Vinodbhai Chhaganbhai Tamboli Vs DCIT (ITAT Ahmedabad)
Ahmedabad ITAT: Section 54F Exemption Covers Post-Purchase Reconstruction and Renovation-“Cost of New Asset” Is Wider Than Mere Purchase Price
The Ahmedabad ITAT has delivered an important ruling on Section 54F, holding that where an assessee purchases a residential house and thereafter incurs bona fide expenditure on construction, reconstruction, alterations or modifications, such expenditure can form part of the “cost of the new asset” for computing Section 54F exemption. The exemption cannot be restricted merely to the original purchase price on the ground that the house was already habitable.
The assessee sold a non-agricultural plot for ₹4.275 crore, resulting in long-term capital gains. He claimed ₹50 lakh deduction under Section 54EC and ₹1.295 crore under Section 54F. For Section 54F, he purchased a residential house in Vadodara for ₹49.50 lakh, incurred ₹4.47 lakh towards stamp duty, registration and allied expenses, and subsequently spent ₹86.05 lakh on reconstruction/renovation.
The AO accepted the purchase price and related expenses but refused to treat the ₹86.05 lakh reconstruction expenditure as qualifying investment. According to the AO, the property was already habitable and the subsequent expenditure represented renovation/beautification. Consequently, the Section 54F exemption was restricted and ₹83.73 lakh of the claim was disallowed. The CIT(A) confirmed the action, relying particularly on the fact that the house already had electricity and gas connections and had been occupied by the seller.
The Tribunal rejected the Revenue’s restrictive interpretation. Referring to CBDT Circular No. 667 dated 18.10.1993, it noted that where a plot is purchased and a residential house constructed thereon, both the cost of land and construction cost constitute the cost of the new asset. By the same reasoning, where an assessee purchases land with an existing superstructure, demolishes it and constructs a new residential house, the aggregate purchase and construction cost can qualify, subject to the assessee establishing the reconstruction through appropriate evidence.
More importantly, the ITAT held that the expression “purchase or construction” does not mean that the assessee must choose exclusively between the two. A residential property may be purchased first and thereafter subjected to bona fide construction, reconstruction or supplementary work. Such subsequent construction expenditure does not cease to qualify merely because the house was initially acquired as a ready-made residential unit.
The Tribunal also relied upon the Karnataka High Court decision in Mrs. Rahana Siraj v. CIT, which drew a significant distinction between “cost of the new asset” and merely “consideration for acquisition of the new asset.” The Karnataka High Court had held that even where the house purchased was already habitable, expenditure subsequently incurred on additions, alterations, modifications and improvements could become part of the cost of the new asset for Section 54F purposes.
The Ahmedabad ITAT further observed that “habitability” is inherently subjective and depends upon the socio-economic status and requirements of the taxpayer. Section 54F does not prescribe the quality of construction, amenities or any monetary ceiling on the investment. Therefore, the Revenue cannot deny exemption merely because expensive flooring, tiles or superior construction materials are used.
However, the Tribunal recognised an important limitation: movable items of personal comfort, such as consumer electronics, entertainment equipment, air-conditioners, furniture and bedding, do not constitute purchase or construction cost and cannot qualify merely because they are installed in the new house.
On the facts, the Revenue did not dispute the genuineness of the ₹86.05 lakh expenditure, nor did it contend that the expenditure included such non-qualifying items of personal comfort. Accordingly, the Tribunal allowed the assessee’s entire Section 54F deduction of ₹1,29,52,940, treating both the purchase price and construction/renovation expenditure as part of the cost of the new asset, and deleted the partial disallowance.
Key principle: For Section 54F, “cost of the new asset” is not necessarily frozen on the date the residential house is purchased. Bona fide capital expenditure incurred thereafter on reconstruction, additions, alterations and improvements can also qualify—even if the purchased house was already technically habitable. What matters is the nature and genuineness of the expenditure, not merely whether electricity, gas connections or basic residential facilities already existed.
