2022 (8) TMI 445 - AT - Income Tax

Deduction u/s. 54F - Claim denied by the CIT(A) as the flats were purchased in the name of appellant s wife and son - whether the sale consideration received by a person from sale of capital asset if applied in the name of his wife or son for purchasing/constructing residential house whether the assessee can claim deduction u/s. 54F or 54 of the Act? - HELD THAT - We observe that the assessee has filed registered sale deed dt. 17-10- 2015 for purchase of a building comprising of ground floor three flats and the purchaser(s) mentioned in this sale deed are Sri Mukkamala Srihari Rao(Self), Smt. Mukkmala Jhancy Lakshmi (Wife) and Sri Mukkamala Amar Rao (Son). As per said sale deed Flat No. 102 is registered under the name of assessee(self) and remaining two flats in the name of son and wife. As in the case of Bhagwan Swroop Pathak 2020 (7) TMI 656 - ITAT DELHI we find that similar issue was for consideration regarding the deduction u/s. 54F of the Act for the investments made in purchase of property in the name of assessee s son. The Co-ordinate Bench, Delhi relied on the judgment of the Hon ble Delhi High Court in the case of CIT Vs. Kamal Vahal 2013 (1) TMI 401 - DELHI HIGH COURT wherein the assessee purchased new house in the name of his wife and the Hon ble High Court held that deduction u/s. 54 is valid. Respectfully following the same the Delhi Tribunal decided in favour of assessee and allowed the deduction u/s. 54F of the Act claimed for purchase of property in the name of assessee s son. Similar view was also taken by the Tribunal (ITAT Ranchi) in the case of Anand Dhanuka 2020 (8) TMI 234 - ITAT RANCHI wherein assessee invested the corresponding long term capital gain in name of his wife. This Tribunal in view of the judgment of the Hon ble Apex Court in the case of CIT Vs. Vegetable Products Ltd 1973 (1) TMI 1 - SUPREME COURT followed the judgment of the Hon ble Delhi High Court in the case of CIT Vs. Kamal Wahal 2013 (1) TMI 401 - DELHI HIGH COURT and decided in favour of assessee. We, therefore, respectfully following the judicial precedence referred hereinabove (supra) are of the considered view that since in the instant case the assessee has applied the sale consideration received from sale of capital asset towards purchase of residential flat in the name of his wife and son, the assessee is eligible to claim deduction u/s. 54F of the Act subject to fulfilment of all other conditions provided u/s. 54F of the Act. We, thus, reverse the finding of the ld. CIT(A) and allow ground no.1 raised by the assssee and direct the ld.AO to allow the benefit of deduction u/s. 54F for two flats purchased in the name of assessee s wife and son. Deduction claimed by the assessee u/s. 54F towards cost of improvement of purchase of new flats - HELD THAT - As perusal of the bills, we find that the bills placed at page-17 of the P.B is in the name of Kanishk Holdings dt.07-08-2015 for the renovation expenses - But this claim of the assessee remains in doubt because the flats in question has been purchased through sale deed executed on 17-10-2015 and there is no mention about any prior agreement and that include by the assessee and family members with the seller of the property and also the details of payment appearing in the back side of each copy of bills for renovation includes various payments made in cash. No evidence filed by the assessee to demonstrate the source of such expenditure. Under these given facts and circumstances of the case, we are of the view that this issue of claim of deduction u/s. 54F needs to be restored to the file of the ld. CIT(A), who shall call for remand report from the ld. AO ( if needed) regarding the genuineness of the expenditure claimed by the assessee. Needless to mention that adequate opportunity of being heard to be given to the assessee. The assessee is also directed to be vigilant and not to take adjournment unless otherwise required for reasonable cause. Thus, ground no.2 raised by the assessee is allowed for statistical purpose.

Summary

Issues:
1. Deduction under section 54F denied for flats purchased in the name of appellant's wife and son.
2. Deduction claimed for improvement on purchase of new flats disallowed.
3. Charging of interest under section 234A/234B on returned income.
4. Other grounds to be argued later.

Detailed Analysis:
1. The appeal involved the denial of deduction under section 54F for flats purchased in the name of the appellant's wife and son. The assessee purchased three flats, constituting one unit, in the names of his wife, son, and himself. The assessing officer allowed deduction only for the flat purchased in the appellant's name. The tribunal referred to similar cases and held that if the sale consideration is applied by a person for purchasing a residential house in the name of their wife or son, they are eligible for deduction under section 54F. The tribunal reversed the decision of the CIT(A) and allowed the deduction for the flats purchased in the names of the wife and son.

2. The second issue pertained to the deduction claimed for improvement on the purchase of new flats. The assessee failed to provide evidence for the claimed expenditure before the assessing officer and the CIT(A). Although bills for furnishing and renovation were submitted during the tribunal hearing, doubts remained regarding the genuineness of the expenditure. The tribunal directed the issue to be restored to the file of the CIT(A) for further examination and verification of the claimed expenditure, ensuring the assessee is given a fair opportunity to present their case.

3. The third issue addressed the charging of interest under section 234A/234B on the returned income instead of the assessed income. The tribunal did not provide a detailed analysis of this issue in the judgment.

4. The fourth issue was of a general nature and required no adjudication, as it was left for further arguments at the time of hearing.

In conclusion, the tribunal partly allowed the appeal for statistical purposes, granting deductions under section 54F for the flats purchased in the names of the appellant's wife and son, while directing further examination of the claimed expenditure for improvement on the new flats.