2018 (12) TMI 572 - AT - Income Tax

Tribunal upholds exemption under Income Tax Act for assessee's residential property investment

Income-tax Officer, Ward – 15 (1), Hyderabad Versus Sri Shravan Kumar Akula

The Tribunal upheld the CIT(A)'s decision to grant the exemption under Section 54F of the Income Tax Act to the assessee. The Tribunal found that the ... Eligibility for claim of exemption u/s 54F - assessee has not deposited the net consideration in the capital gains account scheme as stipulated in section 54F and as the construction of the flats have not been commenced, the purchase deed and the work order placed cannot be relied upon - Held that:- The assessee is eligible for claim of exemption u/s.54F on the amount of investments made upto the date of the filing of return of income. In the result, that the assessee is eligible for claim of exemption u/s.54F of the I.T. Act and Assessing Officer is not correct in denying the claim of exemption. Therefore, the Assessing Officer is directed to grant the exemption u/s.54F AO disallowed the claim u/s 54F on three counts, i.e., i) the assessee has not deposited the sale consideration before filing the return of income, ii) Assessee has purchased two residential flats instead of 1 flat and iii) the residential flats were not completed within three years from the date of sale. All these aspects were properly addressed and adjudicated by the ld. CIT(A). Therefore, we do not find any infirmity in the order of the CIT(A) in directing the AO to grant exemption u/s 54F to assessee as his decision is in consonance with the decisions of Hon’ble High Courts and ITAT and accordingly we uphold the order of CIT(A) and dismiss the grounds raised by the revenue. - decided in favour of assessee. Issues Involved:1. Non-deposit of net consideration in the capital gains account scheme.2. Purchase of two residential flats instead of one.3. Non-completion of residential flats within three years from the date of sale.Issue-wise Detailed Analysis:1. Non-deposit of Net Consideration in Capital Gains Account Scheme:The Assessing Officer (AO) disallowed the exemption under Section 54F of the Income Tax Act, 1961, on the ground that the assessee did not deposit the net consideration in the capital gains account scheme before the due date for furnishing the return of income under Section 139(1). The CIT(A) overturned this decision, noting that the assessee filed the return under Section 139(4) before the extended due date of 31-03-2015, thus complying with the requirement of Section 54F. The CIT(A) relied on judgments from the Punjab and Haryana High Court in CIT vs. Jagtar Singh Chawla and the Guwahati High Court in Rajesh Kumar Jalan, which held that the extended due date under Section 139(4) is applicable for claiming the exemption. The Tribunal upheld the CIT(A)'s decision, affirming that the assessee met the conditions for exemption by investing the net consideration before the actual filing date of the return.2. Purchase of Two Residential Flats Instead of One:The AO contended that the exemption under Section 54F is available only for the purchase of one residential house, whereas the assessee purchased two flats. The CIT(A) accepted the assessee's argument that the two flats constituted a single residential unit connected by an internal staircase. The CIT(A) cited the jurisdictional High Court's decision in Syed Ali Adil and the Madras High Court's ruling in Smt. V.R. Karpagam, which allowed the exemption for multiple units considered as one residential house. The Tribunal agreed with the CIT(A), noting that the amendment restricting the exemption to one house came into effect only from A.Y. 2015-16, and thus the assessee was eligible for the exemption for the assessment year in question.3. Non-completion of Residential Flats within Three Years from the Date of Sale:The AO also disallowed the exemption on the basis that the construction of the flats was not completed within three years from the date of sale. The CIT(A) countered this by referring to CBDT Circular No. 471 and various High Court decisions, which clarified that payment to the builder is sufficient for claiming the exemption, even if the construction is not completed within the stipulated period. The Tribunal supported the CIT(A)'s view, citing the jurisdictional Tribunal's decisions in Narasimha Raju Rudra Raju and Pradeep Kumar Chowdhary, which held that investment in construction or purchase, even if incomplete, qualifies for the exemption under Section 54F.Conclusion:The Tribunal dismissed the revenue's appeal, finding no infirmity in the CIT(A)'s order to grant the exemption under Section 54F to the assessee. The Tribunal's decision was consistent with the prevailing judicial precedents and the interpretations of the relevant provisions of the Income Tax Act. The appeal of the revenue was thus dismissed, and the assessee's claim for exemption under Section 54F was upheld.