2012 (9) TMI 726 - AT - Income Tax

Tribunal grants appeal, permits exemption under section 54F for residential house construction.

Smt. Usha Vaid Versus Income-tax Officer, Dasuaya

The Tribunal allowed the appeal, directing the deletion of the addition made by the AO and reversing the CIT(A)'s order. The Tribunal found that the ... Deduction u/s 54F - house was not constructed on the date of inspection by the Inspector - Held that:- As the assessee had invested the total sale consideration (net consideration) within three years after the transfer of the original asset. The words mentioned in section 54F are that the amount should be invested in the construction of a residential house. Therefore, once the assessee having been invested total sale consideration into construction of a residential house, then it is not necessary that the residential house should have been completed within three years of the transfer of the original asset. The residential house may be completed even after completion of three years of the transfer of the original asset. In such a situation, when a house is completed after expiry of three years from the transfer of the original asset, the assessee is entitled to exemption under section 54F as decided in CIT v. Sardarmal Kothari [2008 (6) TMI 15 - MADRAS HIGH COURT] The assessee had submitted application under Rule 46A admitting additional evidence which in fact, could not be submitted by the assessee before completion of the assessment but on having completed the house, after the expiry of three years from the transfer of the original asset along-with electricity bill which was not accepted by the CIT(A) as the same should have been accepted by the CIT(A) - in favour of assessee. Issues:1. Admission of additional evidence in appellate proceedings.2. Reduction of cost of shop plot without vouchers.3. Qualification for deduction under section 54F of the Act.4. Justification for not allowing deduction under section 54F.5. Submission of application under Rule 46A for completed construction.Issue 1: Admission of Additional EvidenceThe assessee appealed against the CIT(A)'s refusal to admit additional evidence, including electric bills and transfer documents, to support the completion of a residential house after assessment proceedings. The Tribunal noted the contention that rejecting additional evidence was illegal and against the law.Issue 2: Reduction of Cost Without VouchersThe appeal challenged the confirmation of the AO's reduction of the cost of a boundary wall and gate without vouchers, arguing that the action was illegal and against the law. The Tribunal examined the absence of vouchers for the construction made in 1987, leading to the dispute over the cost reduction.Issue 3: Qualification for Deduction under Section 54FThe dispute involved the CIT(A)'s confirmation that certain expenses did not qualify for deduction under section 54F of the Act, despite the investment in land, foundation, and materials. The Tribunal analyzed the conditions under section 54F and the disagreement over the eligibility for deduction.Issue 4: Justification for Not Allowing DeductionThe appeal contested the denial of deduction under section 54F, arguing that the house was completed within the stipulated period after the sale of capital assets. The Tribunal assessed whether the conditions under section 54F were met and reviewed the completion timeline of the residential house.Issue 5: Submission of Application under Rule 46AThe assessee submitted an application under Rule 46A with evidence of completed construction after the three-year period, which was not accepted by the CIT(A). The Tribunal considered the acceptance of the application and its relevance to the exemption claim under section 54F.In conclusion, the Tribunal allowed the appeal, directing the deletion of the addition made by the AO and reversing the CIT(A)'s order. The Tribunal found that the assessee met the conditions under section 54F by investing the net sale consideration in the construction of a residential house, entitling them to the exemption. The decision was supported by legal precedents and interpretations of the relevant provisions.