The Tribunal granted benefit under section 54F of the Act on the entire amount of investment in new house including the amount paid to the builders for amenities like car parking. It dismissed the revenue’s action of restricting the benefit to the value disclosed in the registered sale deed and held that disclosure of a lower value of property (excluding amount paid for amenities like car parking) for stamp duty was an issue alien to the question of allowing deduction under section 54 of the Act. S Tejraj Ranka v ACIT (ITA No.82/Bang/2014) – TS-512-ITAT-2015 (Bang)

Revision proceedings by CIT on the issue of purchase of new house partly from owned funds and partly from housing loan quashed by ITAT Hyd in Smt. Sumathi Gedupudi [2015] 64 taxmann.com 382 (Hyderabad - Trib.) holding that money has no colour and it is sufficient if requisite amount is invested in new house irresepective of whether it comes from direct sale proceeds or any other source including borrowed funds. ITAT further held that the issue of granting deduction/exemption under S.54F on the borrowed money is a debatable issue and revision proceedings can not be under taken where two views are possible

S.54 F exemption is available on house constructed on agriculture land -Om Parkash Goyal ITA 647 /JP /2011/2.02.12

For Investment u/s 54 F funds other than from transfer of capital asset can also be used. Section 54F does not put any restriction in this regard-Held by Punjab and Haryana High Court in Kapil Kumar Aggarwal ITA 12/2015 dtd. 04-11-2015. P&H High Court relied upon K.C. Gopalan 107 taxman 591(Ker); Anandraj 56 taxmann.com 176 (karnatka); Rajesh Kumar jalan 286 ITR 274 (Gau) and V.R. Desai 197 taxman 52 (Ker). In Anand Raj the assessee used borrowed funds, still exemption was held allowable.[Page 13 Para 18]

Where due date of filing of return has been extended the assessee is entitled to get benefit of deposit in capital gain account scheme in such extended period- Smt. S. Uma Devi [2015] 62 taxmann.com 64 (Hyderabad - Trib.) JANUARY 30, 2015

The incomes of the properties owned by the minor daughters were clubbed in the hands of the assessee[u/s 64(1A)], but the investment for purchase of the said properties came from the independent sources of the daughters and hence, it cannot be presumed that assessee is the owner of the properties for calculating limit of owning one residential house on the date of transfer u/s 54F.[Para 4.7] Smt. S. Uma Devi [2015] 62 taxmann.com 64 (Hyderabad - Trib.) JANUARY 30, 2015

For purpose of S. 54F requiring ownership of not more than one residential house on the date of transfer , ownership of building let out for commercial purposes can not be included. Allahabad High Court in P.N. Shukla v. CIT [2005] 276 ITR 642/142 Taxman 624 (All. Quoted to signify the word “residential” used with house[Para 4.3] Smt. S. Uma Devi [2015] 62 taxmann.com 64 (Hyderabad - Trib.) JANUARY 30, 2015

SLP of assessee rejected by SC on 10.11.14 against decision of Karnataka high court in M.J Siwani holding that no sec.54f relief even if assessee is only joint owner of more than one house on date of sale of asset

Cost of additions or improvements on habitable house is also eligible for sec. 54F relief

Mrs. Rahana Siraj [2015] 58 taxmann.com 333 (Karnataka) JANUARY  5, 2015 
Property purchased by the assessee was habitable but had lacked certain amenities. The assessee has spent nearly about Rs. 18 lakhs towards removal of mosaic flooring and laying of marble flooring, alteration of the kitchen, putting up compound wall, protecting the property with grill work and attending to other repairs. Section 54F of the Act provides that if the cost of the new asset, which is to be taken into consideration while determining the capital gain, the words used is "cost of new asset" and not "the consideration for acquisition of the new asset". 
                                             In law, it is permissible for an assessee to acquire a vacant site and put up a construction thereon and the cost of the new asset would be cost of land plus (+) cost of construction On the same analogy, even though he purchased a new asset, which is habitable but which requires additions, alterations, modifications and improvements and if money is spent on those aspects, it becomes the cost of the new asset and therefore, he would be entitled to the benefit of deduction in determining the capital gains. 
                              The approach of the authorities that once a habitable asset is acquired, any additions or improvements made on that habitable asset is not eligible for deduction, is contrary to the statutory provisions. The said reasoning is unsustainable. To that extent, the impugned order passed by the Tribunal as well as the Lower authorities require to be set-aside and it is to be held that in arriving at cost of the new asset, Rs. 18 lakhs spent by the assessee for modification, alterations and improvements of the asset acquired is to be taken note of. Thus, the second substantial question of law is answered in favour of the assessee

EXEMPTION UNDER SECTION 54 AND 54F

Even amidst  the days when tax department is tightening its grip over the soft and easily bendable neck  of the taxpayer, there are still two sections which are most favorite sections  of the assesses in general and people in housing and reality sector in particular. Both section 54 and 54F have normally been liberally construed by our judiciary and are vital blood vessel of housing infrastructure of our economy and of course at the same time they are heart beat of chapter IV-E on Capital Gains Taxation.  Liberal Interpretation of Section 54 and 54F has been influenced by two important Rules of Interpretation.

