1998 (1) TMI 109 - AT - Income Tax

Tribunal allows exemption for new house investment under Income-tax Act

Ashok Kumar, HUF. Versus Assistant Commissioner Of Income-Tax

Ashok Kumar, HUF. Versus Assistant Commissioner Of Income-Tax - ITD 065, 352, Issues:1. Deduction of unrealized rent from house property income.2. Claim of exemption under section 54F of the Income-tax Act.Issue 1: Deduction of unrealized rent from house property incomeThe appellant claimed a deduction of Rs. 10,560 as unrealized rent from house property income for the assessment year 1989-90. The Assessing Officer rejected the claim, which was upheld by the CIT(Appeals). However, the Tribunal found that the claim had not been properly processed in accordance with the law. The Tribunal noted that the Assessing Officer did not assess any income under the head 'Income from house property' and failed to consider the nature of the claim. The Tribunal referred to section 24(1)(x) of the Income Tax Act, which allows for the deduction of unrealized rent from income chargeable under the head 'Income from house property.' The Tribunal directed the Assessing Officer to verify the income assessed in earlier years and provide the appellant with an opportunity to substantiate the claim, emphasizing that the matter should be decided in accordance with the law.Issue 2: Claim of exemption under section 54F of the Income-tax ActThe appellant claimed exemption under section 54F of the Income-tax Act for investing the sale proceeds of a factory shed in constructing a mezzanine floor with a toilet and kitchen. The Assessing Officer rejected the claim, stating that the appellant already owned a residential house and the construction did not qualify as a new residential house. The CIT(Appeals) upheld this decision, emphasizing that the appellant had only made additions to the existing residential house and had not constructed a new independent residential unit as required by section 54F.The Tribunal disagreed with the Assessing Officer and CIT(Appeals), noting that the investment in the house property was made within the specified time and that the construction of the mezzanine floor with a kitchen and toilet constituted an independent unit. The Tribunal cited judicial interpretations and legislative intent to support its decision. Referring to previous court decisions, the Tribunal concluded that the appellant had indeed invested the capital gains in the construction of a new residential house, as required by section 54F. Therefore, the Tribunal directed the Assessing Officer to allow the claim for exemption under section 54F in both cases, holding the appeals as partly allowed.In conclusion, the Tribunal's judgment addressed the issues of deduction of unrealized rent from house property income and the claim of exemption under section 54F of the Income-tax Act. The Tribunal emphasized the need for proper consideration of claims in accordance with the law, judicial interpretations, and legislative intent to ensure fair treatment for the appellant.