2018 (11) TMI 938 - AT - Income Tax

Deduction u/s 54F denied - assessee is a doctor by profession - joint ownership property sold - investments made by assessee s husband - non-submissions of sale deed - Held that - The property which has been sold by the assessee was in joint ownership with her husband and the investments in new properties, first in Claremont and thereafter in Westgate, made by the assessee are also in joint ownership with her husband. The whole sale consideration has been reflected by the assessee in her return of income and therefore, the stand of Ld. first appellate authority in disregarding the investments made by her husband was not justified. We order so. Coming to assessee s claim of deduction u/s 54F, the documents on record reveal that the assessee, jointly with her husband sold a commercial premises situated at Thane (W) vide Agreement for Sale dated 21/10/2008 for a sale consideration of ₹ 45 Lacs. The assessee, jointly with her husband, acquired certain rights in properties situated at Claremont vide allotment letter dated 08/10/2008 pursuant to application dated 05/02/2008, by making payment of ₹ 27.72 Lacs from time to time, the details of which have already been extracted in the quantum assessment order. Subsequently, as per the request of assessee dated 10/09/2009, the said booking has been transferred to another property situated at Westgate as evidenced by fresh allotment letter dated 22/10/2009 issued by the same builder. The explanation of the assessee, in this regard, as evident from the documents on record, is that the construction of the building Claremont was not coming as per the schedule and therefore, the assessee after a mutual discussion with the builder decided to shift the payment to another building viz. Westgate - explanation to be plausible one since the delay in construction projects is common as well as regular feature of this industry - assessee could not be penalized for these delays since the assessee, in good faith, had made the investments in the hope of getting the allotment particularly when substantial payment towards the same was already made by the assessee - Mere non-submissions of sale deed etc., in our opinion, could not disentitle the assessee to claim the said deduction particularly when all documentary evidences as to allotment and payments were available on record and the same were not under dispute - claim deduction u/s 54F allowed - Decided in favour of assessee.

Summary

Issues:
Assessee's claim under Section 54F of the Income Tax Act, 1961 contested due to denial of deduction; Dispute over the computation of Long Term Capital Gain (LTCG) and denial of deduction under Section 54F; Disagreement regarding joint ownership and investments in new properties; Eligibility of the assessee to claim deduction under Section 54F challenged.

Analysis:
1. The appeal by the assessee for Assessment Year 2009-10 contested the rejection of the claim under Section 54F of the Income Tax Act, 1961. The dispute arose when the assessee sold a plot of land and claimed deduction against investments made in a new flat. The Assessing Officer (AO) denied the deduction, citing lack of documentary evidence and discrepancies in computations.

2. The Commissioner of Income-Tax (Appeals) upheld the AO's decision, emphasizing that the investment made by the assessee's husband could not be considered for claiming deduction under Section 54F. The CIT(A) also noted that the investment in the new house did not fall within the specified period as per Section 54F, leading to the denial of the exemption.

3. The ITAT Mumbai, after hearing both parties, found that the property sold was jointly owned by the assessee and her husband. The investments in new properties were also joint. The ITAT disagreed with the CIT(A)'s decision to disregard the investments made by the husband and ruled in favor of considering them for the deduction under Section 54F.

4. Regarding the claim of deduction under Section 54F, the ITAT observed that the assessee had made substantial investments in new properties, explaining the transfer of booking from one project to another due to construction delays. The ITAT held that the assessee was entitled to claim the deduction under Section 54F, directing the AO to grant the same.

5. The ITAT concluded that the assessee's investments in the new properties, despite the transfer between projects, qualified for the deduction under Section 54F. The appeal was allowed, and the order was pronounced on 2nd November 2018.