Mukesh Arvindlal Vakharia Vs ITO (ITAT Surat)
ITAT Allows Full 54EC Relief Because Investments Were in Two Financial Years; 54EC Deduction Restored as Advance Money Investment Considered Valid; 54F Claim Denied Because Joint Ownership Counts as Second House; Section 54F Exemption Refused Due to Ownership of Multiple Residences; Expense Deduction Rejected Since Firm Interest Cannot Be Offset; ITAT Partly Allows Appeal; 54EC Relief Granted but 54F and Expense Claims Fail
The ITAT delivered multiple rulings covering capital-gain exemptions and expense deductibility. It allowed full Section 54EC relief where investments of ₹50 lakh each were made in two separate financial years within six months of transfer, noting that the later statutory cap from FY 2015-16 was not applicable. The Tribunal also restored 54EC deduction where the investment was made from advance sale consideration before execution of the sale deed, holding such timing valid for exemption. However, the Tribunal consistently denied Section 54F relief, clarifying that joint ownership—or ownership of more than one residential property in any form—disqualifies an assessee from claiming the deduction. Additionally, the ITAT upheld the rejection of expense deductions claimed against interest income from a partnership firm, reiterating that such expenses cannot be offset under Section 28(v). In a consolidated outcome, the Tribunal partly allowed the appeal by granting 54EC benefits while sustaining the disallowance of 54F and expense claims.
The assessee filed an appeal before the ITAT Surat for AY 2014-15 against the order of the CIT(A) dated 12.09.2019, arising from an assessment under section 143(3). The assessee challenged three disallowances: (i) deduction under section 54EC of ₹50,00,000, (ii) deduction under section 54F of ₹48,96,993, and (iii) deduction of expenditure of ₹11,69,488 against interest income from a partnership firm.
