In a recent ruling, the Income Tax Appellate Tribunal (ITAT) has addressed an important question: Can an individual claim deductions under both Section 54 and Section 54F of the Income Tax Act, 1961, simultaneously?
This question arose in the case of Ramdas Sitaram Patil vs. ACIT, Central Circle, Kolhapur. The appellant, an individual, had filed their income tax return for the assessment year 2016-17, declaring a total income of ₹96,55,810. However, the Assessing Officer (AO) disallowed the claim for deductions under Sections 54 and 54F, arguing that a deduction cannot be claimed for both sections simultaneously in respect of a new residential house. The AO further stated that the new residential property was purchased more than one year before the sale of the original asset, disqualifying the deduction.
The ITAT, however, disagreed with the AO's decision. The Tribunal clarified that there is no legal restriction on claiming deductions under both Sections 54 and 54F simultaneously, even if they relate to the same asset. The key factor, according to the Tribunal, is the date of purchase of the new residential property. The Tribunal highlighted that, as per the law, the date of purchase for the purpose of claiming a deduction under Section 54 is when the possession and control of the property are transferred to the buyer, not necessarily the date of legal transfer.
Citing an earlier decision by the Bombay High Court in the case of CIT vs. Dr. Laxmichand Narpal Nagda, the Tribunal emphasized that holding legal title within one year is not a prerequisite for availing of the deduction under Section 54. Consequently, the ITAT ruled in favor of the appellant, allowing the deduction under both Sections 54 and 54F as claimed.
This ruling reaffirms the position that taxpayers can benefit from claiming deductions under both sections, provided the conditions are met, potentially leading to significant tax savings.
For more insights on tax planning and how recent rulings may affect your tax strategies, visit dineshaarjav.com.
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