Kundoly Krishnakutty Sunil Vs ITO (ITAT Cochin)
Cochin ITAT Partly Allows 54F Claim – Only Essential Plumbing Accepted as Habitable Expense- Luxury Interiors Like Modular Kitchen Not Eligible u/s 54F, Rules Tribunal
Assessee filed return declaring income of ₹50,85,060. AO completed scrutiny assessment u/s 143(3) on 10.12.2018 restricting deduction u/s 54F to ₹2,03,79,316 as against ₹2,24,25,368 claimed, & restricting deduction u/s 80C to ₹70,462 as against ₹1,50,000 claimed.
The claim u/s 54F included ₹26,94,260 towards post-purchase works such as interiors, modular kitchen, plumbing, wardrobes, material & labour, contending that these were essential to make the new flat habitable. AO treated them as renovation/luxury expenses like AC, showers, modular kitchen, curtains & even housewarming, disallowing the claim. CIT(A) upheld disallowance relying on Kerala HC in Pushpa & Meera Jacob, which held that 54F covers only cost of purchase/construction of new residential house & not renovation/improvement.
Before Tribunal, Assessee relied on contrary rulings including ITAT Bangalore in Ramakrishna M.J & Karnataka HC in Rahana Siraj holding that modifications to make house habitable qualify for 54F. Tribunal analysed the bills & noted that many expenses (₹14.61 lakh) related to luxury/fixtures like AC, wardrobes, modular kitchen, curtains & housewarming, which cannot be treated as essential for habitability. However, electrical & plumbing expenses of ₹2,10,565 were considered essential & eligible u/s 54F. Thus, partial relief was granted.
