Mr. Rajiv Madhok vs. ACIT - (Income Tax Appellate Tribunal) (29 May 2020)

Assessee is entitled for benefit of Section 54F of the IT Act, when new residential house purchased within two years from the date of transfer of the original asset that is shares

MANU/ID/0500/2020

Direct Taxation

In facts of present case, the return of income filed by the Assessee was selected for scrutiny assessment and statutory notices were issued and complied with. During the year under consideration, the Assessee shown long-term capital gain of Rs. 2,18,91,720 on sale of the shares on 2nd September, 2011, but same was claimed as not to be charged in terms of Section 54F of the Income Tax Act, 1961 in view of the investment in purchase/construction of property in Common wealth Games, Village, Delhi.

The Assessee claimed that the property was purchased/constructed within the time period provided in the Section 54F of the Act and thus, he is entitled for not charging of long-term capital gain to the extent of investment in purchase/construction of the residential house property. However, according to the Assessing Officer, the residential house has been purchased prior to the time period provided in Section 54F of the Act and therefore Assessee is not entitled for said benefit under Section 54F of the Act.

The Assessing Officer, accordingly completed the scrutiny assessment after making addition for the long-term capital gain of Rs. 2,18,91,720. On further appeal, the CIT(A) upheld the addition, however, reduced the addition to Rs.2,07,62,580 i.e. the amount which was claimed as deduction under Section 54F of the Act. Aggrieved, the Assessee is in appeal before the Tribunal. The sole issue raised in both the grounds of the appeal is sustaining disallowance of claim of Rs. 2,07,62,580 which was made under Section 54F of the Act.

Under the provisions of the Section 54F, the long-term capital gain is not charged, if any individual or HUF invest the entire sale consideration arising on transfer of any long-term capital asset (not being a residential house), i.e., original asset, into a purchase or construction of residential house (i.e new asset). If the cost of the new asset is less than the net consideration in respect of the original asset, the capital gain in proportion to the cost of the new asset bears to the net consideration, is not charged under Section 45 of the Act.

For availing the benefit of Section 54F, the investment in purchase/construction of residential house has to be made as (a) Purchase of residential house within a period of one year before or two years after the date on which the transfer of the original asset took place, or (b) Construction of residential house within a period of three years from the date on which the transfer of the original assessee took place.

Accordingly, the new asset i.e. residential house has been purchased within two years from the date of transfer of the original asset i.e shares, and thus, the assessee is entitled for benefit of Section 54F of the Act. The finding of the CIT(A) on the issue in dispute is accordingly set aside. Appeal of the assessee is allowed.

Tags : DEDUCTION BENEFIT PROVISION