Capital Gain Exemption cannot be allowed as No Property Purchased/Constructed within stipulated period U/S 54F: ITAT [Read Order]

The Pune Bench Income Tax Appellate Tribunal ( ITAT ) has held that capital gain exemption cannot be allowed as no property purchased or constructed within the stipulated period U/S 54F.

The assessee, Asha BhausahebThube, with five others have entered into the transaction of sale of immovable property for the total consideration of Rs.12,50,00,000/- and out of the said amount assessee received Rs.9,62,00,000/-. AO denied the assessee’s claim for deduction u/s 54F of the Act. The aggrieved, assessee filed an appeal before CIT(A).

Mr. Kishore B Phadke counsel for the appellant submitted that the Prathamesh Ceramics Pvt. Ltd., in which the assessee was holding 54.5% shares, had taken a loan from State Bank of India(SBI), the Bank had made the charge on the impugned property consisting of Bungalow and Land. The property was released by the bank on an arrangement that the bank kept Rs.3 Crores received from the Sale Proceeds of impugned property as Term Deposits and marked Lien. Bank was to release the lien after submission of the appropriate papers and confirmation of the purchase of the new house which was to be mortgaged by the Bank. Though the assessee identified a new house, due to the failure of the Bank to release Rupees 3 Crores, the assessee could not be able to purchase the said new house.

The Tribunal observed that the assessee allowed the Private Limited Company i.e. Prathamesh Ceramics Pvt. Ltd., to obtain the loan against the impugned property which was sold during the year. The transaction of the Prathamesh Ceramics Pvt. Ltd., has nothing to do with the assessee’s transaction. These are independent transactions. On the date of sale, the impugned property was not mortgaged.

The Coram of Mr. Partha Sarathi Chaudhury, JM, and Dr. Dipak P. Ripote, Hon’ble AM has further observed that on the date of sale when the assessee received the sale consideration, the assessee was free to utilize it as per his own free will. As per Section 54F of the Act, it was mandatory for the assessee either to purchase or construct the new residential house within the stipulated period. The assessee failed to do so.

The Tribunal has held that “the AO has rightly disallowed the assessee’s claim of Section 54F of the Act in the A.Y. 2013-14”.

To Read the full text of the Order CLICK HERE

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