Case Law Details
Arunava Bhattacharjee Vs ACIT (ITAT Kolkata)
Introduction: The recent case of Arunava Bhattacharjee Vs ACIT before the ITAT Kolkata dealt with an important interpretation of the Income Tax Act pertaining to the claim of deductions under Section 54F. The court clarified that if an assessee owns more than one residential house, they are not eligible for this deduction.
Analysis: The appellant, Arunava Bhattacharjee, had sold a guest house and computed a long-term capital gain from this sale. The assessee claimed a deduction under Sections 54 and 54F of the Act. However, the Principal Commissioner of Income Tax (PCIT) noticed that the appellant owned more than one residential house other than the new asset, making him ineligible to claim deductions under Section 54F. The assessee argued that they were eligible for deductions under Section 54, not Section 54F, as the former doesn’t restrict deductions based on the number of houses owned.
The counsel for the assessee pointed out the disparity in conditions between Sections 54 and 54F, noting that the ownership restriction in Section 54F did not apply to Section 54. The ITAT Kolkata agreed with this line of argument, indicating that the PCIT had wrongly applied the conditions of Section 54F to the case, instead of Section 54.
Conclusion: The ITAT Kolkata’s decision clarifies that the conditions of Section 54F, particularly the restriction on owning more than one residential house, do not apply to deductions claimed under Section 54. This ruling emphasizes the need for careful interpretation of tax law provisions and asserts the difference in conditions for claiming deductions under different sections of the Income Tax Act. It serves as a crucial precedent for future cases involving similar disputes.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal has been preferred by the assessee against the order dated 01.02.2021 of the Principal Commissioner of Income Tax (Appeals)-1, Kolkata [hereinafter referred to as ‘PCIT’] exercising his revision jurisdiction u/s 263 of the Income Tax Act (hereinafter referred to as the ‘Act’).
2. The ld. PCIT observed from the assessment records that the assessee had sold a Guest House, located at Ganganagar on 20.02.2016 at Rs.4,50,00,000/- which was acquired on 01.12.2007. The assessee computed Long Term capital gain of Rs.2,00,26,945/-from the sale of the aforementioned property and out of the said capital gain, the assessee had claimed a deduction of Rs.1,17,03,326/-u/s.54EC in ITR. But in its revised computation the assessee had claimed deduction of Rs.1,18,22,046/- u/s.54/54F of the Act. However, in the assessment order the AO allowed deduction to the tune of Rs.1,17,03,326/- u/s. 54/54F against the assessee’s claim of Rs. 1,18,22,046/-. The ld. PCIT further observed from the details of immovable asset as submitted by the assessee in Balance Sheet as on 31.03.2016 that the assessee was in possession of three residential unit viz. (1) 50% shareholding of property at 190/1 Biddhan Nagar Road, Kolkata-67, (2) Flat No.2601 Height Tower 8, Uniworld City, Rajarhal, Newtown, Kol-156 and (3) Flat No. 2201, Height Tower 8. Uniworld City, Rajarhat, New town, Kol-156 during the F.Y. 2015-16. But as per subsection 1(b) of Section 54F, deduction u/s. 54F is not allowable if the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset. He therefore observed that the assessee owned more than one residential house, other than the new asset on the date of transfer (20.02.2016) of the original asset, hence, the assessee was not eligible to claim deduction u/s 54/54F of the Act and allowing the same in the assessment order was irregular and required to be disallowed. He show-caused the assessee in this respect.
In response, the assessee submitted that during the assessment proceeding the assessee had claimed deduction of Rs.1,67,03,026/- u/s 54EC of the Act, whereas, the maximum deduction permissible under the said section was Rs.50,00,000/-. That thereafter the revised computation was furnished and the deduction u/s 54EC was claimed at Rs.50,00,000/- and further deduction of Rs.1,17,03,326/- was claimed u/s 54 of the Act.
3. Before the ld. PCIT, It was explained that section 54 was applicable in the case of the assessee not the section 54F. However, the PCIT proceeded to hold the order of the Assessing Officer as erroneous in law observing that as per section 54F of the Act, the assessee should not have owned more than one residential house other than the new asset on the date of transfer of the original asset.
4. The ld. Counsel for the assessee has invited our attention to the provisions of section 54 of the Act to submit that the condition as prescribed u/s 54F of the Act that the assessee could not own more than one residential house other than the new asset, on the date of transfer of the original asset, were not attracted for claiming deduction u/s 54 of the Act. That such conditions stipulated u/s 54F of the Act were not there under the provisions of section 54 of the Act. That the ld. PCIT proceeded on the wrong footing solely considering the provisions of section 54F of the Act.
5. The ld. DR could not rebut the above submissions.
6. Merely mentioning of section 54/54F in the assessment order does not mean that the assessee was not entitled to deduct u/s 54 of the Act. Therefore, the ld. PCIT has exercised his revision jurisdiction on the wrong footing which is not sustainable in the eyes of law. In view of this, the impugned revision order passed by the ld. PCIT u/s 263 is hereby quashed.
7. In the result, the appeal of the assessee stands allowed.
Kolkata, the 9th June, 2023.
When section 54 does not stipulate any such restriction of owning more than one residential house at the time of transfer of the original asset , it is surprising and disheartening to note that the PCIT did not accept the claim of the assessee and to add fuel to the fire both the assessing officer and the CIT (Appeals) did not accept the claim. In my opinion, this is a case where action needs to be taken against the PCIT, assessing officer and CIT (Appeals) by the CBDT, if it is considered that responsibility is to be fixed on the erring officers. Nowadays this type of irresponsible orders have become the order of the day as there is absolutely no control and supervision by the higher authorities. Hope that this comment reaches the eyes and ears of CBDT .