2018 (3) TMI 1098 - AT - Income Tax

Tribunal grants deduction under Section 54F for house purchase, treats adjacent properties as single unit.

Jag Mohan Sharma (Deceased), Legal Heir Nitesh Sharma Versus The Income Tax Officer, Ward 1 (1), Jaipur

Jag Mohan Sharma (Deceased), Legal Heir Nitesh Sharma Versus The Income Tax Officer, Ward 1 (1), Jaipur - TMI Issues Involved:1. Legality of the demand created by the AO.2. Disallowance of benefit under Section 54F for the purchase of a residential house.3. Rebuttal of the agreement for purchase of a constructed residential house.4. Treatment of two houses as a single residential unit.5. Consideration of sale consideration at DLC value versus actual sale consideration.Issue-wise Detailed Analysis:1. Legality of the Demand Created by the AO:The assessee challenged the legality and justification of the demand created by the AO. The appeal sought to declare the order passed by the AO as illegal and unjustified based on the facts and circumstances of the case.2. Disallowance of Benefit Under Section 54F for the Purchase of a Residential House:The primary issue raised was the disallowance of deduction under Section 54F concerning the investment made in the house purchased on 13.10.2014. The AO noted that the assessee claimed deductions under Section 54F and Section 54B against the long-term capital gain from the sale of agricultural land. While the AO allowed the deduction for the residential house No. 784 and agricultural land, the deduction for house No. 784A was denied due to non-deposition of the sale consideration in the Capital Gain Account Scheme before the due date of filing the return of income under Section 139. The CIT (A) confirmed this disallowance, treating the two houses as separate units and noting the non-compliance with the deposit requirement.3. Rebuttal of the Agreement for Purchase of a Constructed Residential House:The assessee argued that the agreement dated 19.01.2013 for purchasing house No. 784A was rebutted due to non-fulfillment of the condition to deliver possession within ten months. The CIT (A) confirmed the AO's decision without providing cogent reasons, which the assessee claimed was arbitrary and unjustified.4. Treatment of Two Houses as a Single Residential Unit:The assessee contended that both houses (No. 784 and 784A) constituted a single residential unit as per family requirements. The AO and CIT (A) treated them as separate units, denying the deduction under Section 54F for house No. 784A. The assessee relied on various judicial precedents, including decisions from the Hon'ble Jurisdictional High Court and other High Courts, which held that adjacent properties used as a single residential unit qualify for deduction under Section 54F. The Tribunal agreed with the assessee, noting that the two adjacent properties should be considered a single residential unit for the purpose of Section 54F deduction.5. Consideration of Sale Consideration at DLC Value Versus Actual Sale Consideration:The assessee argued that the AO erred in taking the sale consideration at the DLC value of Rs. 2,10,58,043/- instead of the actual sale consideration of Rs. 2,01,00,000/-. The CIT (A) confirmed the AO's order, which the assessee sought to declare as illegal.Conclusion:The Tribunal concluded that the assessee was eligible for deduction under Section 54F for the investment made in the house purchased on 13.10.2014. It held that the two adjacent properties should be considered a single residential unit, and the non-deposit of the amount in the Capital Gain Account Scheme did not disqualify the assessee from the deduction, provided the investment was made within the stipulated period. The appeal of the assessee was allowed, and the order was pronounced in the open court on 13/03/2018.