Case Law Details
DCIT Vs Vijay Hathising Shah (ITAT Ahmedabad)
Summary : In this case, the Revenue challenged the order passed by the Commissioner of Income Tax (Appeals), who had allowed deduction under Section 54F of the Income Tax Act for Assessment Year 2015-16.
The assessee had filed a return declaring total income of Rs.16.43 crore, including Long Term Capital Gain of Rs.15.85 crore. The return was originally accepted under Section 143(3). Subsequently, revision proceedings under Section 263 were initiated. During the relevant year, the assessee, along with co-owners, sold two non-agricultural lands situated at Ambli village and claimed deduction under Section 54F amounting to Rs.3.96 crore on purchase of a new residential house.
The Principal Commissioner denied the deduction on the ground that the assessee owned more than one residential house. Two properties were referred to: (i) Ambli Gam Tal House with a book value of Rs.15.73 lakh, and (ii) a residential bungalow with a book value of Rs.1.02 crore. Consequent to the revision order, the Assessing Officer passed an order denying the deduction under Section 54F and recomputed the Long Term Capital Gain at Rs.19.82 crore.
Before the CIT(A), the assessee submitted agreements, photographs, and sale documents to show that the disputed Ambli property was not habitable. It was contended that although the property may originally have been residential, all structures such as walls, kitchen, and bedrooms had been demolished. The assessee argued that the property had become only an open plot of land and therefore could not be treated as a residential house. It was also pointed out that no income from house property had been offered in respect of the said property and no addition under that head had been made by the Assessing Officer.
The CIT(A) accepted these submissions after examining photographs, sale agreements, and affidavits from the purchaser stating that the property was an open plot. The CIT(A) concluded that the property was not habitable and therefore could not be regarded as a residential premise. Accordingly, the assessee was held to be owning only one residential property and was found eligible for deduction under Section 54F.
The Revenue appealed before the Tribunal contending that the assessee held two residential units during the relevant period. The assessee relied on sale deeds, photographs, and other records showing that the property was vacant land without any roof or residential structure.
The Tribunal examined the records, including the registered sale deeds. It noted that the property was described as “open land of inhabitation” and that the purchaser had also confirmed through a notarized affidavit that no construction existed on the land at the time of purchase. The Tribunal further noted that the assessee had purchased the property in 2014 for Rs.15 lakh and sold it in 2020 for Rs.8.51 lakh, resulting in a capital loss.
After considering the material on record, the Tribunal held that the disputed property was not a residential property. Consequently, the denial of deduction under Section 54F was not justified. The Revenue’s appeal was therefore dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Revenue as against the appellate order dated 16-06-2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2015-16.
2. Brief facts of the case is that the assessee is an individual filed his Return of Income for the Asst. Year 2015-16 on 31-10-2015 showing total income of Rs.16,43,52,760/- including Long Term Capital Gain of Rs.15,85,25,949/-. The return was selected for scrutiny assessment and regular assessment u/s. 143(3) was made on 22-08-2017 accepting the returned income. Subsequently the assessment was revised u/s. 263 of the Act. The assessee along-with other owners sold two nonagricultural lands at Ambli village and the assessee claimed deduction u/s. 54F of Rs.3,96,79,796/- on account of purchase of new residential house. Whereas the assessee was having two residential houses namely (1) Ambli Gam Tal House with book value of Rs.15,73,000/- and (2) Residential Bunglow with Book value of Rs.1,02,53,518/-. Therefore Ld. PCIT denied the claim of deduction u/s. 54F of the Act. This Revision order was giving effect by the Assessing Officer vide order dated 31-032022 and determined the Long Term Capital Gain as Rs.19,82,05,745/-and denied benefit of deduction u/s. 54F of Rs.3,96,79,796/- on the ground that the assessee is having more than one residential unit during this financial year.
3. Aggrieved against the giving effect order, assessee filed appeal before Ld. CIT(A) who allowed the deduction u/s. 54F of the Act by observing as follows:
“…. 6.1 The submissions of the appellant and order of the AO on the said issue has been considered. The appellant during the course of appellate proceedings has submitted a copy of agreement alongwith photographs of the property. The appellant further submitted that the property was not habitable though originally it was not a residential premises, however, considering the condition of the property all the walls, kitchen, bed room etc. were demolished and the appellant wanted to construct the new house, however, due to certain technical difficulties, the property has remained as it is and it is only a land and there is no structure on the said land. The appellant also stated that since it was a plot of land, he has not shown any value of this property as the income under the house property as per section 22 of the I.T Act, 1961. Even the AO has accepted and has not made addition on account of income from House Property. As per the I.T act, 1961, only one house is exempt under the head ‘Income from House Property’. The photograph submitted by the appellant clearly shows that there is no structure on the property. The appellant has also submitted the sale agreement which was made subsequently wherein it was clearly mentioned that he is selling open plot. The affidavit submitted of the purchaser said land that he has purchased open land from the appellant.
