2016 (4) TMI 867 - AT - Income Tax

Tribunal grants full deduction under Section 54F, dismisses Revenue's appeal.

The Tribunal allowed the assessee's appeal, granting full deduction under Section 54F for the entire capital gains as the investment in the new house ... Deduction u/s. 54F - Held that:- In the present case, assessee has purchased a semi-finished house and completed construction before the three years period as prescribed. Revenue has not cited or placed on record any contrary judgment. Therefore, respectfully following the ratio laid down by the Hon'ble Karnataka High Court in the case of CIT Vs. K. Ramachandra Rao [2015 (4) TMI 620 - KARNATAKA HIGH COURT], we direct the AO to allow the capital gains exemption as claimed. Claim of cost of acquisition - Held that:- AO as stated earlier has not considered the cost of acquisition or indexation and brought the entire sale consideration to tax. Before the Ld. CIT(A), additional evidence in the form of purchase deeds were filed. Ld. CIT(A) failed to adjudicate the ground. We notice that assessee is entitled to cost of indexation as claimed as a deduction while computing the capital gains. Even otherwise, since assessee’s investment in new house is more than the sale consideration, the ground may become academic. However, we direct the AO to allow cost of indexation as claimed and arrive at the correct capital gains and allow deduction u/s. 54F/54 thereon. Issues Involved:1. Eligibility for deduction under Section 54/54F of the Income Tax Act.2. Timeliness of deposit in the Capital Gains Account Scheme.3. Completion of house construction within the stipulated period.4. Consideration of indexed cost of acquisition.Detailed Analysis:1. Eligibility for Deduction under Section 54/54F:The primary issue revolves around the eligibility for deduction under Section 54/54F of the Income Tax Act. The assessee sold two plots and claimed a deduction on the capital gains by investing in a new residential house. The Assessing Officer (AO) initially disallowed the claim, but the Commissioner of Income Tax (Appeals) [CIT(A)] acknowledged that the assessee had constructed the house within the stipulated three years. Despite this, the CIT(A) limited the deduction to the amount deposited in the Capital Gains Account, which was Rs. 80,00,000, rather than the entire capital gains.2. Timeliness of Deposit in the Capital Gains Account Scheme:The Revenue contended that the exemption under Section 54F is not allowable unless the gain is deposited in the notified schemes within the due date under Section 139(1). However, evidence showed that the assessee deposited Rs. 80,00,000 on 30-07-2010, which is within the due date of Section 139(1). The CIT(A) and the Tribunal both found that the deposit was timely and dismissed the Revenue's appeal on this ground.3. Completion of House Construction within the Stipulated Period:The CIT(A) confirmed that the house was constructed within three years from the date of sale of the original assets, supported by various documents including electricity and water bills, and an application for an occupancy certificate submitted to GHMC on 10-08-2012. The Tribunal noted that under the Greater Hyderabad Municipal Corporation Act, 1955, and relevant building rules, the occupancy certificate can be deemed issued if the municipal authorities do not respond within 21 days. Thus, the construction was considered completed within the stipulated period, and the assessee was deemed eligible for the deduction.4. Consideration of Indexed Cost of Acquisition:The AO did not initially consider the cost of acquisition or indexation and brought the entire sale consideration to tax. The CIT(A) failed to adjudicate on this ground despite additional evidence being submitted. The Tribunal directed the AO to allow the indexed cost of acquisition as claimed by the assessee, which would reduce the capital gains and consequently the tax liability.Conclusion:The Tribunal allowed the assessee's appeal, directing the AO to grant the full deduction under Section 54F for the entire capital gains, considering the investment in the new house exceeded the sale consideration. The Tribunal also directed the AO to account for the indexed cost of acquisition. The Revenue's appeal was dismissed due to lack of merit in its contentions. The judgment emphasizes adherence to judicial precedents and proper interpretation of tax provisions, ensuring fair treatment of the assessee's claims.