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The Hon’ble Chennai ITAT has in the case of B.Sivasubramanian,v/s ITO has held that there is no condition in the provisions of SEC 54F of the I.T Act,1961 that warrants that the building plan of the residential house constructed should be approved by the Municipal Corporation or any other competent authority.
The provisions of section 54F mandates the construction of a residential house, within the period specified. However, there is no condition that the building plan of the residential house constructed should be approved by the Municipal Corporation or any other competent authority. If any person constructs a house without approval of building plan, he will be raising construction at his own risk and cost. As far as for availing exemption u/s.54F, approval of building plan is not necessary.
A bare reading of section 54F clearly shows that the assessee is entitled for exemption in case he / she constructs a residential house within a period of three years after the sale of the capital asset. However, sub clause (4) of section 54F clearly says that the unutilized portion of the net sale consideration which is otherwise liable for capital gain tax shall be deposited in the capital gain account scheme within the period of due date for filing return of income u/s 139.
ITAT Ahemdabad has held in the case DCIT Vs. Shri Radhakant M. Tripathy that The very fact that the legislature has allowed investment in new property one year prior to the date of transfer establishes in no uncertain terms that it need not be the sale
It is clear from the order of the CIT(A) that the assessee had commenced construction of the building within a period of three years from the date on which the property on the transfer of which capital gain arose.
Capital gains from long-term capital asset – Investment in a flat under the self-financing scheme of the Delhi Development Authority – Whether to be treated as construction for the purposes of capital gains Circular : No. 471 [F. No. 207/27/85-IT(A-II)], dated 15-10-1986. 1. Sections 54 and 54F provide that capital gains arising on transfer of […]
Mere non residential use subsequently would not render the property ineligible for benefit u/s.54F, if it is otherwise a residential property, as held by the Delhi Bench of the Tribunal in the case of Mahavir Prasad Gupta Vs JCIT (5 SOT 353).
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.
Condition precedent for claiming benefit u/s 54F is the capital gain realized from the sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house.
Exemption u/s. 54F has been granted to the assessee with a view to encourage construction of one residential house. The construction/purchase of a house other than one residential house is not covered by section 54F of the Act.
