The Bangalore Income Tax Appellate Tribunal (ITAT) has recently held that assessees could not claim capital gain exemption under section 54F of Income Tax Act 1961 if there was no proof for completion of construction within three years.
Section 54F of Income Tax Act 1961 states that tax exemption shall be allowed on the long term capital gains earned the assessee from selling any capital asset other than house property
Assesse Amarnath Sarala sold two properties for total consideration Rs.36, 00,000/. The assessee declared Long Term Capital Gains (LTCG) after claiming indexed cost of acquisition and brokerage and thereafter assessee claimed exemption under section 54F Income Tax Act 1961 of the amount of capital gains. But the Assessing officer disallowed exemption claim also he mentioned that construction activity has been stopped since February, 2017.Against the claim assesee filed appeal before the ITAT.
Venkatesh Kumar counsel for assessee submits that, assessee purchased the residential plot on 7.10.2016 and started construction immediately and the cut-off date to commence the construction is on or before 28.11.2016 but due to some personal issues construction stopped and further the construction was restarted on January 20.
Sankar Ganesh counsel for the revenue contented that “assesee has not placed any iota of evidence to suggest that the construction has been completed within the period of 3 years from the date of sale of the capital asset as stipulated in section 54F of the Income Tax Act 1961.”
After considering the contention of the both parties the division bench of the ITAT comprising N.V. Vasudevan, (Vice President) and Chandra Poojari, (Accountant Member) denied assessee’s claim as per section 54Fof Income Tax Act 1961.
The bench determined that assessee has not produced any license/permission for construction of building in the scheduled property from any authorities said to be constructed and there was no evidence in support of the fact that there was actually any construction within the stipulated time as per section 54F of the Income Tax Act 1961.
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