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Facts
The assessee appealed the disallowance of a Section 54 deduction claim of Rs. 40,24,786/- by the AO and CIT(A). The claim was for the sale of an open plot, gifted to her, on which a temporary structure was built 3.5 months before sale. Lower authorities rejected the claim, deeming it not a residential house.
Held
The Tribunal allowed the appeal, noting that the assessee had indeed constructed a structure whose residential nature was not specifically rejected by the lower authorities. It accepted the assessee's stand and deleted the impugned Section 54 disallowance.
Key Issues
The key issue was the eligibility of Section 54 deduction for capital gains on the sale of a property, specifically whether the construction of a temporary structure 3.5 months prior to sale qualified the asset as a residential house.
Sections Cited
147, 144, 54
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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: Sh. Satbeer Singh Godara
Date of Hearing: 21.04.2025 Date of Pronouncement: 21.04.2025 ORDER This assessee’s appeal for Assessment Year 2018-19, arises against the CIT(A)/NFAC, Delhi’s DIN & Order No. ITBA/NFAC/S/250-2024-25/1070293208(1) dated 12.11.2024, in proceedings u/s 147/144 of the Income Tax Act, 1961 (in short “the Act”).
Heard both the parties. Case file perused.
Learned departmental representative vehemently argues during the course of hearing that both the learned lower authorities herein have rightly rejected the assessee’s section 54 deduction claim of Rs. 40,24,786/-; in the course of assessment framed on 28.12.2023, as upheld in the lower appellate discussion, as follows:- “6. I have gone through the grounds of appeal, statement of facts, the assessment order, application for admitting additional evidences and the written
2 submissions filed asset. The said disallowance has been made by the AO as it was noted that the property under consideration sold by the appellant was actually open plot purchased by her father in law in the year 2010 and gifted to the appellant on 24.07.2017 and the said plot with some temporary structure thereon was sold by the appellant on 13.11.2017. The AO observed that the so called temporary structure was constructed 3 ½ month prior to the date of actual sale and therefore, the AO held that the said sale of asset cannot qualify as transfer of Long Term Capital Asset being the residential house property. 6.1 During the appellate proceedings, the appellant has made submissions same as filed before the AO. It is seen from the details furnished that there is no evidence on record to prove existence of any temporary structure on the said land and further no cogent evidences in support of the same have been brought on record by the appellant. The deduction u/s.54 of the Act is allowable in respect of capital gain arising from transfer of Long Term Capital Asset being building or land appurtenant thereto and being a residential house the income of which is chargeable under the head income from house property. The appellant has not brought on record any evidence that the said property was used as residential property or income from the same was being offered under the head income from house property by her father in law or by the appellant in any of their ITRs. The appellant appears to have made wrong claim of deduction u/s.54 of the Act by showing some temporary structure on the open plot for taking benefit of provision of section 54 of the Act. Considering overall factual matrix, I agree with the finding given by the AO that the temporary structure was made 3½ months prior to the sale of property and therefore, the said asset does not qualify as Long Term Capital Asset as per the provision of Section 54 of the Act. It is also pertinent to mention here that no cogent evidences have been brought on record to satisfactorily explain the existence of any temporary structure also. In view of the above, the action of the AO in disallowing the deduction of Rs.40,24,786/-
3 u/s.54 of the Act deserves to be upheld. Hence, the ground no.1 to 5 are dismissed.”
Shri Sanjay Kumar, Sr. DR vehemently argued in this factual backdrop that the impugned disallowance of the assessee u/s. 54 deduction deserve to be upheld.
I have given my thoughtful consideration to the assessee’s pleadings and Revenue’s vehement submissions. I see no merit in the Revenue’s stand for the precise reason that it has already come on record that assessee had indeed constructed a structure 3½ months prior to the date of transfer, whose nature as being “residential”, has not been specifically rejected. That being the case here, I hereby accept the assessee’s stand to delete the impugned sole section 54 disallowance/ addition in very terms. Ordered accordingly.
This assessee’s appeal is allowed in above terms. Order Pronounced in the Open Court on 21/04/2025.