Capital Gain Exemption u/s 54F not available for Purchase of 'Office Premises': ITAT [Read Order]

The Pune bench of the ITAT has held that the capital gain exemption under section 54F of the Income Tax Act, 1961 is not available if the sale consideration is used to purchase ‘office premises’.

While computing the capital gain, the assessee claimed, exemption u/s 54F of the Act amounting to Rs.16,03,920/-; deduction towards the indexed cost of improvement; and amount spent on construction of wall compound at the time of sale. The AO rejected all such claims holding that the sale consideration was not used to purchase a new “residential property.”

Shri R.S. Syal, ITAT Vice President observed that the assessee claimed that he purchased a residential house on 04-10-2004 for a sum of Rs.16,03,820/- and thus claimed exemption in the computation of income filed by him in response to notice u/s.148.

“This claim was jettisoned by the AO on the ground that the assessee did not purchase a new residential flat but only an “office premises” and hence, section 54F could not apply. It is apparent from the bare reading of section 54F that the exemption becomes available towards capital gain arising from the transfer of any long-term capital asset on purchasing or constructing one residential house in India. Thus, it is patent that in order to qualify for exemption u/s.54F, it is necessary that the new asset must be a ‘residential house’. Turning to the facts of the instant case, it is seen that the new asset purchased by the assessee is an ‘office premises’ and not a ‘residential premises’. In that view of the matter, the inescapable conclusion is that the authorities below were justified in repelling the assessee’s contention on this issue,” the Tribunal said.

To Read the full text of the Order CLICK HERE

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