Expense for making house habitable eligible for Section 54 exemption
Facts and Issue of the Case
The case is this that the assessee had sold the immovable property being 9/A, Uplav Co-operative Housing Society Ltd., Vasna, Ahmedabad for a consideration of Rs.1,10,00,000/- by and under a registered sale deed dated on 04.12.2014. The assessee has claimed exemption under Section 54 of the Act to the tune of Rs.62,50,000/- on account of investment in residential property at 704, Prabhuvan Flats, Nr. Sneh Orthopedic Hospital, Paldi, Ahmedabad by and under the allotment deed registered dated 26.04.2016. The assessee has claimed to have invested Rs.62,50,000/-. Since the purchase deed shows the amount of consideration of the new property at Rs.48,50,000/- only, a show-cause was issued to the assessee as to why the excess claim of exemption under Section 54 of the Act to the tune of Rs.14,00,000/- should not be disallowed and added to the total income of the assessee.
Observation of the court
It is a fact that the assessee had incurred the cost for making the new property inhabitable before taking over possession of the same but considering the provision of the act we do not find any embargo in granting relief to the assessee under Section 54 of the Act. Bonafide expenses incurred for making the new house habitable though prior to possession but before the completion of the time limit prescribed is found to be allowable. It further appears from the records available before us that the genuineness of the payment of Rs.12,00,000/- for repairing work along with Rs.2,37,650/- paid towards payment of stamp duty and Rs.48,800/- paid towards registration fees has not been doubted by the authorities below.
On this aspect court has further considered the judgement passed by the ITAT, Hyderabad Benches, in the matter of Sri Vidyasagar Dontineni vs. DCIT, Circle 3(1) in ITA No. 632 and 1238/Hyd/2013 wherein it has been held by the Tribunal that the date of commencement of construction is not relevant for the purpose of deduction under Section 54 and what is relevant is the date of completion of construction as well as a period of investment made by the assessee in such construction. Since the construction of the house was completed within the specified period under Section 54 of the Act the assessee was found to be eligible for deduction under Section 54 as observed by the Hon’ble Bench.
Court has further considered the judgement passed by the Coordinate Bench in the matter of Shriniwas R. Desai vs. ACIT(OSD) in ITA No. 1245 and 2432/Ahd/2010 wherein it was held that there is no restriction on the buyer from incurring any construction expenditure on improvisation or supplementary work of ready-made unit. The additional expenses so incurred would be eligible for qualifying investment under Section 54 of the Act.
Taking into consideration the entire aspect of the matter particularly when the assessee has incurred expenditure for making the new property habitable within the stipulated time as framed by the provision of law and particularly when such expenditure has not been doubted by the authorities below respectfully relying upon the ratio laid down by the Coordinate Bench as narrated hereinabove the assessee is found to be entitled to the exemption of Rs.14,00,000/- as the expenditure incurred. The order of addition made by the authorities below is, thus, found to be devoid of any merit and, thus, deleted.
The Court allowed the appeal preferred by the assesse.Hiren-Himmatsingh-Rathod-Vs-ITO-ITAT-Ahmedabad