The Jaipur bench of Income Tax Appellate Tribunal (ITAT) comprising of Judicial Member Vijay Pal Rao has held that Capital Gain Exemption is available on residential house constructed on a commercial plot under Section 54F of Income Tax Act.
The assessee in the instant case being individual and 3 houses was constructed by him. He has three joint housing loans in the ICICI bank with his son. During the assessment year the assessee showed his long term capital gain as nil. And he also claimed the capital gain exemption u/s 54. And also raised an additional ground before the bench regarding the deduction of interest of Rs. 5,82,565/- paid on the loan facility as part of the acquisition u/s 48 of the Act and claimed cost of the deduction under Section 24(b) of the Income Tax Act.
But the AO has noted that the assessee has sold one of his properties and he has received a huge amount from that transaction and he also made an addition of 44,94,343/- rupees as capital gain against the declared long term capital gain as nil. And he contended that the assessee does not entitled to claim the capital gain exemption. And also mentioned that the assessee has tried to reflect an increased cost in order to reduce the capital gain and he doesn’t has any proof documents.
The bench has observed that the assessee does not engaged any business activity hence he deoes not need to keep all the documents up to date. But he submitted documents regarding his loan liability in the bank. And it is clear that the assessee has invested the income from sale in the new house property in the name of his wife and claim of exemption under section 54 against the acquisition of these two houses. As regards the claim of deduction u/s 54 available to more than one houses. In the case in hand the assessee has In the case in hand the assessee has purchase two houses at two different localities which are far from each other therefore, by any stretch of parameter these two houses cannot be regarded contiguous being used as a single residential unit. purchase two houses at two different localities which are far from each other therefore, by any stretch of parameter these two houses cannot be regarded contiguous being used as a single residential unit. The second ground of appeal of the assessee was regarding the deduction of interest of Rs. 5,82,565/- paid on the loan facility as part of the acquisition under Section 48 of the Income Tax Act and also claimed the cost cost of the deduction under Section 24(b) of the Income Tax Act. It is an allowable claim when loan was used for construction of the property.
In light of the relevant materials and records the bench partly allowed the appeal of the assessee.
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