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Facts
The assessee, a practicing doctor, sold an immovable property and declared long-term capital gains after claiming a deduction under Section 54F for investment in a new residential property. The Assessing Officer (AO) denied a portion of this deduction related to interiors and amenities, citing a lack of supporting evidence. The AO also provided short credit for TDS.
Held
The Tribunal noted that the assessee claimed the deduction under Section 54F, not 54, and that the expenditure on interiors forms part of the residential property. The Tribunal also considered that the assessee might not have been granted sufficient time by the AO to submit evidence. Therefore, the issue of the disallowed deduction was remitted back to the AO for verification.
Key Issues
Whether the expenditure on interiors and amenities in a new residential property is eligible for deduction under Section 54F, and whether the assessee was provided adequate opportunity to furnish supporting documents. Also, whether the correct TDS credit was granted.
Sections Cited
54F, 54
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & MS. PADMAVATHY.S
Cherukuri Bapuji, The Income Tax Officer, Plot No.26, Old No.3/261, Vs. Non Corporate Circle-7(1), Bazz Avenue, Maraica Industries, Chennai. ECR Road, Palavakkam, Chennai – 600 041. PAN: AGFPB 8604E (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� की ओर से/ Appellant by : Mr. K.Srinandan, Advocate (Through virtual mode) ��थ� की ओर से /Respondent by : Ms. R. Anitha, Addl. CIT सुनवाई की तारीख/Date of Hearing : 11.02.2026 घोषणा की तारीख /Date of Pronouncement : 16.02.2026 आदेश / O R D E R PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 13.08.2025 for Assessment Year (AY) 2020-21. The grounds raised by the assessee are as under:
“1. The learned CIT A Faceless as well as the AO had misconceived the exemption claimed under section 54F as a Claim under section 54 and increased the taxable capital gains by Rs.22,90,840 instead of Rs.21,82,270/- 2. Without prejudice to the above the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the disallowance of investment Rs. 22,90,840/- claimed by the appellant under Section 54F of the Income-tax Act, 1961, being expenditure incurred towards interiors, fixtures, fittings and amenities in the newly purchased residential house, which are an integral part of the residential property.
The learned Authorities below failed to appreciate that the said expenditure was genuinely incurred, and only partial documentary evidence could be furnished owing to the loss of bills and receipts during the heavy downpour in November 2021, which was a circumstance wholly beyond the control of the Appellant.
4. The Assessing Officer erred in law and on facts in not granting reasonable and sufficient opportunity to the appellant to furnish duplicate bills and confirmations from the concerned suppliers and contractors. The appellant had specifically requested vide reply dated 30.08.2022 and again on 12.09.2022 for extension of time up to 19.09.2022; however, the Assessing Officer prematurely closed the e-filing portal on 13.09.2022, thereby denying the appellant a fair opportunity to substantiate the balance claim.
5. The Assessing Officer further erred in recording the date of appellant's compliance to the notice dated 05.09.2022 as 13.09.2022, whereas in fact the reply was filed on 12.09.2022, as evidenced by records and annexures filed. The said factual misrecording resulted in a denial of justice.
6. The learned CIT(A) has erred in sustaining the aforesaid disallowance, ignoring the judicially settled principle that the benefit of deduction under Section 54 is to be liberally construed to advance the purpose of promoting investment in residential housing, and that expenditure on interiors, amenities, and fittings forming part of the residential unit is eligible for deduction.
The Assessing Officer as well as the CIT(A) have erred in not granting full credit for tax deducted at source (TDS) amounting to Rs. 45,47,757/-, which includes TDS of Rs. 4,95,844/- on the sale of property, as reflected in Form 26AS. Instead, the credit was erroneously restricted to Rs. 40,40,809/- 8. The orders passed by the lower authorities are contrary to law, facts, and evidence on record, and are liable to be set aside as being in violation of the principles of natural justice and equity.
The appellant craves leave to add, amend, modify, substitute or withdraw any of the above grounds of appeal, at the time of hearing, in the interest of justice.”
2. The assessee is a practicing doctor and filed the return of income for A.Y 2020-21 declaring total income of Rs.2,79,25,220/- on 25.01.2021. During the previous year relevant to A.Y 2020-21, the assessee sold an immovable property being land for a consideration where his share is Rs. 4,95,84,416/-. The assessee while filing the return of income declaring long term capital gains at Rs. 74,51,594/- after claiming deduction u/s. 54F of the Act to the extent of Rs. 3,47,82,860/- in respect of the investment made in the new residential property to the tune of Rs. 3,65,13,343/-. The A.O denied the deduction to the tune of Rs. 22,90,840/- claimed by the assessee towards interiors and other amenities in the new residential property, for the reason that the assessee did not furnish any supporting evidences. The A.O while doing so held that a deduction u/s. 54 of the Act is restricted to the above extent. The A.O also gave short credit of TDS to the extent of Rs. 4,95,844/-. Aggrieved, the assessee filed further appeal before the CIT(A). The CIT(A) confirmed the decision of the A.O for the reason that the assessee failed to discharge the onus of substantiating the claim.
3. The Ld. Authorized Representative (AR) of the assessee submitted that before the A.O the assessee did not get sufficient time to collect the details called for and submit the details. The Ld. AR further submitted that before the CIT(A) the assessee had submitted the proof for the claim of expenditure towards the interiors which was not considered by the CIT(A). Accordingly, the Ld. AR argued that there is a violation of principles of natural justice. The Ld. AR also submitted that the assessee has sold asset other than residential property and invested the same in a residential property.
Accordingly, the Ld. AR submitted that the assessee is entitled to claim deduction u/s. 54F of the Act and not u/s. 54 of the Act as held by the lower authorities. With regard to short deduction of TDS, the Ld. AR submitted that the A.O failed to give credit to the extent of tax deducted on the consideration received by the assessee and prayed for a direction in this regard.
The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.
We have heard the parties, and perused the material available on record. During the year under consideration, the assessee has transferred property being land and received his share of consideration to the tune of Rs. 4,95,84,416/-. The assessee offered the LTCG on the said transaction after claiming deduction u/s. 54F of the Act. The deduction claimed by the assessee is denied to the extent of Rs. 22,90,840/- on the ground that the assessee did not furnish the supporting documents. In this regard, we notice that the assessee submitted the proof for the impugned amount along with the appeal memo which has not been considered by the CIT(A). Further, the assessee has sold property other than residential property and therefore the assessee is entitled to claim deduction u/s. 54F of the Act and not section 54 of the Act towards purchase of new residential property. It is also contended by the assessee that sufficient time was not granted by the AO to submit the details. Considering facts and circumstances and in the interests of natural justice, we are remitting the impugned issue back to the A.O for verification of the documentary evidences filed by the assessee towards deduction claimed to the extent of Rs. 22,90,840/- and allow the same in accordance with law. The AO is further directed if the deduction is to be allowed then same is to be allowed as per the provisions of section 54F of the Act. With regard to TDS short
In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced on 16th day of February, 2026 at Chennai.