2019 (8) TMI 14 - HC - Income Tax

Low tax effect - monetary limit - deduction u/s 54F for the entire value of the commercial building constructed - Whether ITAT is right in law in directing the AO to grant the benefit of deduction u/s 54F of the Income Tax Act without adjudicating on the grounds taken by the Revenue in respect of allowance of the deduction on the value of land? - appellant submitted that in the event it is found that these appeals are not hit by the monetary limit of the circular, the Revenue should be permitted to restore these appeals - HELD THAT - The submission made by the learned counsel for the appellant is accepted and liberty is granted to the appellant to restore the appeals, in the event they found out that these appeals are not hit by the monetary limit in the circular. For such liberty, if applications are filed for restoration, the Registry is directed to list those applications along with the appeals without insisting upon any applications for condonation of delay or for such other matters. Consequently, the substantial questions of law are left open. No costs. Consequently, the connected miscellaneous petition is closed.

Summary

Issues:
1. Interpretation of Section 54F of the Income Tax Act - Deduction for commercial building construction.
2. Direction to grant deduction under Section 54F without adjudicating on grounds related to land value.

Interpretation of Section 54F - Deduction for Commercial Building Construction:
The appeals filed by the Revenue under Section 260A of the Income-tax Act, 1961, challenged the order of the Income-tax Appellate Tribunal regarding the deduction under Section 54F for the construction of a commercial building. The Revenue contended that the Tribunal erred in allowing the deduction for the entire value of the commercial building, contrary to the provisions of Section 54F, which only permits deduction for a new residential house. The Tribunal was criticized for its interpretation of the law in this regard.

Direction to Grant Deduction without Adjudicating on Land Value:
Another issue raised was whether the Tribunal was correct in directing the Assessing Officer to grant the benefit of deduction under Section 54F without addressing the Revenue's grounds concerning the allowance of the deduction on the value of the land. The Revenue questioned the Tribunal's decision not to consider their arguments on this matter.

The High Court, comprising Mr. Justice T.S. Sivagnanam and Mrs. Justice V. Bhavani Subbaroyan, heard arguments from both parties. The tax effect involved in the case was determined to be below the threshold limit set by a recent circular issued by the Board. Consequently, the appeals were dismissed on the grounds of low tax effect. However, the counsel for the Revenue requested permission to restore the appeals if it was found that they were not affected by the monetary limit in the circular.

The Court accepted the submission by the Revenue's counsel and granted liberty to the appellant to restore the appeals if they were not impacted by the monetary limit. The Court directed the Registry to list any restoration applications without requiring applications for condonation of delay. As a result, the substantial questions of law remained open, and no costs were awarded. The connected miscellaneous petition was closed as a consequence of the judgment.