Question And Answer
Subject: Claim u/s 54F of the Income Tax Act, 1961
Querist: Ruchi Bhansali
Answered by:
Tags: , ,
Date: January 31, 2022
Query asked by Ruchi Bhansali
  • 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.
File Uploaded: Not Available

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.

Disclaimer: This article is only for general information and is not intended to provide legal advice. Readers desiring legal advice should consult with an experienced professional to understand the current law and how it may apply to the facts of their case. Neither the author nor and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this article nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of

Leave a Reply

Your email address will not be published. Required fields are marked *