Cases Discussed
- Rustom Homi Vakil vs. Assistant Commissioner of Income-tax, 12(3), Mumbai (ITAT Mumbai),[2016] 69 taxmann.com42 (Mumbai)/[2016] 158 ITD 588 (Mumbai)
- Rahana Siraj vs. Commissioner of Income-tax-I, Bangalore (Karnataka High Court),[2015] 232 Taxman 327 (Karnataka)[05-01-2015]
- Meera Jacob vs. Income-tax Officer (Kerala High Court),[2009] 313 ITR 411 (Kerala)[09-06-2008]
- Shrinivas R. Desai vs. Assistant Commissioner of Income-tax (OSD), Circle-10, Ahmedabad (ITAT Ahmedabad),[2013] 35 com170/[2013] 145 ITD 12/[2013] 155 TTJ 743 (Ahmedabad – Trib.)[28-06-2013]
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. The present appeal preferred by the Assessee is directed against the Order, dated 04/02/2026, passed by the Commissioner of Income Tax (Appeals), Addl/JCIT(A)-7, Kolkata [hereinafter referred to as ‘the CIT(A)‘] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act‘] whereby the Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 31/10/2017, passed under Section 143(3) of the Act for the Assessment Year 2015-2016
2. The following grounds have been raised in the present appeal:
“1. The order of the learned CIT(A) is bad in law and on facts and is required to allow full exemption U/s 54F or give grant relief as deemed fit.
2. The learned CIT(A) erred in confirming the action of the Assessing Officer in restricting the exemption claimed under Section 54F in respect of investment made towards reconstruction of the residential house.
3. The learned CIT(A) failed to appreciate that:
(a) The appellant had purchased a residential house which was in uninhabitable condition;
(b) Substantial reconstruction was necessary to make the house fit for residence and the fact that the same forms integral part of making the residential house habitable
(c) The reconstruction was completed within the statutory period of three years;
(d) Section 54F permits investment in purchase or construction of a residential house, and reconstruction/renovation necessary to make the house habitable forms part of cost of construction.
4. The learned CIT(A) failed to appreciate that the provisions of Section 54F are beneficial in nature and are required to be construed liberally to promote investment in residential housing.
5. The learned CIT(A) erred in confirming proportionate restriction of exemption without properly appreciating the legislative intent and judicial principles governing Section 54F.
6. The Ld. CIT(A) erred in distinguishing judgments relied upon by Appellant without reasoned analysis, violating principles of natural justice and consistency in tax jurisprudence.”
3. The admitted facts of the case, as emanating from the record, that the Assessee, an individual, filed return of income for Assessment Year 2015-2016 on 27/08/2015 declaring total income of INR.2,09,14,790/-. During the relevant previous year, the Assessee transferred a non-agricultural plot for sale consideration of INR.4,27,50,000/- on 28/10/2014 resulting in Long Term Capital Gain. The Assessee claimed deduction under Section 54EC of Rs.50,00,000/- and deduction of INR.1,29,52,940/- under Section 54F of the Act.
4. For the purpose of claiming exemption under Section 54F of the Act, the Assessee stated during the assessment proceeding that the Assessee had purchased a residential house at A-30, Rajdeep Society, Polo Ground, Vadodara on 02/01/2015 for INR.49,50,000/- and had incurred stamp duty/registration and allied expenses of INR.4,47,000/-. Thereafter, the Assessee had incurred further expenditure of INR.86,05,000/- on reconstruction of the said property and had claimed that the same was necessary to make the house habitable. Therefore, the Assessee was eligible to claim exemption under Section 54F of the Act in respect of the aggregate amount. Whereas, the Assessing Officer concluded that exemption under Section 54F was available only in respect of purchase cost of the residential house as well as stamp duty and related allied expenses only. The Assessing Officer denied the exemption claimed by the Assessee under Section 54F of the Act in respect of reconstruction/renovation expenses of INR.86,05,000/-. Thus, the Assessing Officer restricted the exemption claimed by the Assessee under Section 54F of the Act to INR.45,79,790/- and disallowed the excess claim of INR.83,73,150/- holding that the subsequent expenditure represented renovation/beautification of an already habitable residential house.
5. In appeal, the Learned CIT(A) upheld the action of the Assessing Officer. The Learned CIT(A), after taking into consideration the registered sale deed, the existence of electricity & gas connections and the fact that the seller was residing in the property, concluded that the immovable property was already habitable. Further, expenditure of INR.86,05,000/-, being 1.73 times of the purchase cost, incurred by the Assessee was in the nature of reconstruction/renovation expenses not eligible for exemption under Section 54F of the Act.
6. Being aggrieved by the above order passed by the Learned CIT(A), the Assessee has preferred the present appeal before this Tribunal on the grounds reproduced in paragraph 2 above.
