Criteria for denial of exemption u/s 54 of the Income Tax Act

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES ‘A’ JAIPUR 

BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM

ITA No. 1358/JP/2019
Assessment Year :2011-12 

Manohar Lal Choudhary
5/338, Malviya Nagar,
Jaipurcuke PAN/GIR No. ACWPC1043R
Appellant

Vs.

Dy. CIT,
Circle-06,
Jaipur
Respondent

Assessee by : Sh. Naresh Gupta (Adv.)
Revenue by : Smt. Monisha Choudhary (JCIT)

Date of Hearing : 24/06/2021
Date of Pronouncement: 12/07/2021

ORDER

PER: VIKRAM SINGH YADAV, A.M.

This is an appeal filed by the assessee against the order of ld. CIT(A), Ajmer dated 17.10.2019 wherein the assessee has raised the following grounds of appeal:

“1. That the CIT (A) has grossly erred in sustaining the denial of the exemption u/s 54 of the Act of 1961 of Rs. 12 lacs invested in purchase of new residential flat at Bharooch in State of Gujarat vide registered sale deed dated 04-01-2011.

1.1. Because the Revenue authorities have committed illegality in assuming that the property is not chargeable to tax under the head'Income from House Property' and ignoring the uncontroverted affidavit of the staff of the assessee proving that the basement and the room (kotari) were being used for the residence of the staff for last so many years.

1.2. Alternatively, because the Revenue authorities have grossly erred in not allowing the benefit of exemption u/ s. 54 at least qua the half of the property being apparently constructed and used for residence purposes.

2. That the CIT (A) has grossly erred in allowing deduction only of Rs. 2,00,000/- as against Rs. 5,24,602/- (i.e. 1,91,100 * 711/259) claimed by the assessee on account of construction cost incurred in construction of three shops, basement, one room (Kotari) as well as boundary wall all along 4 sides of the Plot.

3. That under the facts and in totality of the circumstances of the case the assessee is entitled to benefit of exemption u/s. 54 of the Act so claimed on the actual sale consideration of Rs. 35 Lacs received to the appellant instead of Rs. 43,08,360/- as assumed by the AO as per DLC Rates u/s. 50C of the Act.”

2. Briefly stated, the facts of the case are that the assessment in the case of assessee was completed u/s 143(3) read with section 147 of the Act. The AO considered deemed sale consideration as per stamp dutyvalue u/s 50C at Rs. 43,08,360/-, disallowed claim of cost of construction (after indexation) amounting to Rs. 5,24,602/- and disallowed claim of deduction u/s 54 amounting to Rs. 12,00,000/-while computing capital gains on sale of immoveable property and assessed total income at Rs 44,79,732/- as against returned income of Rs 19,46,770/-. 

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