S. 54F Benefit not allowable for Purchase of Land after One Year of Sale of Old Asset: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Bengaluru bench has held that the benefit of Section 54F of the Income Tax Act is not available in respect of the purchase of land after the period of one year of the sale of the old capital asset.

The assessee claimed deduction under section 54F of the Income Tax Act by claiming that the assessee’s case falls within the purview of Section 54F(1) as the assessee has carried out the construction which includes the purchase of land. However, the claim was rejected by the Assessing Officer by finding that the said land was acquired by the assessee before one year of sale of the capital asset i.e. 01.04.2012.

On appeal, the first appellate authority confirmed the said order. Aggrieved by the order. The assessee approached the Tribunal on the second appeal.

Dismissing the appeal, the Tribunal noted that the claim under the last clause of 54F would only fall if the assessee within a period of three years after the date of transfer had constructed one residential house in India.

“Admittedly land was purchased on 17.04.2010 and hence this clause would also not be applicable for the purposes of claiming the benefit of section 54F as the land was purchased prior to one year whereas land required the construction of residential house after 3 years of the sale of the capital asset. In our understanding, the construction or acquisition of the residential house should have taken place within a period of three years after the transfer of the capital asset. The capital asset was transferred on 01.04.2012 and the land was purchased on 17.04.2010 ie., one year prior to the date of transfer and hence for the purposes of availing the benefit u/s.54F (3rd exemption), as mentioned hereinabove, it is necessary that the house should have been constructed within a period of three years from the date of transfer of the capital asset. Purchase of the land was prior to one year hence the case of the assessee does not fall under any of the three exemptions available to the assessee u/s.54F,” the Tribunal said.

“In view of the above, we dismiss the appeal of the assessee and hold that the assessee is not entitled to the benefit of Section 54F in respect of the investment made by the assessee in purchasing the capital asset (land) prior to the period of one year from the sale of capital asset, as the said purchase of the land was not within a period of one year prior to the sale of the capital asset or falling in any of the categories in which the assessee was entitled to claim exemption u/s.54F under various categories,” the Tribunal added.