9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (8) TMI 289 - AT - Income TaxDeduction u/s. 54 - denied deduction on the ground that since the Assessee was not owner of the land, the condition laid down in Sec.54 for claiming deduction was not satisfied - assessee purchased only tenancy rights and therefore was not entitled to deduction u/s.54 - HELD THAT - As rightly contended by the learned counsel for the Assessee, when exemption is claimed under the second limb of Sec.54, i.e., utilization of the capital gain in construction of one residential house in India, all that the Assessee has to do is to invest the capital gain in construction of a residential house. It is immaterial whether the Assessee has ownership of the land over which the new asset i.e., one residential house in India, is constructed. Such a condition does not emanate from a plain reading of Sec.54 . In our view the AO fell into an error in reading such a condition and refusing the claim of deduction u/s.54. As rightly submitted deduction in the case of Yogesh Sunderlal Shah 2012 (9) TMI 769 - ITAT MUMBAI was claimed by the Assessee u/s.54 on the first limb i.e., purchase of a new asset i.e., a residential house and not on the basis of the second limb of Sec.54 viz., construction of new asset i.e., one residential house in India. Since the words used in Sec.54 of the Act in so far as it relates to the first limb are purchase of a new asset, there was scope for examining regarding ownership of the new asset purchased, but such conditions cannot be extended to a case of deduction u/s.54 claimed on the basis of the second limb viz., construction of new asset i.e., one residential house in India. The requirement of Sec.54 in the second limb is that capital gain should be used in construction of residential house and nothing more. Assessee in the present case is the owner of the superstructure constructed by utilizing the capital gain and this is clear from clause-10 of the lease deed by which the land over which the construction has been put up was given on lease to the Assessee. Therefore, the deduction u/s.54 of the Act ought to be allowed to the Assessee as claimed by the Assessee. - Decided in favour of assessee.
Issues Involved:
1. Whether the revenue authorities were justified in denying the benefit of deduction u/s. 54 of the Income-Tax Act, 1961 to the assessee. Issue-wise Detailed Analysis: 1. Denial of Deduction u/s. 54 of the Income-Tax Act, 1961: The core issue in this appeal is whether the revenue authorities were justified in denying the benefit of deduction u/s. 54 of the Income-Tax Act, 1961 to the assessee. The Assessee sold a property on 04.04.2014, resulting in a Long Term Capital Gain. Under Section 54 of the Act, the Assessee is entitled to a deduction if the capital gain is invested in either the purchase of a new residential house or the construction of a new residential house in India within specified time limits. The Assessee leased land for 20 years under a lease deed dated 14.3.2013 and constructed a residential house on it. The Assessee claimed a deduction u/s. 54 for the capital gain utilized in the construction. The Assessing Officer (AO) denied the exemption on the ground that the Assessee was not the owner of the land, thus not satisfying the conditions of Section 54. The AO argued that the Assessee only had a leasehold interest and not the right to alienate the superstructure. The Assessee contended, citing the Hon’ble Madras High Court's decision in Park View Enterprises (1991) 189 ITR 192, that there can be separate ownership of land and building. Reference was made to Sections 63A, 108(h), and 8 of the Transfer of Property Act, 1882, and the decision of the Karnataka High Court in D R Puttanna and Sons V/s CIT (1986) 162 ITR 468, which held that a lessee constructing a building on leased land becomes the owner of the building. Despite these arguments, both the AO and the CIT(A) denied the exemption. The CIT(A) relied on the Mumbai ITAT decision in Yogesh Sundarlal Shah v. ACIT, where it was held that if capital gain is utilized for acquiring leasehold rights, deduction u/s. 54 is not available. The CIT(A) concluded that the Assessee was not the owner of the land or building and thus not entitled to deduction u/s. 54. Upon appeal, the Tribunal considered the provisions of Section 54, which allow deduction if the capital gain is reinvested in either purchasing or constructing a new residential house. The Tribunal noted that the Assessee had a leasehold interest for 20 years with the right to construct and own the superstructure during the lease period. The Tribunal held that for claiming deduction under the second limb of Section 54 (construction of a new residential house), it is immaterial whether the Assessee owns the land. The Tribunal emphasized that the requirement is to invest the capital gain in constructing a residential house, which the Assessee did. The Tribunal distinguished the present case from the Mumbai ITAT decision in Yogesh Sundarlal Shah, where the deduction was claimed under the first limb of Section 54 (purchase of a new asset). The Tribunal concluded that the Assessee, being the owner of the superstructure constructed using the capital gain, is entitled to the deduction u/s. 54. Conclusion: The Tribunal allowed the appeal, directing that the deduction u/s. 54 be granted to the Assessee as claimed. The judgment underscores that for deduction under the construction limb of Section 54, ownership of the land is not a requirement, provided the capital gain is utilized in constructing a residential house.
|
