Rajat B Mehta vs. ITO (ITAT Ahmedabad)- 10 Feb 2018
1- The Assessing Officer noted that the assessee had entered into two separate contracts, though on the same date, for purchase of house property and the furniture and fixtures therein. The payment of Rs 60,00,000 was under contract for the purchase of house property and the remaining payment of Rs 18,00,000 was made under contract for the purchase of furniture and fixtures in the said property.
2- The Assessing Officer was of the opinion that clearly “the assessee has executed the separate deed (for sale of furniture and fixtures etc) to save stamp duty on it, (and) now the assessee is trying to evade income tax”
3- While the Assessing Officer did not have an issue with the proposition that expenses incurred to make the house habitable will qualify for deduction under section 54F, as was held by a coordinate bench of the Tribunal in the case of Srinivas R Desai Vs ACIT [(2013) 155 TTJ 743 (Ahd)], he was of the view that expenses incurred on buying furniture cannot be said to be expenses incurred for making the house habitable
4- On the basis of this line of reasoning, the Assessing Officer declined deduction under section 54 F to the extent of Rs 18,00,000 paid under a separate agreement for furniture and fixtures in the residential property purchased by the assessee.
5- Learned court said " As we do so, we must bear in mind the fact that the expression used in the statute is “cost of the residential house so purchased” and it does not necessarily mean that the cost of the residential house must remain confined to the cost of civil construction alone. A residential house may have many other things, other than civil construction and including things like furniture and fixtures, as its integral part and may also be on sale as an integral deal."
6- Hence If these things are integral part of the house being purchased, the cost of house has to essentially include the cost of these things as well. In such circumstances, what is to be treated as cost of the residential house is the entire cost of house, and it cannot be open to the Assessing Officer to treat only the cost of only civil construction as cost of house and segregate the cost of other things as not eligible for deduction under section 54.
In the light of the above discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee, and, accordingly, direct the Assessing Officer to delete the disallowance of deduction under section 54 to the extent of Rs 18,00,000. The assessee will get the relief accordingly.
for reading full text of the case please refer link - http://itatonline.org/archives/rajat-b-mehta-vs-ito-itat-ahmedabad-s-54-the-expression-cost-of-the-residential-house-so-purchased-in-s-54-is-not-confined-to-the-cost-of-civil-construction-but-includes-furniture/rajat-mehta-54-exemption/
Some of the important pointers of the case for our easy reference:
1- The Assessing Officer noted that the assessee had entered into two separate contracts, though on the same date, for purchase of house property and the furniture and fixtures therein. The payment of Rs 60,00,000 was under contract for the purchase of house property and the remaining payment of Rs 18,00,000 was made under contract for the purchase of furniture and fixtures in the said property.
2- The Assessing Officer was of the opinion that clearly “the assessee has executed the separate deed (for sale of furniture and fixtures etc) to save stamp duty on it, (and) now the assessee is trying to evade income tax”
3- While the Assessing Officer did not have an issue with the proposition that expenses incurred to make the house habitable will qualify for deduction under section 54F, as was held by a coordinate bench of the Tribunal in the case of Srinivas R Desai Vs ACIT [(2013) 155 TTJ 743 (Ahd)], he was of the view that expenses incurred on buying furniture cannot be said to be expenses incurred for making the house habitable
4- On the basis of this line of reasoning, the Assessing Officer declined deduction under section 54 F to the extent of Rs 18,00,000 paid under a separate agreement for furniture and fixtures in the residential property purchased by the assessee.
5- Learned court said " As we do so, we must bear in mind the fact that the expression used in the statute is “cost of the residential house so purchased” and it does not necessarily mean that the cost of the residential house must remain confined to the cost of civil construction alone. A residential house may have many other things, other than civil construction and including things like furniture and fixtures, as its integral part and may also be on sale as an integral deal."
6- Hence If these things are integral part of the house being purchased, the cost of house has to essentially include the cost of these things as well. In such circumstances, what is to be treated as cost of the residential house is the entire cost of house, and it cannot be open to the Assessing Officer to treat only the cost of only civil construction as cost of house and segregate the cost of other things as not eligible for deduction under section 54.
In the light of the above discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee, and, accordingly, direct the Assessing Officer to delete the disallowance of deduction under section 54 to the extent of Rs 18,00,000. The assessee will get the relief accordingly.
for reading full text of the case please refer link - http://itatonline.org/archives/rajat-b-mehta-vs-ito-itat-ahmedabad-s-54-the-expression-cost-of-the-residential-house-so-purchased-in-s-54-is-not-confined-to-the-cost-of-civil-construction-but-includes-furniture/rajat-mehta-54-exemption/
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