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2022 (2) TMI 520 - AT - Income TaxDeduction u/s 54F or u/s 54 - property sold as mere sale of land instead of land and building and, thereby denying the benefit of deduction u/s 54 - As since the assessee, in the instant case, has conclusively proved that the property sold was a land with building over it, therefore, merely because in the sale deed only land was mentioned cannot be a ground to deny the benefit of deduction u/s 54 - HELD THAT - Since the assessee, in the instant case, has sold 1/4th share in the property No. 22, Radice Road, Gokhaley Marg, Lucknow and has filed the requisite details before the AO to substantiate that the property that was sold was, in fact, a building with land appurtenant thereto, therefore we are of the considered opinion that the assessee is entitled to claim the benefit of deduction u/s 54 of the IT Act on account of sale of the property and the subsequent investment in the residential property. Cost of new house property including the cost of improvement to make it habitable - The cost of the property declared by the assessee includes an amount for making the house habitable which includes certain items as per serial No.1 to 16 of the table at para 5.5. of the CIT(A) which in our opinion is not allowable as a deduction for making the house habitable because these are all luxury items.CIT(A) has rightly determined the amount for making the house habitable. Therefore, the assessee is entitled to get the benefit of deduction u/s 54 of the Act to the extent including amount for making the house habitable. The AO shall verify the calculation. The grounds raised by the assessee are accordingly allowed.
Issues Involved:
1. Eligibility for deduction under Section 54 of the Income Tax Act. 2. Eligibility for deduction under Section 54F of the Income Tax Act. 3. Determination of indexed cost of acquisition. 4. Jurisdiction of the Assessing Officer (AO) in issuing notice under Section 143(2). Detailed Analysis: 1. Eligibility for Deduction under Section 54 of the Income Tax Act: The primary issue revolves around whether the assessee is eligible for deduction under Section 54 of the IT Act for the sale of a residential house property. The AO rejected the claim, arguing that the property sold was described as a plot in the sale deed and agreement to sell, thus not qualifying as a residential house. The CIT(A) also did not allow the claim under Section 54, but instead allowed it under Section 54F. The Tribunal found that the assessee had sold a residential house with land appurtenant thereto, supported by evidence such as the will, house tax bills, and a valuation report. The Tribunal cited the decisions of the Hon'ble Andhra Pradesh High Court in Zaibunnissa Begum and the Hon'ble Karnataka High Court in C.N. Anantharam, which clarified the meaning of "land appurtenant" and supported the assessee's claim. Therefore, the Tribunal concluded that the assessee is entitled to the benefit of deduction under Section 54 of the IT Act. 2. Eligibility for Deduction under Section 54F of the Income Tax Act: The AO did not consider the assessee's eligibility for deduction under Section 54F, and the CIT(A) allowed the deduction under this section based on fresh evidence without giving the AO an opportunity to verify it. The Revenue contended that the CIT(A) erred in allowing this deduction. The Tribunal, however, focused on the eligibility under Section 54 and found that the assessee had indeed sold a residential house property with land appurtenant thereto, thus making the discussion on Section 54F redundant. The Tribunal allowed the deduction under Section 54, rendering the Revenue's appeal on Section 54F infructuous. 3. Determination of Indexed Cost of Acquisition: The AO adopted the cost of acquisition at ?30,48,998/- as against ?74,50,517/- claimed by the assessee based on a valuation report. The CIT(A) did not address this issue explicitly, but the Tribunal found that the assessee had provided sufficient evidence, including a registered valuer's report and house tax bills, to substantiate the cost of acquisition. The Tribunal directed the AO to verify the calculations and allowed the indexed cost of acquisition as claimed by the assessee, except for certain luxury items included in the cost of making the house habitable. 4. Jurisdiction of the Assessing Officer in Issuing Notice under Section 143(2): The assessee contended that the initial notice under Section 143(2) should have been issued by the DCIT/ACIT, International Taxation, as the assessee is an NRI. The Tribunal did not specifically address this issue in detail but focused on the substantive issues of deductions under Sections 54 and 54F. Conclusion: The Tribunal allowed the appeal filed by the assessee, granting the benefit of deduction under Section 54 of the IT Act for the sale of a residential house property with land appurtenant thereto. The Tribunal also directed the AO to verify the calculations for the indexed cost of acquisition and allowed the cost of making the house habitable, excluding certain luxury items. Consequently, the appeal filed by the Revenue was dismissed as infructuous.
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