PRAFULLA KUMAR KHATEI,BHUBANESWAR vs. ITO, WARD-2(3), BHUBANESWAR

This is an appeal filed by the assessee against the order of CIT(A)-

1, Bhubaneswar, dated 28.2.2017 for the assessment year 2012-2013.

confirming the order of the Assessing Officer disallowing deduction

u/s.54F(1) of the Act for Rs.11,35,701/-.

money of Rs.11,62,893/- towards his share of the land compulsorily

acquired by the Government. The assessee earned long term capital gain

of Rs.11,35,701/-. The assessee claimed deduction u/s. 54F (1) of the

2 ITA No. 143/CT K/ 2017 Asse ssment Year :20 12- 13 Act for Rs.11,35,701/- since the compensation amount was invested in

the construction of a new building. The Assessing officer did not allow the

claim of deduction u/s.54F(1) of the Act to the assessee on the ground

that the assessee possesses more than one residential building and

proviso (a)(i) to section 54F(1) debars the assessee for claiming the

same.

enquiry conducted through Inspector, who visited the residence of the

assessee in Nuapatna, Pratap Sasan, Post: Balakati, where he was staying

in a two storied building with his wife and children. The assessee

submitted that his brothers are staying separately in different houses

situated at Uttara Chhak which comes under Sardeipur Mouza and those

houses are also in the name of their father Late Sudam Charan Khatei.

The house in which he is staying is the house which comes in his share in

village property as no formal partition is made among the brothers. The

Assessing Officer therefore held that he was the owner of one house

property at the time of sale of the original asset giving rise to long term

capital gain and, therefore, he was not entitled to deduction u/s.54F of

the Act. He submitted that as per proviso clause (a)((i) to Section 54F(1)

of the Act, the assessee would not be entitled to deduction u/s.54F(1),

where he owns more than one residential house, other than the new

asset, on the date of transfer of the original asset. He argued that the

3 ITA No. 143/CT K/ 2017 Asse ssment Year :20 12- 13 Assessing Officer has mis-directed himself in concluding that as per the

said proviso, if the assessee owns one residential house other than new

assets on the date of transfer of the original asset, he would not be

entitled to deduction u/s.54F of the Act. Therefore, he prayed that the

disallowance should be deleted.

authorities and materials available on record. The undisputed facts giving

rise to this appeal are that the Assessing Officer disallowed deduction

u/s.54F of the Act for Rs.11,35,701/- being long term capital gain arising

from sale of land on the ground that he was the owner of one residential

building on the date of transfer of the original assets and, therefore, was

not entitled to deduction as per proviso (a)(i) to Section 54F(1) of the

Act. The same was confirmed in appeal by the CIT(A). I find that the

said proviso (a)(i) to section 54F(1) of the Act reads as under:

“Provided that nothing contained in this sub-section shall apply where – (a) The assessee –

(i) Owns more than one residential house, other than the new asset, on the date of transfer of the original asset’”

Thus, a reading of the above shows that the assessee is not entitled to

deduction u/s.54F(1) of the Act, if he owns more than one residential

house on the date of transfer of the original asset excluding new asset.

4 ITA No. 143/CT K/ 2017 Asse ssment Year :20 12- 13 In the instant case, the assessee on the date of transfer of original asset

was the owner of one house property excluding new asset and, therefore,

is entitled to deduction u/s.54F(1) of the Act on the long term capital

gains of Rs.11,35,701/- arising out of transfer of land. Hence, I set aside

the orders of lower authorities and delete the disallowance of deduction of

Rs.11,35,701/- and allow the ground of appeal of the assessee.

Order pronounced in the open court on 04 /08/2017. Sd/- (N.S Saini) ACCOUNTANT MEMBER

Cuttack; Dated 04/08/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The appellant : Prafulla Kumar Khatei, Plot No.E-17, BJB Nagar, Bhubaneswar 2. The Respondent. ITO, Ward 2(3), Bhubaneswar 3. The CIT(A) -1, Bhubaneswar 4. Pr.CIT-1, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. BY ORDER, //True Copy//

SR.PRIVATE SECRETARY ITAT, Cuttack