Smt. Sajida Begum Vs ITO (ITAT Bangalore)
Income Tax Appellate Tribunal (ITAT) Bangalore Bench recently delivered a judgment in the case of Smt. Sajida Begum Vs. ITO, allowing an appeal by the assessee and overturning a decision by the Commissioner of Income-tax (Appeals) [CIT(A)]. The core issue in contention was the denial of a deduction claimed under Section 54F of the Income Tax Act, 1961, for Assessment Year 2009-10. The case hinged on the validity of oral gifts (Hiba) made under Mohammedan Law and the assessee’s eligibility for capital gains exemption.
Background of the Case
Smt. Sajida Begum, an individual assessee, sold a vacant site on September 4, 2008, for Rs. 65,65,000. Subsequently, on July 9, 2009, she purchased another vacant site for Rs. 42,75,000 and deposited the remaining capital gain in the Capital Gains Account Scheme with Syndicate Bank. Her intention was to claim full exemption from capital gains tax by investing the entire sale consideration in acquiring a new site and constructing a residential house on it, as permitted under Section 54F of the Act.
Section 54F allows exemption from capital gains tax on the transfer of any long-term capital asset (not being a residential house), provided the entire net consideration from the sale is invested in constructing a new residential house within three years after the date of transfer. A crucial proviso to Section 54F(1) stipulates that the assessee should not own more than one residential house, other than the new asset, on the date of transfer of the original asset.