6.2 Reliance in this regard is placed upon the decision of the Hon’ble Hyderabad Tribunal in the case of Smt. Usharani Kalidindi vs. ITO 37 taxmann.com (Hyderabad Trib.); Ashok Sayal vs. CIT, Central Circle, Jalandhar 24 taxmann.com, 274 (Punj. & Haryana).
6.3 Considering the above fact that though originally, the appellant might have purchased residential premises, however, at the time of sale, all the structures were demolished. Considering the above facts and the fact that the property is not habitable, the same cannot be treated as a residential premises. In view of the above, it is very clear that appellant was holding one residential premise and, therefore, the condition of section 54F are met and appellant is entitled to the said deduction.
7. In the result, the appeal is allowed.”
4. Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal:
1.” Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 3,96,79,796/- on account of disallowance of deduction u/s 54F of the Act, without considering the facts of the case, that the conditions u/s. 54F of the Act were not fulfilled entitling the appellant to claim such exemption?”
2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.”
3.” It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored?”
5. Sr. D.R. appearing for the Revenue in support of the orders passed by Lower Authorities and requested to disallow the deduction u/s. 54F of the Act, since the assessee was holding two residential units during the relevant time.
6. Per contra, Ld. Counsel appearing for the assessee submitted before us three Paper Books at Page Nos. 162 to 171 brought to our notice that translated copy of the Sale Deed dated 29-05-2014. Ld. Counsel appearing for the assessee submitted that the registered Sale Deed makes it very clear the property namely land is inhabitation admeasuring 49.72 Sq. Mtrs. within the border village of Ambli Sub-district Bopal, Ahmedabad. The registered Sale Deed wherein Page No. 7 & 8 carries the photograph of the vacant land with adjacent owners building wall. Thus Ld. Counsel claimed that this property is unfit for habitation and cannot be construed as a residential property. Ld. Counsel also brought to our notice at the time of sale, there was no residential structure however both sides of the property, the neighboring walls were there and no roof over the land, thus it is not a residential property. Therefore the assessing officer was not correct in denying deduction u/s. 54F of the Act that two residential properties were there during this Financial Year.
7. Heard rival submissions and perused the materials available on record including Paper Books filed by the assessee. This giving effect to the Revision order was passed by the Assessing Officer on 31-03-2022 by observing as follows:
“…7. The submissions of the assesse has been considered but is not acceptable for the following reasons:
a. The assesse has claimed that the said property was inhabitable at the time of purchase of the property. However, the assesse has included the asset in his balance sheet for a value of Rs.15,73,600/-
b. The assesse has produced photographic evidence in support of his claim, however it is not ascertainable whether the photographs were taken recently or the condition of the structure was dilapidated at the time of purchase of the property in 2013.
c. It is unlikely that the property was inahabitable at the time of purchase, otherwise the assesse would not have valued the property at Rs.15,73,600/-and included in his class of assets.
In view of the same, the worth of the property is determinable only from the valuation of Rs. 15,73,600/- assigned to it by the assesse himself. It is therefore established that the assesse was the owner of two residential properties at the time of sale of land in the relevant period and is therefore, not eligible to get deduction u/s 54F of the Act.”
7.1. Further the Revision order passed u/s. 263 of the Act by Ld. PCIT was confirmed by Co-ordinate Bench of this Tribunal vide order dated 21-122022 in ITA No.97/AHD/2021.
7.2. Perusal of records and the registered Sale Deed (Purchase Deed) dated 29-05-2014 also clearly states that no residential building in the premises and the Schedule of the property described as follows:
SCHEDULE
“The property of land of inhabitation admeasuring 49.72 Sq. Mtr. of City Survey No.382 within the border of Village Ambli of City Taluka of Registration Sub-District Ahmedabad-9 (Bopal) of District Ahmedabad which is running as Tenement No.0654-17-1960-001-K in Ahmedabad Municipal Corporation, the said property together with the constructions having Roofs made from soil and mud of about 80-50 sq.mtrs. and, together with the rights of going and coming into the same, rights of disposal and, for bringing and taking the pipes of water and drainage, cables of electric and, telephone, etc. the details of its four khuntas is as under:-
East: Road
West: Open Space
North: House of Vasubhai
South: House of Ganpatbhai
Accordingly, the entire property situated in between the four khuntas.”
8. The assessee purchased the above property in 2014 for a consideration of Rs.15,00,000/- whereas he sold the same property on 05-03-2020 for a consideration of Rs.8,51,000/- only thereby incurred capital loss. The purchaser of the above property also confirmed by way of an Notarized Affidavit that the aforesaid property is open land of inhabitation and at present there does not exist any construction as on 05-03-2020. Even this registered Sale Deed dated 05-03-2020 also describes the property as open land of inhabitation admeasuring 49.72 sq. mtrs. at Ambli. Thus it is clear the above property is not a residential property. Therefore the question of denying benefit of deduction u/s. 54F does not arise. Thus the ground raised by the Revenue is devoid of merits and liable to be dismissed.
9. In the result, the appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 22 -04-2026.
Author Bio
