INCOME TAX ACT, 1961

Section 54F

Capital gains - Exemption under section 54F - Purchase of residential land and nursing Home was constructed in addition to residential house - Benefit of indexation in computing capital gains

AO noticed that assessee was joint owner of commercial property, which was sold during the year. AO observed that assessee along with his son being co-owner of property sold the property. He further observed that property was given on lease to a firm in which assessee and his son were partners. Subsequent to sale, assessee invested fund realized from sale to acquire piece of land jointly with his son and constructed residential house and nursing home. Assessee claimed exemption under section 54F as capital gain arising on sale of property was invested in acquisition of land and construction of residential house and nursing home. AO personally inspected premises of assessee and found that assessee constructed commercial building that was hospital along with residential house and therefore, deduction under section 54F was restricted Held: Admittedly, assessee constructed commercial property being nursing home, on the land purchased from sale proceeds, and residential house, which was claimed as exemption under section 54F. Section 54F is very clear in respect of exemption being available to assessee, in respect of either purchase of residential property or construction of residential property within the period of limitation prescribed therein. It was observed that AO while computing capital gain, allowed Rs. 33,41,839 as cost of land appurtenant to residential house for which there is no basis. Both AO and CIT(A) failed to compute vacant land that may be annexed to residential house. Therefore, assessee was eligible for benefit of indexation in computing capital gains.

REFERRED : ITO v. Jaya Deepak Bhavnani ITA No. 6444/Mum/2016, vide Order dated 12-10-18 : 2018 TaxPub(DT) 6975 (Mum-Trib)

FAVOUR : In assessee's favour

A.Y. :

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