Capital gain – Exemption u/s. 54 – A. Y. 2007-08 – Investment of net consideration in purchase of a residential house – Acquisition of plot and substantial domain over new house – Requirement for claiming exemption complied with – Assessee entitled to exemption –

The assessee sold a property and sale proceeds were used for construction of a new building. The Tribunal found that the assessee invested the entire net consideration within the stipulated period and in fact had even constructed the major portion of the residential property except some finishing, making it fit for occupation. The Tribunal held that as the assessee had acquired substantial domain over the new house and had made substantial payment towards cost of land and construction, within the period specified u/s. 54 of the Income-tax Act, 1961 the assessee could be said to have complied with the requirements for claiming the exemption u/s. 54. Accordingly, the Tribunal allowed the assessee’s claim for exemption u/s. 54 of the Act.

On appeal by the Revenue, the Telangana and Andhra Pradesh High Court upheld the decision of the Tribunal and held as under:

“i) In order to get the benefit of section 54 of the Act, it does not appear that in case of purchase of property with sale proceeds it has to be reconed within three years, in case of construction of new building utilizing sale proceeds, the construction has to be completed within a period of three years of the sale. In this case, the question of registration of document does not arise and it is a question of investment in construction of the new building.

ii) When it was found on the facts that the construction was completed within three years of sale of the property, the benefit would automatically follow. Hence we dismiss the appeal.”