There is lot of importance of exemption available
under section 54 from Long term capital gain
and same had been discussed in part –I. The link of the same is given
below for your kind reference.
Given below provided more recent judgments in respect
of exemption under section 54 which will enable yourself with more knowledge on
the subject.
·
Agricultural Land: For the purpose of determining capital gain on the
sale of Agricultural l
and, the existence of the Agricultural land should be
measured from the approachable road. Not as per sec. 2(14)(iii)(b)
stipulations. Refer, CIT .v. Shabbir Hussain Pithawala, 265 CTR 606.
The inability of the
assessee to use land for agricultural purposes due to vagaries of nature and
nonavailability of resources cannot be a ground to deny deduction under s. 54B.
Refer, ACIT v. N. Raghu Varma, 24 ITR 616 (Hyd.)(Trib.)
·
Renovation : Assessee claimed cost of renovation as part of cost
of acquisition of new residential house for purpose of deduction under S. 54 of
the Act. The AO disallowed cost of renovation holding that renovation was not
in connection with any structural damage to house and was only in respect of
plastering and renovating of wires which cannot be treated as making house
habitable. CIT (A) confirmed disallowance made by AO. The Tribunal held that
the residential house for purpose of section(s) 54 and 54F means a habitable
house and Investment made up to stage of making house as habitable to be
considered as investment in purchase of house. Assessee chose to purchase a
house and incurred bonafide expenditure on improvement/renovation for making it
habitable it would be eligible as investment in new asset for section 54 of the
IT Act. Refer, Meher R. Surti .v. ITO, 61 SOT 5.
Similar judgement
provided in the case of CIT. .v. R. Balaji (Dr.), 222 Taxman 305 where it had
been held that Extent of construction of
residential building and facilities provided in such building are not relevant.
·
Rural Industrial Undertaking : The assessee had sold its land located at City belt
area and set up an industrial undertaking at Koppur village and claimed the
exemption under section 54G. The Tribunal held that the object of enacting section 54G was to deurbanize and remove
industries from populated area and promote industrialization in underdeveloped
areas. Section 54G is a provision intended for promoting inclusive growth of
the country. In such a situation, giving a very narrow interpretation to the
said section will defeat the very
purpose thereof. Thus the assessee was eligible for claiming exemption
under section 54G. Refer, Edac Engineering Ltd. .v. ACIT, 159 TTJ 526.
·
Construction : Benefit cannot be denied on ground that construction of house had commenced before
sale of shares 'original asset'. Refer, CIT .v. Bharti Mishra, 222 Taxman 2.
However, in the case
of Farida A. Dungerpurwala v. ITO, VOL 35 PG 205, the ITAT held that Deduction
available only if assessee constructs new house within three years after date
of transfer and Assessee not entitled to claim deduction in respect of cost of
new flat as old flat sold before the construction of new flat.
In the case of CIT
.v. Ashok Kumar Ralhan, 360 ITR 575, it was held that demolition of old house
and purchase of new house entitled for exemption.
ITAT in the case of CIT
.v. Bharti Mishra, 98 DTR 1, S.54F does not stipulate that to claim
exemption the construction of house should commence before the date of sale of
shares. Exemption could not be denied on the ground that the construction of
house had commenced before the date of sale of shares
Chandigarh ITAT in
the case of Binder Khokher (Smt.) .v. ACIT, 59 SOT 141(URO), held that Where
assessee was a member of a housing society which had entered into an agreement
with a developer, whereby members were
to be given flats in lieu of their plot, deduction under section 54F could not be allowed when construction of
such flat had not yet started as it could not be said that amount had been invested in a new residential
house.
Investment in
construction of new residential property made by assessee is not entitled to
deduction under section 54F to the
extent the same is made before the sale of existing residential property.
Refer, Nimmagadda Sridevi (Smt.) v. DCIT, 58 SOT 54 (Hyd.)(Trib.).
Assuming the construction is not completed within three
years ,the exemption can be withdrawn the period when three years expires. [S.54F]. Refer, Pushpa
Devi Tirbrewala (Smt.) v. ITO, 58 SOT 41 (Hyd.)(Trib).
New flat received
in exchange of old flat, which
constructed by builder amount to construction and entitled to exemptions.
Refer, Veena Gope Shroff (Smt.) v. ITO, 58 SOT 36 (Mum.)(Trib.).
Assessee made
payments out of consideration of ancestral property to brothers and sisters of
forefathers under the Muslim law. Since there was no material to show
recipients had title over property, assessee was not entitled to deduction of
payments/ If the assessee constructed a residential house , the onus is on
assessee to prove that the construction of new residential building took place.
In the absence of any material to suggest the construction of the house ,out
the sale proceeds of the land the assessee was not entitled for deduction under
section 54F. Refer, Syed Nawab Hussain v. ACIT , 24 ITR 180.
