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Deduction u/s 54F not eligible as flats not hold for minimum period of 3 years

Smt. Madhu Devi Jain Vs ITO (ITAT Hyderabad)

ITAT Hyderabad held that claim of deduction under section 54F of the Income Tax Act not available as the flats sold are not hold for a minimum period of 3 years.

The assessee is an individual deriving income from house property, business income, capital gains and other sources. She filed her return of income for the A.Y 2015-16 electronically on 27.11.2015 declaring an income of Rs.3,49,568/- after claiming deduction under Chapter VIA at 1701/-. Subsequently, the case was selected for scrutiny under CASS and the Assessing Officer completed the assessment u/s 143(3) on 22.11.2017 accepting the income returned.

Subsequently, the PCIT, on perusal of the assessment record, noted that the order passed by AO is erroneous in so far as it is prejudicial to the interest of the Revenue.

PCIT observed that the assessee in the instant case has not fulfilled the conditions prescribed u/s. 54F of the I.T Act.

PCIT noted that the developer, M/s. Ace Venture of India Pvt Ltd has entered into a development agreement with the assessee along with three others and allotted seven flats in the month of Feb. 2015 at ACE RATNA PEARL APARTMENT.

PCIT verified that the assessee had sold the flats without holding them for a minimum period of three years from the date of acquisition. According to him, the assessee’s act of such sale within three years requires the capital gains of Rs.1,57,08,220/- to be taxed at 30% along with her net taxable income. Aggrieved by the order of PCIT, the assessee has preferred the present appeal.

The division bench of R.K. Panda, Vice-President and Laliet Kumar, Judicial Member observed that when the assessee has not held the flats for a minimum period of 3 years, the provisions of section 54F are not fulfilled and therefore, by allowing the claim of deduction u/s 54F, the order of the Assessing Officer has become erroneous as well as prejudicial to the interest of the Revenue.

Further, the tribunal held that the order of the Assessing Officer is also very cryptic and the reasons for which the case was selected for scrutiny have not been addressed at all.

Under these circumstances, the order passed by the Assessing Officer u/s 143(3) on 23.11.2017, has become erroneous as well as prejudicial to the interest of the Revenue.

The bench therefore, did not find any infirmity in the order of the PCIT invoking the jurisdiction u/s 263 of the I.T. Act.

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