Income tax - Whether Section 54F benefits can be denied on ground that house purchased by assessee was not fit for residence as it had no doors nor windows - NO: HC
By TIOL News Service
BANGALORE, JAN 01, 2014: THE issues before the Bench are - Whether Section 54F benefits can be denied on the ground that the house purchased by the assessee was not fit for residence as it had no doors nor windows and Whether the report of an Inspector is the sole criteria of allowing exemption u/s 54F - Whether in case it is proved that prior to sale, the vendor lived in the house and the same was sold along with the residential construction, exemption u/s 54F can't be denied. And the verdict goes against the Revenue.
Facts of the case
The assessee, a medical practitioner, had filed his returns of income for the AY 2008-09 declaring a total income of Rs.27,22,500/-, which was processed u/s 143(1). Subsequently, it was taken up for scrutiny u/s 143(2). During assessment, income was determined at Rs.1,03,25,814/- by denying the assessee’s claim for exemption u/s 54F.
On appeal, the CIT(A) dismissed the petition. On further appeal, the Tribunal, on reappreciation of the entire materials on record, held that the sale deed under which the assessee purchased the property clearly described that the assessee purchased a site together with 02 Square RCC roofed house, cement floor, jungle wood doors and windows. Form No.1A issued by the Department of Registration and Stamps, Government of Karnataka, dated 16.10.2007 also referred to the schedule ‘C’ measuring 200 sq.ft. RCC house, with cement floor and all civic amenities. A receipt dated 03.07.2007 showing the payment of property tax for the year 2006-07 and 2007-08 showed that the tax was paid for a site and a house and therefore, it was of the view that what the assessee purchased was a residential site with house. However, the Assessing Authority, three years after the purchase of the house inspected and the said Inspector’s report dated 19.11.2010 showed that there was no house; there was only a watchman shed where building material of the neighbor was collected and acted on the said report without proper verification. Therefore, the Tribunal was of the view that the material on record showed that the assessee purchased a house with a site, subsequently, he had demolished it. He was in the process of putting up a construction. In the meanwhile, he had accommodated his neighbor to keep his building material by permitting a watchman to live there by putting a temporary shed, but that cannot be construed as a fact, which showed that the case of the assessee was incorrect. Therefore, Tribunal held that the findings recorded by both the Authorities were unsustainable and therefore, it set aside the said findings and granted relief to the assessee.
Before the HC, the Revenue's counsel contended that the photographs produced by the assessee himself did not show that the construction put up therein was not fit for residence which had no facilities like electricity, water and toilet. It had no windows, no doors and therefore, the Tribunal committed a serious error in interfering with the concurrent finding of fact.
Held that,
++ the orders by the lower Authorities are based on the report submitted by the Inspector who visited the place three years after the sale. On the day he inspected, there was a shed constructed for living of the watchman and to store the building material of the neighbor of the assessee who was putting up a construction. That is not the building, which is referred to in the sale deed. On the day the property was purchased, a residential structure measuring about 200 sq.ft. was in existence. The photograph which was produced by the assessee even before the Authorities demonstrates the said fact. May be, that structure is not palatial, it does not have all civic amenities, that was the status of the vendor of the assessee. He sold the site to the assessee who is a doctor by profession. What the law contemplates is, after selling the property, if the assessee invests the sale consideration in purchase of a residential property, he is entitled to exemption under Section 54F. What should be the extent of construction of residential building, what facilities should be provided in such constructions to be eligible for the exemption, is not set out in the Act. All that the Authorities have to look into is, whether what is purchased is a residential construction or not? If the material on record shows, prior to sale, the vendor lived there with his family and he has sold the site along with the residential construction, merely because the property is not suitable to the assessee and construction materials are kept there, is not a ground to deny exemption under Section 54F of the Act. What the Tribunal has held is on careful consideration of the entire material on record. In that view of the matter, we do not see any justification to entertain this appeal. No substantial question of law arises for consideration in this appeal, no merits, accordingly, dismissed.
(See 2014-TIOL-02-HC-KAR-IT)
