The Hyderabad bench of the Income Tax Appellate Tribunal ( ITAT ) has permitted a deduction for the investment made in the construction of a mosque utilized for religious purposes within a residential property under Section 54F of the Income Tax Act, 1961
The assessee electronically filed their income tax return for the Assessment Year ( A.Y ) 2013-14 on March 31, 2014, declaring a total income of Rs. 1, 73, 88,852. The case underwent scrutiny through the Computer Assisted Scrutiny Selection ( CASS ) process under Section 143(2) of the Income Tax Act, 1961, and a notice was issued on September 4, 2014, which was duly served on the assessee. Additionally, notices under Section 142(1) of the Income Tax Act, 1961, were issued at various intervals, requesting specific information.
The Assessing Officer observed that the assessee had sold two properties in the financial year 2012-13 in Hafeezpet, Serilingampally mandal, for Rs. 2, 14, 90,500 and Rs. 6, 76, 97,000 respectively. The assessee claimed to have acquired the land in 1981, incurred legal expenses due to disputes over time, and ultimately obtained the land through a family settlement decreed by the High Court of Andhra Pradesh, the assessee sought exemption under Section 54F of the Income Tax Act, 1961, against the cost of acquisition.
The counsel for the revenue Sheetal Sarin contented that the assessee had claimed a deduction under Section 54 of the Income Tax Act, 1961, in respect of the property, which was in the nature of a Mosque. Therefore, the assessee was not entitled to the relief under Section of the Income Tax Act, 1961
The counsel for the revenue further presented that the Municipal application submitted by the assessee aimed at regularization specifically pertained to the Mosque. To support this claim, the counsel directed our attention to the application filed before the GHMC, where on page 5, dated 31.12.2015, the nature of property usage was specified as “Madrasa activities and Mosque” only
Additionally, the counsel for the revenue noted that the assessee had filed an application with the Property Tax Department of the State, which indicated that the property was exempt from taxation. Based on this evidence, it was argued that the property constructed by the assessee was primarily intended for use as a Mosque
Consequently, the counsel for the revenue contended that the assessee did not meet the conditions or criteria required for the deduction under Section 54 of the Income Tax Act, 1961, and thus, the assessee was not entitled to such deduction. Furthermore, it was asserted that there was no provision for granting a pro-rata deduction under Section 54F of the Income Tax Act, 1961
The property was predominantly utilized for religious purposes, specifically as a Mosque, Orphanage School, and Staff quarters. Consequently, in our assessment, it does not meet the criteria outlined for a residential house as defined under Section 54F of the Income Tax Act.
However, there was a conflicting report indicating that the third floor of the property serves as a residence for the assessee. The bench found this report contradictory to the statement submitted by the assessee to the Greater Hyderabad Municipal Corporation ( GHMC ), wherein it was declared that the property was used for religious purposes and staff accommodation. This declaration clearly indicates that the assessee did not utilize the property for residential purposes within the statutory timeframe, and there was no evidence to support investment in constructing a residential house. Hence, in the judgment, the assessee was not eligible for any relief under Section 54F of the Income Tax Act, 1961.
The two member bench of the tribunal comprising R.K.Panda ( Vice president ) and Laliet Kumar ( Judicial member ) scrutinized the provisions of Section 54F, of the Income Tax Act, 1961, which provide for deductions. A straightforward interpretation of the section indicates that there is no provision for a proportional deduction, especially when a residence cannot be established within a Mosque.
Accordingly, the grounds of appeal of the revenue were allowed and the order of the Assessing Officer was upheld. In the result, an appeal filed by the Revenue was allowed.
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