Assessee qualifies for deduction under Section 54F despite house ownership by mother. Construction nature to be verified.

The Tribunal held that the assessee is eligible for deduction under Section 54F even if the house is constructed on a plot owned by his mother. However, the nature of the construction (new house vs. renovation) needs further verification. The case was remanded to the AO for a detailed investigation and fresh decision. The appeal was partly allowed.

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Issues Involved:
1. Disallowance of deduction under Section 54F of the Income Tax Act, 1961.
2. Ownership and construction of the house property.
3. Nature of construction: new house vs. renovation.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 54F:
The assessee claimed a deduction under Section 54F of Rs. 60,63,980/- for the construction of a house property. The Assessing Officer (AO) disallowed this claim, arguing that the assessee did not construct a new house but merely renovated an existing one. The CIT(A) upheld this disallowance, further noting that the property was in the mother’s name, not the assessee’s.

2. Ownership and Construction of the House Property:
The assessee argued that Section 54F does not require the house to be constructed in the assessee’s name. The assessee had invested Rs. 60,63,980/- in constructing a house on a plot owned by his mother, where he had been residing for 20 years. The mother had gifted half the property to the assessee’s sister-in-law, and the remaining half was in the assessee’s possession. The assessee provided a declaration from his mother permitting the construction. The Tribunal agreed with the assessee, citing precedents like CIT vs. Kamal Wahal and Shri Laxmi Narayan vs. CIT, which held that the deduction under Section 54F is permissible even if the house is constructed in the name of a family member, provided the investment is made by the assessee.

3. Nature of Construction: New House vs. Renovation:
The Tribunal noted that determining whether the work was new construction or renovation is a factual matter requiring physical verification. The assessee provided various documents, including vouchers, FIR, and a notice from the Municipal Corporation, indicating construction activities. However, these documents were not conclusive proof of new construction. The Tribunal observed that the nature of expenses suggested possible commercial use of the property. Therefore, the Tribunal remanded the issue back to the AO for thorough verification, including physical inspection and expert opinion, to ascertain whether the construction was new or merely renovation and whether the property was residential or commercial.

Conclusion:
The Tribunal held that the assessee is eligible for deduction under Section 54F even if the house is constructed on a plot owned by his mother. However, the nature of the construction (new house vs. renovation) needs further verification. The case was remanded to the AO for a detailed investigation and fresh decision. The appeal was partly allowed.

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