Exemption U/s. 54F not allowable on amount invested in construction before transfer of original asset. Brief facts of the case are that the assessee is a director in M/s. Veen Promoters Pvt. Ltd. There was a survey u/s. 133A of the Act on 14.7.2009 in the case of M/s. Veen Promoters Pvt. Ltd. The assessee filed return of income for the A.Y. 2008-09 on 31.7.2009 declaring total income at Rs. 24,99,289 after claiming deduction u/s. 54F at Rs. 5,30,04,081 has invested in H. No. C-10, AFCHS, Sainikpuri, Secunderabad according to which the investment was made during the period from August, 2007 to July, 2008. It is also on record that the assessee sold property bearing No. 986 Road No. 50, Jubilee Hills in the financial year 2007-08 vide sale document No. 2739/2007 and 2741/2007 dated 26.7.2007 for a gross consideration of Rs. 4,32,00,000 as against Sub-Registrar value of Rs. 5,04,92,000. According to the Assessing Officer, as the assessee sold the property on 26.7.2007 and the new investment made by the assessee is before 31 .3.2007. In other words, the construction of house was substantially completed by 31 .3.2007 i.e., before the sale of capital asset which led to capital gain. As such the condition laid down u/s. 54F of the Act was not fulfilled. Being so, the assessee is not entitled for deduction u/s. 54F and the same was denied. Held- Investment in residential house which would have taken place after the sale of existing capital asset is to be considered for deduction u/s. 54F of the Act as the investment in residential house would not only include the cost of purchase of the house but also the cost incurred in making the house habitable and an inhabitable premises, in our opinion, cannot be equated with a residential house. If a person cannot live in the premises, then such premises cannot be considered as a residential house. In case of semi finished house, the assessee will have to invest huge money on finishing the house to make it habitable. Therefore, in our view, the investment in a house would be complete only when such house becomes habitable. This view of ours is supported by the order of the Tribunal in the case of Saleem Fazelbhoy v. DCIT (106 ITD 167) (Mum) and Mrs. Sonia Gulati vs. ITO (115 Taxman 232) (Mum). Similarly, in the case of Smt. Shantaben P. Gandhi v. CIT (129 ITR 218) (Guj) held that where the construction of new residential property is completed before the date of transfer of the existing property, the assessee is not entitled to relief u/s. 54 in respect of capital gain received on sale of existing property. In view of the above discussion, it is clear that whatever investment made by the assessee in construction of new property within the period stipulated u/s. 54F after the sale of existing property the assessee is entitled for deduction u/s. 54F of the Act. In other words, the investment in new property made by the assessee is not entitled for deduction u/s. 54F of the Act to the extent made before the sale of property. Only that portion of investment made in the new property in accordance with section 54F of the Act is entitled for deduction u/s. 54F of the Act. Accordingly, we direct the assessee to furnish the details of investment made by the assessee in the construction of new residential building after the sale of existing property before the due date of filing of return of income u/s. 139(1) of the Act. The Assessing Officer shall consider that investment made by the assessee in the construction of new property after the sale of existing property in terms of section 54F of the Act. Accordingly, the issue is remitted back to the file of the Assessing Officer for the purpose of quantification of deduction u/s. 54F of the Act. THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ‘B’, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA No. 183/Hyd/2012 Assessment year 2008-09 Smt. Nimmagadda Sridevi vs. The DCIT Date of pronouncement: 22.02.2013
Posted on: Wed, 24 Jul 2013 07:35:12 +0000
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