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Facts
The assessee sold a residential plot and claimed deduction under Section 54F of the Income Tax Act, 1961. The Assessing Officer and the CIT(A)/NFAC disallowed the claim on the grounds that the deduction is applicable only for the sale of a residential house, not a plot.
Held
The Tribunal held that the assessee's claim for deduction under Section 54F is valid as the section provides exemption on capital gains from the sale of a capital asset other than a residential house. The disallowance by the lower authorities was reversed.
Key Issues
Whether the sale of a residential plot is eligible for deduction under Section 54F of the Income Tax Act, 1961 for exemption from capital gains.
Sections Cited
147, 54, 54F
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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI S. RIFAUR RAHMAN
This assessee’s appeal for assessment year 2015-16, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2024-25/1070611171(1), dated 25.11.2024 involving proceedings under section 147 of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
We note at the outset that both the learned lower authorities have disallowed the assessee’s section 54F deduction claim of Rs.75.20 lakhs, for the sole reason that he had sold/transferred a residential plot than residential house, in the assessment in question framed on 27.09.2021 and upheld in the CIT(A)/NFAC’s lower appellate discussion, reading as under: “6.1 After careful consideration of relevant facts, assesee’s submission and case laws relied upon by appellant, the assessee is not eligible to claim exemption u/s 54 F. 6.2 I have gone through the facts of the case and material available on record and the case is being decided considering the same. In this case, the assessee had sold residential plot in Gurgaon worth 99,95,000/- and earned capital gain of 61,94,857/- and made investment in residential house worth 75,20,000/- in Palwal and claimed deduction under section 54 of the income tax act 1961. The appellant has claimed exemption under section 54, which has rightly been disallowed by the assessing officer. As per section 54 of income tax act, the specific asset eligible for claim of deduction under section 54 is transfer of long-term capital asset being a residential house. 6.3 A simple perusal of the facts of the case shows that the Appellant has sold a residential plot and not a house. During the course of assessment proceedings, the assessee was given multiple opportunities, but he has not been able to justify his claim. 6.4 During the course of appeal proceedings, the case of assessee was fixed for several times giving opportunity to prove the claim filed by appellant during the appellate proceedings, but the appellant has not filed any submission in support of his claim. 6.5 The assessee in the grounds of appeal has claimed exemption under section 54F against the sale of residential plot. A careful perusal of section 54F, shows that the claim of appellant is non- tenable as this exemption is not available for sale of residential plot. 6.6 Section 54F of Income Tax Act 1961 provides an exemption on long-term capital gains when selling a capital asset other than a residential house, such as shares, stocks, bonds, or gold. 6.7 The Income tax section 54F exemption is available to individuals and Hindu Undivided Families (HUFs). Other entities,
2 | P a g e such as companies or partnerships, do not qualify under this provision. 6.8 The capital gain must arise from the sale of any capital asset, excluding a residential house. This means that the gain can come from selling assets like stocks, bonds, or commercial properties. 6.9 Accordingly, it is held that the appellant is not eligible to claim exemption under section 54F. Hence after careful consideration of all the facts, all the grounds of appeal are hereby dismissed.” This is what leaves the assessee aggrieved who is in appeal before the tribunal.
4. The Revenue vehemently supports the impugned section 54 deduction disallowance that sale/transfer of a residential house forms a condition precedent in such an instance and the assessee herein has failed to prove his residential plot as being used as a residential house, so as to satisfy the rigor thereof. It could hardly dispute the clinching fact that the assessee had indeed sold/transferred the relevant residential plot forming a capital asset; and, therefore, his case is very well covered under section 54F deduction in the given facts, since satisfying all other conditions.
5. We thus accept the assessee’s alternative prayer raised in the course of hearing in very terms. Both the learned lower authorities’ action making the impugned disallowance of section 54F claim at the assessee’s behest stands reversed. All other pleadings herein stand rendered academic. 3 | P a g e