2023 (1) TMI 563 - AT - Income Tax

Denial of deduction u/s. 54F - assessee did not invest a new property within stipulated time and denied exemption u/s. 54F - HELD THAT - Admittedly, the assessee s share at 21% of profit from housing project i.e. Shriram Residency which is evident from para 4 of the assessment order. Therefore, there is no dispute with regard to capital gain arising from housing project i.e. Shriram Residency. Therefore, the assessee is entitled to proportionate deduction to the extent investment made in a new property up to the filing of return of income. AO disallowed entire claim made u/s. 54F of the Act to the extent of Rs.25,00,000/- which was confirmed by the CIT(A). Therefore, in terms of the decision in the case of Humayun Suleman Merchant 2016 (9) TMI 70 - BOMBAY HIGH COURT that the assessee is entitled to claim proportionate deduction as evident from receipts which are payments made towards new property and also the said payments were made before filing of return of income. Admittedly, the return of income was filed on 31-07-2014 which is evident from para 1 of the impugned order. Thus, the assessee is entitled to get deduction of Rs.11,00,000/- u/s. 54F of the Act as against the entire disallowance of Rs.25,00,000/-. Thus, ground Nos. 3 and 4 raised by the assessee are allowed. Denying exemption u/s. 54B - enhancement made by the CIT(A) - disallowance made on account of having purchased agricultural land in individual - THAT - Hon ble High Court of Delhi in the case of Ravinder Kumar Arora 2011 (9) TMI 343 - DELHI HIGH COURT held that the provisions of section 54 of the Act are the beneficial provision which should be interpreted liberally in favour of the deduction to the taxpayer and deduction should not be denied on hyper technical ground. There is no dispute with regard to reinvestment on agricultural land by the assessee in his individual capacity, the provisions u/s. 54 of the Act being the beneficial provision which should be interpreted liberally in favour of the assessee seeking deduction u/s. 54B - Therefore, following the order of Babubhai Arjanbhai Kanani (HUF) 2021 (7) TMI 976 - ITAT SURAT hold that the assessee is entitled to claim deduction u/s. 54B of the Act and enhancement made by the CIT(A) is not justified. Thus, the order of AO is restored in allowing deduction u/s. 54B of the Act - Thus, ground No. 5 raised by the assessee is allowed.

Summary

Issues:
1. Denial of deduction u/s. 54F of the Act.
2. Enhancement of income u/s. 54B of the Act.

Denial of deduction u/s. 54F of the Act:
The appeal involved the denial of deduction u/s. 54F of the Act by the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The Assessing Officer (AO) disallowed the deduction claimed by the assessee for not investing in a new property within the stipulated time. The assessee contended that they had made investments and furnished receipts before the filing of the income tax return. The Judicial Member referred to a decision of the Hon'ble High Court of Bombay where proportionate exemption was allowed based on the amount paid before the return filing. The Judicial Member noted that the assessee had indeed made investments before filing the return and allowed proportionate deduction, contrary to the CIT(A)'s decision. Grounds 3 and 4 raised by the assessee were allowed.

Enhancement of income u/s. 54B of the Act:
The assessee claimed deduction u/s. 54B of the Act for reinvestment in agricultural land, which was initially allowed by the AO. However, the CIT(A) sought a remand report and enhanced the total income of the assessee based on the purchase of agricultural land in individual and HUF capacities. The Judicial Member referred to a decision of the Surat Bench of Tribunal, emphasizing that the HUF could claim exemption under section 54B of the Act even if the property was registered in the name of a coparcener. The Judicial Member also cited a decision of the Hon'ble High Court of Delhi, stating that the provisions of section 54 of the Act should be interpreted liberally in favor of the taxpayer. Based on these precedents, the Judicial Member allowed the deduction u/s. 54B of the Act, restoring the AO's decision. Ground No. 5 raised by the assessee was allowed.

In conclusion, the appeal of the assessee was allowed, with deductions granted under both u/s. 54F and u/s. 54B of the Act. The order was pronounced on 5th December 2022 by Shri S.S. Viswanethra Ravi, Judicial Member.