While quashing the impugned order of CIT (A), The Kolkata bench of Income Tax Appellate Tribunal ( ITAT )held that benefit of section 54 of the Income Tax Act cannot be denied merely on ground that the assessee availed housing loan for the purchase of the new house.
In the instant case the, Assessee is an individual and engaged in the business of commission agency for car finance and other products. The AO found that Amit Parekh, taxpayer had claimed capital gain exemption of 59 lakhs under section 54 of the Act. During the Assessment AO was of the opinion that the Assessee obtained a home loan to the tune of 82 lakhs from ICICI bank and invested only an amount of 9 lakhs in new residential unit out of capital gain.
Accordingly, the Assessing Officer denied the exemption under section 54 of the Act and added back a sum of 49.7 lakh, which is the remaining amount from loan amount and added the same to the total income of assessee.
Being aggrieved, the Assessee challenged the same before CIT (A) wherein CIT (A) confirmed the addition to the extent of 36 lakhs instead of earlier amount.
Before the Tribunal, the counsel for the Assessee invited the attention of tribunal in the judgment of High Court Punjab & Haryana in the case of Kapil Kr. Agarwal and argued that the assessee is entitled to claim exemption u/s. 54 of the income Tax Act.
On contrary to this, the counsel for Revenue relied on the decision of AO & CIT-A. The Tribunal bench heard the recitals and perused the case records cited by Assessee and Revenue.
The Tribunal bench including S.S. Viswanethra Ravi, Judicial Member and M. Balaganesh, Accountant Member admitted a fact that the cost of new house is more than the capital gain noted by both the lower authorities.
The tribunal accepted the aforementioned case cited by Assessee identical to this case wherein court compels under section 54 of the Act the said capital gain should utilize for purchase or construction of residential property for his own purpose within a period of 2 years after the date of transfer.
The Tribunal however, opinioned that tax benefit is also available even if the taxpayer, within three years after the date of sale of the old house, constructs a new residential house.
Finally, the ITAT held that assessee is entitled to claim exemption u/s. 54 of the Act. Merely because assessee had availed house building loan of Rs. 82.50 lakhs from bank for purchasing a new residential unit that cannot act as a disqualification for claim of exemption u/s. 54 when the primary conditions imposed in Sec. 54 of the Act were satisfied.
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