2023 (9) TMI 155 - AT - Income Tax

Deduction u/s. 54F - flats to be received in pursuant to JD Agreement - AO denied deduction as assessee has acquired multiple flats in violation of conditions prescribed u/s. 54F and the construction of new residential house property was not completed on or before three years from the date of transfer of original asset - HELD THAT - There is no dispute with regard to the fact that, the assessee has claimed deduction u/s. 54F of the Act for multiple flats and said claim is in accordance with law, in light of the decisions of various High Courts including Smt. V.R. Karpagam ( 2014 (8) TMI 899 - MADRAS HIGH COURT ). A similar issue has been taken in the case of K.G. Rukminiamma 2010 (8) TMI 482 - KARNATAKA HIGH COURT Therefore, we cannot find fault with the claim of the assessee on this ground alone. Construction of house property was not completed within three years from the date of transfer of original asset - We find that the assessee has admitted the fact that the builder did not complete construction of house property on or before three years from the date of transfer of original asset. Therefore, we cannot find fault with the reasons given by the Assessing Officer to reject deduction u/s. 54F on this ground. Assessee has made a new claim before the CIT(A) and sought deduction u/s. 54F in respect of purchase of new residential house property purchased - CIT(A) rejected alternate claim made by the assessee without discussing how such claim cannot be admitted. In the present case, the assessee has purchased a new residential house property on 25.04.2012, which is within two years from the date of transfer of original asset. The assessee has satisfied other conditions because, the new residential house property was purchased on or before due date for filing return of income u/s. 139(1) of the Act and thus, she need not to keep sale consideration in capital gains deposit account scheme as per the provisions of section 54F(4) of the Act. Since, the appellant has satisfied all conditions prescribed for claiming deduction u/s. 54F of the Act, in our considered view, the ld. CIT(A) ought to have allowed alternate claim made by the assessee for deduction u/s. 54F of the Act. Thus, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to allow deduction u/s. 54F of the Act, in respect of residential house property purchased by the assessee on 25.04.2012. Decided in favour of assessee.

Summary

Issues Involved:
The judgment involves issues related to the denial of exemption claimed under section 54F of the Income Tax Act, the rejection of an alternate plea for exemption, confirmation of interest levied under sections 234A and 234B of the Act, and the overall assessment for the assessment year 2012-13.

Denial of Exemption under Section 54F:
The appellant, an individual, entered into a Joint Development Agreement (JDA) for the development of land and claimed long term capital gains under section 54F of the Act. The Assessing Officer denied the deduction citing that the construction of property was not completed within the specified time frame. The appellant contended that the completion of construction was not in their control and sought deduction for a new residential flat purchased within the due date for filing the return. The Tribunal held that the appellant satisfied all conditions for claiming the deduction under section 54F and directed the Assessing Officer to allow the deduction for the residential house property purchased by the appellant.

Rejection of Alternate Plea for Exemption:
The appellant made an alternate claim for deduction under section 54F for the purchase of a new residential flat. The CIT(A) rejected this claim stating that the appellant had violated conditions by purchasing another residential property within one year of the original asset transfer. The Tribunal found that the appellant had fulfilled all conditions for claiming the deduction under section 54F for the new residential house property purchased within the specified time frame. The CIT(A) was directed to allow the alternate claim for deduction under section 54F.

Confirmation of Interest Levied under Sections 234A and 234B:
The Assessing Officer confirmed the interest levied under sections 234A and 234B of the Act due to the denial of exemption claimed under section 54F. The Tribunal, upon allowing the appellant's appeal and granting the deduction under section 54F, effectively nullified the basis for the interest levied. Therefore, the confirmation of interest levied under sections 234A and 234B was deemed unnecessary and was implicitly set aside by the Tribunal's decision.

Overall Assessment for AY 2012-13:
The Tribunal, after considering the arguments of both parties and reviewing the orders of the authorities below, allowed the appeal filed by the assessee. The Tribunal found that the appellant had satisfied the conditions for claiming deduction under section 54F of the Act for the purchase of a new residential house property. The order of the CIT(A) was set aside, and the Assessing Officer was directed to allow the deduction under section 54F for the residential house property purchased by the appellant. The appeal was allowed in favor of the assessee.