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2022 (5) TMI 1404 - AT - Income TaxLTCG - Rejection of deduction claimed u/s 54F - expenditure incurred on the new house property for computing deduction u/s 54F - Whether assessee is entitled to claim deduction to the extent of 50% of the cost of acquisition computed by him? - HELD THAT - We noticed that the agreement for the purchase of property was first entered by the assessee s husband in 2004. However the sale agreement for transfer of plot was registered only on 24.2.2007 and it was registered in the name of the assessee and her husband. Accordingly, the AO/Ld CIT(A) has taken the view that the assessee was already entitled to 50% of the right in the property - As held in the case of Mrs. Jennifer Bhide 2011 (9) TMI 161 - KARNATAKA HIGH COURT that the deduction u/s 54 of the Act should not be denied merely because the name of assessee s husband is mentioned in the purchase document, when the entire purchase consideration has flown from the assessee. In the instant case also, the plot was purchased in the name of the assessee and her husband. Hence, what is required to be examined is the question, viz., who has funded the acquisition? - Admittedly, in the instant case, the assessee s husband had advanced money initially. Subsequently, the admitted fact is that the assessee has reimbursed the money to her husband and finally, it is the assessee who has actually given funds for the acquisition of the property. CIT(A) has taken the view that the funds given by the assessee should not be taken in account and in our view, the said view of the Ld CIT(A) is not, in our view, correct in law. Deduction u/s 54F of the Act only induces an assessee to make investment in residential house property. If the assessee has herein has given money for acquisition of the property either directly to the builder or as reimbursement to her husband, then the assessee should be given benefit of deduction u/s 54F of the Act for the cost of acquisition. Plot was purchased jointly in the name of the assessee and her husband and hence it should be held that both held 50% right each and hence the assessee could have purchased only her husband s share only - We are unable to agree with this logic. There is no dispute that the assessee has actually given funds for the acquisition of the property. When the assessee s husband has not given money for purchase of property, how it can be held that her husband was owner of 50% of the property merely for the reason that his name appears in the conveyance agreement and also in the rental agreement. The deduction under sec.54F of the Act shall be given only to the person who has invested the money. In the instant case, it is the assessee who has invested the money and hence the assessee should be given deduction u/s 54F of the Act for the money invested by her. Cost of acquisition - The assessee claimed the cost of acquisition to be Rs.1,72,29,993/-. During the remand proceedings, the assessee herself has agreed for reduction of cost of acquisition by Rs.16,97,098/-, since she could not prove the incurring of expenses to that extent. Hence the cost of acquisition as per the assessee now stands at Rs.1,55,32,895/-. There is no dispute that the assessee has invested the money to the above said extent in acquisition of the property. CIT(A) has taken the view that the amount spent after the date of registration of land, i.e., 24.02.2007 for interiors, renovation, furnishing etc cannot be part of acquisition. The Hon ble Karnataka High Court has held in the case of Mrs. Rahana Siraj 2015 (1) TMI 1421 - KARNATAKA HIGH COURT that the money spent in additions, alterations, modifications and improvements on the new asset to make it habitable would be eligible for benefit of deduction u/s 54F of the Act. Accordingly, we set aside the view so taken by Ld CIT(A) as it is contradictory to the binding decision of jurisdictional High Court. Accordingly, we hold that the assessee is eligible for deduction u/s 54F of the Act in the amount spent on interiors, renovation, furnishing etc. - Appeal of assessee allowed.
Issues Involved:
1. Partial rejection of deduction claimed under Section 54F of the Income-tax Act, 1961. 2. Eligibility for deduction under Section 54F considering the ownership and acquisition of the property. 3. Computation of the cost of acquisition for the purpose of deduction under Section 54F. 4. Admissibility of expenses incurred on interiors, renovation, and furnishing as part of the cost of acquisition. Issue-wise Detailed Analysis: 1. Partial rejection of deduction claimed under Section 54F of the Income-tax Act, 1961: The primary issue in the appeal of the assessee was the partial rejection of the deduction claimed under Section 54F of the Income-tax Act, 1961. The assessee had declared a long-term capital gain from the sale of land and claimed exemption under Section 54F, which was partially disallowed by the Assessing Officer (A.O.) on various grounds, including the ownership and timing of the acquisition of the new property. 2. Eligibility for deduction under Section 54F considering the ownership and acquisition of the property: The A.O. disallowed the deduction on the grounds that the assessee already held a 50% share in the property and had other residential properties at the time of the sale. The assessee's husband had initially entered into an agreement for the property, and the property was later registered in the names of both the assessee and her husband. The A.O. argued that the assessee could not be considered to have purchased a new house within one year before the date of transfer. However, the Tribunal held that the deduction under Section 54F should not be denied merely because the name of the husband appeared in the purchase document when the entire purchase consideration was funded by the assessee. 3. Computation of the cost of acquisition for the purpose of deduction under Section 54F: The A.O. computed the cost of acquisition as Rs.91,57,683/- and disallowed the expenses incurred on interiors, renovation, and furnishing. The Ld. CIT(A) also held that the assessee could only claim deduction for 50% of the cost of acquisition, as she had purchased only 50% of the right from her husband. The Tribunal, however, held that the entire cost of acquisition should be considered, as the assessee had reimbursed her husband and funded the acquisition of the property. 4. Admissibility of expenses incurred on interiors, renovation, and furnishing as part of the cost of acquisition: The Tribunal noted that the Ld. CIT(A) had disallowed expenses incurred after the registration of the plot for interiors, renovation, and furnishing. The Tribunal referred to the decision of the Karnataka High Court in the case of Mrs. Rahana Siraj, which held that money spent on additions, alterations, modifications, and improvements to make the new asset habitable would be eligible for deduction under Section 54F. Accordingly, the Tribunal held that the assessee was eligible for deduction for the amount spent on interiors, renovation, and furnishing. Conclusion: The Tribunal concluded that the deduction under Section 54F should be computed on the amount of Rs.1,55,32,895/-, which included the expenses incurred on interiors, renovation, and furnishing. The appeal filed by the assessee was allowed, and the appeal of the revenue was dismissed. The Tribunal directed the A.O. to compute the deduction accordingly.
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