2015 (5) TMI 989 - AT - Income Tax

Appellant wins tax deduction case: Tribunal cancels Commissioner's order, allows deduction under section 54F.

The Tribunal ruled in favor of the appellant, canceling the Commissioner's order under section 263 of the Income Tax Act. It held that the appellant was ... Revision u/s 263 - error in the order of the Assessing Officer in accepting the claim of the assessee under S.54F - Held that:- It is not disputed that the assessee has in fact deposited the total amount in the purchase of the residential house during the stipulated period. Merely because the assessee has availed a bank loan of ₹ 45,45,855 and has invested in the purchase of the residential house, it cannot be denied exemption under S.54F of the Act. The fact that money to that extent has not come directly from the sale proceeds of the original asset received by the assessee, is not decisive of the issue. The fact remains that the amount received by the assessee on the sale of the original asset owned by it was invested in the purchase of the residential asset within the stipulated time, partly from the sale proceeds of the original asset directly and partly from the borrowed amount. The assessee has fulfilled all the conditions of investment of the equivalent amount of the sale proceeds in the purchase of residential house qualifying for relief under S.54F, by investing the money out of the sale proceeds of the original asset available with it or by borrowing from the bank. We find that the decision of the Hyderabad Tribunal in Smt.V.Kumuda V/s. DCIT (2012 (2) TMI 212 - ITAT HYDERABAD) relied upon by DR relates to a decision in the Miscellaneous Application preferred by the assessee. At any rate, it is clear that two views are possible on this issue before us, and the view taken by the Assessing Officer was a possible view and could not be said to be a perverse view. The issue of granting deduction/exemption under S.54F on the borrowed money can at best be called a debatable issue. Thus AO has taken a possible view permitted under law, and is as per the series of decisions of different benches of the Tribunal. It could not be said that the order of the Assessing Officer was erroneous or prejudicial to the interests of the Revenue. In this view of the matter, we hold that the Commissioner was not justified in setting aside the assessment framed under S.143(3), as the order of the Assessing Officer could not be said to be erroneous and prejudicial to the interests of the Revenue. - Decided in favour of the assessee. Issues:1. Jurisdiction under section 263 of the Income Tax Act, 1961.2. Interpretation of section 54F regarding deduction on the amount utilized in the acquisition of a residential house.3. Validity of the Commissioner's direction to recompute the deduction under section 54F.4. Justification of the Assessing Officer's order regarding the deduction under section 54F.Analysis:Issue 1: Jurisdiction under section 263 of the Income Tax Act, 1961The appeal involved a challenge to the Revisionary Order under section 263, contending it was erroneous and prejudicial to the revenue's interest. The Commissioner of Income-tax had directed the Assessing Officer to recompute the deduction under section 54F. The appellant argued that the assessment order was not erroneous, and the Commissioner lacked jurisdiction under section 263. The Tribunal noted that the Commissioner cannot intervene merely due to a difference in opinion and that the Assessing Officer's decision was not erroneous or prejudicial to the revenue's interests. Consequently, the Tribunal held in favor of the appellant, canceling the Commissioner's order under section 263.Issue 2: Interpretation of section 54F regarding deduction on the amount utilized in the acquisition of a residential houseThe primary issue revolved around the interpretation of section 54F concerning the deduction on the amount invested in a residential house acquisition. The appellant had invested a significant sum in purchasing a house, partly utilizing a bank loan. The Commissioner restricted the deduction under section 54F, considering the bank loan amount. However, the Tribunal found that the appellant had invested the total required amount within the stipulated time, partly from the sale proceeds and partly from the borrowed amount. Citing various precedents, the Tribunal concluded that the borrowed money's utilization did not disqualify the appellant from claiming the deduction under section 54F.Issue 3: Validity of the Commissioner's direction to recompute the deduction under section 54FThe Commissioner's direction to recompute the deduction under section 54F was challenged by the appellant. The Tribunal analyzed the facts and legal provisions, noting that the appellant had complied with the conditions of investment within the stipulated time, even though part of the investment was from a bank loan. The Tribunal observed that two views were possible on the issue, and the Assessing Officer's decision was a possible view permitted under the law. Consequently, the Tribunal held that the Commissioner was not justified in setting aside the assessment, as the Assessing Officer's order was not erroneous or prejudicial to the revenue's interests.Issue 4: Justification of the Assessing Officer's order regarding the deduction under section 54FThe Assessing Officer's decision to allow the deduction under section 54F was scrutinized. The Tribunal found that the appellant had fulfilled all conditions for the deduction, investing the required amount in the residential house acquisition within the stipulated time. Despite utilizing a bank loan for part of the investment, the Tribunal held that the Assessing Officer's decision was not erroneous or prejudicial to the revenue. The Tribunal concluded in favor of the appellant, allowing the appeal.In conclusion, the Tribunal's judgment addressed the jurisdiction under section 263, the interpretation of section 54F, the validity of the Commissioner's direction, and the justification of the Assessing Officer's decision, ultimately ruling in favor of the appellant and canceling the Commissioner's order.