INCOME TAX ACT, 1961

Section 54F

Capital gains - Exemption under section 54F - Denial of exemption as assessee received multiple number of flats -

Assessee along with his three brothers had inherited a property from their father. The assessee and co-owners of the property had entered into a joint development agreement. In the re-assessment order completed under section 143(3) r/w section 147, AO calculated total long-term capital gains and assessee's share being 1/4th, capital gains was assessed in assessee's hand. Assessee submitted before first appellate authority that capital gains was not assessable in the year of entering into joint development agreement but only when flats were received by assessee as per JDA. Alternatively, it was submitted that assessee was entitled to benefit of section 54F in respect of the 3 flats, which assessee will receive as per agreement. Held: All the flats were situated in a residential building and four residential flats constitute “a residential house”. As decided in B.J. BADRINATH [ITA No. 2938/Bang/2018, dated 16-11-2018 : 2019 TaxPub(DT) 0542 (Bang-Trib)] ratio of judgment of High Court in the case of CIT v. K.G. Rukmani reported in (2011) 331 ITR 211 (Karn) : 2011 TaxPub(DT) 0429 (Karn-HC) applies to also section 54F since both sections i.e. 54 and 54F are pari materia. Moreover, in case of other co-owners, it was submitted that claim of deduction under section 54F was allowed by AO. Amendment to section 54 and 54F, restricting the claim of deduction to one residential unit was introduced by Finance (No.2) Act, 2014 w.e.f. 1.4.2015 and amendment brought out by Finance (No.2) Act, 2014 did not have application for the instant case. Thus appeal of assessee was partly allowed.

Followed:CIT v. KG. Rukminiamma (2011) 331 ITR 211 (Karn) : 2011 TaxPub(DT) 0429 (Karn-HC) B.J. Badrinath v. ITO ITA No. 2938/Bang/2018 dated 16-11-2018 : 2019 TaxPub(DT) 0542 (Bang-Trib)

REFERRED :

FAVOUR : Partly In assessee's favour

A.Y. : 2009-10

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