| Question And Answer | |
|---|---|
| Subject: | Claim u/s 54F of the Income Tax Act, 1961 |
| Category: | Income-Tax |
| Querist: | Ruchi Bhansali |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | development agreement, investment in house, Section 54F deduction |
| Date: | January 31, 2022 |
- Assessee is an individual and has made claim U/Sec. 54F in respect of investment in the bungalow along with the land. while executing the agreement , the assessee has executed Registered Development Agreement , where in the description of property it is clearly mentioned that it is land with the constructed bungalow. However the AO has rejected the claim on the ground that the investment made by the assessee in the property is not for purchase of house property by the assessee but assessee had taken it for the purpose of Development of the property. Assessee is not engaged in the business of development of property. Assessee has after period of 4 years has sold the same property as it is and the capital loss in the transaction has been accepted U/Sec.143(1)(a) of the Act.
- whether rejection of the claim of the assessee U/Sec.54F by the A.O. on the ground that the assessee had entered in to Development agreement is correct. Pl guide.
It would be pertinent to understand that the nomenclature i.e., “Development Agreement” cannot be the reason for deciding disallowance. As section 54F of the Income-tax Act, 1961, is a beneficial provision granting an exemption, the same would be construed strictly and onus is on the tax-payer to establish its entitlement to exemption. But once the taxpayers establish their entitlement to the exemption provision, full benefit is to be given to the exemption provision to achieve the intended purposes for which the said provisions are legislated.
Therefore, it is upon the assessee to establish the substance of the transaction i.e., the said property was a residential property.
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