2018 (8) TMI 513 - AT - Income Tax

Tribunal emphasizes actual investment for deduction eligibility under s.54F, rejects proportionate computation.

Jayanti lal Dahyabhai Patel Versus The DCIT, Circle - 5 (3), Ahmedabad

The Tribunal ruled in favor of the assessee, emphasizing that the actual investment made by the assessee should determine the deduction eligibility under ... Deduction u/s 54F - whether the deduction 54F can be restricted in proportion to the number of joint owners in the new asset disregarding the fact of full payment appropriated by the assessee towards such acquisition - assessee claims that entire deemed sale consideration (computed under s.50C of the Act) stands invested in the purchase of new asset (residential property) out of resources of Assessee - Held that:- We are in complete agreement with the claim of the assessee that where the investment in the new asset has been made (alongwith other co-owners) and where all money has been paid by the assessee, it is the assessee which will be entitled to deduction in respect of investments. What is crucial is the act of investment which will override the fact of joint ownership in so far as eligibility of deduction under s. 54F is concerned. The case of the assessee is covered by the decision of the Tribunal in the case of Jitendra V Faria [2017 (5) TMI 12 - ITAT MUMBAI] where the decisions of several High Courts were referred while holding the issue in favour of the assessee. In conclusion, where the assessee purchased new house out of his money, exempt ion under s.54F cannot be denied to the assessee, regardless of the fact that the assessee holds the property in joint ownership alongwith other parties as per the purchase deed. Consequently, we direct the AO to grant deduction under s. 54F of the Act with reference to the amount utilized by the assessee towards purchase of new asset in joint ownership. - decided in favour of the assessee Issues involved:Restriction of deduction claimed under s.54F, Investment of sale consideration in new asset, Joint ownership impact on deduction eligibility, Applicability of deemed sale consideration under s.50C, Interpretation of Section 54F for joint ownership situations.Analysis:Issue 1: Restriction of deduction claimed under s.54FThe assessee contested the Revenue's decision to limit the deduction under s.54F to Rs. 44,31,000 instead of the claimed Rs. 88,62,000. The AO argued that since the new asset was purchased jointly, the deduction should be computed proportionately. However, the Tribunal disagreed, emphasizing that the actual investment made by the assessee should determine the deduction eligibility under s.54F. The Tribunal cited a precedent to support the assessee's claim and directed the AO to grant the deduction based on the amount utilized by the assessee for the purchase of the new asset.Issue 2: Investment of sale consideration in new assetThe assessee invested the deemed sale consideration, determined under s.50C, in acquiring a new asset and claimed deduction under s.54F. The AO, considering joint ownership of the new asset, restricted the deduction. The Tribunal ruled in favor of the assessee, stating that the investment made by the assessee, regardless of joint ownership, should entitle them to the deduction under s.54F. The Tribunal highlighted that the crucial factor is the act of investment, not joint ownership, for determining deduction eligibility.Issue 3: Joint ownership impact on deduction eligibilityThe dispute arose from the joint ownership of the new asset, leading the AO to limit the deduction under s.54F. The Tribunal rejected this approach, emphasizing that the actual investment made by the assessee should dictate the deduction entitlement. The Tribunal's decision was based on the principle that the act of investment overrides joint ownership concerning eligibility for deductions under s.54F.Issue 4: Applicability of deemed sale consideration under s.50CThe assessee argued that the deemed sale consideration under s.50C should not impact the investment required for claiming deduction under s.54F. The Tribunal did not delve into this alternative argument as the primary issue was resolved in favor of the assessee. Therefore, the Tribunal did not address the contention regarding the applicability of deemed sale consideration in the context of Section 54F.This detailed analysis of the judgment highlights the key issues addressed by the Tribunal concerning the restriction of deduction claimed under s.54F, the impact of joint ownership on eligibility, and the significance of actual investment in determining deduction entitlement.