CAPITAL GAINS EXEMPTION UNDER SECTION 54F IS ADMISSIBLE IF THE PROPERTY IS FOUND TO BE OF COMMERCIAL NATURE: ITAT

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CAPITAL GAINS EXEMPTION UNDER SECTION 54F IS ADMISSIBLE IF THE PROPERTY IS FOUND TO BE OF COMMERCIAL NATURE: ITAT

12/01/2023

CAPITAL GAINS EXEMPTION UNDER SECTION 54F IS ADMISSIBLE IF THE PROPERTY IS FOUND TO BE OF COMMERCIAL NATURE: ITAT

Brief facts of the case are that the assessee is a Doctor by profession and running a hospital in the name and style of M/s. S.P. Hospital as one of the partners.

The assessee has filed his return of income for the assessment year 2015-16 on 28.09.2015 admitting a taxable income of ₹.99,40,884/-. The assessment was completed under section 143(3) of the Income Tax Act, 1961 dated 07.11.2017 and determining total income at ₹.6,12,76,876/- by making addition towards disallowance of deduction claimed under section 54F of the Act against long term capital gains derived from sale of property.

The assessee carried the matter in appeal before the first appellate authority and the ld. CIT(A), for the reasons stated in his appellate order dated 23.01.2020, deleted the addition made by the Assessing Officer towards withdrawal of exemption claimed under section 54F of the Act, on the ground that the property at RMO quarters is belong to the firm M/s. S.P. Hospital and it is used as commercial property for the purpose of hospital run by the assessee. Thus, the assessee is entitled for claiming exemption under section 54F of the Act.

We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. Facts in the impugned order are that the assessee sold an immovable property on 06.06.2014 to M/s. Chellamal Educational Society for a total sale consideration of ₹.5,16,54,000/-.

The assessee has computed the long term capital gains towards sale of property and claimed exemption under section 54F of the Act by reinvesting the capital gains by entering into an agreement with M/s. Mantri Technology Constellations Private Limited on 06.09.2013 for purchase of residential house. The Assessing Officer, during the course of assessment proceedings, denied the claim of exemption under section 54F of the Act on the ground that at the time of reinvestment of capital gains, the assessee was owner of more than one house property.

Hence, we set aside the issue to the file of the Assessing Officer and direct the Assessing Officer to cause necessary enquiries on the additional evidences filed by the assessee to ascertain the nature of the property. In case, the Assessing Officer finds that if the property is accounted in the books of firm M/s. S.P. Hospital as a commercial property and the property is used for the purpose of hospital, then the Assessing Officer is directed to allow deduction under section 54F of the Act.

In the result, the appeal filed by the Revenue and the Cross Objections filed by the assessee are allowed.

READ JUDGEMENT HERE