ITAT refused sec. 54F relief to assessee with multiple houses due to lack of commercial rental proof

Case Details: Surendra Babu Sabbineni v. DCIT - [2023] 147 taxmann.com 560 (Hyderabad-Trib.)

Judiciary and Counsel Details

• • R. K. Panda, Accountant Member & K Narasimha Chary, Judicial Member
  • Kotha Hari Prasad, Adv. for the Appellant.
  • Rajendra Kumar, CIT (DR) for the Respondent.

Facts of the Case

Assessee, an individual, filed its return of income for the relevant assessment year. A search operation was conducted, and a revised return of income declaring capital gains was filed. The Assessing Officer (AO) completed the assessment proceedings by allowing the claim under section 54F with respect to such capital gains.

Subsequently, the Principal Commissioner of Income Tax (Pr. CIT) noticed that the assessee owned more than one residential house property at the time of transfer of such capital asset. The AO allowed the deduction claim under section 54F without proper verification of the facts and ordered AO to investigate the case.

Assessee contended that these properties were let out for commercial use and, therefore, did not fall under the purview of a residential unit. Dissatisfied by the assessee’s reply, AO disallowed the deduction claimed under section 54F and computed the income accordingly.

Aggrieved by the order, the assessee preferred an instant appeal to the CIT(A). The CIT(A) confirmed the additions made by AO, and the matter then reached the Hyderabad Tribunal.

ITAT Held

The Tribunal held that there was no merit in the assessee’s contention that all the properties were let out for commercial use and, therefore, did not fall under the purview of a residential unit. As per the details furnished with respect to such properties, although the properties were let out, all these properties are situated in residential societies. The assessee could not prove with evidence that these properties were, in fact, used for commercial purposes.

Further, it was observed that the assessee could not prove that the local authorities were charging taxes on the said properties as applicable to commercial properties. In addition, the assessee furnished no evidence to support the claim that the Electricity Department was charging electricity for the said flats at commercial rates.

Since the evidence was insufficient to support the claim, the CIT(A) rightly upheld order AO disallowing Section 54F’s claim to the assessee.

List of Cases Reviewed

• • Sanjeev Puri v. Dy. CIT [2016] 72 taxmann.com 147/160 ITD 213 (Delhi) (para 15)
  • Naveen Jolly v. ITO [2020] 117 taxmann.com 323/272 Taxman 348/424 ITR 462 (Karn.) (para 15) distinguished.

List of Cases Referred to

• • Sanjeev Puri v. Dy. CIT [2016] 72 taxmann.com 147/160 ITD 213 (Delhi) (para 10)
  • Naveen Jolly v. ITO [2020] 117 taxmann.com 323/272 Taxman 348/424 ITR 462 (Karn.) (para 10).