2022 (9) TMI 158 - AT - Income Tax

Disallowance of deduction u/s. 54F - reinvestment of capital gains in a residential house at Pune - CIT-A deleted the addition - second round of proceedings between the parties before the tribunal - HELD THAT - We make it clear that there is no stipulation in section 54F which could be held to have been violated in assessee s impugned development agreement. We thus invoke stricter interpretation in light of Commissioner of Customs Vs. Dilip Kumar and Co. 2018 (7) TMI 1826 - SUPREME COURT to affirm the CIT(A) action deleting the impugned disallowance - Decided against revenue.

Summary

Issues:
1. Disallowance of section 54F deduction of Rs.3.25 crores made by the Assessing Officer.

Analysis:

Issue 1: Disallowance of section 54F deduction

The appellant's appeal against the disallowance of the section 54F deduction of Rs.3.25 crores was considered by the tribunal. The Assessing Officer disallowed the deduction as the investment made by the appellant was considered not for the purchase of a house property but for a development agreement. The appellant argued that the property purchased was a bungalow along with land, treated as residential property in municipal records. The appellant presented various documents to support the claim, including a development agreement and sale deed indicating the property as a residential house. The appellant also referred to legal precedents supporting the treatment of the property as a residential house. The tribunal noted that the appellant had reinvested the capital gains in a new residential property through a development agreement. The tribunal emphasized that there was no violation of section 54F in the appellant's actions and upheld the CIT(A)'s decision to delete the disallowance. The tribunal invoked a stricter interpretation to affirm the action taken by the CIT(A) in favor of the appellant. The Revenue's appeal was dismissed, and the order was pronounced on 1st September 2022.

This detailed analysis of the judgment highlights the key arguments presented by the parties, the tribunal's assessment of the evidence and legal principles, and the final decision reached regarding the disallowance of the section 54F deduction.