2021 (9) TMI 956 - AT - Income Tax

Deduction u/s 54F - HUF - reinvestment in multiple properties located in different addresses is not eligible for claiming deduction - HELD THAT - As decided in the case of Smt. B. Vathsala mother of Shri B. Sundararajan assessee 2019 (12) TMI 1543 - ITAT CHENNAI as relying case of Tilokchand Sons v ITO 2019 (4) TMI 713 - MADRAS HIGH COURT has held that profit on sale of property used for purchasing more than one residential houses within stipulated time limit the assessee would be entitled to the benefit of exemption under section 54 of the Act - So long as the same Assessee (HUF) purchased one or more residential houses out of the sale consideration for which the capital gain tax liability is in question in its own name the same Assessee should be held entitled to the benefit of deduction under Section 54 of the Act subject to the purchase or construction being within the stipulated time limit in respect of the plural number of residential houses also. - Decided in favour of assessee. Computation of capital gain - cost of acquisition being the fair market value as on 01.04.1981 - HELD THAT - Admittedly the date of sale was on 19.03.2008 for a consideration of Rs..25, 00, 00, 000/-. Without any valid document the assessee has estimated the cost of acquisition of the property at Rs..25, 00, 000/- per ground which appears to be on the higher side but at the same time the value adopted by the Assessing Officer is only Rs..30, 000/- per ground and that is also not correct value since the property is located at T. Nagar Chennai. The decision in the case of CIT v. J. Chelladurai 2011 (12) TMI 41 - MADRAS HIGH COURT relied on by the ld. Counsel for the assessee has no application since the property in that case was located in mofussil area whereas in the present case the property is at prime locality of Chennai city. Thus to meet the ends natural justice and considering the facts and circumstances of the case we fix the value of the property at Rs..45, 000/- per ground as on 01.04.1981 i.e. 45, 000 x 4.5 2, 02, 500x5/9 comes to Rs..1, 12, 500/- and direct the Assessing Officer to adopt the value and allow relief to the above extent and recompute the capital gains. Thus the ground raised by the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Deduction under Section 54F of the Income Tax Act, 1961.
2. Confirmation of the cost of acquisition as the fair market value as on 01.04.1981.

Issue-wise Detailed Analysis:

1. Deduction under Section 54F of the Income Tax Act, 1961:

The Revenue's primary contention was that the Ld. CIT(A) erred in directing the Assessing Officer (AO) to allow the assessee’s claim of deduction under Section 54F of the Income Tax Act, 1961. The Revenue argued that the section did not envisage reinvestment in multiple properties located at different addresses even before the amendment by the Finance Act, 2014. The Revenue supported the assessment order, which restricted the deduction to one property despite the assessee’s reinvestment in two properties.

The Tribunal reviewed the case law and submissions from both sides. The assessee's counsel referenced the Tribunal's decision in the case of Smt. B. Vathsala, where a similar issue was adjudicated in favor of the assessee. The Tribunal noted that the assessee had invested in two properties before the amendment restricting reinvestment to one property, which was introduced prospectively from the assessment year 2015-16.

The Tribunal cited the Hon’ble Jurisdictional High Court's decision in the case of Tilokchand & Sons v. ITO, which held that profit on the sale of property used for purchasing more than one residential house within the stipulated time limit entitles the assessee to the benefit of exemption under Section 54 of the Act. The Tribunal found no merit in the Revenue's contention and upheld the Ld. CIT(A)'s decision, allowing the assessee's claim for deduction under Section 54F for both properties.

2. Confirmation of the Cost of Acquisition as the Fair Market Value as on 01.04.1981:

The assessee contested the AO’s determination of the fair market value (FMV) of the property as on 01.04.1981 at Rs. 75,000, against the assessee’s claim of Rs. 14 lakhs. The AO had estimated the FMV based on verification from the SRO’s letter and adopted Rs. 30,000 per ground. The Ld. CIT(A) confirmed the AO’s assessment.

The Tribunal considered the rival submissions and noted that the property was located in a prime locality of Chennai city, making the AO's valuation appear on the lower side. The Tribunal found that the assessee’s estimation was on the higher side without valid documentation. Given the facts and circumstances, the Tribunal fixed the FMV of the property at Rs. 45,000 per ground as on 01.04.1981, directing the AO to adopt this value and recompute the capital gains accordingly. This decision was made to meet the ends of natural justice.

Conclusion:

The appeal filed by the Revenue was dismissed, and the appeal of the assessee was allowed for statistical purposes, with the Tribunal directing the AO to recompute the capital gains based on the revised FMV. The order was pronounced on the 16th of September, 2021 in Chennai.