2020 (6) TMI 319 - AT - Income Tax

Benefit of exemption u/s 54F - purchase of new residential house OR a case of construction of a new house - it is a case of revenue the construction of the property acquired by the assessee and since construction is required to be within prescribed time after the date of sale of the capital asset on which capital gain has arisen and in the present case, the construction is before the date of transfer, deduction is not allowable to the assessee under section 54F - HELD THAT - It is a case of purchase of residential house property which was purchased on 16.07.2015 as noted by learned CIT(A) and the date of sale / transfer of the capital asset on which the capital gain has arisen is 28.08.2015 / 30.09.2015 and therefore, the purchase of residential house is within the period of one year before the date of transfer and therefore, deduction under section 54F is allowable. To what extent the deduction is allowable to the assessee because the residential house was acquired by the assessee jointly with his daughter - How much amount was invested by the assessee and how much amount was invested by his daughter for acquiring this new residential house property? - CIT(A) has held that even if deduction is allowed to the assessee under section 54F of the Income Tax Act, 1961, the deduction allowable cannot be more than 50% of investment in the new asset and he has also stated that since the entire exemption is already been disallowed in the present case, this issue is not being discussed further. Under these facts, we feel it proper to restore back this aspect of the matter to the file of learned CIT(A) for the purpose of deciding by way of speaking and reasoned order about the quantum of deduction allowable in the present case under section 54F after finding out these facts as to what is the amount of investment made by the assessee in the new house and what is the amount of investment made by his daughter in the said new house as the daughter of the assessee is a joint holder. Appeal of the assessee stands allowed for statistical purposes

Summary

Issues:
1. Claim of exemption u/s 54F for the purchase of a villa.
2. Disallowance of exemption claimed u/s 54F by the Assessing Officer.
3. Interpretation of Section 54F regarding purchase or construction.
4. Joint ownership of the new residential property and its impact on deduction under section 54F.

Analysis:
1. The appeal was filed against the order of the CIT(A) for Assessment Year 2016-17 concerning the claim of exemption u/s 54F for the purchase of a villa. The assessee declared an income of ?1,78,97,540 and sold a residential site and equity shares during the financial year 2015-16. The appellant claimed exemption u/s 54F against the purchase of a villa on 16-07-2015 for ?1,48,49,300. The grounds raised by the assessee challenged the Assessing Officer's conclusion that the conditions of section 54F were not met, leading to the disallowance of ?2,28,31,262. The appellant argued that section 54F does not mandate payment for purchase, emphasizing the date of completion of construction or purchase as crucial rather than payment dates.

2. The Assessing Officer and CIT(A) contended that the property was constructed before the sale of the old asset, thus disallowing the exemption claim u/s 54F. However, the sale deed indicated the purchase of a completed property, not construction, on 16.07.2015, within the stipulated time frame. The Tribunal held that the purchase was within one year before the sale of the old asset, making the assessee eligible for the deduction under section 54F. The issue of joint ownership with the daughter was raised, and the Tribunal directed a reevaluation by the CIT(A) to determine the quantum of deduction allowable based on the individual investments made by the assessee and his daughter.

3. The Tribunal's decision emphasized the distinction between purchase and construction of the residential property, highlighting the importance of the completion date and the nature of the transaction. The interpretation of Section 54F was pivotal in determining the eligibility for exemption, focusing on the timeline and compliance with statutory provisions. The Tribunal's analysis clarified that the case revolved around the purchase of a residential property rather than construction, aligning with the requirements of section 54F for claiming deductions.

4. The aspect of joint ownership raised concerns regarding the quantum of deduction allowable under section 54F, specifically in cases where multiple parties are involved in acquiring the new residential property. The Tribunal recognized the need for a detailed assessment of individual investments to ascertain the proportionate deduction applicable to each joint owner. By directing a reevaluation by the CIT(A) to address this issue comprehensively, the Tribunal ensured a fair and reasoned determination of the deduction amount in accordance with the law.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the eligibility of the assessee for deduction under section 54F due to the purchase of a residential property within the prescribed timeline. The detailed analysis provided clarity on the interpretation of statutory provisions, addressing key issues related to exemption claims and joint ownership implications in such cases.