Sale consideration invested in construction of new house which remains incomplete after 3 years from date of transfer , still s. 54 F exemption shall be allowed

Smt. Usha Vaid ITAT AMRITSAR BENCH IT Appeal No. 98 (Asr.) of 2011 July 27, 2012
CIT v. Sardarmal Kothari [2008] 302 ITR 286

Mrs. Seetha Subramanian v. Asstt. CIT [1996] 59 ITD 94

Smt. Ranjit Sandhu v. Dy. CIT [2010] 133 TTJ 46 (Chd)(UO).

S.54F exemption is available on house constructed on agricultural land

Om Prakash Goyal IT APPEAL NO. 647 (JP) OF 2011 FEBRUARY 2, 2012 ITAT JAIPUR

S.54F exemption is available for house outside India also

Vinay Mishra (Banglore Tribunal) 12-10-2012 ITA 895/Bang/2012
Mrs. Prema P. Shah v. ITO [2006] 100 ITD 60 (Mum.
ITO v. Dr. Girish M. Shah in I. T. A. No. 3582/Mum/2009, dated 19-2-2010 

Value of Entire land appurtenant to building can not be considered for s.54/54F

HIGH COURT OF KERALA

Smt. Asha George

v.

Income-tax Officer, Ward 2(1), Thrissur

IT APPEAL NO. 114 OF 2012

Date of Pronouncement – 16.01.2013

Exemption under s.54/54F is available for several units of residential house

CIT Vs. Gita Duggal, ITA No. 1237/2011, Judgment delivered on: 21.02.2013, High Court of Delhi.
In this case asessee entered into development agreement and was to get multiple units. AO added cost of construction of residential units to sale consideration but allowed exemption under 54 for one unit only. However court allowed exmption for multiple units

Even though assessee was engaged in purchase and sale of properties, still he could purchase and hold some plots as capital asset and claim benefit of deduction under section 54F in respect of sale of those plots

[2013] 30 taxmann.com 202 (Jodhpur - Trib.) Sunil Bhandari NOVEMBER 30, 2012

54F benefit is available on capital Gain calculated u/s 50C on value exceeding actual consideration

Raj Babbar vs ITO ITA 6497/MUM/2011 DECIDED ON 02-01-2013

No denial of section 54F exemption on registration of residential property in name of minor daughter - Exemption under section 54F will be admissible even where assessee has registered residential house property in name of his minor daughter

N. Ram Kumar [2012] 25 taxmann.com 337 (Hyderabad - Trib.)
Mir Gulam Ali Khan v. CIT [1987] 165 ITR 228/[1986] 28 Taxman 572, CIT v. Ravindra Kumar Arora [2012] 342 ITR 38/[2011] 203 Taxman 289/15 taxmann.com 307 (Delhi) and Third ITO v. S. Vardarajan [1989] 33 TTJ 466 (Mad.) (para 7) followed.

Jainarayan v. ITO [2008] 306 ITR 335 (Punj. & Har.); Parkash v. ITO [2009] 312 ITR 40/[2008] 173 Taxman 311 (Mum.) and ITO v.Prakash Timeji Dhanjede [2002] 258 ITR (AT) 114 (Nag.) (para 7) distinguished.

S. 54F exemption can be claimed if amount invested although construction not completed

IN THE ITAT AMRITSAR BENCH

Smt. Usha Vaid

v.

Income-tax Officer, Dasuaya

IT Appeal No. 98 (Asr.) of 2011

[Assessment year 2006-07]

July 27, 2012

This view is supported by the decision of the Hon’ble Madras High Court in the case of  CIT vs. Sardar Mal Kuthari 302 ITR 286. The Ld. counsel for the assessee has also placed reliance on the following decisions : 

i)  Mrs. Seetha Subramanian vs. ACIT 56 TTJ 417 (Mad)  

ii)  Smt. Ranjit Sandhu vs. DCIT 133 TTJ (Chd)(UO) 46 (2010). 

S.54 and S.54EC can be claimed simultaneously

IN THE ITAT MUMBAI BENCH ‘D’

Assistant Commissioner of Income-tax, Cr-23(2)

v.

Deepak S. Bheda

IT APPEAL NO. 5011 (MUM.) 2010

[ASSESSMENT YEAR 2007-08]

JUNE 15, 2012