2021 (10) TMI 901 - AT - Income Tax

Addition towards relief claimed u/s 54F - purchase of residential house property located at first floor of a complex having shops constructed on ground floor - HELD THAT - As per the permission granted by the Municipal Corporation, Bhopal, the ground floor is to be utilized for commercial activities and thus shops are constructed on ground floor and first floor to be utilized for residential purpose. We also find that the assessee has purchased a property as a residential property and registering authority have also registered the said purchase after charging expenses valuing the said property for stamp duty value as a residential property. Copy of registration papers and guidelines for stamp duty valuation are placed on record. It is noteworthy that Electricity Department had also considered the use of the said premises as a residential use and has charged the electricity rates accordingly. Perusal of record also shows that the assessee has submitted the copy of the Municipal receipt and return during the course of assessment proceedings itself. Municipal authorities have charged the property tax treating it as a residential property. From perusal of the purchase deed we find that the complete details of the property purchased by the assessee is mentioned which is measuring 864 sq.ft. and consists of residential rooms all located at first floor. Copies of electricity bills relating to the property in question are also placed in the paper book which also supports the contention that the property is used for residential purpose. We are satisfied with the contention made by the Ld. counsel for the assessee and Ld. DR being unable to place any contrary material to prove otherwise, are of the considered view that the assessee has rightly claimed exemption u/s 54F for purchase of residential house property located at first floor of a complex having shops constructed on ground floor - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of exemption claimed under section 54F of the Income Tax Act.

Analysis:
The appeal was filed by the Assessee against the order of the Ld. Commissioner of Income Tax(Appeals) for the Assessment Year 2010-11, challenging the addition of ?18,98,561 towards relief claimed under section 54F of the Act. The Assessee, an individual engaged in the business of grinding spices and wholesale trading, claimed exemption under section 54F for purchasing a property at the first floor of a complex in Bhopal. However, the Assessing Officer (AO) considered the property to be of commercial nature, denying the exemption and making additions to the income. The Income Tax Appellate Tribunal (ITAT) was approached by the Assessee against the decision of the Ld. CIT(A) confirming the addition.

During the assessment proceedings, it was observed that the property in question was located on the first floor of a building designated for residential use, with the ground floor intended for commercial activities. The Assessee had purchased the property as a residential one, supported by documents such as registration papers, stamp duty valuation guidelines, electricity bills, and municipal receipts. The Municipal Corporation treated the property as residential for property tax purposes, and the Electricity Department charged residential rates, further validating the residential nature of the property. The purchase deed detailed the property as a residential unit measuring 864 sq.ft. with all rooms on the first floor being residential.

After considering the contentions of both parties and reviewing the documentary evidence, the ITAT found in favor of the Assessee. The ITAT noted that the property was indeed used for residential purposes, as evidenced by various documents and official actions. The Assessee's claim for exemption under section 54F was upheld, and the addition made by the AO was set aside. The ITAT allowed the Assessee's appeal, emphasizing that the property qualified for the exemption under section 54F of the Income Tax Act.

In conclusion, the ITAT ruled in favor of the Assessee, allowing the appeal and setting aside the addition made under section 54F of the Act. The decision was based on the residential nature of the property as established by documentary evidence and official records.