The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that purchasing of residential house property before due date for filing return of Income makes assessee eligible for deduction under section 54F of the Income Tax Act.
The appellant is an individual and has filed her return of income for the assessment year 2012-13 on 01.06.2013, admitting a total income of Rs. 2,76,760/-. During the financial year relevant to assessment year 2012-13, the appellant along with 7 other family members entered into a Joint Development Agreement (JDA) dated 01.04.2011, for development of 72092 sq.ft. of land at Zameen Pallavaram Village. As per JDA, the appellant and the co-owners has received 91833 sq.ft. of super built up area comprised in 70 residential apartments and 3 penthouses along with 27 covered car parking and 49 open car parking.
The appellant has computed long term capital gains from transfer of property in pursuant to JD Agreement dated 01.04.2011 for assessment year 2012-13, by taking her share of consideration received for transfer of property. The appellant had also claimed deduction under Section 54F of the Income Tax Act towards constructed flats to be received from buier. The Assessing Officer, denied deduction under Section 54F of the Income Tax Act, on the ground that the assessee has claimed deduction for multiple flats and further construction of property was completed beyond the due date specified as per the provisions of section 54F of the Act.
Since, the construction of property was not completed even as on 04.03.2016, the Assessing Officer denied deduction under Section 54F of the Act and computed long term capital gains at Rs. 64,92,456/- and added back to the total income.
Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). CIT(A), after considering relevant submissions of the assessee opined that, the assessee is not entitled for deduction under Section 54F of the Income Tax Act, because she has violated twin conditions as laid down under Section 54F by purchasing a new residential flat on 24.05.2012, in addition to new flats on which the benefit of deduction claimed under Section 54F of the Act. Aggrieved by the CIT(A) order, the assessee appealed before the the tribunal.
After hearing both the parties, the tribunal noted that As per section 54F of the Act, in order to get deduction for capital gains, the assessee should purchase new residential house property one year before or two years after the date of transfer of original asset. Further, in so far as construction of property is concerned, it should be completed within three years from the date of transfer of original asset. In the present case, the assessee has purchased a new residential house property on 25.04.2012, which is within two years from the date of transfer of original asset.
The two member bench consisting of Manmohan Das (Judicial Member) and Manjunatha G. (Accountant Member) held that Since, the appellant has satisfied all conditions prescribed for claiming deduction under Section 54F of the Income Tax Act, the CIT(A) ought to have allowed alternate claim made by the assessee for deduction under Section 54F of the Income Tax Act.
Thus the order of the CIT(A) was set aside and the Assessing Officer was directed to allow deduction under Section 54F of the Act, in respect of residential house property purchased by the assessee on 25.04.2012. Thus the appeal was allowed.
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