Siva Brahma Narayana Chowdary Bodepudi Vs ACIT (ITAT Visakhapatnam)
ITAT Allows Section 54F Relief as Residential Floor in Nursing Home Retained Residential Character; ITAT Grants Section 54F Deduction Because Subsequent Demolition Does Not Affect Initial Eligibility; Section 54F Claim Upheld Because Approved Building Plan Proved Property Was Residential; ITAT Rejects Denial of Section 54F Because Property’s Location in Nursing Home Building Is Not Decisive.
The assessee, a doctor and Managing Director of a hospital company, filed his return for AY 2018-19 and claimed deduction under Section 54F of the Income Tax Act amounting to ₹1,73,49,248 on long-term capital gains arising from the sale of a capital asset. He had invested ₹2.50 crore out of the sale consideration of ₹3.91 crore in purchasing an undivided share of land and a third-floor RCC structure at Prajasakthi Nagar, Vijayawada.
During scrutiny assessment following a survey under Section 133A, the Assessing Officer (AO) restricted the deduction proportionately to ₹1,10,73,046 because the investment made in the new asset was less than the total sale consideration. The AO further denied the deduction on three grounds: the purchased property was part of a nursing home and therefore not a residential property, the assessee failed to produce evidence proving it was residential in nature, and the property was demolished in the subsequent financial year and replaced with a commercial structure.
