ITAT Delhi: No Tax Deduction Permits U/S 54 Without Basic Facilities

In DCIT vs. Sandeep Hooda, adjudicated by ITAT Delhi, the taxpayer’s eligibility for deduction u/s 54 of the I-T Act, 1961, is scrutinized. The dispute emerges from the absence of essential amenities in the claimed residential property.

The case background is that the taxpayer, Sandeep Hooda, qualifies for tax deduction u/s 54 despite the shortage of basic amenities such as boundary walls, kitchen, washroom, electricity, and water connections in the purported residential property. The Revenue argues that the absence of such amenities disqualifies Hooda from claiming the deduction.

Related questions are raised by the assessing officer (AO) for the nature and status of the property claimed by Hooda for deduction. The scrutiny of AO discovered that the property does not have the essential amenities and losses to fulfil the criteria outlined in section 54 of the Income Tax Act.

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Even after furnishing the distinct chances to furnish the supporting proof earlier, Hooda failed to specify the compliance with the legal needs.

A physical inspection accomplished by the Inspector and Office Superintendent confirmed the absence of basic amenities on the property. The makeshift structures encountered on the land, along with the plywood rooms with attached toilets and makeshift kitchen arrangements, fell short of the standards desired for a residential dwelling. The shortage of electricity and water connections, including the absence of a permanent boundary wall, supported the decision of the Assessing Officer(AO) to refuse the deduction.

The property was situated in a rural area where construction norms varied from urban standards, Hooda claimed. To support his claim of residential construction, he furnished certificates from the Sarpanch of the village and an architect. Irrespective of that the certificates still need the proof certainly under the physical inspection demonstrating the inadequacy of amenities.

Under the shown proof the ITAT Delhi kept the decision of AO to refuse Sandeep Hooda the deduction under Section 54 of the Income Tax Act, 1961. The lack of basic amenities essential for habitation caused the claimed property to be ineligible for the deduction.