Case Law Details

Case Name : Addl. CIT Vs Narendra Mohan Uniyal (ITAT Delhi)
Appeal Number : ITA No. 1624 /Del/2009
Date of Judgement/Order : 31/08/2009
Related Assessment Year : 2006- 07
Courts : All ITAT (4213) ITAT Delhi (925)

RELEVANT PARAGRAPH

9. Provisions of Section 54F which deal with provisions of Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house, read as under:- 54f. (1) [Subject to the provisions of sub-section (4). where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to is the original asset), and the assessee has, within a period of one year before or (two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,…….. ……… ……… ……… ……… ……… ….. ” 10. It is crystal clear from the plain reading of Section 54 & 54F that exemption is allowable in respect of amount invested in the construction of a residential house. There is no rider u/s 54F that no deduction would be allowed in respect of investment of capital gains made on acquisition of land appurtenant to the building or on the investment on land on which building is being constructed. When the land is purchased and building is constructed thereon, it is not necessary that such construction should be on the entire plot of land, meaning thereby a part of the land which is appurtenant to the building and on which no construction is made, there is no denial of exemption on such investment. Therefore, the contention of the learned DR that there is a distinction with respect to investment in appurtenant land as per Section 54 and 54F is not tenable at all. In the instant case, there is no dispute to the fact that investment of capital gains was made within the statutory period and moreover within the same financial year. Another plot of land which was purchased by the assessee was adjacent to the plot already purchased during the relevant year itself out of capital gains. Only because construction was made on the first plot of land, he exemption claimed in respect of investment made in adjacent plot of land cannot land the exemption claimed in respect of investment made in adjacent plot of land cannot be declined when all the other conditions as stipulated u/s 54F are being satisfied. While dealing with the objection of the AO, the CIT (A) has categorically given a finding that the land so purchased was one piece of plot having area of 2000 sq.mtr. Both these plots were having 1000 sq.mtr. of land. Both the plots formed part of one residential unit and are contiguous and adjoining to each other. The comments of the AO to the effect that exemption u/s 54F is eligible only for construction of house is not tenable insofar as even cost of land forming part of the residential unit on which no construction is done is also, eligible for exemption u/s 54F. Thus, the cost of vacant land appurtenant to and forming part of the residential unit is to be considered for claim of exemption u/s 54F even if no construction has been done on the appurtenant land. The provisions of Section 54 clearly provide for exemption if the net consideration received as a. result of transfer of any capital asset, other than a residential house, is invested in the purchase or construction of a residential house. The new residential house is not debarred from having a land appurtenant to any size and it is also not the case of the AO that the land appurtenant to the building is not entitled to exemption u/s 54F. Had it been a case of land not appurtenant to the building so constructed, then the contention of the AO to the effect that investment of capital gains made in the second plot which is not appurtenant to the building so constructed is not eligible for exemption, can be favorably accepted. The case law cited by the learned DR in the case of Zaibunnisa Begun (supra) is entirely on different facts insofar as the appurtenant land was not used by the assessee for any other purposes. On the contrary, the expression “land appurtenant” in section 54 of the Act was held to be construed in a broad and non-technical sense and it was held that the meaning given to that expression in other Acts should be irrelevant. The Hon’ble Jurisdictional High Court in the case of Sunita Aggarwal (supra) has observed that while claiming exemption under section 54, the property though purchased from two different persons by virtue of four different sale instances in the shape of four different parcels, constitutes one single residential unit of the assessee. 11. In view of the above discussion and keeping in view the detailed observation made by the CIT (AP at paragraphs 4,5 and 6, we can safely conclude on proper appreciation of material available on record that the property purchased by the assessee was a single unit and was being used for residential purposes, therefore investment made in respect of both the plots was eligible for claim of exemption u/s 54F. We, therefore, uphold the order of CIT (A) and dismiss the appeal filed by the Revenue. As the cross-objection are basically in support of the CIT (A)’s action, we allow the cross-objection in terms indicated herein above.

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Category : Income Tax (24919)
Type : Judiciary (9830)

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