2022 (7) TMI 1264 - AT - Income Tax

Deduction claimed u/s.54F - assessee owns more than one houses at the time of transfer of original asset - HELD THAT - As explanation of the assessee before the AO that although, he had owned more than one houses, but those houses are let out for commercial purposes and if we exclude houses let out for commercial purposes, then the assessee does not have more than one houses, when the original asset was transferred and thus, entitled for exemption u/s 54F - We have considered rival submissions and also decision relied upon by the learned AR for the assessee in the case of Navin Vs, ITO 2020 (6) TMI 514 - KARNATAKA HIGH and we find that the issue involved in the present appeal is squarely covered by the decision of the Hon ble Karnataka High Court where it has been held that where two apartments owned by the assessee, even though had been sanctioned for residential purpose, yet same were in fact, being used for commercial purposes as service apartments, then both needs to be excluded for the purpose of deduction u/s.54F. Assessee is entitled for deduction u/s.54F in respect of amount invested for purchase of another residential property. Hence, we direct the AO to delete additions made towards disallowance of deduction claimed u/s.54F - Decided in favour of assessee.

Summary

Issues:
- Disallowance of deduction claimed under Section 54F of the Income Tax Act, 1961.

Detailed Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) denying exemption under Section 54F for the assessment year 2007-08.
2. The assessee had sold a property and claimed deduction under Section 54F for purchasing another residential property. However, the Assessing Officer disallowed the deduction as the assessee owned more than one house property at the time of the original asset transfer.
3. The assessee argued that the other properties owned were let out for commercial purposes and should be excluded, making them eligible for the deduction. The case cited in support was Navin Jolly vs. ITO.
4. The Department contended that the properties owned by the assessee were residential, even though they were let out for commercial purposes, thus disqualifying the assessee from claiming the deduction.
5. The Tribunal considered the arguments and the decision in Navin Jolly vs. ITO, where it was held that properties used for commercial purposes should be excluded for the purpose of deduction under Section 54F.
6. Referring to Section 54F(1) of the Act, the Tribunal found that the assessee was entitled to the deduction as the properties used for commercial purposes should be excluded. The Tribunal directed the Assessing Officer to delete the disallowance made under Section 54F.
7. The appeal was allowed in favor of the assessee based on the interpretation of the law and relevant precedents, including the decision of the Hon'ble Karnataka High Court in Navin Jolly vs. ITO.

This detailed analysis outlines the key arguments, legal provisions, and precedents considered by the Tribunal in deciding the issue of disallowance of deduction claimed under Section 54F of the Income Tax Act, 1961.