ITAT Rules in Favor of Assessee: Renovation Expenses Within CBDT’s Extended Deadline Qualify for Section 54F Relief [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘F’ has ruled that renovation expenses incurred within the extended deadline set by the Central Board of Direct Taxes (CBDT) are eligible for deduction under Section 54F of the Income Tax Act.

Rikant Pittie had sold shares of Easy My Trip Planners Ltd in March 2021, resulting in a substantial long-term capital gain. To claim relief under Section 54F, which allows exemption from capital gains tax if the proceeds are invested in a new residential property, Pittie purchased a residential house in Gurgaon and incurred significant renovation expenses.

The Assessing Officer, however, restricted the deduction, arguing that a portion of the sale proceeds had not been utilized for the new property before the due date for filing the income tax return, nor had the unutilized amount been deposited in the capital gain scheme account. The officer allowed a deduction of Rs. 28.54 crore against the claimed amount of Rs. 45.81 crore, disallowing the rest.

Stay Updated with the Latest Audit Report Formats & Audit Trials Requirements!, Click Here

Pittie appealed the decision before the Commissioner of Income Tax(Appeals) CIT(A), submitting additional evidence and pointing out that the CBDT had issued Circular No. 12/2021 and Circular No. 1/2023, which extended the last date for making investments or payments for claiming exemptions under Section 54 to 54GB due to the COVID-19 pandemic. The CIT(A) accepted this argument, noting that the deadline for making such investments, which originally fell between 1 April 2021 and 28 February 2022, had been extended to 31 March 2023.

The CIT(A) carefully examined the bills and payments made by Pittie and allowed the claim for deduction under Section 54F to the extent of Rs. 36.07 crore, excluding certain amounts spent on air conditioning and furniture, which were not considered integral to the house.

The Revenue challenged this order before the ITAT, arguing that the CIT(A) had allowed the claim on the basis of additional evidence not presented before the Assessing Officer and had not given the officer an opportunity to verify the documents. The Revenue also questioned whether Pittie was eligible for the exemption, suggesting he may have owned more than one residential property.

The Tribunal, comprising S. Rifaur Rahman (Accountant Member) and Madhumita Roy (Judicial Member), considered the submissions and the material on record. The bench observed that the CIT(A) had relied on the extended deadlines provided by the CBDT and found that Pittie had utilized the sale proceeds within the permitted time frame. The Tribunal also noted that the CIT(A) had the authority to adjudicate the issue based on the evidence provided. In Conclusion the appeal filed by Revenue was dismissed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates