In an assessee-friendly ruling, the Income Tax Appellate Tribunal (ITAT), Hyderabad bench has recently observed that the assessee is eligible for deduction under section 54F of the Income Tax Act even if he did not disclose the amount of capital gain in the original return and disclosed the same in the revised return.
eligibility of the assessee for deduction under Section 54F of the Income Tax Act, 1961 and allow the same if the assessee satisfies the conditions.
The assessee, an individual, running a provisional store by name M/s Sri Parameshwara Kirana & General Stores had derived income from business and capital gains. During the Previous Year, the assessee along with another person sold a house property, consisting of ground floor and first floor, for a consideration. The AO was of the opinion that provisions of Section 50C of the Income Tax Act, 1961 were applicable in assessee’s case. Since the assessee has filed return of income admitting total income from business after Chapter-VIA deduction, but the assessee had not offered the capital gain to tax, the AO reopened the assessment under Section 147 of the Act by the issuance of a notice under Section 148 of the Act.
The assessee submitted a letter stating that on account of sale of house property, his share was only Rs.10,00,000/- and the remaining share was with his brother, and out of sale consideration received, he has constructed the first floor on the existing ground floor, for which the assessee had claimed exemption from payment of tax on long term capital gain as he was holding only one house property apart from the one house he has sold.
The AO held that the claim of exemption under Section 54F is not acceptable as the assessee failed to disclose capital gain on the original return of income and as there was no claim of deduction under Section 54F of the Act in the original return, and the assessee failed to file the revised return of income.
The tribunal comprises a Judicial Member P. Madhavi Devi held that the assessee had filed written submissions before the CIT(A) and had submitted before the Tribunal that he had all the relevant evidence to substantiate the claim under Section 54F of the Act.
“Since Section 54F of the Act is a beneficial provision and the Hon’ble Courts have held that the beneficial provision should be construed liberally, I deem it fit and proper to admit assessee’s claim of deduction under Section 54F of the Act and remand the issue to the file of the AO with a direction to consider the eligibility of the assessee for deduction under Section 54F of the Act and allow the same if the assessee satisfies the conditions. Needless to mention that the assessee shall be given a fair opportunity of hearing. The assessee is directed to produce all the necessary evidence before the AO and cooperate with the AO for early completion of the assessment,” the Tribunal said.Subscribe Taxscan AdFree to view the Judgment