Assessee sold a
commercial plot of land on 14-10-2005 and invested total sale consideration in
construction of a residential house within three years after transfer of plot
Said house was completed by end of October, 2008. Assessee claimed exemption
under section 54F in respect of capital gain arising from sale of plot. Once
assessee had invested total sale consideration into construction of a
residential house within three years after transfer of plot, she was entitled
to exemption under section 54F even though house was completed after expiry of
three years from transfer of plot. Refer, Usha Vaid (Smt.) v ITO, 53 SOT
385(Asr.)(Trib.).
·
Investment in
Bond : The deeming
fiction of long-term capital gain to be
treated as short-term capital gain is restricted only to section 50 and
would have no application to other provisions such as section 54EC. Refer, CIT
.v. United Paper Industries, 221 Taxman 158.
Similar decision find
in the case of CIT .v. Aditya Medisales Ltd, 218 Taxman 477, where it had been
held that Since capital gain arose out of long term capital asset and same was
invested in specified assets, exemption under section 54EC could not be denied
on account of fact that deeming fiction of shortterm capital gain was created under section 50.The
assessee cannot be denied the exemption.
The assessee sold
capital assets and earned long term capital gain of Rs. 1.10 Crores. The
Assessee invested Rs. 50 Lakhs each in two different assessment years in REC
Bonds but within the period of six months. The Revenue allowed only a claim of
Rs. 50 Lakhs and the remaining was denied. The Tribunal in the case of Smt.
Sriram Indubal v. ITO [2013] 32 taxmann, 118 (Chennai) held that if the
assessee had invested Rs. 50 Lakhs each in specified assets in two different
financial years but within six months from date of transfer of capital asset,
restrictive proviso to Sec. 54EC would not limit exemption claim to Rs. 50
Lakhs only and the exemption claimed by the assessee upto Rs. 1 Crore was allowed. Refer, Coromandel Industries
(P.) Ltd. .v. ACIT, 145 ITD 171.
Under a development
agreement, assessee-co-owner of land received, apart from built-up area,
monetary consideration .Assessee invested said amount in NABARD Capital Gains
Bonds within six months . AO noted that investment was made in assessment year
2006-07 while assessee was claiming exemption under section 54EC for assessment
year 2005-06 . AO, thus, rejected assessee’s claim. Provisions of section 54EC
do not make any reference to assessment year in which investment is to be made
but only lays down a condition of 6 months period of time after date of
transfer of capital asset .Since investment in long term specified asset was
made by assessee within period of 6 months after date of transfer of capital
asset, assessee’s claim for deduction was to be allowed. Refer, ITO v. Chetana
H. Trivedi (Mrs.), 53 SOT 544 ( Mum)(Trib.).
·
Joint/ other Names: Sale of agricultural land in joint names of assessee
and his son and purchase of new land in assessees sons name. Assessee entitled
to deduction. Refer, Bant Singh v. ITO, VOL 367 PG 679.
The assessee sold
agricultural land and made investment in purchase of agricultural land and residential flat in the name of her two
married major daughters. While computing LTCG, the assessee claimed exemption u/s. 54B &
54F. The A.O. rejected exemption claimed by the assessee on ground that the
properties were not registered in the name of assessee. The CIT(A) upheld
A.O.’s order. The Tribunal dismissing the appeal held the ‘assessee’ used in
Sec. 54B/54F could not be extended to
include major married daughters. Therefore, assessee was not entitled to claim
exemption in respect of investment made in the name of her daughters. Refer, Ganta
Vijaya Lakshmi .v. ITO, 145 ITD 150.
House purchased in
the name of daughter. Assessee having purchased flat in the name of his minor
daughter is entitled to deduction u/s. 54F. A bare reading of s. 54F(1) makes
it clear that there is no requirement that the house has to be purchased in the
name of the assessee only. Refer, N. Ram Kumar v. ACIT, 79 DTR 386.
·
Re-assessment : In the case of CIT v. M. J. Siwani, 366 ITR 356, assesse
claimed deduction under section 54 but department while sending notice under
section 148 typed it wrongly as section 54E and hence notice not valid.
·
Different units: Two flats, even though acquired under different
agreements & from different sellers, are one residential unit if there is a
common kitchen-Entitled exemption. Refer, CIT .v. DevedasNaik, Mumbai High
Court.
Expression 'a
residential house' appearing in sections 54 and 54F has to be understood in a
sense that building should be of a
residential nature and word 'a' should not be understood to indicate a singular
number. Refer, Vittal Krishna Conjeevaram v. ITO, 144 ITD 325.
Assessee purchased
two flats which were joined together before the purchase , exemption under
section 54 was rightly allowed in respect of both the flats treating them as
one residential house .The Tribunal decided the issue in favour of assessee
following the ratio of ITO v.SushilM.Jhaveri (2007) 292 ITR 1(SB)(Trib.). On
appeal by revenue the High Court affirmed the view of Tribunal. Refer, CIT v.
