TaxTMI 
TaxTMI 
2026 (2) TMI 1140
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....f indexed cost of acquisition claimed by the assessee and second issue relates to claim of deduction under section (u/s.) 54 of the Income Tax Act, 1961 (in short the 'Act'). 3. Briefly the facts are, the assessee is a resident individual. For the assessment year under dispute, assessee filed her return of income on 27.08.2015, declaring income of Rs. 8,03,360/-. The return of income filed by the assessee was selected for scrutiny. While verifying the return of income, Assessing Officer noticed that the assessee had declared 'Long Term Capital Gain' of Rs. 3,37,93,219/-. Whereas, she claimed deduction u/s. 54 of the Act for an amount of Rs. 4,40,49,819/-. In other words, the capital gain computed by the assessee was set off against the d....
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....claimed cost of acquisition of entire plot of land while computing capital gain. 4. In so far as claim of deduction u/s. 54 of the Act, the Assessing Officer observed that deduction u/s. 54 of the Act would be available only in respect of one residential house whereas the assessee and her husband have got three floors, hence, deduction would not be available. Accordingly, the Assessing Officer issued a show cause notice to the assessee to justify her claim. In response to the show cause notice, the assessee furnished a detailed reply reiterating her claim. In support of her claim, she also relied upon certain judicial precedents. However, the Assessing Officer remained unconvinced. Based on the reasoning on which the show cause notice wa....
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....ore, it cannot be said that the assessee was owning more than one residential house. 7. Learned Departmental Representative (DR) strongly relied upon the observations of Departmental Authorities. 8. We have considered rival submissions and perused the materials on record. Undisputedly, the assessee and her husband were owners of an immovable property, being a residential house constructed over a land admeasuring 500 sq. yad. Being desirous of developing the property, the assessee and her husband entered into a agreement with a developer in terms of which, the old residential house was to be demolished and in its place, a new residential house having ground plus three floors was to be constructed entirely with the investment of the dev....
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....deleted. Accordingly, we do so. 9. In so far as claim of deduction u/s. 54 of the Act is concerned, undisputedly, in place of the old building used by the assessee and her husband for residential purpose, the builder has developed a new building consisting of ground plus three floors. Because the developer invested own fund for the development of new building one floor was given to him in lieu of cost of construction. However, fact remains that except one floor given to the builder, rest of the building remained in the possession of assessee and her husband. It is not a case where the builder was given the authority and freedom to develop the property for sale to outsiders. Therefore, two floors given to the assessee are part of one resi....