By Jagdish D. Shah, Jagdish T. Punjabi, Charted Accountants
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Exemption u/s. 54 and 54F of the Act can be claimed with reference to investment in the same residential house purchased/constructed, if the other conditions are satisfied.
Facts:
During the previous year 2007-08 the assessee transferred land to a developer under a development agreement and also sold a house along with land. Long term capital gain earned on transfer of land to developer was Rs. 49,19,513 and long term capital gain on sale of house was Rs. 44,05,302. The assessee claimed the entire amount of long term capital gain of Rs. 93,24,815 to be exempt u/s. 54 and 54 F of the Act towards investment in a new house purchased for a total price of Rs. 1,43,26,665.
The Assessing Officer (AO) held that to claim exemption under both sections i.e. 54 and 54F the assessee has to invest in two houses. He disallowed exemption claimed u/s. 54 and added back an amount of Rs. 44,05,302 to the total income of the assessee.
Aggrieved, the assessee preferred an appeal to CIT(A) who upheld the action of the AO.
Aggrieved, the assessee preferred an appeal to the Tribunal.
Held: Section 54 and 54F apply under different situations. While section 54 applies to long term capital gain arising out of transfer of long term capital asset being a residential house, section 54F applies to long term capital gain arising out of transfer of any long term capital asset other than a residential house. However, the condition for availing exemption under both sections is purchase or construction of a new residential house within the stipulated period. There is also no specific bar either u/s. 54 and 54F or any other provision of the Act prohibiting allowance of exemption under both the sections in case the conditions of provisions are fulfilled.
Since the assessee had invested long term capital gain arising from sale of two distinct and separate assets in purchase of a new residential house, the Tribunal held that he was entitled to claim exemption both u/s. 54 and 54F of the Act. The Tribunal directed the AO to delete the addition of Rs. 44,05,302.
This ground of appeal filed by the assessee was decided in favour of the assessee.