Raman Kumar Suri, 81 DTR 33 (Bom.) (High Court).
capital gain arising
from 2 separate transactions will be exempt u/s 54 and sec 54F of the act if
the entire gains are invested in a single house. Refer, Venkata Ramana Umareddy
v DCIT, ITA no 55 of 2012 Hyd ITAT.
·
International property : Not necessary that property should be purchased in India
itself. Assessee investing gains in residential property in Singapore is entitled
to exemption. Refer, N. Ranganathan v. ITO, VOL 33 PG 444.
Assessee claimed
exemption for capital gains on the basis of investment of consideration in residential property in foreign country.
Intimation under section 143(1)(a) denying exemption is not permissible. The assessee filed a petition
for rectification under section 154. The Assessing Officer held that investment
made outside India could not be considered for the purpose of exemption
under section 54F and dismissed the
petition under section 154.The Assessing Officer was directed to initiate
proceedings permissible under law to bring the question of exemption under section
54F of the Act for scrutiny and to pass
a fresh order on the petition filed under section 154 of the Act on the
subject-matter raised in the petition. Refer, Sushiela Natarajan (Ms.) .v. ITO,
28 ITR 237.
There is nothing in
s. 54F to suggest that the new residential house acquired should be situated in
India and therefore, assessee is eligible to claim exemption u/s. 54F
notwithstanding the fact that the house property purchased in outside India.
Refer, Vinay Mishra v. ACIT, 79 DTR 1.
·
Date of possession: Assessee had paid 96% of the consideration on 3rd
October 1999 for purchase of plot of land. The assessee got the possession of
the land on 12-12-2005 . The assessee sold the land on 9-01-2008 and invested
in capital bonds and claimed exemption under section 54EC.AO held that the
capital gain is short term capital gain and disallowed the claim under section
54EC. Tribunal allowed the claim of assessee. On appeal by revenue the court up
held the view of the Tribunal by observing that the assessee had acquired the
beneficial interest to the property at least 96% of the amount on payment by
3rd October 1999.Order of Tribunal was up held. Refer, CIT .v. K. Ramakrishnan,
363 ITR 59.
Karnataka High court
in the case of Latha Ramachandra Inamdar (Ms.) .v. DCIT, 218 Taxman 277 held
that Since there was no evidence that assessee was in possession of subject
land pursuant to an agreement of
purchase any time beyond period of 3 years, assessee would not be entitled for
exemption as provided for under section 54F.
As sale deed executed
was executed on 3-9-2005 and was possession handed over in the financial year relevant to AY 2006-07. Hence, capital
gains were held to be assessable in AY 2006-07 and not in AY 2007-08. Refer, Satishkumar
Agarwal .v. DCIT, 28 ITR 167.
·
Definition of month : The term “month” in S.54E, 54EA, 54EB & 54EC
does not mean “30 days” but the “calendar month”. So, the expression “within a
month” means “before the end of the calendar month”. Refer, Alkaben B. Patel
.v. ITO, Ahd ITAT.
·
Land appurtenant to : for claim of deduction land appurtenant to
residential house determined with locality, social status, profession of assesse
. completion certificate issued by Local Panchayat acceptable & certificate
of village officer valid to accept land use. Refer, Tony J. Pulikal .v. Dy.CIT,
145 ITD 172.
·
Tenancy Right : Since cost to
previous owner of tenancy rights inherited by assessee was not nil, assessee
had the option to adopt fair market
value of tenancy right as on April 1, 1981. Assessee entitled to exemption for
expenditure incurred for making old house habitable. Surrender of tenancy rights is not entitled
to exemption for transfer of residential house u/s 54, since it is deemed
ownership. Deduction allowable for purchase of more than one house u/s 54F, Meher
R. Surti .v. ITO, 27 ITR 340.
·
Others : Assessee could not be denied exemption under section 54F for investment
of sale proceeds of shares in acquiring
residential unit, on the ground that the assessee has not provided the details
of broker. Sale consideration cannot be
treated as bogus. Refer, Ramesh Kumar Goel v. ITO, 58 SOT 49 (Guwahati)(Trib.).
Merely because
capital gains earned had been utilized for other purposes and borrowed funds
were deposited in capital gains investment account, benefit of section 54F
exemption cannot be denied. Refer, J.V. Krishna Rao v. Dy. CIT, 54 SOT 44.
·
Extension of old property: For the purpose of s. 54F, the residential house so
constructed is referred to as new asset. Obviously, a new house is not
something which is either an extension or addition made to an existing
structure. In the present case, approval plan of the Corporation pertains only
to roof changing (sunshade projection) and for construction/extension of/to the
first floor. Assessee was not therefore entitled to exemption under s. 54F.
Refer, Pushpa v. ITO, 79 DTR 218.
In case you have any further
clarification, feel free to contact me at taxbymanish@yahoo.com or else you can view more articles & news related to Indian tax
& finance at http://taxbymanish.blogspot.in/.
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