Section 54F exemption not allowable if no property purchased or constructed within stipulated period

Asha Bhausaheb Thube Vs ITO (ITAT Pune)

Section 54F of the Act requires assessee to purchase new residential house within a period of Two years after the date of Sale or construct within a period of Three years. In this case, it is a fact that assessee has neither purchased nor constructed a residential house within a period mentioned in the Section. The impugned property was sold vide registered sale deed dated 31/08/2012. As per the clause 6 of the said registered sale deed, the impugned property was kept mortgaged with State Bank of India ,the State Bank of India vide registered release document of mortgaged property dated 29/06/2012 , released the impugned property due to repayment of loan. Thus , it is an admitted position, that State Bank of India by registered document released the mortgaged property on 29/06/2012. It is also mentioned in clause 9 of the Registered Sale deed dated 31/8/2012, that possession of the impugned property was handed over to the buyer of the property. It means on the date of transfer of the impugned property there was no bar on the assessee. The SBI has filed petition before Debt Recovery Tribunal -II Mumbai, in the said petition on page 15, the SBI has stated that property at survey no.63/1A, 63/1B have been subsequently released from the mortgage charge. Thus even SBI has admitted the fact. The assessee claimed that amount was blocked by the Bank. However, it is an independent transaction of the assessee that assessee allowed the Private Limited Company i.e. Prathamesh Ceramics Pvt. Ltd., to obtain the loan against the impugned property which was sold during the year. The transaction of the Prathamesh Ceramics Pvt. Ltd., has nothing to do with assessee’s transaction. These are independent transactions. On the date of sale the impugned property was not mortgaged, rather SBI released it much early on 29/6/2012. Thus, on the date of sale (31/8/2012) when the assessee received the sale consideration, the assessee was free to utilise it as per his own free will. As per Section 54F of the Act, it was mandatory for the assessee either to purchase or construct the new residential house within the stipulated period. The assessee failed to do so. Therefore, the disallowance has to be made in the year of sale of impugned property, on which Long Term Capital Gain has been calculated i.e. during the A.Y. 2013-14. The assessee’s claim that disallowance under section 54F should be in A.Y. 2016-17 does not have any merit. Therefore, the AO has rightly disallowed the assessee’s claim of Section 54F of the Act in the A.Y. 2013-14.

FULL TEXT OF THE ORDER OF ITAT PUNE

This is an appeal filed by the Assessee directed against the order of ld.Commissioner of Income Tax(Appeals)-1, Nashik, Appeal No.Nsk/CIT(A)-1/748/2015-16dated 21.11.2016 for the Assessment Year 2013-14.The Assessee raised following grounds of appeal:

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