The Delhi Income Tax Appellate Tribunal (ITAT) chaired by Yogesh Kumar US (Judicial Member) and Dr. B. R. R. Kumar (Accountant Member) held that the equivalent amount of capital gain utilised for acquisition of new residential house is eligible or allowable for Tax Exemption under Section 54 of the Income Tax Act, 1961.
This appeal before the ITAT has been filed by the assessee Anik Chatterjee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)].
Brief fact is that the assessee filed return of income on 13.07.2016 declaring income of Rs. 21,98,100. During the course of assessment proceedings, the Assessing Officer noted that the assessee had claimed deduction of Rs.1,13,88,413 under the Section 54 of the Income Tax Act.
The assessee, with the counsels, Renu Suri and Tarun Khandhari, contended that the Commissioner of Income Tax Appeals erred in law as well as on the facts without considering the submission and other documentary evidence submitted by the appellant and disallowed the deduction claim by the appellant under Section 54 of the Income Tax Act.
The bench observed that the agreement was signed on 08.08.2014 and the full payment was completed on 08.10.2014, two months after signing the agreement.
The bench highlighted the provision of Section 54F of the Income Tax Act, which states that Capital gain on transfer of certain capital assets should not be charged in case of investment in a residential house.
Further, this provision does not apply if the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset. The income from such a residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head of “Income from house property”.
The bench with the clear interpretation of Section 54F of the Income Tax Act ruled that since, the amount equivalent to the capital gains has been utilized for acquisition of new house, the assessee be permitted to avail the benefit allowable under the Section 54 of the Income Tax Act.
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