2024 (8) TMI 1072 - AT - Income Tax

LTCG - deduction u/s 54F - investment in three flats - HELD THAT - Admittedly, the appellant made investment of the sale consideration from plot of land in three flats comprising of two flats 1 BHK and the third one 2 BHK which were located on same floor, side by side in one building, to be joined to make a joint living. As seen that the assessee was running under time constraint to make the investment otherwise he would have altogether lost the deduction. Section 54/54F uses the expression 'a residential house' and that the expression used is not 'a residential unit'. In our view, the AO was wrong in interpretating the statute and so sustained by Ld. CIT (A) without appreciating the facts of the case in the light of provisions of statute applicable for the assessment year under consideration. As per statute, the Section 54/54F requires the assessee to acquire a 'residential house' and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. We hold that the only requirement for claim of deduction u/s 54F of the Act is that the house or Flats should be for the residential use and not for commercial use. CIT(A) order is infirm and perverse to the facts on record in confirming the addition. Accordingly, we accept the grievance of the appellant as genuine. Thus, the appellant is legally qualify for the claim of deduction u/s 54F and as such, the addition is deleted. Disallowance of deduction of amount kept in bank for registration as not eligible for deduction as the money has not been deposited in CGAS - AR submitted that booking of a flat with builder is akin to construction. If the assessee goes for construction, then he has full three years to complete the construction and obviously money will be invested as construction progresses - HELD THAT - In the present case, the appellant assessee has booked flats which were going to be constructed by a builder had to be considered as a case of construction of flat , and not a case of purchase of flat. Since, registry was effected only after completion of construction and hence the appellant cannot be denied deduction is respect of the amount kept for registration in its bank account. Accordingly, we hold that the observation of the Ld. CIT(A) is perverse to the facts on record of the present case. In our view, that the appellant was lawfully eligible for the deduction for the said amount kept for registration of flats, in its bank account and utilized for the registration purpose. In the present case, since the disputed amount was utilized for the purposes of registration in turn construction of new house within the stipulated time and hence, we hold the same as part of allowable deduction u/s 54F of the Act. Accordingly, addition on account of denial of registration and stamp duty is deleted. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Deduction under Section 54F of the Income Tax Act for investment in multiple residential units.
2. Disallowance of deduction for the amount kept in the bank for registration and stamp duty purposes.

Issue-Wise Detailed Analysis:

1. Deduction under Section 54F of the Income Tax Act for investment in multiple residential units:

The appellant challenged the confirmation of disallowance made by the AO regarding the claim of deduction under Section 54F of the Act. The AO disallowed the deduction for the purchase of three flats, restricting it to only one flat, based on the amendment to Section 54F w.e.f. 1-4-2015, which specifies that the benefit is to be given only for one residential house. The CIT(A) upheld this view, citing the amendment and the case of M/S Tilokchand & Sons v. ITO, which clarified that the amendment was meant to end the controversy over the interpretation of "a residential house" in plural terms.

The appellant argued that the flats were purchased to accommodate a large family and were intended to be used as a single residential unit. The appellant cited the case of CIT v. Gita Duggal, where it was held that Section 54/54F talks about a "residential house" and not a "residential unit," and that the requirement is satisfied as long as the building is for residential use, regardless of its internal structuring.

The Tribunal noted that the amendment to Section 54F is not applicable retrospectively and pertains to assessment years post-2015. For the assessment year in question, the law as interpreted by the Delhi High Court in CIT v. Gita Duggal was applicable, which allowed for the interpretation of "a residential house" in a manner that could include multiple units used as a single residence. The Tribunal concluded that the AO and CIT(A) erred in their interpretation and allowed the deduction for the investment in the three flats.

2. Disallowance of deduction for the amount kept in the bank for registration and stamp duty purposes:

The appellant also challenged the disallowance of Rs. 18,74,892/- for the amount kept in the bank for registration and stamp duty, which was not deposited in the Capital Gains Account Scheme (CGAS). The appellant argued that booking a flat with a builder is akin to construction, and the money would be invested as construction progresses. The Tribunal cited several cases, including CIT v. Sunder Kaur Sujan Singh and Kishore H. Galaiya v. ITO, which held that booking a flat with a builder is considered construction, not purchase.

The Tribunal found that the flats were booked for construction and the registry was effected only after completion, making the appellant eligible for the deduction. The Tribunal held that the amount kept for registration and stamp duty was part of the allowable deduction under Section 54F, as it was utilized for the construction of the new house within the stipulated time.

Conclusion:

The Tribunal allowed the appeal of the assessee, holding that the appellant is entitled to the deduction under Section 54F for the investment in the three flats and the amount kept for registration and stamp duty purposes. The additions made by the AO were deleted, and the order was pronounced in accordance with Rule 34(4) of the Income Tax Appellate Tribunal (Rules) 1963.