Yogesh Mutha Vs ITO (ITAT Jaipur)
In Yogesh Mutha Vs ITO, ITAT Jaipur observed that AO and CIT(A) wrongly restricted Section 54 exemption on LTCG by applying Section 54F and ignoring actual use of the property. Tribunal remanded the matter for fresh inquiry to determine if the entire land qualifies as a residential house for exemption.
Assessee sold a residential plot at Jawahar Nagar, Jaipur for Rs.2.40 crore on 16.07.2016, resulting in LTCG of Rs.1.55 crore after indexation. He invested the entire gain in purchasing, jointly with his brother, a property at Bhankrota, Ajmer Road, Jaipur, consisting of 0.8619 hectares (92,774 sq.ft.) of land with a small house of 1,490 sq.ft. constructed thereon, for Rs.4.80 crore (share of Assessee Rs.2.40 crore).
AO held that deduction u/s 54F (instead of 54) was allowable only in respect of a reasonable portion of land appurtenant to the small construction. Treating only 500 sq.ft. (1/3rd of plinth area) as appurtenant, AO restricted exemption to Rs.5.17 lakh, & added balance Rs.1.50 crore as taxable LTCG. CIT(A) upheld AO’s view, holding that claiming entire agricultural land as appurtenant was against legislative intent of s.54, which aims at promoting housing & not large land purchases.
Before Tribunal, Assessee contended that expression “residential house” is not defined in the Act, & once a house exists on purchased land, entire property qualifies for exemption u/s 54. AO failed to verify actual user of land, call for land records, or inspect site before branding it as agricultural. Thus, denial was arbitrary.
