Property Not Eligible for Sec. 54F Relief If It Was Predominantly Being Used for Religious Purposes | ITAT

Case Details: Assistant Commissioner of Income-tax vs. Iqbal Ali Khan - [2024] 158 taxmann.com 377 (Hyderabad-Trib.)

Judiciary and Counsel Details

• • R.K. Panda, Vice-President & Laliet Kumar, Judicial Member
  • Mohd. Afzal for the Appellant.
  • Smt. Sheetal Sarin, DR for the Respondent.

Facts of the Case

The assessee filed his return of income offering long-term capital gains for the relevant assessment year and claiming exemption under section 54F for a building constructed in a specific area of Hyderabad. Subsequently, the case was selected for scrutiny, and the notice was issued to the assessee.

Assessing Officer (AO) contended that the assessee claimed deduction in respect of the property in the nature of a Mosque. The nature of the usage of the property was mentioned in the application filed by the assessee before the GHMC as “Madrasa activities and Mosque” only. The assessee was required to construct the residential house as per section 54F.

Dissenting with the assessee’s claim, AO disallowed the deduction claimed under section 54F, and the matter reached the Hyderabad Tribunal.

ITAT Held

The Tribunal held that the Income-tax Act does not define the term residential house. Judicial precedents and various dictionaries define the residential house as a house constructed for residence having a provision for a kitchen and toilet, etc. The assessee mentioned that the property consisted of Mosque, Orphanage School, and Staff Quarters in the application before GHMC.

Further, during the proceedings, the assessee did not provide evidence of raising any construction in the premises. Various inspections carried out by the Department officials led to a conclusion that the property was predominantly being used for religious purposes, namely Mosque, Orphanage School, and Staff quarters.

In addition, the report suggested that the 3rd floor was residential, but it was contrary to the statement of the assessee filed before the GHMC seeking regularization of the property. The statement clearly showed that the assessee had not used the property for residential purposes within the time granted by the statute. Therefore, the assessee was not entitled to any relief under section 54F.