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2021 (7) TMI 553 - AT - Income TaxExemption u/s 54F - deduction was denied mainly on the ground that the assessee had owned more than one residential house as on the date of purchase of new Asset - claim of the assessee was denied firstly on the reason that the assessee has not constructed residential house at Kattigenahalli, Bengaluru and the payment said to be made towards construction was met by assessee by cash - HELD THAT - On enquiry by the Inspector of the Department, it was revealed that the said property consists of ground floor, first floor and second floor and it was a commercial building evident from page No.24 of the written submissions which is not countered by the learned DR and it was not a residential building and AO in his remand report admitted that assessee did not own more than one house as on date of transfer of property survey No.149, Bokkasagara Village, Anekal Taluk. Therefore, on this count exemption under section 54F of the Act cannot be denied. Payment made towards construction of the house - As a proof of this, in support of this expenditure, assessee filed payment vouchers before us - These evidences were also filed before the lower authorities. The lower authorities have brushed it aside on the reason that these are self-made vouchers or are not having sufficient details regarding the various expenditure incurred by the assessee. In our opinion, without examining the parties concerned, lower authorities have precluded in rejecting the evidence submitted by assessee in the form of bills and vouchers. Being so, the assessee s property No.9 at 100 Ft. Road, BTM Layout, Bengaluru, cannot be considered as a residential property and also expenditure incurred by assessee towards construction of new residential property cannot be brushed aside - evidence brought by assessee in the form of Khatha show that originally at the time of acquisition of property, there was only 500 sq. ft. of built-up area at 3646/8/8/1 as per Khatha extracted at pages 22, 23 of written submissions, the construct area in property bearing No. 8/1, Kattigenahalli Village, Bengaluru, was 500 sq. ft. - as per Khatha dated 23.12.2014 issued by BBMP, the constructed area in the said property was at 2500 sq.ft. Thus, it means that there is addition construction between 14.06.2013 to 23.12.2014 and also supported by the bills and vouchers submitted by the assessee and due consideration to be given to these evidences - we are inclined to grant deduction under section 54F of the Act as claimed by the assessee. - Decided in favour of assessee.
Issues Involved:
1. Whether the property purchased by the assessee qualifies as a residential property for the purpose of claiming exemption under Section 54F of the Income Tax Act. 2. Whether the assessee owned more than one residential property at the time of the transfer of the original asset. 3. Whether the assessee incurred expenditure on the construction of a new residential house and whether such expenditure qualifies for the exemption under Section 54F. 4. Whether the additional evidence provided by the assessee should be admitted. Detailed Analysis: 1. Qualification of Property as Residential for Section 54F Exemption: The primary issue was whether the property at 8/1, Kattigenahalli Village, purchased by the assessee, qualifies as a residential property for claiming exemption under Section 54F. The AO initially disallowed the claim on the basis that the property was commercial, supported by an Inspector's report and Google Maps imagery indicating the existence of commercial shops, including Ayyappa Bakery, prior to and at the time of purchase. The assessee argued that the property was residential at the time of purchase, supported by the sale deed and BBMP Khatha extracts. The sale deed described the property as a "House Site" with a building constructed of bricks and cement mortar. The BBMP Khatha extracts showed an increase in built-up area from 500 sq. ft. in June 2013 to 2500 sq. ft. in December 2014, indicating construction activity. The Tribunal noted that the description in the sale deed and Khatha extracts supported the assessee's claim of residential use at the time of purchase. The Tribunal also referenced decisions from other ITAT benches, which held that subsequent changes in property use do not affect the eligibility for Section 54F exemption if the property was initially residential. 2. Ownership of More Than One Residential Property: The AO initially disallowed the exemption on the grounds that the assessee owned more than one residential property at the time of the transfer. The assessee provided evidence that the property at 9, 100 ft Road, BTM Layout, was commercial, supported by an Inspector's report confirming its commercial use. The Tribunal found that the AO's remand report admitted the assessee did not own more than one residential property at the time of transfer. Therefore, the exemption under Section 54F could not be denied on this basis. 3. Expenditure on Construction of New Residential House: The assessee claimed to have incurred significant expenditure on constructing a new residential house on the purchased property, supported by self-made vouchers and a valuation certificate. The AO rejected these claims, citing insufficient details and evidence of expenditure. The Tribunal noted that the assessee provided Khatha extracts showing an increase in built-up area, corroborating the construction claims. The Tribunal criticized the lower authorities for dismissing the vouchers without examining the parties involved. Given the evidence, the Tribunal accepted the expenditure claims and allowed the deduction under Section 54F. 4. Admission of Additional Evidence: The assessee submitted additional evidence in the form of bills and vouchers during the appellate proceedings. The AO and CIT(A) initially rejected these, citing procedural grounds and lack of sufficient cause for not presenting them earlier. The Tribunal emphasized the need for a fair hearing and found that the lower authorities did not give proper consideration to the additional evidence. The Tribunal admitted the additional evidence, noting that it supported the assessee's claims of construction expenditure. Conclusion: The Tribunal allowed the assessee's appeal, granting the exemption under Section 54F. It concluded that the property was residential at the time of purchase, the assessee did not own more than one residential property, and the construction expenditure was validly incurred. The additional evidence was admitted, and the lower authorities' findings were overturned.
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