INCOME TAX ACT, 1961

Section 54

Capital gains - Exemption under section 54 - Exemption denied on the ground that residential house was not constructed within three years of sale of house property -

Assessee during the year sold a property and made investment in new residential house and claimed exemption under section 54. AO did not allow exemption to assessee on the ground that new residential house was not constructed within three years of sale of house property and even at the end of the stipulated period of three years, the house was incomplete. Held: High Court in case of Shashi Varma ((1997) 224 ITR 106 (MP) : 1997 TaxPub(DT) 0268 (MP-HC)) had held that while allowing exemption under section 54, investment for acquisition of flat under the Scheme of DDA, where first installment was paid, was much more than capital gains, deduction is to be allowed as section 54 does not require that the construction of new house should necessarily be completed within two years where substantial investment is made in construction of house. Requirement of section 54 is for assessee to have either purchased a residential house, being a new asset, within the stipulated period or construct a residential house within a period of three years from the date of transfer. Since assessee claimed that he had invested an amount which was higher than the amount of capital gain computed by AO, assessee was very much eligible for claim of exemption under section 54.

REFERRED : Shashi Varma v. CIT (1997) 224 ITR 106 (MP) : 1997 TaxPub(DT) 0268 (MP-HC)

FAVOUR : In assessee's favour

A.Y. :

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