Tribunal Grants Exemption for Residential House Investments, Orders Recalculation and Verification

The Tribunal allowed the assessee's appeal regarding exemption under Section 54F of the Income Tax Act for investments in two residential houses, overturning the CIT(A)'s decision. The deduction under Section 80C was remanded for verification, with instructions to allow if supported by evidence. The Tribunal addressed the interest issue under Sections 234A and 234B, ordering recalculations based on the final taxable income assessment. The department's appeal was dismissed, and the AO was directed to verify the Section 80C deduction while granting the Section 54F exemption for both residential house investments.

---

---

Issues Involved:
1. Exemption under Section 54F of the Income Tax Act, 1961.
2. Deduction under Section 80C of the Income Tax Act, 1961.
3. Charging of interest under Sections 234A and 234B of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Exemption under Section 54F of the Income Tax Act, 1961
The primary issue in both the assessee's and the department's appeals concerns the exemption under Section 54F of the Income Tax Act, 1961. The assessee claimed exemption of Rs. 46,00,630/- on account of investment of Rs. 46,68,400/- against the sale of his immovable property. The Assessing Officer (AO) noticed that the assessee sold one plot divisible into two units for a total sale consideration of Rs. 94,73,002/- and claimed the resultant long-term capital gains as exempt under Section 54F by investing in two residential houses.

The AO denied the exemption, stating that the assessee did not fulfill the eligibility conditions prescribed by Section 54F, as the sale proceeds were reinvested in two house properties, which violates the conditions of Section 54F. The CIT(A) observed that the exemption under Section 54F is available for the purchase of one residential house only, and since the assessee invested in two residential houses, the exemption could not be allowed. However, the CIT(A) allowed a proportionate exemption of Rs. 20,79,900/- for the investment in one of the houses.

Upon appeal, the Tribunal found that the assessee purchased one plot, divided it into two plots, and sold them separately. The Tribunal held that the assessee was entitled to exemption under Section 54F for both investments since he did not own more than one house at the time of each purchase. The Tribunal deleted the addition confirmed by the CIT(A).

Issue 2: Deduction under Section 80C of the Income Tax Act, 1961
The assessee claimed a deduction of Rs. 88,341/- under Section 80C, but the AO allowed only Rs. 59,576/- due to the absence of complete documentary evidence. The CIT(A) confirmed the AO's action. The Tribunal remanded this issue back to the AO for verification, instructing that if the assessee provides proof of the claimed investments, the deduction should be allowed in accordance with the law.

Issue 3: Charging of Interest under Sections 234A and 234B of the Income Tax Act, 1961
The issue of charging interest under Sections 234A and 234B is consequential. The Tribunal ordered accordingly, implying that the interest would be recalculated based on the final assessment of the taxable income.

Conclusion:
The Tribunal partly allowed the assessee's appeal for statistical purposes and dismissed the department's appeal. The Tribunal directed the AO to verify the deduction under Section 80C and allowed the exemption under Section 54F for both residential house investments made by the assessee.

---