Appeal granted for deduction under Income Tax Act sections 54/54F for assessment year 2010-11

The ITAT allowed the appeal, overturning the denial of the deduction claimed under sections 54/54F of the Income Tax Act for the assessment year 2010-11. The appellant was directed to be granted the deduction under section 54F if all specified conditions were fulfilled, emphasizing the liberal construction of beneficial provisions like sections 54/54F.

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Issues:
1. Denial of deduction claimed under sections 54/54F of the Income Tax Act.
2. Entitlement to deduction under sections 54/54F based on original return of income and revised return.

Issue 1: Denial of deduction claimed under sections 54/54F of the Income Tax Act

The appellant, an individual engaged in trading and dealing in listed securities, filed a return of income for AY 2010-11, declaring total income. The assessment was completed under section 143(3) of the Act, disallowing exemption claimed under sections 54/54F towards long-term capital gain from the sale of property. The appellant contended that by virtue of an allotment letter, she acquired the right to obtain conveyance of immovable property, constituting a capital asset. The CIT(A) dismissed the appeal, stating that the appellant did not fulfill the conditions for deduction under sections 54/54F. The CIT(A) observed that the appellant did not sell a residential house, a primary requirement for deduction under section 54. The appellant argued that the CIT(A) erred in confirming the rejection of the deduction claimed under sections 54/54F based on the technical ground of not filing a revised return. The ITAT held that the AO erred in not allowing the appellant's claim of deduction under section 54F, directing the AO to admit the alternate claim of deduction under section 54F if all specified conditions were fulfilled.

Issue 2: Entitlement to deduction under sections 54/54F based on original return of income and revised return

The appellant raised the issue of entitlement to deduction under sections 54/54F based on the original return of income and the revised return. The CIT(A) upheld the denial of the deduction claimed under sections 54/54F, emphasizing the technicality of not making the claim through a revised return. The appellant argued that the law laid down by the Supreme Court did not restrict the appellate authorities from deciding the issue, despite limiting the AO's power to admit new claims without a revised return. The ITAT noted that the appellant initially claimed deduction under section 54 but later claimed deduction under section 54F during assessment proceedings. The AO rejected the claim under section 54F for not filing a revised return. The ITAT held that the AO erred in denying the appellant's claim solely on the ground of not filing a revised return, as all necessary facts for deduction under section 54F were already available before the AO. The ITAT emphasized the liberal construction of beneficial provisions like sections 54/54F and directed the AO to admit and allow the appellant's claim under section 54F if all conditions were met.

In conclusion, the ITAT allowed the appeal filed by the appellant, setting aside the denial of the deduction claimed under sections 54/54F of the Income Tax Act for the assessment year 2010-11.

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