The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench, has recently, in an appeal filed before it, held that deduction u/s 54F is not allowable, if assessee has more than a residential house at the time of claiming the deduction.
The aforesaid observation was made by the Hyderabad ITAT, when an appeal was preferred before it by, by the Revenue, feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals)-, Hyderabad dated 12.05.2022 for the A.Y. 2019-20.
The grounds of the Revenue’s appeal being as to whether, on the facts and in the circumstances of the case and in law, the CIT(A) was right in allowing deduction u/s. 54F of the Income Tax Act, even though the legal formalities of getting the property in the appellant’s name did not take place within the stipulated time u/s. 54F , as to whether on the facts and in the circumstances of the case and in law, the CIT(A) was right in allowing the claim of 54F holding that the 09 independent properties are commercial units but not residential units, in absence of the evidence in support of so as to categorize the properties as commercial units, and also as to whether the CIT(A) was justified in admitting the additional evidence without disposing off the objections raised by the TPO on the admission of the same , the brief facts of the case are that assessee is a Non-resident Individual, who filed her Return of Income on 22.07.2019 for the A.Y. 2019-20 admitting the total income of Rs. 5,25,81,858.
Subsequently, the case of assessee was selected for scrutiny through CASS, for which notice u/s 143(2) of the Income Tax Act was issued and served on the assessee. And thereafter, notices were issued to the assessee from time to time and the assessee had submitted her reply through ITBA Module.
In the present case, assessee had claimed deduction u/s 54F of Rs.3,63,73,330/- towards purchase of residential property at Hyderabad. However, the claim of assessee was not allowed by the Assessing Officer after examining the submissions of the assessee, as she failed to fulfil the conditions prescribed under section 54F of the Income Tax Act.
Thereafter, the Assessing Officer had passed a draft assessment order u/s 143(3) r.w.s. 144C (3) of the Income Tax Act, on 30.11.2021, disallowing the claim of the assessee u/s 54F, thereby determining the long-term capital gains at Rs.7,58,13,772/. And feeling aggrieved by the order passed by the assessing officer, assessee had filed an appeal before the CIT(A), who granted part relief to the assessee.
And it is feeling aggrieved by the order passed by the CIT(A), that the Revenue has filed the present appeal before the Hyderabad ITAT, on the grounds mentioned herein above.
With Sri K.P.R.R. Murthy, the DR having submitted that, till date, neither the possession nor the title documents of the property were submitted by the assessee to the Revenue Authorities or to the Tribunal, he added that the builder namely, DSR Builders and Developers, is a related party to the assessee and neither registration of property nor its possession was given to assessee. Thus, the DR contented that, therefore, assessee is not entitled to any relief u/s 54F of the Act.
With the DR further submitting that the assessee was owning 7 properties, and therefore that the Assessing Officer had rightly denied the claim of the assessee as the assessee owned more than one residential property, on the other hand, Sri K.C. Devdas, C.A., the AR submitted that the assessee had paid substantial amount to the builder within the time granted under the Income Tax Act , that the assessee had no control over the builder after making the payment and further that the assessee was at mercy of the builder for seeking the possession.
Hearing the opposing contentions of both sides and persusing the materials available on record, the ITAT observed:
“From the perusal of the contents of the sale deed, it is abundantly clear that the payments referred by the Assessing Officer and also referred by the assessee in her reply at page 86, were duly accounted for in the said sale deed. However, the assessee over and above the said payment of Rs.4,10,85,000/- had also paid a sum of Rs.47,50,000/- on 01.09.2020, Rs.42,05,000/- on 01.12.2021 and an amount of Rs.5,45,000/- towards TDS to the builder. Referring these transactions, the assessee had submitted before us that the substantial amount had already paid by the assessee to the builder and therefore, the assessee was entitled for the benefit u/s 54F of the Act. He relied upon various decisions cited hereinabove. In our considered opinion, for the purposes of claiming deduction u/s 54F of the Act, it is essential that the assessee within a period of 2 years on which the transfer took place purchased residential house in India.”
“In the present case, though the assessee had paid more than 80% of the payment to the builder, yet a substantial amount of more than rupees Rs.1 crore was to be paid by the assessee to the builder, the balance payments were made beyond the time provided by the Act. In the light of the above, it has to be decided on the facts whether the assessee had purchased the residential house within four corners of section 54F of the Act or not. Though there are various decisions which are mentioned hereinabove in the submissions of the assessee, however, those are required to be examined by the lower authorities in the light of new facts namely, registration of sale deed dt.01.12.2021.”, the ITAT Panel consisting of Rama Kanta Panda, the Accountant Member, along with Laliet Kumar, the Judicial Member added.
Finally, allowing the Revenue’s appeal, the Hyderabad ITAT held:
“As the case may be, without giving any finding on the above said facts, in the interests of justice, the case is required to be remanded back to the file of Assessing Officer with a direction to examine afresh having regard to the SRO Certificate, GST and Municipal Tax Receipts and to record a categorical finding as to for what purposes the facts were approved by municipal authorities.”
“In the light of the above, the case is remanded back to the file of Assessing Officer for the above said two limited purposes. The Assessing Officer shall decide the issue in accordance with law after affording due opportunity of hearing to the assessee in accordance with law. The assessee shall be at liberty to file documents, if any, as required for proving her case and the Assessing Officer shall consider the evidences, if any, filed by the assessee. Needless to say, the Assessing Officer shall examine those documents / evidence filed by the assessee and also the other documents available on record. After considering all the submissions and the documents filed by the assessee and the submissions made by the assessee, the Assessing Officer shall pass a detailed speaking order dealing with the contentions of the assessee. Thus, the appeal of the Revenue is allowed for statistical purposes.”, the ITAT thus concluded.
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