7. We have heard the rival submissions and have perused the material available on record.
8. All the 6 grounds raised by the Assessee are interconnected and relate to Assessee’s claim for exemption under Section 54F of the Act. Therefore, the same are taken up together for adjudication hereinafter.
9. The Learned Authorised Representative for the Assessee submitted that though the sale deed described the property as a residential house, in reality the property purchased by the Assessee was old and in an uninhabitable condition, and substantial expenditure had to be incurred on removal of old plaster, slab breaking, excavation, plumbing, electrical work, tiling, granite fitting, doors, windows, painting and other allied works in order to make the same habitable. It was contended that the genuineness of the expenditure has never been doubted and the reconstruction was completed within the statutory period of three years prescribed under Section 54F of the Act. It was further submitted that Section 54F of the Act is a beneficial provision intended to promote investment in residential housing and, therefore, the expression “purchase”/“construction” of a residential house should receive a liberal construction. The expenditure necessarily incurred to render the purchased property habitable forms an integral part of the cost of the residential house and the same cannot be excluded from the cost of purchase/construction of property. In support, reliance was placed on the judicial precedents.
10. Per contra, the Learned Departmental Representative supported the orders of the lower authorities and submitted that the property purchased by the Assessee was a habitable residential house with electricity, and gas connection which was admittedly occupied by the seller prior to the transfer. The possession of the said house was delivered to the Assessee in terms of the sale deed. It was contended that the scale of further expenditure, being substantially higher than the purchase consideration itself, clearly demonstrated that the Assessee had undertaken extensive beautification of an existing habitable house.
11. We have given thoughtful consideration to the rival submissions and have perused the material on record including the orders passed by the income tax authorities and the judicial precedents cited.
12. Section 54F of the Income-tax Act, inter-alia, provided that capital gains shall either not be charged to tax or shall be charged to tax on proportionate basis where:
(a) capital gains arise from transfer of a long-term capital asset (not being a residential house), and
(b) the assessee (i) within a period of one year before or two years after the date of transfer – purchases, or (ii) within a period of three years after the date of transfer – constructs, a residential house.
The quantum of exemption is computed taking into consideration the ‘cost of the new asset; and the ‘net consideration received on transfer’.
13. In the facts and circumstances of the present case the issue that arises for consideration is whether the benefit of Section 54F of the Act can be granted to an assessee in respect of (a) consideration for purchase of existing residential house as well as (b) cost of construction/reconstruction incurred by the Assessee (after the purchase of the aforesaid residential house) by taking the aggregate of the aforesaid purchase consideration and construction cost as ‘cost of the new asset’ for the purpose of computing the amount of capital gains not charged to tax under Section 45 of the Act in terms of Section 54F of the Act.
14. Section 54F was inserted in the Act by the Finance Act, 1982 (with effect from 01/04/1983) to encourage house construction and address the shortage of housing. Sections 54F of the Act provided that capital gains arising on transfer of a long-term capital asset (referred to as ‘Old Asset’), not being building or land appurtenant thereto, shall not be charged to tax to the extent specified therein, where the amount of capital gain is invested in a residential house (referred to as ‘New Asset’). Initially, in the case of purchase of a house, the benefit was available if the investment was made within a period of 1 year before or after the date of transfer of Old Asset whereas in case of construction of a house, the benefit was available if the investment was made within three years from the date of such transfer. In case the cost of New Asset was less than the Net Consideration arising from transfer of Old Asset, entire amount of capital gains was exempt. However, where the cost of New Asset was less than such Net Consideration, proportionate amount of capital gains was exempt.
15. On perusal of the Memorandum to Finance Bill, 1983 and the speech of the then Finance Minister we find that Section 54F was inserted to deal with acute shortage of housing and with the stated object of giving impetus to house building activity.
16. On 18/10/1993, Circular No. 667 was issued by the Central Board of Direct Taxes wherein it was clarified that the benefit of Section 54F would be available in case of purchase of plot of land and construction thereon carried out by an assessee; and that the quantum of deduction under Section 54F shall be computed taking into consideration the cost of plot of land and the construction cost. The said circular read as under:
“Circular No.667, Dated 18-10-1993
1. Sections 54 and 54F provide for a deduction in cases where an assessee has, within a period of one year before or two years after the date on which the transfer of a capital asset takes place, purchased, or has within a period of three years after that date constructed, a residential house. The quantum of deduction is itself dependent upon the cost of such new asset. It has been represented to the Board that the cost of construction of the residential house should be taken to include the cost of the plot as, in a situation of purchase of any house property, the consideration paid generally includes the consideration for the plot
2. The Board has examined the issue whether, in cases where the residential house is constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also. The Board are of the view that the cost of the land is an integral part of the cost of the residential house whether purchased or built. Accordingly, if the amount of capital gain for the purposes of section 54, and the net consideration for the purposes of section 54F, is appropriated towards purchase of a plot and also towards construction of a residential house thereon, the aggregate cost should be considered for determining the quantum of deduction under section 54/54F, provided that the acquisition of plot and also the construction thereon, are completed within the period specified in these sections” (Emphasis Supplied).
