By TIOL News Service

AHMEDABAD, AUG 12, 2016: THE issue is - Whether assessee can be allowed Sec 54F benefits even if assessee fails to prove that investment was made in a residential house. NO is the answer.

Facts of the case

The assessee is an individual engaged in the business of trading of grains filed return of income declaring income. The return was further revised after including long term capital gain. AO disallowed the deduction claimed u/s 54F on the ground that assessee was unable to prove that investment of Rs.3,06,250/- was made in the residential property. CIT(A) dismissed assessee’s appeal.

Having heard the parties, the ITAT held that,

++ assessee is trying to take benefit of section 54F of the Act by one way or the other without placing on record any satisfactory evidence to prove that investment has been made in residential house and is only bending to an agreement that too made on the last day of the Asst. Year which has not attained finality in the subsequent period;

++ at the time of filing revised return of income assessee has claimed deduction u/s 54F of the Act for Rs.3,06,250/- claiming the same as investment in residential house but when the matter came up before CIT(A) the facts relating to the impugned claim of Rs.3,06,250/- were put forth by the assessee through which it was made clear that Rs.3,06,250/- was actually the cost of improvement which the assessee was entitled to deduction from the sale consideration. This fact gets further proved when ITAT looked into the income-tax return of other co-owners who have claimed deduction as cost of improvement incurred towards construction of the immovable property which has been sold thereafter. However, assessee failed to claim the deduction of Rs.3,06,250/- as cost on improvement rather it was claimed as deduction u/s 54F of the Act at the time of filing of revised return. It was incumbent on the assessee that if the claim of deduction u/s 54F was not correct then he could have revised the return before completion of assessment proceedings to put forth his claim under the right provisions of the Act which he failed. More so even during the course of assessment proceedings also, assessee submitted that the deduction u/s 54F claimed by him was genuine and, therefore, he even placed on record copy of agreement dated 31.3.2011 in support of purchase of residence for Rs.3,06,250/-;

++ assessee is not eligible for any deduction u/s 54F of the Act as there has been no investment in a residential property and also the claim of the assessee for getting deduction of Rs.306,250/- incurred towards cost of construction, to be reduced from the sale consideration of Rs.7,50,000/- shown, cannot be entertained as it was not claimed in the return of income and certainly one cannot get the benefit of rightful claim if it has not been put forth in the return of income and in the given case assessee has changed the stories for getting deduction of Rs.3,06,250/- and has miserably failed to make proper claim at the right place.

(See 2016-TIOL-1424-ITAT-AHM)