Cost of New Residential House includes Cost of Land Purchased u/s 54: ITAT [Read Order]

The visakhapatnam bench of the Income Tax Appellate Tribunal (ITAT), held that the cost of new residential house includes cost of land purchased under section 54 of the Income Tax Act,1961.

The assessee,Dattatreya Varma Penmatsa is a civil contractor who filed his return of income declaring a total income of Rs. 62,08,350/-.  The AO concluded the assessment U/s. 143(3) of the Act assessing the total income of Rs. 1,32,02,792/by disallowing the deduction u/s 54 of the Act.  The CIT(A) confirmed the addition made by the AO and dismissed the appeal.

The assessee argued that he had purchased the land on 28/12/2012, on which the construction of the residential building was commenced before the sale of a capital asset and the cost of landwas included while calculating the deduction U/s. 54 of the Act. 

It was viewed that the assessee claimed Rs. 67,19,884/- as deduction U/s. 54 of the Act stating that the amount was utilized for the construction of residential property completed on 28/03/2015. 7. It is not disputed by the Revenue that the new residential house has been constructed within the time stipulated in section 54(1) of the said Act.   It is the cost of the new residential house and not just the cost of construction of the new residential house which is to be allowed as a deduction. 

It was viewed that the cost of new residential house which should necessarily include the cost of land, cost of materials used in the construction, the cost of labour and other relatable costs of construction of the residential house has to be considered for deduction U/s. 54 of the Act. 

Shri Duvvuru R L Reddy, judicial member & Shri S Balakrishnan, accountant member while allowing the appeal directed to consider the cost of land purchased by the assessee while computing the deduction U/s. 54 of the Act.

The appellant was represented by Sri NSSH Bhaskar and the respondent was represented by Sri Sankar Pandi.

To Read the full text of the Order CLICK HERE

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