INCOME TAX ACT, 1961

Section 54F

Capital gains - Exemption under section 54F - Utilization of sale proceed for the purpose of construction of a residential property - Within period of 3 years

Assessee sold 3000 equity shares in a company and declared long term capital gains. He claimed exemption under sections 54EC and 54F. As regards the claim of exemption under section 54EC, there was no dispute. With regard to exemption under section 54F, AO called for information from the builder regarding the amount invested in construction / purchase of a flat. Builder submitted that assessee had made payment of only Rs. 1,75,83,000 instead of Rs. 1,90,00,000 claimed by the assessee. Therefore, AO recomputed the exemption under section 54F and accordingly, excess exemption claimed was added to the assessee's total income. Held: In the light of the judgments of CIT v. Sri.K.Ramachandra Rao [ITA Nos.494 and 495 of 2013 and 46 and 47 of 2014 dt. 14-7-2014 : 2015 TaxPub(DT) 1933 (Karn-HC)] and Sambandam Udaykumar [(2012) 345 ITR 389 (Karn-HC) : 2012 TaxPub(DT) 1804 (Karn-HC)] it is clear that assessee would be entitled to exemption under section 54F with regard to utilization of sale proceeds for the purpose of construction of a residential property within a period of three years from the date of sale of old asset. In the instant case there was no clarity as regards the date of utilization of the amounts apart from Rs. 1,75,83,000. Therefore, matter needed to be examined by AO and assessee shall be entitled to exemption under section 54F with regard to utilization of sale proceeds which are within three years from the date of sale of original asset.

Followed:CIT v. K. Ramachandra Rao ITA Nos.494 and 495 of 2013 and 46 and 47 of 2014 dt. 14-7-2014 : 2015 TaxPub(DT) 1933 (Karn-HC) and CIT v. Sambandam Udaykumar (2012) 345 ITR 389 (Karn-HC) : 2012 TaxPub(DT) 1804 (Karn-HC).