Size of the residential house is not a criteria for claiming exemption u/s 54F – ITAT
In a recent judgment, the ITAT Delhi has held that size of the residential house is not a criteria for claiming exemption u/s 54F
ABCAUS Case Law Citation:
ABCAUS 4065 (2024) (06) ITAT
Important Case Laws relied upon:
Associated Indem Mechanical Private Ltd. vs. West Bengal Small Scale Industrial Development Corporation Ltd. [ 2007 (3) SCC 607]
Smt. Asha George vs. ITO
Sumati Dayal vs. Commissioner of Income tax
In the instant case, the Revenue had challenged the order passed by the CIT(A) in allowing exemption u/s 54F of the Income Tax Act, 1961 (the Act).
The assessee during the relevant period had sold a property to a Real Estate company. The assessee claimed deduction u/s 54F of the Act.
Before the Assessing Officer (AO), the assessee in support of his claim u/s 54F furnished a copy of registered deed purchased by the assessee jointly with three persons. The share of the assessee in the above property was around 40 per cent.
The AO observed that as per the registry of the property it was mainly a land of about one Acre size where a covered area of a size of 500 sq. ft. was stated to be a house (“Makan”).
The AO noted that the registry did not say a “Rihayshi Makan” or residential house. Thus, the claim of assessee u/s 54F was not evident from the documents provided in his support.
The AO also deputed an Inspector to the said land to ascertain the correctness of the claim of the assessee. On his visit to the said property he found that a concrete-brick manufacturing unit was being run by one person.
The assessee submitted that the he had obtained a domestic connection of 1 KW after the purchase of the property which proves that the said building was a residential house. It was also asserted that the premise was purchased by assessee with a view to reside with his parents by using the entire land and the said building as residential house.
The assessee also relied upon the registered documents where it was mentioned that the said property comprises of an area of 500 sq. feet constructed building.
The AO opined that merely having a domestic electricity connection did not prove that it was a residential house. The assessee has not been able to substantiate his claim to prove that how a small area of 500 sq. ft. which was purchased jointly could be eligible for deduction u/s 54F on a land of more than 90 times.
Therefore, the AO made an addition to the total income of the assessee on account of disallowance of exemption u/s 54F of the Act.
The CIT(A) deleted the addition holding that the assessee had purchased a house “Makan”, hence the exemption u/s 54F is to be allowed.
The Tribunal opined that the domestic electric connection cannot give any credence or criteria to prove that the assessee had purchase d a residential house as per the provisions of Section 54F as the electricity company has different types of tariff categories. Thus, the Tribunal declined to accept the rationale of the CIT(A) that since there was a domestic electricity connection, the residential house has been said to be purchased.
Similarly, the Tribunal opined that the ratio of the size & location of the house will come into fore only once the factum of purchase of house had been proved. The size & location of the residential house do not matter as long as the capital gains are invested in purchase of the residential house. The master plan as relied by the CIT(A) is not a correct way of determining the purchase of residential house. The master plan of any urban area is the future perspective planning urban land scheme.
The Tribunal also referred to CBDT Circular No. 667 which held that deduction u/s 54F can be given on the combined cost of construction of the residential land and cost of plot. The cost of plot is an integral part of the purchase of the house. No two calms about that. In the instant case the master plan was only a perspective plan, the Patwari’s certificate and the electricity connection cannot prove either purchase or construction of house. The registration document of the land clearly proves that the land was an agricultural land as per the registration document. The registration fee was also paid as per Circle rate of agricultural land. The covered area of 500 varg foot (sq. ft.) did not mention it as a residential house in the registration document. There was no evidence or certificate of conversion of land use (CLU) from agricultural land to residential land.
Further, the enquiries conducted by the revenue authorities had clearly proved with photographic evidences that the area had been used for concrete brick manufacturing unit.
Thus, based on the evidences collected, collated, examined, verified and investigated by the revenue authorities, the covered area which is shed of 500 mtr. on the agricultural land cannot be considered as a residential house. Hence, keeping in view, the entire facts and peculiarities
of the instant case and judicial pronouncements, we hold that the claim of the assessee for exemption u/s 54F had been rightly denied by the Assessing Officer.
However, the ITAT added that it is of the firm opinion that the size of the residential house is not a criteria for claiming o f exemption u/s 54F. The very fact that whether there existed any residential house and whether the assessee constructed any house subsequent to purchase of the land had not been proved in this case.
Download Full Judgment Click Here >>
- GST e-invoice-1 and e-invoice-2 Portals to be launched from 18.07.2024
- The Companies (Significant Beneficial Owners) Amendment Rules, 2024
- Clarification on GST rates & classification of goods as per GST Council 53rd meeting
- Clarifications on applicability of GST on certain services as per 53rd GST Council meeting
- Merely increasing/ reducing agriculture expenses/ income not result in taxable income