17. Thus, it was clarified by the CBDT that the consideration for purchase of plot formed part of ‘cost of new asset’ for the purpose of computing quantum of deduction under Section 54F of the Act. However, it was specified that the acquisition of plot as well as the construction should take place within specified period. Therefore, it is clear that where a new residential house is constructed on a plot of land purchased by an assessee, the benefit of Section 54F Act is to be extended in respect of cost of purchase of plot as well as the construction cost.
18. We are of the view that by the same analogy the benefit of Section 54F should also be extended to an assessee who purchases plot of land with superstructure, demolishes the superstructure and thereafter, constructs a new residential house. However, the onus would be on the Assessee to establish a new residential house has come into existence after purchase and demolition of old superstructure; and the same would depend upon the facts and circumstances of each case. Where an assessee can support the factum of construction or re-construction by way of documentary evidence showing (a) existing superstructure was demolished or had been rendered unusable, and/or (b) new foundation was laid or new structural frame was constructed by way of construction of new columns, beams, slabs, load-bearing walls etc.; and/or (c) new building plan, demolition permission, commencement certificate or revised approval was taken; the preponderance of possibility would lie in favour of the Assessee. In our view, in the aforesaid facts and circumstances benefit of Section 54F can be extended to the Assessee in respect of aggregate of purchase consideration and construction cost as the ‘cost of new asset’ provide all the other conditions specified in the said section are satisfied.
19. However, the issue that arises for consideration in the present case is whether expense incurred by the Assessee for reconstructing/renovating a residential house can be treated as ‘cost of new asset’ for the purpose of claiming the benefit of Section 54F of the Act.
20. In Meera Jacob vs. Income-tax Officer [2009] 313 ITR 411 (Kerala)[09-06-2008], the assessee had an existing residential house and incurred expenditure on modification and expansion. The Kerala High Court held that Section 54F does not provide for exemption on investment in renovation or modification of an existing house. The Hon’ble High Court held that an addition to the plinth area amounted to modification of the existing house and consequently, exemption under Section 54F of the Act was not available. Thus, mere incurring on renovation expenses on a house that was already purchased/owned by the Assessee does not entitle the Assessee to claim benefit of Section 54F of the Act. Even in the Circular No. it was specifically specified stated – ‘the acquisition of plot and also the construction thereon, are completed within the period specified in these sections’. Therefore, mere renovation of existing house without acquisition does not entitle an Assessee to claim benefit of Section 54F of the Act.
21. In the present case, it is admitted position that the Assessee had acquired a new residential house and thereafter, carried out renovation/reconstruction work. The contention of the Revenue is that where an assessee makes purchase of a new residential house, the qualifying event is the purchase. Therefore, any expenditure incurred by the Assessee after the event of purchase would not be eligible for deduction under Section 54F of the Act.
22. In the case of Shrinivas R. Desai vs. Assistant Commissioner of Income-tax (OSD), Circle-10, Ahmedabad [2013] 35 com170/[2013] 145 ITD 12/[2013] 155 TTJ 743 (Ahmedabad – Trib.)[28-06-2013], the Ahmedabad Bench of the Tribunal had held:
“5. We have noticed that …………………………… In our considered view, the cost of purchases does include any capital expenditure incurred on the assessee on such property to make it liveable. As long as the costs are of such a nature as would be includible in the cost of construction in the normal course, even if the assessee has bought a readymade unit and incurred those costs after so purchasing the readymade unit – as per his taste and requirements, the costs so incurred will form integral part of the qualifying amount of investment in the house property. The use of words ‘purchased or construed’ does not mean that the property can either be purchased or constructed and not a combination of both the actions. A property may have been purchased as a readymade unit but that does not restricts the buyer from incurring any bonafide construction expenditure on improvisation or supplementary work. Accordingly, in our considered view, as long as the assessee has incurred the bonafide construction expenditure, even after purchasing the unit, the additional expenses so incurred would be eligible for qualifying investment under Section 54 ”
(Emphasis Supplied)
On perusal of above it is clear that the Co-ordinate Bench of the Tribunal had held that the use of words ‘purchased or construed’ does not mean that the residential house should either be purchased or constructed and not a combination of both the actions. We reject the contention of the Revenue that in the case of purchase and construction, ‘purchase’ should be treated as qualifying event for claiming benefit of Section 54F of the Act and that the cost of construction should be not be taken into consideration.
