2020 (5) TMI 191 - HC - Income Tax

Income from other sources - addition as interest - enhanced sale consideration received by the assessee due to delay in the completion of the sale transaction on account of the default of the buyer of the property - HELD THAT - The finding of the Tribunal that the amount received by the assessee from his purchaser cannot be termed as interest because there is no finding of the Commissioner of Income Tax as to the rate of interest, is a finding of fact. Also the value of the said item is far less than the value for which the appeals can be filed before this Court by the Department. Deduction u/s 54F - delay in delivery of possession of the property , which the assessee intends to purchase, beyond the time line fixed under the provisions of the Act - HELD THAT - We agree with the view of the Tribunal that the Assessing Officer rightly granted deduction to the assessee taking into account the settled legal position that investment of the entire capital gains for construction of a residential house within the stipulated period alone is relevant, and delivery of possession by the builder/promoter of the assessee of the said residential house cannot be a ground to deny the assessee deduction under Section 54F of the Act, for the reason that the assessee has no control over the actions of the builder/promoter and he cannot be punished for the delay on the part of the builder/promoter in delivering possession.

Summary

Issues:
1. Challenge to assessment order under Section 260-A of the Income Tax Act, 1961.
2. Validity of deduction claimed under Section 54F of the Act.
3. Interpretation of delay in delivery of possession for grant of deduction.

Analysis:
1. The appeal was filed challenging the assessment order for the assessment year 2008-09 under Section 260-A of the Income Tax Act, 1961. The original assessment was completed by accepting the revised computation of income by the assessee. However, the jurisdictional Commissioner of Income Tax found the assessment erroneous and prejudicial to the Revenue's interest, disallowing the deduction claimed under Section 54F of the Act due to delayed receipt of sale consideration. Subsequently, a fresh assessment order was passed disallowing the deduction claimed by the respondent. The Tribunal, in its order, held that the delayed sale consideration cannot be treated as 'interest' and subjected to tax under 'income from other sources'. It also observed that the assessee's entitlement to deduction under Section 54F should not be affected by delays in possession due to the builder's fault, granting relief to the assessee.

2. The Tribunal's decision was further examined regarding the grant of deduction under Section 54F of the Act. The Tribunal upheld the assessee's entitlement to the deduction, emphasizing that the crucial factor is the investment of entire capital gains for construction within the stipulated period. The delay in possession due to the builder's fault should not penalize the assessee, as it is beyond their control. The High Court concurred with the Tribunal's view, dismissing the appeal at the admission stage and upholding the grant of deduction under Section 54F to the assessee.

3. The High Court found no merit in challenging the Tribunal's decision. It affirmed that the delayed sale consideration cannot be treated as 'interest' without a specific finding by the Commissioner of Income Tax on the rate of interest. Moreover, the Court agreed with the Tribunal's interpretation that delays in possession by the builder should not impact the assessee's eligibility for deduction under Section 54F, as long as the capital gains were invested for construction within the prescribed period. The appeal was dismissed, and no costs were awarded, with pending petitions also being dismissed accordingly.