2022 (4) TMI 1020 - AT - Income Tax

Exemption u/s 54 - investment in residential property under the allotment deed registered - HELD THAT - The judgement passed by the Coordinate Bench in the matter of Shriniwas R. Desai 2014 (1) TMI 883 - ITAT AHMEDABAD wherein it was held that there is no restriction on the buyer from incurring any construction expenditure on improvisation or supplementary work of ready-made unit. The additional expenses so incurred would be eligible for qualifying investment u/s 54. Taking into consideration the entire aspect of the matter particularly when the assessee has incurred expenditure for making the new property habitable within the stipulated time as framed by the provision of law and particularly when such expenditure has not been doubted by the authorities below respectfully relying upon the ratio laid down by the Coordinate Bench as narrated hereinabove the assessee is found to be entitled to the exemption as the expenditure incurred. The order of addition made by the authorities below is, thus, found to be devoid of any merit and, thus, deleted. Assessee s appeal is, therefore, allowed.

Issues involved:
1. Exemption claim under Section 54 of the Income Tax Act for investment in residential property.
2. Disallowance of excess claim of exemption.
3. Allowability of expenses incurred for making the new property habitable.
4. Relevant judgments on deduction under Section 54.
5. Eligibility for deduction under Section 54 based on completion of construction and investment period.
6. Qualifying investment under Section 54 for additional construction expenditure.

Analysis:
1. The appeal was against the order passed by the Commissioner of Income Tax (Appeals) arising from the Income Tax Officer's order for the assessment year 2015-16 under Section 143(3) of the Income Tax Act, 1961. The assessee sold a property and claimed exemption under Section 54 for investing in a new property. The dispute arose due to the excess claim of exemption.

2. The assessee claimed to have incurred expenses for extra work and charges related to the new property to make it habitable. The Revenue contended that these expenses were not allowable under Section 54 as they were incurred before taking possession of the property. The authorities below rejected the claim.

3. The Tribunal found that the expenses incurred by the assessee for making the new property habitable were genuine and allowable under Section 54. The Tribunal referred to judgments from ITAT Hyderabad and a Coordinate Bench in Ahmedabad, emphasizing that expenses for making the property habitable before possession are eligible for deduction under Section 54.

4. The Tribunal noted that the completion of construction and the investment period are crucial for determining eligibility for deduction under Section 54. Since the construction was completed within the specified period, the assessee was found eligible for the deduction. The Coordinate Bench's judgment further supported that additional expenses for construction are considered qualifying investments under Section 54.

5. Considering the genuineness of the expenses, compliance with the provision of law, and the judgments cited, the Tribunal allowed the assessee's appeal. The order of addition made by the authorities below was deemed meritless and deleted, granting the assessee the exemption for the incurred expenses.

6. The Tribunal pronounced the appeal as allowed, emphasizing the entitlement of the assessee to the exemption of the incurred expenses. The decision was based on the assessee's compliance with the law and the genuineness of the expenditure, as supported by relevant legal precedents.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive understanding of the Tribunal's decision regarding the exemption claim under Section 54 of the Income Tax Act.

← Previous Next →