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2017 (1) TMI 324 - AT - Income TaxDeduction u/s 54 denied - AO observe that deduction for construction of residential house is allowable u/s 54 of the Act only if the assessee constructs the house within a period of three years after the date of transfer of original asset, whereas assessee commenced and almost completed the construction of new residential house much before the date of transfer of capital asset - Held that:- Provisions of section 54 of the Act contemplates that deduction u/s 54 of the Act can be made by assessee only if a residential house is purchased within one year before or two years after the date of transfer of old residential house or in the alternative if the assessee constructs new residential house within three years from the date of transfer of capital asset. We find that the assessee is eligible to claim deduction under this section even if a new residential house is purchased within one year before the date of transfer of capital asset which means that assessee has to make use of funds other than the sale consideration of house sold for investing in a residential house and it is not mandatory that only the sale consideration of house sold is to be utilized for purchasing or constructing a new residential house. In the given case assessee has utilized other funds (apart from sale consideration) for constructing residential house and for this reason only he cannot be denied deduction u/s 54 of the Act. Further going through the provisions of section 54 of the Act we also observe that there is no mention about the date of start of construction of residential house but it only refers to a construction of a residential house which in our view is the date of completion of the constructed residential house habitable for the purpose of residence. Thus in the case of assessee long term capital gain arose from sale of old residential house on 18.07.2008 and assessee invested ₹ 53,92,287 in constructing another residential house construction of which was commenced in 2006 but was completed on 16.4.2009 and was well within the statutory time limit meant for constructing of new residential house within 3 years from the date of transfer of capital asset as envisaged in the provisions of section 54 of the Act and, therefore, assessee is eligible to claim deduction u/s 54 - Decided in favour of assessee
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