Y. Manjula Reddy Vs ITO (ITAT Bangalore)
The next impediment in the minds of the tax authorities was that the plot was purchased jointly in the name of the assessee and her husband and hence it should be held that both held 50% right each and hence the assessee could have purchased only her husband’s share only. We are unable to agree with this logic. There is no dispute that the assessee has actually given funds for the acquisition of the property. When the assessee’s husband has not given money for purchase of property, how it can be held that her husband was owner of 50% of the property merely for the reason that his name appears in the conveyance agreement and also in the rental agreement. The deduction under sec.54F of the Act shall be given only to the person who has invested the money. In the instant case, it is the assessee who has invested the money and hence the assessee should be given deduction u/s 54F of the Act for the money invested by her.
Additions, alterations, modifications and improvements on the new asset to make it habitable would be eligible for benefit of deduction u/s 54F
The Ld CIT(A) has taken the view that the amount spent after the date of registration of land, i.e., 24.02.2007 for interiors, renovation, furnishing etc cannot be part of acquisition. The Hon’ble Karnataka High Court has held in the case of Mrs. Rahana Siraj (2015)(58 com 333)(Kar) that the money spent in additions, alterations, modifications and improvements on the new asset to make it habitable would be eligible for benefit of deduction u/s 54F of the Act. Accordingly, we set aside the view so taken by Ld CIT(A) as it is contradictory to the binding decision of jurisdictional High Court. Accordingly, we hold that the assessee is eligible for deduction u/s 54F of the Act in the amount spent on interiors, renovation, furnishing etc.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These cross appeals are directed against the order passed by Ld. CIT(A)-5, Bengaluru and they relate to the assessment year 2008-09.
2. These appeals were earlier disposed of by this bench of Tribunal vide its order dated 2.12.2016. The assessee challenged the order passed by the Tribunal by filing appeal before Hon’ble High Court of Karnataka. The Hon’ble High Court has restored the matter back to the file of the Tribunal with the following observations:-
“8. From close scrutiny of the order passed by the Tribunal, it is evident that the tribunal while deciding the appeal preferred by the revenue has adjudicated only grounds 2 and 3 and has not adjudicated the ground with regard to the claim of assessee under Section 54F of the Act in the light of law laid down by Delhi High Court in ‘CIT Vs. GITA DUGGA’, (2013) 257 CTR (DEL.) 208. The Tribunal has failed to adjudicate the grounds raised by the assessee in her appeal. The impugned order therefore, cannot be sustained in the eye of law. It is accordingly quashed. The matter is remitted to the tribunal to decide the appeal preferred by the assessee as well as the revenue afresh in accordance with law laid down by this Court in NAVIN JOLLY, GITA DUGGAL, M. GEORGE JOSEPH, M/S. JENNIFER BHIDE AND KAMALA WAHAL supra. It is therefore, not necessary for us to answer the substantial questions of law.”
We notice that the Hon’ble High Court has directed the Tribunal to decide the appeals afresh.
3. At the time of hearing, both the parties admitted that the tax effect involved in the appeal filed by the revenue is below the monetary limit as prescribed by the CBDT in its circular No.17/2019 dated 8.8.2019. Accordingly, the appeal of the revenue is dismissed in limine.
4. The only issue urged in the appeal of the assessee relates to partial rejection of deduction claimed u/s 54F of the Income-tax Act,1961 [‘the Act’ for short].
5. The facts relating to the issue are stated in brief. The assessee is an individual and she filed her return of income for the year under consideration on 29.9.2008 declaring a total income of Rs.9,06,860/-. The assessee had earned long term capital gain of Rs.1,56,85,225/- on sale of a land and claimed exemption u/s 54F of the Act from it to the extent of Rs.1,56,33,870/-. Accordingly, the assessee offered net long term capital gain of Rs.51,355/-.
6. The A.O. examined the long-term capital gain declared by the assessee. It was noticed that the assessee along with 3 other persons had sold a property on 27.10.2007 for a consideration of Rs.5.35 crores. The assessee’s share out of the above said consideration was Rs.1,60,50,000/-. The assessee claimed that she has purchased a residential house property in a project named “M/s. Prestige Ozone” for a sum of Rs.1,72,29,993/-. Accordingly, she claimed deduction u/s 54F of the Act to the extent of Rs.1,56,33,870/-.
7. The A.O. examined the details of purchase of the property at Prestige Ozone. The A.O. noticed that the initial agreement was entered by the assessee’s husband Shri Y.C. Rami Reddy with M/s Prestige Properties on 5.5.2004 for construction of building at a cost of Rs.46,35,610/-. Subsequently, a sale deed was registered on 24.2.2007 for purchase of plot No.8 having extent of Rs.6,108 sq.ft. for a consideration of Rs.39,67,933/-, on which the above said construction has happened. The said sale deed was executed in favour of Shri Y.C. Rami Reddy and the assessee herein. The assessee claimed that she has reimbursed all the payments made by her husband to him and she also incurred further expenses for interior design, etc. Accordingly, the assessee claimed that the entire cost of purchase was met by her and further, the property was purchased by her from her husband. The breakup details of total expenses incurred in connection with this property was stated as under:-
