Girish Mohan Vs ACIT (ITAT Delhi)
ITAT Delhi held that deduction under section 54F of the Income Tax Act cannot be denied merely alleging that proportion to the size of plot/ land the constructed portion is very small. As assessee submitted sufficient and all possible documentary evidence, the deduction u/s 54F is allowable.
Facts- The present appeal is preferred by the appellant contesting that CIT(A) has erred in upholding disallowance of deduction claimed under section 54F of the Income Tax Act. On the other hand, AO alleges that assessee is merely possessing a piece of land without any construction thereon and hence not entitled for deduction of Section 54F of Income Tax Act, 1961.
Conclusion- Held that the assessee has constructed residential buildings comprising of two rooms, kitchen, toilet having electricity and water connection and a borewell with a septic tank which was being used as residential unit. Therefore, we are unable to agree with the basis taken by the ld CIT(A) that in proportion to the size of plot/ land the constructed portion is very small and thus, the exemption benefit u/s 54F of the Act cannot be extended to the cost of land appurtenant to the house.
Therefore, on the basis of foregoing discussion we reach to a legal conclusion that the assessee, for claiming deduction u/s 54F of the Act, has submitted sufficient and all possible documentary evidence under his command, before authorities below to show that the assessee purchased land, constructed a residential unit consisting of two rooms, kitchen and bathroom with electricity and water facility supported by connection of borewell and septic tank built therein. The change of land use certificate reveals that the assessee before construction of said unit obtained permission from the competent authority before using agricultural land for the purpose of construction of residential house pertaining entire 1.26 hectre of land. Therefore, we are inclined to hold that the authorities below have erred in dismissing the claim of the assessee for deduction u/s 54F of the Act and hence, the AO is directed to allow the same to the assessee.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal has been filed by the assessee against the order of the ld CIT(A)-1, Gurgaon dated 23.09.2019 for AY 2016-17.
2. The assessee has raised following grounds of appeal:-
“1. That the Ld CIT (A) has erred on facts and in law in upholding the disallowance of the cost of improvement in incurred by the appellant on the property which was sold by him.
2. That the Ld CIT (A) has erred on facts and in law in upholding the disallowance of deduction claimed u/s. 54F.
3. That the Ld CIT (A) has erred on facts and in law in upholding the disallowance of deduction claimed u/s. 54F on the ground that the appellant has not constructed the residential house.
4. That the impugned order is arbitrary, illegal, bad in law and the violation of rudimentary principle contemporary jurisprudence.”
Ground No. 1
3. Apropos ground No. 1, the ld counsel submitted that the AO as well as the ld CIT(A) has erred in on facts and in law in upholding the disallowances of cost of improvement of Rs. 4 lakh incurred by the assessee on the property which was sold during the financial period 199697 despite the fact that the assessee successfully established the claim of cost of improvement by way of filing all possible evidence under his command. Therefore, cost of improvement may kindly be allowed to the assessee.
4. Replying to the above, the ld Sr. DR drawing our attention towards relevant part of the assessment as well as first appellate order submitted that the documentary evidences submitted by the assessee was not reliable and the AO has verified and examined the same in detailed in assessment order wherein, he rightly held that the bills/ vouchers submitted by the assessee are not acceptable and thus claim of incurring of such expenses was rightly disallowed. The ld Sr. DR submitted that the AO has enclosed bills/ vouchers submitted by the assessee to the assessment order which clearly revealed that the assessee has failed to establish such claim of cost of improvement on the property sold during FY 1996-97.
5. On careful of the above submission from relevant para 4.2 and 4.4 of the first appellate order we clearly note that the ld CIT(A) after considering the facts and circumstances of the issue and by reproducing relevant part of the assessment order held that the appellant has not been able to controvert the observation of the AO in the assessment order and therefore, the same are accordingly rejected. For the sake of completeness we find it appropriate to reproduce the said para 4.2 of the first appellate order which reads as under:-
“4.2 The Assessing Officer asked the appellant to furnish evidence with regard to investment in construction in immoveable property and to justify the claim of deduction u/s 54F. The appellant filed copies of vouchers and bills in support of construction. The Assessing Officer considered the appellant’s submissions and pointed out as under:-
“At the outset, the claim of assessee with regard to Rs. 10 lakhs to be included in cost of acquisition is rejected as the assessee cannot include the expenses incurred on property purchased for the purpose of computing the investment amount for the purpose of provisions of section 54F. Only the cost of property purchased i.e. Rs. 3.25 crores in this case can be considered.
Without prejudice, the bills submitted by the assessee cannot be accepted because of following reasons:
