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A construction in inhabitable position cannot be equated with a residential house. If a person cannot live in a premises, then such premises cannot be considered as a residential house. In our opinion, investment in the construction would be complete as a house only when such house becomes habitable.
Issue- Whether while computing the capital gain, exemption available under the head Capital Gain should be given effect and then only the provisions for set off and carry forward of losses should be applied under the Act?
The dispute is regarding allowability of exemption under section 54 of the Act and computation of long term capital gain in respect of exchange of old flat with a new flat and cash compensation under development agreement with the builder.
Assessee, owner of a residential property, entered into a development agreement for construction of flats with a developer. Under agreement, assessee received 7 flats towards his share. He claimed exemption u/s 54F on the entire amount of capital gain.
Issue – Assessee in this appeal had sold a residential house at Film Nagar, Hyderabad, during the relevant previous year, for a sum of Rs. 6,50,00,000/-. After deducting indexed cost of acquisition, the long term capital gain came to Rs. 5,98,25,430/-.
The assessee before execution of the sale deed purchased the properties vide document No. 8547/2008 on 18.09.2008 for Rs. 47,53,223/-, document No. 8743/2008 on 04.10.2008 for Rs. 51,47,014/- and document No. 8295/2008 on 24.09.2008 for Rs. 28,68,302/-
The facts, in brief, are that during the year the assessee sold a shop for Rs.18 lacs on 17.1.2005 and declared sale price while working out the capital gain and investment in construction of a residential house.
As regards another facet of addition in this case which has resulted from enhancement made by the Ld. Commissioner of Income Tax (A) by holding that assessee is not eligible for deduction u/s. 54F(1) on the payment of Rs. 55,70,800/-. This has been denied on the ground that the payment was made by M/s Capital Advertising Pvt. Ltd. wherein the assessee was Director and not by the assessee himself. In this regard, it is the assessee’s claim that the assessee has duly made the arrangement for booking of the flat and necessary documentation were made by the assessee in his individual capacity.
Exemption claimed by the assessee under S.54 of the Act cannot be denied on the ground that the assessee has not utilised the sale consideration received from the sale of flats itself, in purchasing the plot. Law is well settled by the judicial precedents that investment in purchase of pot for construction of house would entitle an assessee to claim exemption u/s.54 or 54F of the Act. Board’s circular No.667 dated 18.10.1993 also says so.
Extract Of Section 54B of Income Tax Act 1961 54B. (1) Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee being an individual […]
