2022 (3) TMI 889 - AT - Income Tax

Deduction u/s 54F - AO disallowed related to investment in new property through borrowed fund - HELD THAT - CIT(A) in his order mentioned the assessee s wife is repaying the loan which was borrowed for investment in property for getting the deduction u/s 54F of the Act. This issue was not adjudicated properly by any of the revenue authorities - verification is required in this issue. The matter is returned back to the AO for further verification related to payment of borrowed fund. Related to cost of improvement amount to ₹ 8,00,000/-, Ld. Counsel submitted details of payment related cost of improvement. The verification of payment is not possible in this stage. So, the matter is returned back to the Ld. AO for further verification. Related payments of registration charges and stamp duty for amount was agitated before the bench for first time through additional grounds. The assessee claimed benefit u/s 54F related payment of registration charges and stamp duty value. The proper verification is required for this assessee s claim. AO is directed to allow benefit of the assessee u/s 54F after proper verification related those payments. Appeal filed by the assessee is allowed for statistical purposes.

Issues:
1. Jurisdiction of the Learned Commissioner of Income Tax (Appeals) in determining exemption U/s.54F.
2. Consideration of borrowed funds for investment in new house property.
3. Disallowance of cost incurred towards improvement of new house property.
4. Consideration of stamp duty and registration charges for computing exemption U/s.54F.
5. Verification of payments related to borrowed funds, cost of improvement, and registration charges.

Jurisdiction of the Learned Commissioner of Income Tax (Appeals) in determining exemption U/s.54F:
The appellant contested the order of the Learned Commissioner of Income Tax (Appeals) claiming it lacked jurisdiction and was contrary to legal principles. The appellant argued that the Ld. CIT(A) erred in not considering the sum of ?50,00,000 invested in a new house property while computing the exemption U/s.54F. Additionally, the appellant claimed that the Ld. CIT(A) failed to acknowledge that utilizing borrowed funds for property acquisition does not negate eligibility for the exemption. The Tribunal noted the appellant's contentions and directed the Assessing Officer to further verify the payment of the borrowed fund amount to ?50,00,000 for proper adjudication.

Consideration of borrowed funds for investment in new house property:
The appellant invested ?2,30,00,000 in a new property after selling a property for ?2,60,00,000, utilizing ?1,80,00,000 from the sale proceeds and ?50,00,000 from borrowed funds. The Assessing Officer disallowed the ?50,00,000 borrowed amount for the exemption U/s.54F, stating that only the actual amount utilized from the sale proceeds could be considered. The Tribunal observed that the issue of the appellant's wife repaying the loan was not adequately addressed by the revenue authorities. Therefore, the matter was remanded to the Assessing Officer for further verification regarding the borrowed fund payment.

Disallowance of cost incurred towards improvement of new house property:
The Ld. CIT(A) sustained the disallowance of ?8,00,000 made by the Assessing Officer for the cost incurred by the appellant towards improving the new house property. The Tribunal acknowledged the details submitted by the appellant's counsel but deemed verification of the payment unfeasible at that stage. Consequently, the matter was referred back to the Assessing Officer for additional verification.

Consideration of stamp duty and registration charges for computing exemption U/s.54F:
The appellant raised additional grounds regarding stamp duty and registration charges amounting to ?18,40,160 incurred during the purchase of the new property. The Tribunal directed the Assessing Officer to verify these payments and allow the benefit of exemption U/s.54F after proper verification.

Verification of payments related to borrowed funds, cost of improvement, and registration charges:
The Tribunal emphasized the need for thorough verification of payments related to borrowed funds, cost of improvement, and registration charges. The matter was remanded to the Assessing Officer for detailed scrutiny and verification to ensure accurate determination of eligibility for exemption U/s.54F. Ultimately, the appeal filed by the appellant was allowed for statistical purposes.

This detailed analysis of the judgment highlights the key issues raised by the appellant, the decisions made by the authorities, and the directions given by the Tribunal for further verification and adjudication.

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