The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that capital gain exemption under Section 54 of Income Tax Act, 1961 benefit could be availed in respect of basement property.
Section 54 of the Income Tax Act can be claimed exemptions on capital gains of assessee arising from the long term capital asset.
Rano Jain appeared for the assessee and Kanv Bali appeared for the revenue.
The facts of the case was that Assessee Anu Gera, after filing his return the assessee had shown income from business of Rs. 5,42,500/-, income from other sources of Rs. 1,450/- and Long Term Capital Gain of Rs.29,28,945/- which was claimed as exempt income by the assessee under Section 54 of the Income Tax Act.
The return was processed under Section 143(1) of the Income Tax Act. The assessment proceedings have been initiated against the assessee and the claim of exemption under Section 54 of the Income Tax Act was denied by the AO.
As against the order of the AO, the assessee had preferred an appeal before the CIT(A). The CIT(A) dismissed the appeal filed by the assessee. Aggrieved by order of the CIT(A), the assessee preferred the present appeal.
The main observation made while disallowing the claim of the assessee was that, “The assessee is not entitled for relief u/s 54 of 1.T. Act in respect of investment made by him in above three properties against long term capital gain. The assessee is entitled for exemption u/s 54 of the IUT Act against long term capital gain in respect of investment in one residential property. The assessee has acquired these properties in 3 different locations. The properties acquired are not adjacent and are not interconnected.”
Before the tribunal, the revenue contented that assessee is eligible to get exemption under section 54 of the Income Tax Act only in respect of one residential property.
After considering the submissions the tribunal found that exemption under section 54 of the Income Tax Act has been denied in respect of the basement floor on the ground that the benefit of exemption under section 54 Income Tax Act could be passed on the assessee only in respect of one residential property instead of claim of 3 properties.
B.R.R. Kumar, (Accountant Member) and Yogesh Kumar Us,(Judicial Member) of the appellate tribunal held that acquisition of more than one residential house by assessee out of capital gains would not disentitle assessee from availing benefit conferred under Section 54 of the Income Tax Act.
Hence, the department has erred in denying exemption claimed under Section 54 of the Income Tax Act insofar as the basement floor is concerned.
Therefore, the bench allowed the appeal of the assessee.
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