Assessee eligible for Sec 54F Relief since Construction of New House Property completed within three years from Date of Transfer: ITAT [Read Order]

The New Delhi bench of ITAT comprising Judicial Member Sudhanshu Srivastava and Accountant Member N.K. Saini has said that Assessee eligible for relief under Section 54F of the Income Tax Act since the construction of house property had been completed within three years from the date of transfer.

In the instnat case, assessee Tarun Jalali was aggrieved by the order of the DDIT wherein capital gain exemption under section 54F was denied to the assessee.

Assessee entered into sale cum construction agreement with M/s Skyline Construction and Housing Pvt. Ltd. for purchase of flat in Bangalore and had made payment amounting to Rs. 57,14,699/- towards the purchase of this new residential house on different dates ranging from 18.5.2007 to 15.4.2011.

The agreement to buy a new house within a period of one year from the date of sale of old house, and, therefore, the assessee was eligible for exemption u/s 54 notwithstanding the fact that the builder had failed to hand over the possession of the flat to the assessee within the stipulated period.

However, the AO added back the amount of exemption claimed by the assessee u/s 54 to the income of Assessee. When Assessee preferred this matter before CIT (A) who partly allowed the assessee’s appeal by holding that he was entitled to claim section 54 by endorsing the judgment of Allahabad High Court in the case of H.K. Kapur 234 ITR 753(Allahabad) held that the agreement to construction being dated prior to the date of transfer of old asset was ultimately for allowing the benefit of exemption u/s 54 of the Act.

Further, the Assessee approached ITAT against the partial confirmation of disallowance by the ld. Commissioner of Income Tax (A). The counsel on behalf of Assessee submitted before the bench that the amount of Rs. 5,06,415/- paid on 18.05.2007 and Rs. 6 lakh paid on 11.3.2008 were amounts for which no deduction was being claimed in the return of income and the department allowed deduction on only two payments.

The Tribunal, after hearing both sides contentions, relied upon the Karnataka High Court in the case of Commissioner of Income Tax vs J.R. Subramanya Bhat had expressed similar view and had held that investment made towards construction of house property prior to the date of transfer should also be eligible as deduction for the purpose of section 54 of the Act.

The Tribunals observation regarding the case was ” provisions of section 54F do not prescribe any condition as to the date of commencement of construction of new house property, meaning thereby that the construction of house property may be commenced even before the date of transfer of original asset. However, it should be completed within three years after the date of transfer of original asset”.

Accordingly bench held that the assessee is eligible for exemption u/s 54F in respect of the two disputed amounts which were expended prior to the date of transfer of original asset.

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