Capital Gain Deduction allowable if New Residential Property was purchased within Two Years from Transfer of Shares: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently held that the capital gain deduction under section 54F of the Income Tax Act, 1961 is available if the new residential property was purchased by the assessee within two years from two years of the date of transfer of old shares.

The assessee, an individual, sold his shares and claimed tax deduction under section 54F by stating that he invested in the purchase/construction of the property. He claimed that the said purchase was within the time period provided in section 54F of the Act and thus, he is entitled to not charging of long-term capital gain to the extent of investment in purchase/construction of the residential house property.

Under section 54F of the Act, if an assessee invests in certain new assets, the capital gain is not charged to the extent provided in the provisions of the Act. One such provision is section 54F of the Act

The Tribunal noted that availing the benefit of the said provision is subject to fulfill the following requirements, i.e., (i) Purchase of residential house within a period of one year before or two years after the date on which the transfer of the original asset took place, or (ii) Construction of residential house within a period of three years from the date on which the transfer of the original assessee took place.

The Tribunal, while ruling in favor of the assessee, observed that the transfer of the shares has taken place on 17/08/2011 and therefore time period available to the assessee for purchase/construction for availing benefit of the section 54F.

“In view of the identical facts and circumstances, the ratio of the above decision in the case of Ayushi Patni (supra) is squarely applicable over the facts of the instant case and thus Accordingly, we hold that the new asset i.e. residential house has been purchased within two years from the date of transfer of the original asset i.e shares, and thus, the assessee is entitled for benefit of section 54F of the Act,” the Tribunal concluded.