2022 (8) TMI 1190 - AT - Income Tax

Disallowance u/s 54F - A.O found from the return of income that the assessee was owner of more than one house property and hence as per provisions of section 54F, he was not liable to get such exemption - HELD THAT - Before us, the assessee had filed a registered transfer deed wherein 50% of the share of the assessee in one flat has been transferred in favour of his wife. That apart, we find as per the observations in MR. AJIT THOMAS DIRECTOR A.V. THOMAS LEATHER ALLIED 2016 (8) TMI 1545 - MADRAS HIGH COURT the application of section 27 of the Act in this case is mis-placed so far as the department is concerned since it has been categorically observed in the aforestated judicial pronouncement that the deeming provisions are for the purpose of computation of income from house property and are applicable for provisions of sections 22 to 26 of the Act for computing annual value of the property. However, section 54F is an independent provision for granting exemption in respect of capital gain of transfer of certain capital asset. The assessee in this case satisfies the condition provided under the said provision. Therefore, placing reliance on the aforestated decision and the facts of this case we do not find any reason why the assessee should not be granted exemption u/s 54F of the Act. In view thereof, we set aside the order of the ld. CIT(A) and allow the appeal of the assessee.

Summary

Issues:
1. Disallowance of claim under section 54F
2. Just and equitable relief
3. Interest charged under section 234B
4. Additional grounds during appeal proceedings

Analysis:

Issue 1: Disallowance of claim under section 54F
The appellant claimed exemption under section 54F of the Income-tax Act, 1961 for long-term capital gains on the sale of shares by purchasing a new flat. The Assessing Officer (A.O) disallowed the claim as the appellant was deemed to be the owner of more than one house property. The appellant argued that he was not the owner of a full residential flat on the date of the sale of shares. The Tribunal observed that section 27(i) is a deeming provision applicable only for sections 22 to 26 of the Act and cannot be extended to deny exemption under section 54F. The Tribunal dismissed the appeal filed by the Revenue, upholding the appellant's entitlement to exemption under section 54F.

Issue 2: Just and equitable relief
The appellant contended that just and equitable relief should be granted. However, the judgment did not provide detailed analysis or discussion on this issue.

Issue 3: Interest charged under section 234B
The appellant sought cancellation of interest charged under section 234B. The judgment did not elaborate on the specific reasons or legal arguments related to this issue.

Issue 4: Additional grounds during appeal proceedings
The appellant requested to add, alter, amend, or withdraw grounds during the appeal proceedings. The judgment did not delve into the details of any additional grounds raised by the appellant during the appeal process.

In conclusion, the Appellate Tribunal ITAT Pune allowed the appeal of the assessee, granting exemption under section 54F of the Income-tax Act, 1961. The judgment emphasized the independent nature of section 54F in granting exemption for capital gains on the transfer of certain capital assets, distinct from the deeming provisions of sections 22 to 26 of the Act. The decision was based on the appellant satisfying the conditions provided under section 54F, leading to the setting aside of the order of the ld. CIT(A) and allowing the appeal of the assessee.