By TIOL News Service

NEW DELHI, AUG 11, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether a 'house property under construction', would satisfy the criteria of 'residential accomodation', for purpose of claiming deduction u/s 54F. NO is the answer.

Facts of the case:

The Assessee was engaged in the business of manufacturing and export of ready-made garments for ladies and kids wear in the name of proprietary concern M/s. Chelsea Mills. During the year, the assessee sold 5 house properties and invested sale consideration received in construction of another property. The assessee thereafter filed return declaring total income of Rs.1,73,68,240/-, after claiming deduction u/s 54F for investment in residential house against the capital gain on sale of house properties. The AO however informed the assessee that deduction u/s 54F had already been allowed in A.Y 2009-10 amounting to Rs.47,84,000/- for investment made in construction of House at 9, Mehandi Farms, Bhatti Mines, New Delhi. He further noted that claim of deduction u/s 54F in A.Y 2010-11 was withdrawn during assessment proceeding. According to the AO, on the date of transfer of the original asset, the assessee owned more than one residential house and therefore it was not eligible for deduction u/s 54F. Accordingly, the AO disallowed the deduction amounting to Rs.1,59,77,680/- claimed by the assessee.

On appeal, the ITAT held that,

++ it is to be noted that in what circumstances the deduction was withdrawn by the assessee in the preceding year, is not relevant. What is relevant, is, whether the assessee satisfies the conditions of section 54F of the Act in the year under consideration. The DR could not controvert findings of the CIT-(A). In view of the facts and circumstances of the case, the assessee is entitled for deduction u/s 54F because house property at 9, Mehandi Farms was under construction during the year under consideration and it cannot be said as another residential house owned by the assessee. As the assessee owned only one residential house at D-3/8 Vasant Vihar, New Delhi, the assessee is entitled for deduction u/s 54F for investment in construction of the house property at 9, Mehandi Farms. In our considered opinion, the finding of the CIT-(A) on the issue in dispute is well reasoned and we find no error in the said finding.

(See 2017-TIOL-1128-ITAT-DEL)