Denial of deduction u/s. 54F by merely stating that constructed portion is small is unjustified

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.

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