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| DATE: | March 8, 2012 (Date of publication) |
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| Click here to download the judgement (sambandam_udaykumar_54F_construction.pdf) |
S. 54F does not require construction to be complete within specified period
The assessee sold shares for Rs. 4.18 crores and, within 12 months, invested Rs. 2.16 crores thereof to construct a house property and claimed exemption u/s 54F. However, as even after the expiry of 3 years of the date of transfer, the construction of the house was not complete and sale deed not executed, the AO & CIT (A) denied relief u/s 54F though the Tribunal granted it. On appeal by the department to the High Court, HELD dismissing the appeal:
S. 54F is a beneficial provision for promoting the construction of residential house & requires to be construed liberally for achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are ‘purchased’ or ‘constructed’. The condition precedent for claiming benefit u/s 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to be occupied does not disentitle the assessee to claim s. 54F relief (Sardarmal Kothari 302 ITR 286 (Mad) followed)
The view the HC has taken is no doubt quite liberal; done so, in its magnanimity, more from a pragmatic approach and appreciation of the down to earth realities and happenings all around in the reality sector. The only nagging doubt but of a worrisome nature in one’s mind is on the scope for the Revenue to contest, on inter alia the ground that the HC has travelled beyond and there has been an exercise of powers exceeding the parameters to be confined to ‘interpretation’ of what the enactment says, with no ambiguity adduced or proven by the tax payer.
to be contd..
The decision by the High Court is commendable.But the authorities immediately amend the section with retrospective if it is done it is an injustice to the people.
Good desion on section 54F -The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. Other decisions also have same views
ACIT v. Smt. Sunder Kaur Sujan Singh Gadh, (3 SOT 206) the assessee had booked the new flat with the builder and as per agreement, the assessee was to make payment in instalments and the builder was to hand over the possession of the flat after construction.
CIT v. Mrs. Hilla J. B. Wadia, (216 ITR 376) (Mum) it was not necessary that the possession of the flat should also be taken within the period of three years the assessee had invested the capital gains in construction of a new residential house within a period of three years, this should be treated as sufficient compliance of the provisions of section 54.
In the case of Kishore H. Galaiya v. ITO [2012] 24 taxmann.com 11 (Mumbai – Trib.) following the above decision and circular the Learned Mumbai Tribunal has held that payment to builder / developer for under construction property comes under the purview of construction under section 54 of Income Tax Act for exemption from Capital Gains. Therefore, the time limit for investment is 3 years and if the amount is paid then possession of flat is also not a consideration for granting exemption