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Assessee will be entitled for benefit of deduction U/s. 54F of Act if he demolished new asset being residential house purchased by him within period of three years from the date of purchase in violation to Section 54F(3) of Act.
The Honble Bombay HC in the above stated case held that when the wordings of law are quite clear then law should be applied in its letter and no space could be made for logical or beneficial or constructive interpretation.
Where a residential house was transferred and four flats in a single residential complex were purchased by the assessee, it was held that all four residential flats constituted “a residential house” for the purpose of Section 54 and that the four residential flats cannot be construed as four residential houses for the purpose of Section 54.
Where assessee was precluded from construction of new house due to prohibition of construction in his area then assessee could seek relaxation in terms of section 119(2)(c) at time of claiming deduction under section 54F and such claim could be made only within time period, as prescribed under Act for making such claim.
Claiming Of Deduction Under Section 54F Of The Income Tax Act, 1961 When Property Builder Could Not Complete The Flat While Assessee Fulfilled Condition Under Above-Mentioned Section.
The assessee has been denied the deduction u/s 54F of the Act. the assessee has duly purchased and made investment in the residential bungalow at Juhu(new asset) along with co-owner Smt. Chhaya B. Parekh. The said bungalow was demolished for the purposes of redevelopment.
Amount deposited but not utilized wholly or partly for purchase or construction of new asset within the specified period will be charged to tax under Section 45 in the previous year in which the period of three years from the date of transfer of original asset expired.
Assessee submitted the documentary evidence to show that after purchasing the property there was a civil suit filed by the other parties and the assessee could not complete the construction and the licence for constructing the house was accordingly delayed.
In this case assessee sold a property at Rs.20 lakhs against circle rate of 89 lakhs and spent more than a crore in construction of new residential property, exemption u/s 54F was claimed but the AO allowed exemption only with reference to 20 lakhs and balance amount was assessed as capital gain.
Assessee had not invested in Capital Gain Account Scheme before the due date under section 139(1) but complied with the conditions under section 54F(1). The provisions of section 54F are beneficial provisions and are to be considered liberally on the aspect of limitation period. However the investment in residential property is a must which the assessee had complied with evidence.
