains arising from a single transaction. The Tribunal noted that the assessee sold a property comprising a residential house and land appurtenant thereto, and invested the proceeds in a new residential property and specified bonds. The Tribunal upheld the CIT(A)'s decision, allowing deductions under sections 54, 54F, and 54EC, noting that the deductions are not mutually exclusive and can be claimed for the same transaction.

2. Extent of Land Appurtenant to the Building:
The Assessing Officer (AO) restricted the deduction under section 54 to the value of the building and a reasonable extent of land appurtenant thereto, determining this to be 8,228 sq. ft. The AO excluded the remaining 45,351 sq. ft. from the deduction. The Tribunal upheld the CIT(A)'s view that the entire property, including the land appurtenant to the building, should be considered for the deduction under section 54, as the property was used for residence.

3. Permissibility of Claiming Deductions under Both Sections 54 and 54F:
The AO argued that deductions under sections 54 and 54F could not be claimed for the same property. The Tribunal disagreed, stating that the Act does not bar claiming deductions under both sections for the same property. The Tribunal emphasized that the deductions pertain to different investments from the sale proceeds and are not mutually exclusive.

4. Validity of Claiming Section 54F Deduction During Assessment Proceedings:
The AO rejected the assessee's claim for deduction under section 54F on the grounds that it was not made in the original return of income. The Tribunal upheld the CIT(A)'s decision to allow the deduction, noting that appellate authorities have the power to adjudicate and allow legitimate claims not made in the original return. The Tribunal cited various court rulings supporting this view and allowed the claim under section 54F.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow deductions under sections 54, 54F, and 54EC for the capital gains arising from the sale of the property. The Tribunal emphasized that the deductions are not mutually exclusive and can be claimed for the same transaction, and that appellate authorities can allow legitimate claims not made in the original return of income. The decision underscores the importance of considering the entire property, including land appurtenant to the building, for deductions under section 54.