2015 (3) TMI 188 - AT - Income Tax

Exemption under section 54 - residential house was habitable or not - Held that - The claim of the assessee is that the house was habitable and there is no material evidence brought on record by the lower authorities to controvert the averments of the assessee or to disbelieve the assessee's claim. At this point of time i.e. 5 years after the construction in 2009, it would not be possible to verify the condition of the building or whether it was inhabitable at that point in time. On the basis of the material on record, we are satisfied that the assessee has fulfilled the conditions for grant of exemption under section 54 of the Act. Incoming to this finding, we draw support from the decision of the co-ordinate bench of this Tribunal in the case of M.A. Patel (2012 (9) TMI 360 - ITAT, BANGALORE) which has been followed by another co-ordinate bench of this Tribunal in the case of Dr. R. Balaji (2015 (2) TMI 149 - ITAT BANGALORE) relied on by the learned Authorised Representative wherein on similar facts the Tribunal held that the assessee would be entitled to exemption under section 54 of the Act. Following the aforesaid decision of the co-ordinate benches of this Tribunal (supra), we direct the Assessing Officer to allow the assessee exemption claimed under section 54 of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Denial of exemption under section 54 of the Income Tax Act.
2. Charging of interest under sections 234A, 234B, and 234C.

Issue 1: Denial of Exemption under Section 54:

The appellant, an individual, filed an appeal against the denial of exemption under section 54 of the Income Tax Act for Assessment Year 2007-08. The appellant sold two properties and claimed exemption on the Long Term Capital Gains (LTCG) from the sale of one property by investing in the construction of a residential house. However, the Assessing Officer denied the exemption as the constructed structure was deemed temporary. The CIT (Appeals) upheld this decision based on various factors such as the location of the property, absence of building plans, and lack of necessary approvals. The appellant argued that the structure met the criteria for exemption and cited relevant tribunal decisions. The Tribunal found that the evidence supported the existence of a habitable residential structure, qualifying for exemption under section 54. Relying on previous tribunal decisions, the Tribunal directed the Assessing Officer to allow the exemption claimed by the appellant.

Issue 2: Charging of Interest under Sections 234A, 234B, and 234C:

The appellant challenged the interest charged under sections 234A, 234B, and 234C by the Assessing Officer. The Tribunal noted that the charging of interest under these sections is mandatory, and the Assessing Officer lacked discretion in this matter. While upholding the charging of interest, the Tribunal directed the Assessing Officer to recompute the interest amounts in accordance with the order. The Tribunal emphasized the mandatory nature of interest charges under the specified sections, requiring strict compliance by the Assessing Officer.

In conclusion, the Tribunal allowed the appellant's appeal regarding the denial of exemption under section 54 of the Income Tax Act, citing the existence of a qualifying residential structure. The Tribunal directed the Assessing Officer to grant the exemption claimed by the appellant. Additionally, the Tribunal upheld the charging of interest under sections 234A, 234B, and 234C while instructing the Assessing Officer to recalculate the interest amounts.