Case Law Details
S.M. Shoba Vs ITO (ITAT Bangalore)
Facts- The assessee is an individual and filed her ROI for year under consideration on 05.08.2016 declaring total income of Rs. 8,66,860/-. The said return was selected for scrutiny and statutory notices were issued to assessee. In response to statutory notices, representative of assessee appeared before the AO and filed requisite details called for. From the assessment order, the AO noted that assessee had declared income from other sources of Rs. 8,66,860/- and LTCG of Rs. Nil. We observe that assessee claimed deduction u/s. 54F of Rs.4,64, 16,154/- being cost of acquisition of residential property on Site No. 839/21, 37th F Cross, T Block, Jayanagar, Bangalore on 10.2.2011 for an amount of Rs. 1,52,02,905/- and construction of residential house on the same property value of Rs. 3,12,13,249/-.
The AO observed that assessee also constructed a residential house on the same property. As per valuation report, the construction cost was Rs.3, 12,13,249/-. Therefore, the deduction u/s. 54F was restricted to Rs. 3,12,13,249/-. The difference between the total Capital Gains and Cost of construction Rs. 14,90,260/- (Rs. 3,27,03,509-Rs. 3,12,13,249) was brought to tax and the LTCG was computed at Rs. 14,90,260/-. The AO was of the opinion that the property acquired by assessee on 10.02.2011 was before the transfer of original asset and accordingly the claim u/s. 54F was denied.
Conclusion- The passport to derive benefit under sec. 54F(1) is investment in construction of property within the period required u/s 54(1)F or to invest in residential property within the stipulated time for enabling deduction under section 54F of the Act.
Hon’ble Karnataka High Court in decision of CIT vs. Sambandam Udaykumar reported in 251 CTR 371 took the view that, under provisions of section 54F of the Act, the condition preceded is that, capital gains realised from sale of capital asset should have been parted by assessee and invested or constructed a residential house, as the case may be. Hon’ble court also observed that, the essence of the purpose of section 54F, is whether, the assessee who received the capital gain has invested in a house. Once it is demonstrated that the consideration received on transfer of capital asset has been invested in or construction of residential house, even though the construction is not complete in all respect as required under law, assessee cannot be denied benefit under section 54F. Further on a plain reading of decision of Hon’ble Karnataka High Court in case of CIT Vs. Sambandam (Supra) reveals that, there is no particular stage of completion of construction, that is contemplated. Ld. AR submitted that, the construction was later on completed and the sale deed was registered in favour of assessee on 05/07/2019 in respect of transfer of ownership of residential property. There is nothing placed by revenue on record to demonstrate any other violation in support of their arguments.
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