INCOME TAX ACT, 1961

Section 54F

Capital gains - Deduction under section 54F - Denial on the ground of non-completion of construction within 3 years -

Assessee declared long-term capital gains on account of sale of plots and claimed exemption under section 54F in respect of purchase of Villa project. AO denied exemption on the ground that assessee had not deposited amount in the capital gains scheme nor she got the house constructed within the period of three years from the date of sale of original asset. Held: Section 54F only provides that sale proceeds should be invested in construction of house property within three years. In other words, in order to get the benefit under section 54F, assessee need not complete construction of house in all aspects and occupy it. It is enough if the assessee established that the investment of the entire net consideration was made within stipulated period and the construction was mostly completed. The essence of the said provision is whether assessee who received capital gains has invested the sale proceeds in a residential house. Once it is demonstrated that consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house, even though transactions are not complete in all respects and as required under the law, that would not disentitle the assessee from said benefit. Therefore, disallowance of exemption was not justified.

Relied:Pr.CIT v. C.Gopalaswamy [2016 (6) TMI 643 (Karn-HC), CIT v. Sambandam Udaykumar [2012(3) TMI 80 (Karn-HC) : 2012 TaxPub(DT) 1804 (Karn-HC), Smt.Babitha Kemparaje urs v. CIT [ITA No. 699/Bang/2014] : 2017 TaxPub(DT) 4475 (Bang-Trib) and T.Shiva Kumar v. ITO [2016(3) TMI 52 (Bang-Trib) : 2016 TaxPub(DT) 1277 (Bang-Trib).