Income Tax Deduction u/s 54F allowed on house registered in name of parents [Read Order]

The Income Tax Appellate Tribunal (ITAT Delhi) in the matter of Rajiv Ghai Vs. ACIT has allowed Income Tax Deduction u/s 54F on houses registered in the name of the parents.

The Relevant Text of the Order is as follows:

The assessee filed a return of income declaring income of Rs.41,12,890. During the year, the assessee sold his residential house located at No. 9/21, Rana Pratap Marg, Lucknow (“Lucknow House” ) for a consideration of Rs.5,80,00,000 which was purchased by the assessee on 15.06.1982 and claimed indexed cost of acquisition as Rs.97,09,344 as a deduction in his working of computation of long term capital gains from the sale of the Lucknow house.

The Assessing Officer observed that the cost of acquisition along with cost of improvement of Rs. 97,09,344 was based on the valuation report of a registered valuer. The AO found on the basis of the statement of the valuer, that the items included in the cost of improvement are based solely on the version of the client. The AO observed that the photographs produced by the assessee were vague and insufficient to prove the year of incurrence of expenditure as claimed. Accordingly, the AO disallowed the indexed cost of improvement to the tune of Rs.12,53,213 while computing the capital gain in this case.

It was found that the AO has categorically accepted that Air conditioning, modular kitchen and kitchen chimney, tube -well and submersible pump are not a part of the building. The AO also accepts the fact that the building was valued as per the CPWD guidelines. Having said so, the AO holds that the expenses relatable to Air conditioning, modular kitchen and kitchen chimney, tube-well and submersible pump are not allowable as cost of improvement. The AO again agrees that the valuation report cannot be completely disregarded and parts of it are based on evidence and are in line with existing CPWD guidelines but has an objection that the photographs produced by the assessee are vague and insufficient to prove the incurrence of expenditure. The AO also held that the photographs do not portray the exact specifications of the improvement made. It cannot be said that the house operated, made to live without a modular kitchen. The availability of a submersible pump is a finding of fact and not mentioning it in the agreement doesn’t entitle the deduction. All the improvements made necessarily lead to an improvement in the value of the sale. The authorities have blown hot and cold in disallowing the expenditure. The selective reading of the sale agreement and lack of mention of the pump and modular kitchen cannot necessarily lead to disallowance. The AO could not bring anything on record that the statement given by the valuer was wrong on facts or had inconsistencies. Hence, we allow the appeal of the assessee on this ground.

In the case of the Bangalore property, the assessee claimed an amount of Rs.13,80,146 as cost of improvement which includes a sum of Rs. 12,00,000 incurred for the installation of the lift. In this regard, the assessee submitted a handwritten note signed by one Sh. Manjunath admitted the receipt of Rs.4,50,000 and Rs.3,75,000 dated 10.09.2014 and 03.09.2014 respectively. We find that the revenue has not disputed the import of a Pneumatic Vacuum Elevator (PVE) however held that it is not essential for the improvement of the house to make it habitable. Whether to have a lift in the house or not is certainly not the purview of the Assessing Officer. Notwithstanding that, we find that the father of the assessee, Brig. V. K. Ghai is 90 years old staying with the assessee which is also a fact on record before the AO. Hence, we hold that the sum of Rs. 12,00,000 incurred for the installation of a lift is an allowable item of cost of improvement. The amount of Rs.1,80,000 was made with regard to the installation of the lift and the other sundry expenses to make the house habitable and hence the amounts are also to be allowed. Hence, we allow the appeal of the assessee on this ground.

We have gone through the entire record before us and find that the ld. CIT(A) had diligently, meticulously and conscientiously, after considering the Hon’ble jurisdictional High Court judgments in the case of ACIT Vs. Suresh Verma (135 ITD 102) and CIT Vs. Kamal Wahal (351 ITR 4) came to a valid conclusion that the investments have been made by the assessee from his bank account of Rs.17,65,000 on 14.08.2014 and Rs.3,31,82,000 dated 21.08.2014 for payment to Sh. V. Ravindran, seller of the property and the parents have gone to registration owing to the absence of the assessee in India. Further, it is also a fact that such registered property has also been gifted to the assessee by the parents on 10.06.2015. Hence, we decline to interfere with the order of the ld. C IT(A) invoking rule of purposive construction and object of Section 54F and allowing the deduction u/s 54F on the house registered in the name of the parents of the assessee.

In the result, the appeal of the assessee is allowed and that of the Revenue is dismissed.

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