2021 (12) TMI 644 - AT - Income Tax

Disallowing the claim of the assessee u/s 54F - As per assessee he owned only one residential house property and accordingly she is eligible for deduction u/s 54F - HELD THAT - Admittedly, the details of the ownership of the Madiwala property was submitted to ld.CIT(A) along with the copies of Wealth-tax Returns for the first time. These details and the contentions of the assessee in this regard were not available before the AO. We noticed that the ld.CIT(A) has also not confronted these materials with the AO in order to elicit his opinion with regard to the claim of the assessee. This issue requires to be remitted to the file of AO for examining it afresh by duly considering the claim of the assessee with regards to the ownership of the residential building located at Madiwala. We earlier noticed that the assessee had claimed deduction u/s 54 of the Act and it is the AO who has stated that the assessee is eligible for deduction u/s 54F of the Act and the said view of the AO has been accepted by the assessee. We also notice that the manner of computation of deduction u/s 54 and 54F are different. However, there was no occasion for the AO to compute the eligible amount of deduction, since he had held that the assessee is not eligible for deduction u/s 54F of the Act. Hence, the manner of computation of deduction also requires to be examined, if the AO is convinced on the claim of the assessee with regard to residential building located in Madivala. We set the order passed by the ld.CIT(A) on this issue and restore the same to the file of the AO for examining it afresh by duly considering the claim of the assessee with regard to the ownership of residential building located at Madiwala. The assessee is also directed to furnish all the relevant materials to prove that the residential building located in Madiwala is not owned by her and she was only a name lender. After hearing the assessee, the AO may take appropriate decision on this issue in accordance with law. Not adjudicating the ground relating to disallowance of interest expenditure - disallowance of interest expenditure claimed by the assessee against income from other sources - HELD THAT - We noticed earlier that the CIT(A) did not adjudicate this issue even though contentions were raised by the assessee on this issue. Before us, the Revenue has raised a ground stating that the ld.CIT(A) has not adjudicated this issue. In fact, the Revenue cannot be said to be aggrieved by the action of the CIT(A) in not adjudicating this issue. It is the assessee who is aggrieved in this matter, but the assessee is not in appeal before us - revenue has only pointed out in its ground that Ld CIT(A) has not adjudicated this issue. Accordingly, we are of the opinion that this ground of the revenue does not require adjudication. Appeal filed by the Revenue is treated as allowed for statistical purposes.

Summary

Issues:
- Allowing deduction claimed by the assessee u/s 54F of the Act
- Not adjudicating the ground relating to disallowance of interest expenditure

Analysis:

Issue 1: Allowing deduction claimed by the assessee u/s 54F of the Act
The assessee declared a total income for the year under consideration and claimed deductions under section 54F of the Act. The Assessing Officer disallowed the claim initially, but the ld.CIT(A) allowed the deduction. The main contention was whether the assessee was eligible for deduction under section 54F. The AO argued that the assessee owned more than one residential property, making her ineligible. However, the ld.CIT(A) accepted the explanation provided by the assessee regarding the ownership of the properties. The Revenue challenged this decision, claiming that the materials supporting the assessee's claim were not presented before the AO initially. The ITAT decided to remit the issue back to the AO for further examination, emphasizing the need for verification regarding the ownership of the residential property at Madiwala.

Issue 2: Not adjudicating the ground relating to disallowance of interest expenditure
The second issue pertained to the disallowance of interest expenditure claimed by the assessee against income from other sources. The ld.CIT(A) did not address this issue in the initial appeal. The Revenue raised a ground stating the non-adjudication of this matter. However, the ITAT noted that the Revenue was not directly aggrieved by this non-adjudication, and it was the assessee who should have been in appeal. Consequently, the ITAT held that this ground did not necessitate further adjudication. As a result, the appeal filed by the Revenue was treated as allowed for statistical purposes.

In conclusion, the ITAT remitted the issue of deduction claimed under section 54F back to the AO for re-examination while dismissing the need for adjudication on the interest expenditure disallowance issue. The decision aimed at ensuring a thorough verification of the ownership details of the residential property and maintaining procedural fairness in the assessment process.