The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the cost of investment in land is also part of the cost of construction of the residential house, for purpose of availing capital gain exemption under Section 54F of the Income Tax Act.
The assessee, an individual, had sold 22 carat jewellery of 383.32 grams for Rs.10 lacs, for which the indexed cost of acquisition was taken at Rs.511098/- resulting into long term capital gain of Rs.4,88,902/-.
While filing the income tax returns for the relevant year, the assessee claimed the same as exempt u/s 54F being investment made in a residential house property. However, the claim of exemption was denied by the AO on the ground that the assessee had not purchased any residential house but had purchased only land.
On appeal, the CIT(A) observed that there was no corroborative evidence of construction/ completion of a house to prove the bonafide intention of construction and without proof the benefit of section 54F could not be given.
The Tribunal observed that there is no dispute that the assessee has invested the full sale consideration received on the sale of jewellery in the purchase of the plot of land.
“It is also not in dispute that before the lower authorities the assessee could not adduce any evidence. The certificate from municipal corporation, Moradabad has been furnished for the first time. In the interest of justice I restore this issue to the files of the Assessing Officer. The Assessing Officer is directed to verify the certificate of construction issued by Municipal Corporation, Moradabad and decide the issue afresh as per provisions of law, keeping in mind that the cost of investment in land is also part of cost of construction of the residential house to avail the exemption u/s. 54 F Act. Needless to mention the Assessing Officer shall give a reasonable opportunity of being heard to the assessee,” the Tribunal said.
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