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2017 (4) TMI 342 - AT - Income TaxDisallowance of exemption claimed u/s 54 and 54F - assessee had made investment in acquiring two residential flats whereas the benefit of deduction under section 54/54F is available on acquisition/construction of one residential house only - Held that - The assessee acquired the flat, the intention was to use it as one residential unit. In our considered view, it will not make any distinction whether the flats were constructed as such by the builder or the same was altered or combined into one at the instance of the buyer (assessee). Thus, the assessee is very much eligible to claim the benefit of deduction under section 54/54F on the entire amount of investment made in residential flat bearing Nos. 2601 and 2602 in Beau Monde, Tower C , Prabhadevi, Mumbai. Thus, the learned Commissioner of Income-tax (Appeals) has rightly granted relief to the assessee and, therefore, his order is upheld. - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition due to disallowance of exemption claimed under sections 54 and 54F. 2. Allowing benefit of sections 54 and 54F for investment in two separate house properties converted into one unit. 3. Acceptance of additional evidence without providing opportunity to the Assessing Officer. 4. Ignoring documentary evidence while allowing deduction under sections 54 and 54F. Issue-wise Detailed Analysis: 1. Deletion of Addition Due to Disallowance of Exemption Claimed under Sections 54 and 54F: The Revenue appealed against the order of the Commissioner of Income-tax (Appeals) [CIT(A)], which deleted the addition of ?23,21,83,740 being the disallowance of exemption claimed under sections 54 and 54F. The Assessing Officer (AO) had disallowed the exemption on the ground that the assessee purchased two separate house properties and not one, as evidenced by two separate agreements. The CIT(A) held that the assessee had made an investment in "a residential house property" and allowed the exemption. The Tribunal upheld the CIT(A)’s order, noting that the assessee had purchased one flat bearing Nos. 2601 and 2602, which were shown as one flat in the floor plan and supported by certificates from the structural engineer and the housing society. 2. Allowing Benefit of Sections 54 and 54F for Investment in Two Separate House Properties Converted into One Unit: The AO argued that the assessee purchased two separate flats and thus the benefit should be limited to one flat only. The CIT(A) and the Tribunal found that the two flats were indeed combined into one residential unit with a common kitchen and entrance, as supported by documentary evidence. The Tribunal emphasized that the law does not limit the size or nature of the residential house property and that combining two units into one for practical use should not disqualify the assessee from the exemption. The Tribunal cited judgments from the Bombay High Court to support this view. 3. Acceptance of Additional Evidence Without Providing Opportunity to the Assessing Officer: The Revenue contended that the CIT(A) erred in accepting additional evidence (a structural engineer's report) without providing the AO an opportunity to examine it, violating rule 46A(3)(a) of the Income-tax Rules, 1962. However, the Tribunal noted that the CIT(A) had called for a remand report from the AO, who had the opportunity to examine all the evidence. The Tribunal dismissed this ground, finding no merit in the Revenue's contention. 4. Ignoring Documentary Evidence While Allowing Deduction under Sections 54 and 54F: The AO had relied on various documentary evidence, including the approved plan and completion certificate, to conclude that the flats were separate units. The CIT(A) and the Tribunal found that the AO did not conduct a physical inspection or properly verify the assessee's claims. The Tribunal noted that the AO's enquiries were incomplete and based on irrelevant or half-cooked information. The Tribunal upheld the CIT(A)’s decision, emphasizing that the factual position should prevail over the legality of the construction alterations, and the beneficial provisions of sections 54 and 54F should be interpreted liberally. Conclusion: The Tribunal upheld the CIT(A)’s order, granting the assessee the benefit of deductions under sections 54 and 54F for the investment in the combined residential unit. The appeal filed by the Revenue was dismissed. The Tribunal emphasized the importance of a liberal interpretation of beneficial provisions and the need for thorough and relevant enquiries by the AO.
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