RAMANUJAM ELANCHELIYAN,CHENNAI vs. ITO, NCW - 20 (2), CHENNAI

The appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-7 / Chennai [in brevity Ld. CIT(A)] bearing order no dated 28.11.2019.

The assessee raised the following grounds which are as follows:

That the Ld.CIT(A) failed to appreciate that merely because borrowed funds were utilized for acquisition of new house property does not mean that exemption U/s.54F is to be denied.

The assessee filed an appeal before the Ld. CIT(A). The ld CIT(A) disallowed the following grounds of the assessee which were agitated by the assessee during appeal hearing. The grounds are as follows:- the investment in property through borrowed fund amount to Rs. 50,00,000/- and Rs. 8,00,000/- as cost of improvement. The only point cost of registration charges and stamp value amount to Rs. 18,40,160/- is agitated before us for first time. Accordingly, the assessee filed an appeal before us.

As per the order of the ld. CIT(A) in page7 which is as follows: “II. Now arises the issue of utilization of the impugned receipts towards the new capital asset for the purpose of claiming exemption u/s. 54F of the IT Act. The assessee sold immovable property for Rs. 2,60,00,000/- on 10.10.2012 and subsequently purchased a residential property on 30.11.2012 for Rs. 2,30,00,000/-. Before the AO, the sources were explained to be from followings: 1) Rs. 1,80,00,000 from sale of old property 2) Rs. 50,00,000 from HDFC Bank loan taken on 28.11.2012 The AO took a view however, that the entire sale consideration was not utilized by the assessee for the re-investment in the new house property. He also held that since the bank loan of Rs. 50,00,000/- taken from HDFC was repaid by the assessee’s wife, only a sum of Rs. 1,80,00,000/- could be held as having been invested for the new asset for the purpose of claiming sec 54F he proceeded to disallow the balance amount of Rs. 80,00,000 as exempt u/s. 54F. I find that the AO’s action cannot be faulted in this regard. The assessee will be entitled to claim the benefit to the extent of amount utilized by him out of the sales proceeds. In this case it its Rs. 1,80,00,000/-. Assessee has paid the balance amount towards the cost of the new property of an amount of Rs. 50,00,000/- out of borrowed funds. Hence AO was correct in restricting the claim u/s. 54F to Rs. 1,80,00,000/- only.”

The Ld. DR vehemently argued and relied upon the orders of the Ld. CIT(A) and the Ld. AO.

We heard both the parties. It is very clear that the Ld. AO disallowed Rs. 50,00,000/- related to investment in new property through borrowed fund. The ld CIT(A) in his order mentioned the assessee’s wife is repaying the loan which was borrowed for investment in property for getting the deduction U/s 54F of the Act. This issue was not adjudicated properly by any of the revenue authorities. The further verification is required in this issue. The matter is returned back to the ld. AO for further verification related to payment of borrowed fund amount to Rs 50,00,000/-.

The related payments of registration charges and stamp duty for amount to Rs. 18,40,160/- was agitated before the bench for first time through additional grounds. The assessee claimed benefit U/s 54F related payment of registration charges and stamp duty value. The proper verification is required for this assessee’s claim. The Ld AO is directed to allow benefit of the assessee U/s 54F of the Act after proper verification related those payments.

In the result, the appeal filed by the assessee is allowed for statistical purposes.