Section 54F exemption to be allowed on investment even if transaction hasn’t been completed within stipulated time

Assessee would be entitled to benefit under section 54F if he had invested amount of capital gain in purchasing or constructing a residential house, even though transaction was not completed within stipulated period

In the instant case the assessee had sold certain property and claimed exemption from capital gains under section 54F by stating that he had invested the amount in purchase of land and construction of house property. During the assessment, the AO noted that the period of 3 years from the date of sale of that property had expired and that the assessee had neither purchased any residential house nor had completed construction of any residential house as stipulated in section 54F, therefore, assessee was not eligible for deduction under section 54F. The CIT (A) confirmed the action of the AO. Aggrieved assessee filed the instant appeal.

The Tribunal held as under:

1) Provisions contained in section 54F being a beneficial provisions, have to be construed liberally. In various judicial precedents it has been held that the condition precedent for claiming benefit under section 54F is only that the capital gain realized from the sale of capital asset should be invested by assessee either in purchasing or constructing a residential house within the stipulated period ;

2) If the assessee had invested the money in construction of residential house, merely because the construction was not complete in all respects and the house was not in a fit condition to be occupied within the period stipulated, that would not disentitle the assessee from claiming the benefit under section 54F;

3) Once the assessee demonstrated that the consideration received on transfer had been invested, even though the transaction was not complete in all respects, he would be entitled to avail of benefit under section 54F;

4) Even though investment made in purchasing a plot of land for the purpose of construction of a residential house had been held to be an investment satisfying the conditions of section 54F, yet the assessee was required to prove the actual date of investment and the amount invested towards purchase or construction of the residential house with supporting evidence;

5) The order of CIT (A) was to be set aside and matter was to be restored to the file of the AO. Thus, ground raised by the assessee was to be allowed - NARASIMHA RAJU RUDRA RAJU V. ACIT 35 taxmann.com 90 (Hyderabad - Trib.)

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