DCIT Vs Vellore Subramanian Saravanan (ITAT Chennai)
Land Bought Early Still Qualifies: ITAT Says 54F Covers Full House, Not Just Bricks; Encroachers Out, Exemption In: ITAT Allows 97 Lakhs as Cost of Improvement!
Assessee sold land on 31.03.2015 & earned long-term capital gains. To claim exemption, he constructed a residential house r & invested a total of ₹13.43 crore. Out of this, ₹1.89 crore represented construction cost & ₹11.43 crore was the cost of land purchased on 01.02.2013. AO accepted deduction u/s 54F only to the extent of the construction cost, disallowing the land cost on the ground that the land was purchased more than one year before the date of transfer, thus allegedly violating the condition under section 54F.
CIT(A), however, relied on the Madras High Court judgment in C. Aryama Sundaram v. CIT & held that the term “cost of new residential house” includes both the land & the construction, & that construction within three years is sufficient compliance. The land is an inseparable part of the residential house. As the High Court had already settled this issue, CIT(A) allowed the entire claim.
Revenue challenged this, arguing that the land purchase was beyond the one-year window & that the High Court decision could not be relied upon since the Supreme Court dismissed the SLP on low tax effect. Tribunal rejected the Revenue’s arguments, reiterated that the jurisdictional High Court decision is binding, & emphasized that dismissal of SLP on low tax effect does not nullify the legal proposition. It confirmed that section 54F relief covers the entire investment in the new residential property, including land, especially when the construction is completed within the statutory period. Accordingly, the Revenue’s appeal was dismissed.
