2019 (8) TMI 1735 - AT - Income Tax

Tribunal directs AO to quantify deduction under section 54F

The Tribunal allowed the appeal for statistical purposes, directing the matter to be sent back to the AO to quantify and allow the deduction under section ... Exemption under section 54F - capital gain arising from transfer of a long term capital asset - purchase/ construction of a residential house within prescribed period - indefinite article 'a' in statutory language not to be construed as singular - remand for quantification and verificationExemption under section 54F - capital gain arising from transfer of a long term capital asset - indefinite article 'a' in statutory language not to be construed as singular - Claim for deduction under section 54F in respect of capital gains arising from sale of two commercial properties and reinvestment in a residential house - HELD THAT: - The Tribunal held that the authorities below erred in rejecting the claim for exemption under section 54F solely because the capital gain arose from sale of two separately deeded commercial properties. Relying on the view expressed by the Hon'ble Karnataka High Court in CIT v. Smt. K.G. Rukminiamma, the Tribunal accepted that the expression 'a residential house' in the statutory context does not convey a requirement of singularity and should not be construed to limit the exemption to gain from only one asset when the statutory language elsewhere uses plural expressions. Applying that principle, the Tribunal found the assessee's claim for deduction under section 54F is not barred merely because two distinct commercial properties were sold, and concluded that the claim cannot be denied on that ground.Assessee entitled to claim deduction under section 54F despite sale of two commercial properties; the rejection by lower authorities on that ground set aside.Purchase/ construction of a residential house within prescribed period - remand for quantification and verification - Quantification and allowance of the section 54F deduction and verification of compliance with temporal conditions - HELD THAT: - Although entitlement on the point of law was accepted, the Tribunal did not quantify the deduction. The matter was restored to the Assessing Officer for determination of whether the assessee purchased an eligible residential house within the statutory time limits and, if so, for computation and allowance of the deduction in accordance with law. The remand is limited to factual verification and consequent quantification in terms of section 54F.Matter remanded to the Assessing Officer to verify compliance with the prescribed period for purchase/construction and to quantify and allow the deduction under section 54F as per law.Final Conclusion: Appeal allowed in part: the Tribunal held that sale of two separate commercial properties does not, by itself, disentitle the assessee from claiming deduction under section 54F; the matter is remitted to the Assessing Officer for factual verification and quantification of the deduction in accordance with law. Issues Involved:1. Eligibility for deduction under section 54F of the Income Tax Act in case of sale of two commercial properties and investment in one residential property.2. Disallowance of loss claimed from a house property.Analysis:Issue 1: Eligibility for deduction under section 54F:The appeal was filed by the assessee against the order of the ld. CIT(A)-4, Bangalore dated 08.03.2019 for Assessment Year 2012-13. The AO contended that the assessee is not eligible for deduction u/s. 54F as the capital gain arose from the sale of two commercial properties purchased separately. The AO referred to sections 54 and 54F of the IT Act, stating that deduction is allowable for capital gain arising from the transfer of a long term capital asset. The AO concluded that since the capital gain arose from the sale of two properties, the assessee is not eligible for deduction u/s. 54/54F. The ld. AR of the assessee cited Tribunal orders and a judgment of the Hon'ble Karnataka High Court to support the claim for deduction. The ld. CIT(A) upheld the disallowance, stating that the exemption under sec. 54F is restricted to one transaction and disallowed the exemption claimed on the sale of two properties amounting to Rs. 56,22,000.Analysis Continued:The Tribunal noted that the assessee sold two commercial properties with two distinct sale deeds and aimed to invest in one residential property to claim exemption u/s. 54F. The Tribunal referred to a judgment of the Hon'ble Karnataka High Court, which clarified that the term 'a residential house' in section 54 does not refer to a single residential house but allows for plural interpretation. The Tribunal held that the authorities were not justified in rejecting the claim for deduction u/s. 54F based on the sale of two commercial properties. The Tribunal ordered the matter to be restored to the AO to quantify and allow the deduction u/s. 54F as per law, provided the assessee purchased an eligible residential house property within the prescribed time.Issue 2: Disallowance of loss claimed from a house property:The assessee raised a ground regarding the disallowance of a loss of Rs. 37,249 from a house property. The AO disallowed the loss claimed by the assessee as no notional income was offered from a vacant let-out property. The ld. CIT(A) agreed with the AO's observation, stating that the assessee was not entitled to claim a loss on this property.Conclusion:The Tribunal allowed the appeal for statistical purposes, holding that the authorities were not justified in rejecting the claim for deduction u/s. 54F based on the sale of two commercial properties. The Tribunal ordered the matter to be sent back to the AO to quantify and allow the deduction as per law if the assessee had purchased an eligible residential house property within the prescribed time. Additionally, the disallowance of the loss claimed from a house property was upheld by the ld. CIT(A).