|Question And Answer
|SEC.54F of Income Tax Act.
|Advocate Shashi Ashok Bekal
|Investment in residential bungalow, Section 54F deduction
|May 23, 2022
Assessee is an individual and partner in partnership firm engaged in the business of advertising. In the A.Y. 2008-09. Assessee received a amount of Rs. 1 cr against his right in the property, which is liable for longterm capital gain. Assessee invested the amount of Rs. 1.25 cr for purchase of residential bungalow alongwith the land appertatnent their to by executing the Development Agreement and power of attorney by paying full stamp duty and also taken the possession of the said property. The assessee has not carried out any Development on said property and after holding for period of 42 months sold the said property as it is and offered the LTCL in A.Y. 2012-13, which is accepted U/sec. 143(1)(a) of the Act.
Assessing Officer rejected the claim of the appellant made U/Sec.54F on following grounds
1. Assessee has entered in to Development Agreement and the rights were granted to assessee for Development and sale of flats on the said property. The assessee has not purchase the property for getting deduction u/Sec.54F.
2. When the assessee sold the said property in the A.Y. 2012-13, he has to obtain the consent of original owner. Which means assessee was never the owner of the property and property was not transfered to assessee.
3. Development Agreement was executed just to avail unreasonable deduction u/Sec. 54F of the Act.
4. Purchase of property is necessary condition for claiming deduction u/Sec. 54F and acquiring property through Development Agreement does not tantamount to purchase of property.
5. By executing Development Agreement assessee do not became the owner of property.
6. Subsequent acceptance of Long term capital loss on sale of said property in A.Y.2012-13 does not mean assessee has complied with conditions of sec. 54F in A.Y. 2008-09.
Is the action of AO is justified in Law.
As we infer, the assessee claimed deduction under section 54F of the Income-tax Act, 1961 on the Capital Gains accrued from sale of interest in the Partnership Firm. The assessee has not fulfilled the conditions for availing deduction under section 54F of the Act and hence the same has been denied.
As the assessee never purchased a house property, the deduction has been rightly disallowed.