Saturday, May 14, 2016

Sec. 54 relief is available even if expenditure is incurred for making new house habitable

a)  Assessee earned capital gain on sale of his tenancy rights in a residential house property. He invested the sale proceeds to purchase another house property which was in a dilapidated condition.
b)  In order to make the said house fit for residential purpose, assessee incurred certain expenses on repairs and painting work etc. Assessee claimed deduction under section 54 in respect of expenses so incurred to make the new house property habitable.
c)  Assessing Officer (AO) contended that only the cost paid for acquiring new residential house is to be taken for the purposes of granting benefit under section 54 and not cost incurred towards the improvement of the same. Thus, the claim of the assessee towards cost of making a new house property habitable was disallowed.
d)  The CIT(A) confirmed the order of the AO. Aggrieved by the order of the AO, assessee filed the instant appeal before the tribunal.

The tribunal held in favour of assessee as under-