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2015 (6) TMI 674 - ITAT BANGALOREDeduction u/s. 54F - CIT(A) allowed the claim - Held that:- An analysis of the provisions of section 54F of the Act in the light of the grounds raised by the Revenue in the appeal would show that there is no merit in the grounds raised by the Revenue in its appeal. Section 54F(1) lays down that any capital gain arising from transfer of long term capital asset, not being a residential house, will be allowed exemption, if the assessee has after the date on which the transfer took place, within a period of three years after that date, constructed residential house, the assessee will be entitled to claim deduction, even after the capital gain is invested in construction of a residential house. It cannot be disputed by the Revenue that the payment made by the assessee to the builder is for the purpose of construction of a residential house. It is pertinent to mention that there is no requirement regarding registration and valid title, as a condition for availing exemption u/s. 54F(1). The purport of the section is investment in construction of a property and the fact that provisions of section 54F(1) does not use that expression will not mean money spent for construction of residential property will not be eligible for deduction u/s. 54F of the Act. It is therefore clear that none of the grounds raised by the Revenue in the grounds of appeal has any merit and accordingly the appeal by the Revenue is dismissed. If the money is invested in constructing the residential house, merely because the construction was not complete in all respects and was not in a condition to be occupied within the stipulated period, that cannot be a ground for rejecting the benefit of deduction u/s. 54F to the assessee. The Hon’ble Court in the case of Sambandam Udaykumar [2012 (3) TMI 80 - KARNATAKA HIGH COURT] observed that the essence of the provisions of section 54F is whether the assessee who received the capital gain has invested in the house. Once if it is demonstrated that the consideration received on transfer has been invested in construction of the residential house, then though the construction is not complete in all respects and as required under law, the assessee should be given the benefit of section 54F. A reading of the aforesaid decision of the Hon’ble Karnataka High Court would show that there is no particular stage of completion of construction that is contemplated. It is not in dispute that the later the construction was completed and has occupied the residential house. In such circumstances, we are of the view that no fault can be found with the order of the CIT(Appeals) allowing benefit of deduction u/s. 54F of the Act to the assessee. - Decided against revenue. Interest on borrowed funds utilized for acquisition of property - whether constituted cost of acquisition and same should have been allowed as such while computing the Long Term Capital Gain on sale of property? - Held that:- The assessee did not raise the issue with regard to deduction of ₹ 7,82,394 which was interest paid on borrowing claimed as deduction while computing long term capital gain on sale of land. This sum of ₹ 7,82,394 was interest paid on funds that the assessee borrowed to acquire the land. The AO did not allow the said claim for the reason that it could neither be considered as expenditure incurred in connection with transfer nor cost of acquisition nor cost of any improvement thereon. The assessee challenged this part of the order of AO before the CIT(Appeals). The CIT(Appeals) did not adjudicate this issue at all. In the Cross Objection, the submission of the assessee is that the CIT(Appeals) failed to adjudicate this issue.Since the CIT(Appeals) has not adjudicated this issue, we are of the view that it would be just and appropriate to direct the CIT(Appeals) to adjudicate this issue after affording the assessee opportunity of being heard. - Decided in favour of assessee for statistical purposes.
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