Assessee gets LTCG deduction under Section 54F despite advance payments without proper bills before asset transfer

ITAT Surat allowed assessee's claim for LTCG deduction u/s 54F despite procedural non-compliance. Assessee made advance payments to contractors before asset transfer and after filing return without proper bills/vouchers. ITAT held that exemption provisions u/s 54/54F are benevolent to promote housing and procedural requirements cannot be strictly construed to deny benefits. Advance payments made from sale consideration for construction materials and contractor services were legitimate as assessee had already decided to sell property and construct new residential house. Transactions were genuine as confirmed by parties' responses to notices u/s 133(6) and bank statements. Construction completed within prescribed three-year period. Revenue's appeal dismissed.

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Issues Involved:
1. Deduction u/s 54F of the Act for Rs. 4,39,25,097/-
2. Deletion of addition of Rs. 2,03,55,192/-
3. Deletion of addition of Rs. 3,30,04,128/-
4. Deletion of addition of Rs. 3,75,00,000/-

Summary:

1. Deduction u/s 54F of the Act for Rs. 4,39,25,097/-:
The Revenue contended that the assessee failed to fulfill the conditions prescribed in the Income-tax Act for claiming a deduction u/s 54F. The Tribunal noted that the assessee sold two plots of land and invested Rs. 22,92,48,201/- towards the construction of a new residential house, claiming a deduction u/s 54F. The Assessing Officer (AO) recomputed the exemption and disallowed Rs. 4,39,25,097/- as excess claim. However, the Tribunal upheld the CIT(A)'s decision to allow the deduction, emphasizing that the provisions of section 54F are benevolent and should be interpreted liberally to promote housing.

2. Deletion of addition of Rs. 2,03,55,192/-:
The AO disallowed Rs. 2,03,55,192/- paid to various parties before the transfer of the asset, arguing that these payments did not qualify for deduction u/s 54F. The Tribunal, however, noted that the assessee had received advance payments for the sale of plots and used these funds for construction activities, which were in compliance with section 54F. The Tribunal cited various judicial precedents supporting the view that advance payments for construction qualify for deduction u/s 54F and upheld the CIT(A)'s decision to delete the addition.

3. Deletion of addition of Rs. 3,30,04,128/-:
The AO disallowed Rs. 3,30,04,128/- paid after the due date of filing the return, arguing that the assessee did not deposit the un-appropriated amount in a bank account under the Capital Gains Scheme as required u/s 54F(4). The Tribunal noted that the payments were made in installments for a bill dated 30.03.2021 and that the assessee had already incurred the expenditure before the due date specified u/s 139(4). The Tribunal emphasized that section 54F is a beneficial provision and should be interpreted liberally, especially during the Covid-19 pandemic. The Tribunal upheld the CIT(A)'s decision to allow the deduction.

4. Deletion of addition of Rs. 3,75,00,000/-:
The AO disallowed Rs. 3,75,00,000/- paid as advances to various parties, arguing that these payments did not constitute actual expenditure for construction. The Tribunal noted that the assessee had made advance payments for the supply of specific goods required for construction and provided bank statements confirming the payments. The Tribunal found the transactions to be genuine and held that the payments were made for incurring expenses towards construction. The Tribunal upheld the CIT(A)'s decision to delete the addition.

Conclusion:
The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order, allowing the deductions claimed by the assessee u/s 54F of the Act.

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