23. We note that the Revenue has taken a stand that the residential house purchased by the Assessee was habitable and therefore, any further reconstruction/renovation expenses incurred by the Assessee cannot be regarded as ‘cost of the new asset’. In this regard, we note that the Mumbai Bench of the Tribunal had, in the case of Rustom Homi Vakil vs. Assistant Commissioner of Income-tax, 12(3), Mumbai [2016] 69 taxmann.com42 (Mumbai)/[2016] 158 ITD 588 (Mumbai), held as under:
“Similarly, Section 54 of the Act does not impose any conditions or restrictions as to what constitute ‘habitable’ to get the benefit of deduction u/s 54 of the Act. The word ‘habitable’ is highly subjective and has to be understood and interpreted in the context of the socio-economic status and standing of the tax-payer in the society. Section 54 of the Act only provides that the tax- payer has to purchase or construct a new residential house. One tax-payer can purchase or construct new residential house property for say even Rs 10 lacs and another tax-payer can purchase or construct new residential house property for say Rs 500 lacs, depending upon their socio-economic status and standing in the society . In the above cases, there will be substantial and significant difference in the quality of construction material used and amenities required by both the tax-payer’s to make the house ‘habitable’ fit for living for their residential purposes, but both the tax-payer’s will be entitled for deduction u/s 54 of the Act provided other conditions as stipulated u/s 54 of the Act are fulfilled as section 54 of the Act does not stipulate any such restrictive conditions as to the ceiling on amount per-se of investment in purchase and /or construction of new residential house property which is rather linked to long term capital gain earned by the assessee on sale or transfer of residential house property , or as to type of residential house properties or quality of construction or amenities required by the tax-payer to make the house ‘habitable’ which would entitled the tax-payer for claiming the benefit u/s. 54 of the Act . The tax-payer keeping in view his socio-economic position and status in the society has to define as to what is ‘habitable’ residential house required to make the house fit for living/abode for the tax-payer for his residential purposes. Revenue cannot deny the benefit u/s 54 of the Act on the ground that expensive marble floorings or tiles are used in place of ordinary flooring or tiles etc. or a high quality expensive construction material is used by the tax-payer or more amenities are required by the tax-payer to make the house ‘habitable’ and more so when Section 54 of the Act itself does not stipulate any such restrictive conditions, thus, benefit u/s 54 of the Act cannot be denied to the tax-payer on these grounds as statute does not provide for such conditions/restrictions. Of course, the items of comfort purchased or installed in the new residential house so purchased or constructed by the tax-payer such as consumer electronic and entertainment equipments, air-conditioning equipments, furniture , beddings, electrical and other equipments etc. per-se does not fit into the definition of purchase or construction of the residential house entitling these items to the benefits u/s. 54 of the Act as these are items of comfort and are not part of the purchase or construction cost of new residential house property within the meaning of Section 54 of the Act and hence, benefits u/s 54 of the Act cannot be allowed for these items of comfort so purchased/installed by the tax-payer in the new residential house so purchased or constructed. If the tax-payer is allowed to purchase or construct the residential house without any ceilings as to the amount of investment u/s 54 of the Act , then merely because the tax-payer has purchased a residential house and thereafter followed it with alterations , additions and modifications carried out to construct the said purchased residential house to make it habitable for the tax-payer, benefits cannot be denied by the Revenue u/s 54 of the Act. It will be like treating equals as un-equals and treating un-equals as equals which is not permissible.” (Emphasis Supplied)
24. We concur with the above view taken by the Co-ordinate Bench of the Tribunal. Section 54F of the Act, as applicable, permitted an assessee to purchase or construct the residential house without any ceilings as to the amount of investment under Section 54F of the Act. Therefore, merely because an assessee has purchased a residential house and thereafter, followed it with construction/reconstruction to carry out alterations, additions and modifications to make it habitable depending upon the socio-economic status and standing in the society, the benefit of Section 54F cannot be denied by the Revenue.
