2020 (4) TMI 781 - AT - Income Tax

Deduction u/s 54F - Denial of deduction as on the date of sale of the Original asset the assessee owned more than one residential property viz. (i) residential house at Lonawala and (ii) residential house at Kamothe - HELD THAT - As the assessee had been shown beyond doubt to be the owner of the residential house/Bungalow situated at Lonawala, therefore, irrespective of the fact that the said property was not occupied by him due to its poor quality of construction, the same continued to be a residential house which was owned by the assessee. On the basis of our aforesaid observations, now when it stands proved that as on the date of transfer of the Original asset i.e land on 01.03.2013, the assessee in addition to the residential house at Kamothe also owned a Bungalow at Lonawala, therefore, being an owner of more than one residential house on the said relevant date, he was ineligible to claim deduction under Sec. 54F. As regards the claim of the ld. A.R that the fact that the A.O while framing the assessment under Sec. 143(3) for the year under consideration had not assessed the Annual Lettable Value (ALV) of the aforesaid Bungalow at Lonawala under Sec. 23 of the Act, therein proved that the assessee was not the owner of the said residential property during the year under consideration, we are afraid does not find favour with us - the documents forming part of the APB clearly reveals beyond any scope of doubt that the assessee during the year under consideration was the owner of the residential house/Bungalow at Lonawala. Accordingly, finding no infirmity in the view taken by the CIT(A), who in our considered view had rightly affirmed the declining of the assesses claim for deduction under Sec. 54F by the A.O, we uphold the same. Levy of interest under Sec. 234A and 234B - HELD THAT - As the levy of interest under the aforesaid statutory provisions is mandatory as per the judgment of the Hon ble Supreme Court in the case of CIT Vs. Anjum M.H. Ghaswala 2001 (10) TMI 4 - SUPREME COURT therefore, finding no infirmity in charging of the aforesaid interest by the A.O, we uphold the same.

Issues Involved:
1. Disallowance of the claim made under Section 54F of the Income Tax Act.
2. Ownership of multiple residential properties on the date of sale of the original asset.
3. Investment in multiple residential properties.
4. Disallowance of the investment in property under Section 54F.
5. Confirmation of disallowance under Section 54 for deposit in Capital Gain Account Scheme.
6. Levy of interest under Sections 234A and 234B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Disallowance of the claim made under Section 54F of the Income Tax Act:
The assessee's claim for deduction under Section 54F was disallowed by the CIT(A) on the grounds that the assessee owned more than one residential house on the date of transfer of the original asset. The assessee contended that one of the properties was not ready for occupation due to poor construction quality and ongoing legal disputes, thus should not be considered as a residential house.

2. Ownership of multiple residential properties on the date of sale of the original asset:
The A.O observed that the assessee owned two residential properties: one at Lonawala and another at Kamothe. Despite the assessee's argument that the Lonawala property was uninhabitable and involved in legal disputes, the A.O concluded that ownership, not habitation, was the determining factor. The Tribunal upheld this view, stating that ownership of the property, regardless of its condition, disqualified the assessee from claiming the deduction under Section 54F.

3. Investment in multiple residential properties:
The assessee invested in two different residential properties: one in Pune and another intended to be purchased later through the Capital Gain Account Scheme. The A.O restricted the deduction under Section 54F to only one residential unit, disallowing the claim for the second investment. The Tribunal agreed, noting that Section 54F allows deduction for investment in only one residential unit.

4. Disallowance of the investment in property under Section 54F:
The A.O disallowed the assessee's claim for deduction under Section 54F for the investment in the second residential property through the Capital Gain Account Scheme. The Tribunal upheld this disallowance, citing the statutory restriction to a single residential unit for the deduction.

5. Confirmation of disallowance under Section 54 for deposit in Capital Gain Account Scheme:
The CIT(A) confirmed the A.O's disallowance of the claim for deduction under Section 54F related to the deposit in the Capital Gain Account Scheme. The Tribunal supported this decision, reiterating that the assessee's ownership of more than one residential property on the date of transfer disqualified him from the deduction.

6. Levy of interest under Sections 234A and 234B of the Income Tax Act:
The assessee challenged the levy of interest under Sections 234A and 234B. The Tribunal, referencing the Supreme Court's judgment in CIT Vs. Anjum M.H. Ghaswala, upheld the mandatory nature of these interest charges, dismissing the assessee's appeal on this ground.

Conclusion:
The Tribunal dismissed the appeal, affirming the lower authorities' decisions on all grounds. The assessee was found ineligible for the deductions under Section 54F due to ownership of multiple residential properties and the statutory limitations on claiming deductions for investments in more than one residential unit. The mandatory levy of interest under Sections 234A and 234B was also upheld.

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