The assessee claimed exemption/deduction u/s 54F on account of ...

Long-term capital gains deduction on new house upheld; properties held as stock-in-trade not 'residential houses'.

Case Laws     Income Tax

September 30, 2024

The assessee claimed exemption/deduction u/s 54F on account of investing long-term capital gains in a new residential house. The PCIT disallowed the claim, considering the assessee owned more than one residential house on the date of sale of the original asset. However, the ITAT held that incomes from residential houses held as stock-in-trade were not liable to tax under 'Income from House Property' and did not qualify as 'residential house' u/s 54F. The PCIT provided no reasoning for considering the stock-in-trade property as a residential house. Regarding agricultural land, the PCIT's finding of small houses qualifying as residential houses based on electricity supply and local tax assessment lacked legal basis. The ITAT set aside the PCIT's order denying Section 54F deduction and directing assessment under 'Income from House Property'. The PCIT's direction to deny Chapter VI-A deductions was also set aside as the assessee had not claimed any such deductions. The ITAT held the PCIT's order unsustainable due to lack of concrete findings of error in the AO's order.

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