25. In our view this issue can be examined from another perspective. Assuming the construction/renovation was carried out by the seller and the Assessee had purchased the residential house after the said renovation/construction for a higher purchase consideration (including the cost of such renovation/construction), the Revenue would have accepted the same as ‘the cost of new asset’ for the purpose of Section 54F of the Act. In addition, the seller would have claimed the cost of construction/renovation as cost of improvement while computing the capital gains and to that extent would have been at the same position. Now, since the construction/renovation has been carried out by the Assessee after the purchase of residential house, the Revenue has objected to the claim of deduction under Section 54F of the Act to the extent of cost of construction/renovation. As noted by the Co-ordinate Bench of the Tribunal in the case of Rustom Homi Vakil (supra) in case the contention of the Revenue is accepted it would amount to treating equals as un-equals, and more so when the stated object of introducing the provisions of Section 54F was to deal the issue of shortage of housing and giving impetus to construction activity.
26. In the case of Mrs. Rahana Siraj vs. Commissioner of Income-tax-I, Bangalore [2015] 232 Taxman 327 (Karnataka)[05-01-2015], referred to by the Co-ordinate Bench of the Tribunal in Rustom Homi Vakil (supra) and relied upon by the Learned Authorised Representative for the Assessee during the course of hearing, following substantial question of law had came up for consideration before the Hon’ble Karnataka High Court:
“Whether the Tribunal is right in holding that the appellant is not entitled to make a deduction in respect of additions/alterations made to the property after purchase in order to have a normal living in computing the deduction under Section 54F of the Act, when no such restriction has been provided under Section 54F of the Act?”
Deciding the issue in favour of the Assessee, the Hon’ble Karnataka High Court held as under:
“8. Insofar as the second substantial question of law is concerned, it is not 12 in dispute that the property purchased by the assessee was habitable but had lacked certain amenities. The assessee has spent nearly about Rs. 18 lakhs towards removal of mosaic flooring and laying of marble flooring, alteration of the kitchen, putting up compound wall, protecting the property with grill work and attending to other repairs. Section 54F of the Act provides that if the cost of the new asset, which is to be taken into consideration while determining the capital gain, the words used is “cost of new asset” and not “the consideration for acquisition of the new asset“. In law, it is permissible for an assessee to acquire a vacant site and put up a construction thereon and the cost of the new asset would be cost of land plus (+) cost of construction On the same analogy, even though he purchased a new asset, which is habitable but which requires additions, alterations, modifications and improvements and if money is spent on those aspects, it becomes the cost of the new asset and therefore, he would be entitled to the benefit of deduction in determining the capital gains. The approach of the authorities that once a habitable asset is acquired, any additions or improvements made on that habitable asset is not eligible for deduction, is contrary to the statutory provisions. The said reasoning is unsustainable. To that extent, the impugned order passed by the Tribunal as well as the Lower authorities require to be set-aside and it is to be held that in arriving at cost of the new asset, Rs. 18 lakhs spent by the assessee for modification, alterations and improvements of the asset acquired is to be taken note of. Thus, the second substantial question of law is answered in favour of the assessee and against the Revenue. ….” (Emphasis Supplied)
27. In the present case, the Assessee had incurred substantial construction expenses of INR.86,05,000/-, as against the purchase cost of INR.49,50,000/- and stamp duty/registration and allied expenses of INR.4,47,000/-. The case before us not one in which the Revenue has contended that the cost of construction includes expenditure incurred on the items of comfort such as consumer electronic & entertainment equipments, furniture, beddings, etc. which as per the decision of the Tribunal in the case of Rustom Homi Vakil (supra), per se, do not qualify as purchase or construction expenses. The genuineness of the expenses incurred for construction/renovation has also not been doubted by the Revenue. Therefore, given the facts and circumstances of the present case and keeping in view the language of Section 54F of the Act and judicial precedents discussed hereinabove, we hold that deduction of INR.1,29,52,940/- claimed by the Assessee under Section 54F of the Act taking the cost of purchase and cost of construction/renovation as ‘cost of the new asset’ is to be allowed. Accordingly, the partial disallowance of deduction under Section 54F of the Act made by the Assessing Officer is deleted. Thus, Ground No. 1 to 6 raised by the Assessee are allowed.
28. In result, the appeal preferred by the Assessee is allowed.
Order pronounced on 10.08.2026
