2019 (8) TMI 232 - AT - Income Tax

Tribunal denies deduction under section 54F for multiple properties, upholds CIT(A)'s decision.

The Tribunal upheld the CIT(A)'s decision, dismissing the appeal and affirming that the appellant was not entitled to the deduction under section 54F(1) ... Deduction u/s 54F - assessee purchased two properties - whether the assessee is eligible for deduction u/s. 54F in respect of both the house property purchased by the assessee or not? - scope of amendment - HELD THAT:- In view of the specific provision of section 54F, after the amendment w.e.f. 01.04.2015 i.e. Assessment Year 2015-16, deduction is allowable u/s. 54F(1) only in respect of one residential house purchased or constructed by the assessee and hence, on this aspect, we find no infirmity in the order of CIT(A) and we hold that the assessee is not eligible for deduction u/s. 54F(1) in respect of both the house properties purchased by the assessee. In fact, the requirement of the proviso is this that if the assessee purchases any residential house other than the new asset within the period of one year after the date of transfer of original asset, deduction is not allowable u/s. 54F (1). Hence whether the deduction u/s. 54F (1) is allowable in respect of second property or first property, it is not material because in both the situations, the proviso will be operating and as a result, the assessee will not be eligible for deduction u/s. 54F (1). In view of these facts and legal position, we hold that there is no infirmity in the order of CIT(A) as per which he has held that assessee is not eligible for deduction u/s. 54F (1) in the facts of present case. - Decided against assessee. Issues Involved:1. Legality of the appellate order dated 01-10-2018.2. Confirmation of addition made by the AO by disallowing deduction claimed under section 54F of the Act.3. Enhancement of assessment without issuing notice under section 251(1) of the Act.Issue-wise Detailed Analysis:1. Legality of the Appellate Order Dated 01-10-2018:The appellant contested the appellate order dated 01-10-2018 passed by the CIT(A), Bangalore-7, arguing that it was opposed to law, facts, and circumstances of the case. The appellant had sold a vacant site and purchased two flats, claiming deductions under section 54F for both properties. The CIT(A) considered the amendments in section 54F effective from 01.04.2015, which specified that the exemption is available only if the investment is made in 'one residential house in India.' Consequently, the CIT(A) held that the appellant's claim for deduction under section 54F for both properties was not allowable.2. Confirmation of Addition by Disallowing Deduction Claimed Under Section 54F:The appellant argued that the deduction under section 54F should be allowed for both properties purchased. The CIT(A) noted that the amendment in section 54F by the Finance (No. 2) Act, 2014, effective from 01.04.2015, restricts the deduction to one residential house. Additionally, as per proviso (a)(ii) of section 54F(1), no deduction is allowable if the assessee purchases any residential house other than the new asset within one year after the date of transfer of the original asset. The appellant's claim was disallowed as they had purchased two residential houses within one year, making them ineligible for the deduction under the amended provisions.3. Enhancement of Assessment Without Issuing Notice Under Section 251(1):The appellant contended that the CIT(A) erred in directing the AO to withdraw the deduction of Rs. 28,85,940 allowed in the assessment order, resulting in an enhancement of assessment without issuing a notice under section 251(1). The CIT(A) issued a show cause notice to the appellant, conveying the legal position and requesting a response. Despite the appellant's written submissions, the CIT(A) was not satisfied and directed the AO to withdraw the allowed deduction, citing the amended provisions and the proviso to section 54F(1).Tribunal's Decision:The Tribunal upheld the CIT(A)'s decision, stating that the amended provisions of section 54F, effective from 01.04.2015, apply to the assessment year 2015-16. The Tribunal clarified that the law in force on the first day of the relevant assessment year is applicable. Since the appellant purchased two residential houses within one year from the date of sale of the original asset, the proviso (a)(ii) to section 54F(1) was applicable, disqualifying the appellant from claiming the deduction. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the appeal, concluding that the appellant was not eligible for the deduction under section 54F(1) for both properties.Conclusion:The appeal filed by the assessee was dismissed, affirming that the assessee was not entitled to the deduction under section 54F(1) for both residential properties purchased within one year from the date of sale of the original asset, in light of the amended provisions effective from 01.04.2015.