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| The Tax Publishers2020 TaxPub(DT) 3651 (Hyd-Trib) INCOME TAX ACT, 1961
Section 54F
The assessee had purchased another house for a sum of Rs. 40 lakhs and have invested the balance consideration also in renovation of the said house and have claimed expenditure for such renovation also as 'exempt' under section 54F of the Act. Section 54F of the Act only mandates that the capital gain should be invested in 'a residential house' within the stipulated time by way of purchase or construction. Thus, the amount spent on renovation of such residential house by an assessee according to his requirements is also allowable as exempt under section 54F of the Act as it would amount to construction of a residential house. The only other requirement is that the construction should be completed within three years from the date of transfer of the original asset.
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Capital gains - Exemption under section 54F - Assessee utilized net consideration to re-modify the new house -
Assessee's being family members and co-owners of a plot of land had sold the same and sale consideration was shared by co-owners in proportion to their land holding. The respective assessee's claimed exemption of capital gains on purchase of a residential house collectively in the year 2006 itself to extent it was incurred for purchase and the balance of amount was deposited in Capital Gains Scheme Account. The period of three years in assessee's case expired in the assessment year 2009-10, AO observed that assessee had claimed to have utilized the amount deposited in Capital Gains Scheme Account to renovate the existing residential unit. AO, however, observed that extension of the existing residential unit might not amount to investment of a new residential house. Therefore, AO disallowed the claim of exemption under section 54F. CIT(A) held that any investment made towards extension or modification or renovation of an existing house would not come under the purview of purchase/construction of new asset as envisaged under section 54 or 54F. Held: The assessee had purchased another house for a sum of Rs. 40 lakhs and have invested the balance consideration also in renovation of the said house and have claimed expenditure for such renovation also as 'exempt' under section 54F of the Act. Thus, the assessee had invested their capital gains for purchase of a residential unit and thereafter, they have renovated/re-modified the said unit. Section 54F only mandates that capital gain should be invested in 'a residential house' within the stipulated time by way of purchase or construction. Amount spent on renovation of residential house by an assessee according to his requirements was also allowable as exempt under section 54F as it would amount to construction of a residential house. Only other requirement was that construction should be completed within three years from the date of transfer of original asset.
Followed:CIT v. Godavaridevi Saraf (1978) 113 ITR 589 (Bom) : 1978 TaxPub(DT) 0643 (Bom-HC).
REFERRED :
FAVOUR : Matter remanded.
A.Y. : 2009-10
IN THE ITAT, HYDERABAD BENCH
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