2014 (4) TMI 387 - AT - Income Tax

Denial of claim of exemption u/s 54F of the Act - Whether the building constructed by the assessee on which exemption u/s 54F of the Act has been claimed is a residential building as claimed by the assessee or a building constructed for commercial use Held that - The primary fact which is required to be examined is whether the building has been constructed for residential use or not - This can be verified from the approved plan and architectural design of the building - the plan of the constructed building has not been brought on record thus, it is difficult to arrive at a conclusive finding with regard to the nature of the building thus, it is required to be remitted back to the AO to conduct necessary enquiry to find out the exact nature of construction. A residential house does not mean a single residential house - Even where the assessee constructs or receives a number of flats adjacent to each other or in different floors of the same building then also the assessee would be entitled for exemption u/s 54F of the Act Relying upon In this context, we rely on a decision of the Hon ble Jurisdictional High Court in case of CIT vs. Syed Ali Adil 2013 (6) TMI 278 - ANDHRA PRADESH HIGH COURT - the matter is remitted to the file of the AO for fresh adjudication - Decided in favour of Assessee.

Summary

Issues:
Denial of claim of exemption u/s 54F of the Act.

Analysis:
The appellant filed a return of income for the assessment year 2007-08, declaring long-term capital gains from the sale of two properties and claiming exemption u/s 54F of the Act. The Assessing Officer requested construction details and valuation reports for the newly acquired property. The appellant explained the construction of a residential building with her sister, claiming exemption based on the cost of construction. An Inspector of Income-tax reported that the building was used as a school, not a residential house. Consequently, the Assessing Officer disallowed the exemption. The CIT (A) upheld this decision ex parte, noting the building's commercial use as a school, not for residential purposes.

The appellant contested these findings, arguing that the building was residential, supported by the registered valuer's report and the Inspector's statement that the school started six months after construction completion. The revenue authorities maintained that the building was commercial, not qualifying for exemption u/s 54F. The Tribunal noted that the crucial factor is whether the building was constructed for residential use, regardless of subsequent commercial use. Without the architectural plan, a conclusive decision was challenging. The Tribunal remitted the matter to the Assessing Officer for further investigation to determine if the building was constructed for residential purposes, emphasizing that multiple flats in a building can still qualify for exemption u/s 54F, citing a relevant court decision.

In conclusion, the Tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to reevaluate the issue after providing a fair hearing to the appellant.

Judgment:
The Tribunal, after thorough analysis, remitted the matter to the Assessing Officer to determine if the building was constructed for residential purposes, emphasizing that multiple flats in a building can still qualify for exemption u/s 54F.