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On a plain reading of the provisions of section 54F of the Act, we do not find anything therein to suggest that the new residential house acquired should be situated in India. The jurisdictional High Court in the case of Mrs. Jennifer Bhide (supra) has held that introducing a word which is not there into a section amounts to legislating when Parliament has not used these words in the said section.
Section 54F is intended to encourage construction of or acquisition of residential house with the aid of the proceeds from the transfer of any long term capital asset, which is not a residencial house. The provision contemplates computing the cost of the residential building, but the value of the plot on which the farm house stands and the land appurtenant could also be considered.
CIT Vs. Gita Duggal – Section 54/54F uses the expression a residential house. The expression used is not a residential unit. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use.
Brief facts of the case are that the assessee is a director in M/s. Veen Promoters Pvt. Ltd. There was a survey u/s. 133A of the Act on 14.7.2009 in the case of M/s. Veen Promoters Pvt. Ltd. The assessee filed return of income for the A.Y. 2008-09 on 31.7.2009 declaring total income
On examining section 54 and 54F, we find that the provision contained u/s 54 including the proviso are parimateria with section 54F of the Act. The proviso to section 54 also lays down that if the amount of capital gain is not utilized towards construction of residential house within a period of 3 years from the date of transfer of original asset, then, it will be charged to capital gain u/s 45 of the Act in the year in which the period of three years from the date of transfer of the original asset expires.
The new residential property was acquired in the joint names of the assessee and his wife. The income tax authorities restricted the deduction under Section 54F to 50% on the footing that the deduction was not available on the portion of the investment which stands in the name of the assessee’s wife.
If Assessee Possess more than one house, it can result in denial of deduction under section 54F relief even if one of them is in bad condition.
Section 54 and 54F apply under different situations. While sec. 54 applies to long term capital gain arising out of transfer of long term capital asset being a residential house, sec. 54F applies to long term capital gain arising out of transfer of any long term capital asset other than a residential house. However the condition for availing exemption under both the sections is purchase or construction of a new residential house within the stipulated period.
Though the respondent-assessee had purchased flat Nos. 416A and 516A it was only purchase of one residential house. Further, the Tribunal held that two flats were joined together before the respondent assessee became the owner of the two flats. The Certificate from the society also established the fact that two flat Nos. 416A and 516A were joined together and were considered as one residential house.
Raj Babbar v. ITO – Based on the factual matrix of the present case, where the assessee invested total full value consideration of Rs. 16,87,000/- (as per the SRO) in the residential house, which is one house only as it has only one kitchen, and these FVC is less than the invested amounts of 17,65,752/-, during the specified period, the assessee is not chargeable to tax on the capital gains u/s 45 of the Act.
