Absence of occupation certificate couldn’t be a ground to deny exemption under section 54
Estate of Late Dr. S. Zakaulla Masood v. ITO – [2020] 122 taxmann.com 214 (Bangalore – Trib.)
Short overview of the case:
Assessee claimed deduction under Section 54 on the basis that he had constructed a new residential within 3 years from the date of transfer of original asset.
Assessing Officer (AO) recomputed the amount of capital gains and made additions to assessee’s income.
On appeal, CIT(A) denied the assessee’s claim for Section 54 deduction on the ground that photograph of property submitted by assessee couldn’t be considered as appropriate evidence. Further there was no completion certificate produced to substantiate the claim of the Assessee regarding completion of construction of a residential house.
Assessee contended that in the case of CIT v. Sambandam Udayakumar [2012] 19 taxmann.com 17 (Kar.), the Karnataka High Court held that Section 54F is a beneficial provision for promoting the construction of residential house & requires to be construed liberally for achieving that purpose.
The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law.
The words used in the section are ‘purchased’ or ‘constructed’. The condition precedent for claiming benefit under Section 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house.
Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to disentitle assessee to claim s. 54F relief.
Since the provisions of Section 54F are pari materia same as Section 54 on this aspect, same can be applied in respect of Section 54 as well.
On further appeal, ITAT held that the CIT(Appeals) has gone by the fact that there was the absence of Occupation Certificate.
This will not be a ground to deny the claim of assessee for deduction under Section 54, as other evidence filed by the assessee sufficiently demonstrates that assessee has constructed a residential house within the period stipulated by law.
The findings of the CIT(Appeals) in this regard were very vague and couldn’t be the basis to deny the claim of assessee for deduction.
Therefore, assessee was entitled to deduction under section 54F.
