January 2009
Capital gains : Exemption u/s.54F : Construction of new house : If the assessee has invested the net consideration before the specified period, exemption cannot be denied on ground that construction not completed within that period.
By K. B. Bhujle, Advocate
New Page 1
II. Reported :
37 Capital gains : Exemption u/s.54F of
Income-tax Act, 1961 : A.Y. 2001-02 : Construction of new house : Requirement is
that assessee has to construct a residential house within a period of three
years after date of transfer : If assessee has invested net consideration before
specified period, exemption cannot be denied on ground that construction is not
completed within that period.
[CIT v. Sardarmal Kothari, 217 CTR 414 (Mad.)]
For the A.Y. 2001-02, the Assessing Officer disallowed the
claim of the assessee for exemption of the capital gain u/s.54F of the
Income-tax Act, 1961 on the ground that the construction of the new house was
not completed. The CIT(A) allowed the claim observing that the assessee had
invested the capital gain in the land and the construction was substantially
completed. The Tribunal upheld the decision of the CIT(A).
On appeal by the Revenue, the Madras High Court upheld the
decision of the Tribunal and held as under :
“(i) There is no dispute about the fact that the assessee
has invested the entire net consideration of sale of capital asset in the land
itself and subsequently the assessee has invested large sums of money in
construction of the house. The one and only ground on which the Assessing
Officer has non suited the assessee for the claim of exemption was that the
house has not been completed. There remains some more construction to be made.
(ii) The requirement of the provision is that the assessee,
within a period of three years after the date of transfer, has to construct a
residential house in order to become eligible for exemption. In the case on
hand, it is not in dispute that the assessee has purchased the land by
investing the capital gain and he has also constructed residential house.
(iii) On a reading of the Board Circular No. 667, dated
18-10-1993, relied on by the Revenue, we are of the view that the Circular
would not in any way advance the case of the Revenue to come to the conclusion
that in order to have the benefit u/s.54F of the Act, the construction should
have been completed.
(iv) The Tribunal has also taken note of its own earlier
orders, wherein the Tribunal has held that in order to get the benefit
u/s.54F, the assessee need not complete the construction of the house and
occupy the same. It is enough if the assessee establishes that the assessee
had invested the entire net consideration within the stipulated period. The
said view taken consistently by the Tribunal has been applied in this case
also.
(v) There is no material to entertain this appeal. The
appeal fails and the same is dismissed.”
