Apartments sanctioned for Residential Purposes were let out as Service Apartments: ITAT allows deduction U/s 54F [Read Order]

Income Tax Appellate Tribunal (ITAT), Chennai bench allowed deduction under section 54F of the Income Tax Act,1961 when apartments sanctioned for residential purposes were let out as service apartments.

The assessee, Mr D.Ravikumarderives income from house property apart from remuneration and interest income from M/s.Saidapet Electricals.  The assessee sold the property for consideration of Rs.40 lakhs and computed long-term capital gain of Rs.26,28,898/-, and claimed deduction u/s.54F of the Income Tax Act, 1961 for purchase of another residential house property for consideration of Rs.27,50,000/-.

The Assessing Officer disallowed deduction claimed u/s.54F of the Income Tax Act, 1961, on the ground that at the time of transfer of the original asset, the assessee owned more than one house property. The CIT(A) confirmed additions made by the Assessing Officer towards disallowance of deduction claimed u/s.54F of the Act.

The revenue contended that properties owned by the assessee are residential houses even though, same are let out for commercial purposes, and the assessee was not entitled to deduction u/s.54F of the Income Tax Act, 1961

In light of precedents, the Tribunal observed that where two apartments owned by the assessee, even though had been sanctioned for residential purpose, yet same were, being used for commercial purposes as service apartments, then both needs to be excluded for deduction u/s.54F of the Income Tax Act, 1961.

Shri V Durga Rao, judicial member and Shri G Manjunatha, accountant member viewed that the assessee was entitled to deduction u/s.54F of the Income Tax Act, 1961 in respect of the amount invested for the purchase of another residential property and directed the Assessing Officer to delete additions made. The appeal filed by the assessee was allowed.

The Appellant was represented by Mr Y Sridhar and the Respondent was represented by Mr P Sajit Kumar.

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