Estate of Late Dr. S. Zakaulla Masood Vs ITO (ITAT Bangalore)
The issue under consideration is whether the CIT(Appeals) was justified in denying the benefit of deduction to assessee u/s. 54 of the Income Tax Act, 1961?
ITAT states that, in the present case, ITAT are satisfied on the basis of evidence produced by the assessee that a building had come up over the site purchased by assessee and the purchase of site and cost of construction was much more than the capital gain arrived at by the assessee on sale of ancestral house. The CIT(Appeals) has gone by the fact that there was absence of Occupation Certificate. In our opinion, this will not be a ground to deny the claim of assessee for deduction u/s. 54 of the Act, as other evidence filed by the assessee sufficiently demonstrates that assessee has constructed a residential house within the period of stipulated by law. The findings of the CIT(Appeals) in this regard are very vague and cannot be the basis to deny the claim of assessee for deduction u/s. 54 of the Act. ITAT therefore hold that assessee is entitled to deduction u/s. 54 of the Act and consequently no long term capital gain is eligible to tax. The addition is deleted. In the result, the appeal of the assessee is accordingly allowed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is against the order dated 11.01.2018 of the CIT(Appeals)-3, Bengaluru relating to assessment year 2010-11.
2. The only issue that arises for consideration in this appeal is as to, whether the CIT(Appeals) was justified in denying the benefit of deduction to assessee u/s. 54 of the Income Tax Act, 1961 (‘Act’). Under Section 54 of the Act, if capital gain arises from the transfer of a long-term capital asset, being buildings or land appurtenant thereto, and being a residential house, the income of which is chargeable under the head “Income from house property” (referred to in Sec.54 of the Act as the original asset), and the assessee has
(i) within a period of one year before, or
(ii) two years after the date on which the transfer took place (a) purchased, or (b) has within a period of three years after that date constructed, a residential house, then,
capital gain will be allowed as deduction to the extent of Long-Term Capital Gains OR to the extent of amount invested in the purchase or construction of the new residential house. whichever is less.
3. The undisputed facts are that the assessee was a co-owner of residential house. By a Sale Deed dated 30.10.2009, the aforesaid property was sold by the assessee. The assessee’s share of sale consideration was a sum of Rs.40 lakhs. In the return of income filed for AY 2010-11, the assessee declared long term capital gain(LTCG) on sale of property at Nil and the following was the computation LTCG :-
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