2020 (2) TMI 418 - AT - Income Tax

Deduction u/s 54F - LTCG - more than one residential house property - as per AO assessee owns a self-occupied house property and these nine unsold flats and therefore, as per proviso a (i) to section 54F (1), the assessee is not eligible for deduction u/s 54F - assessee contended that, as flats were not in existence and hence, it cannot be said that the assessee was owner of these flats on the date of sale of the original asset - HELD THAT - Out of these 24 flats, 15 flats are already sold in the present year and remaining 9 flats are likely to be sold within the period of three years from the date of its purchase but the assessee is not claiming deduction u/s 54F in respect of any of these 24 flats but since even these 9 unsold flats can be considered as a part of new asset for deduction u/s 54F, the proviso (a) (i) to section 54F is not applicable because in addition to these 9 flats and one residential house purchased by the assessee for which the assessee is claiming deduction u/s 54F, the assessee is owning only one residential house being self-occupied house and hence, this proviso is not applicable. As per paper book where the Revised Computation of Income and Original Computation of Income is available, the assessee is showing Income from Let Out House Property but the objection of the AO that the assessee is owning more than one residential house as per Para 9 of the assessment order is based on ownership of one self-occupied house property and 9 unsold flats and hence, it appears that this let out house property is not a residential house property and therefore, this proviso is not invokable and not invoked by the AO because of ownership of this house property. Therefore, there is no justification of disallowing this claim of the assessee. Hence, we delete this disallowance.

Summary

Issues: Disallowance of deduction under section 54F of the Income Tax Act, 1961.

The judgment by the Appellate Tribunal ITAT Bangalore involved the disallowance of the assessee's claim for deduction under section 54F of the Income Tax Act, 1961. The assessee had raised 11 grounds of appeal, primarily contesting the disallowance of the deduction amounting to ?248,35,658. The dispute centered around the ownership of 9 unsold flats out of a total of 24 flats received by the assessee from a developer, with the revenue arguing that the assessee owning these flats made them ineligible for the deduction. The assessee, however, relied on a judgment of the Hon'ble Karnataka High Court in the case of CIT vs. Rukminamma to support their claim. The Tribunal examined the applicability of proviso a (i) to section 54F (1) in light of the unamended and amended provisions of the section and the specific facts of the case. The Tribunal analyzed the Joint Development Agreement (JDA) entered into by the assessee with the developer, emphasizing the importance of the date of transfer of the original asset and the ownership of residential houses on that date. It was observed that the ownership of the flats was relevant on the date of the JDA, which preceded the date of the sale of the original asset. The Tribunal also considered the judgment in the case of CIT vs. T K Dayalu, highlighting that the capital gain should have been taxed in a previous assessment year. Additionally, the Tribunal referenced the unamended provisions of section 54F and the judgment in the case of CIT vs. Rukminamma to support the assessee's claim that the deduction could be allowed for more than one residential house. The Tribunal concluded that the assessee's claim for deduction under section 54F was justified, as the proviso a (i) to section 54F (1) was not applicable due to the assessee owning only one self-occupied house and the 9 unsold flats. Consequently, the Tribunal partly allowed the appeal of the assessee, deleting the disallowance of the deduction.