The Income Tax Appellate Tribunal ( ITAT ), Pune Bench, has recently in an appeal filed before it, held that construction of house if couldn’t be completed within 3 years, the capital gain exemption under Section 54 F, is liable to be denied.
The aforesaid observation was made by the Tribunal when an appeal was filed before it by an assessee, as against the order dated 18-07-2019, passed by the Commissioner of Income Tax (Appeals)-2, Kolhapur [CIT(A)], for assessment year 2011-12.
With Shri M.K. Kulkarni & Mrs. J.R. Chandekar, on behalf of the assessee submitting that the construction in question was completed as on 31-03-2018 and thereby praying to remand the matter to the file of AO for his fresh verification in view of the decision of the High Court of Allahabad in the case of Ranjit Narang Vs. CIT, Shri M.G. Jasnani, on behalf of the Revenue relied upon the orders of the Department, thereby supporting its contentions.
However, hearing the contentions of both the sides and perusing the materials available on record, the ITAT Tribunal observed as follows:
“On a careful reading of the decision of Hon’ble High Court of Allahabad in the case of Ranjit Narang, it can be understood that the amount of capital gains which has not been utilized u/s. 54F has to be charged after the expiry of three years from the date of sale of the asset.”
“In the present case, admittedly, the assessee purchased a residential property on 23-12-2010 and the assessee sold immovable properties located at MoujeKorche by various sale deeds i.e. 22-02-2011, 17-03-2011 etc. as shown in para 8 of the assessment order. In pursuance of the decision of Hon’ble High Court of Allahabad, the assessee is required to construct a building as per the date of sale of asset i.e. 17-03-2011 within three years. Admittedly, the AO deployed Inspector to verify whether there is any construction/residential house constructed by the assessee”, S.S. Viswanethra Ravi, the Judicial Member of the Pune ITAT added.
“The Inspector submitted report on 19-12-2016 stating that no construction or residential house is existing at House No. 4, Ward No. 12, Ichalkaranji which clearly establishes the assessee could not construct a house within three years from the date of sale of its assets on 17-03-2011 till 19-12-2016.”, the ITAT Bench further observed.
Thus, pronouncing its ruling and thereby dismissing the assessee’s appeal the Pune ITAT held :
“Therefore, the assessee made construction within three years and in my opinion, the AO rightly denied deduction u/s. 54F of the Act. Therefore, I find no infirmity in the order CIT(A) in confirming the order of AO”.
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