The Income Tax Appellate Tribunal (ITAT), Delhi Bench ruled that the deduction under section 54 is restricted to only one residential house by the Finance Act 2014 is prospective in nature from assessment year 2015-16.
The assessee, Sanjiv Ahuja is an individual and during the year has derived the income from long term capital gains and income from other source. He filed his return of income on 1st August, 2012 declaring total income of Rs. 30,370/-.
During the course of assessment proceedings, the AO noted that assessee had declared capital gain income of Rs. 1,00,00,000 against which deduction under section 54 was claimed at Rs. 80,02,175. He asked the assessee to submit documentary evidence in support of cost of acquisition and sale consideration of the property sold during the year and evidence in support of claim of investment in immovable property claimed exempt under section 54 of the Act.
From the various details furnished by the assessee the AO noted that while claiming deduction under section 54, the assessee has purchased two properties of different places. He, therefore, asked the assessee to explain the same. Assessee submitted that as per provisions of section 54 the assessee should purchase or construct a residential house.
The AO held that assessee is entitled to avail exemption under section 54 of the Act only in respect of acquisition of one residential house property. He, therefore, allowed exemption under section 54 of the Income Tax Act to the tune of Rs. 58 lakhs and made addition of Rs. 22,02,175 to the total income of the assessee. In appeal, the CIT(A) upheld the action of the AO.
The coram of the Accountant member, R.K.Panda noted that the deduction under section 54 is restricted to only one residential house by the Finance Act 2014 is prospective in nature and is effective from assessment year 2015-16 and not retrospective in nature and that deduction u/s 54 of the Act in respect of investment made in one residential house can be claimed by the assessee.
In this view of the matter the Tribunal set aside the order of the CIT(A) and the grounds raised by the assessee were allowed.
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