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2024 (3) TMI 1118 - AT - Income TaxLTCG - Disallowance u/s 54 - construction of new house begun before the sale of the old house - construction with the amount borrowed instead of actual sales proceeds - relevant date for taking possession of the property - as per AO two properties sold by the assessee during the assessment year under consideration when the assessee has taken possession of the constructed property after the date of sale of the two properties - HELD THAT:- Identical issue came up in the case of C. Aryama Sundaram [2018 (8) TMI 864 - MADRAS HIGH COURT] It is not a requisite of Section 54 that construction could not have commenced prior to the date of transfer of the asset resulting in capital gain. If the amount of capital gain is greater than the cost of the new house, the difference between the amount of capital gain and the cost of the new asset is to be charged under Section 45 as the income of the previous year. If the amount of capital gain is equal to or less than the cost of the new residential house, including the land on which the residential house is constructed, the capital gain is not to be charged u/s 45. We further observed that in the case of CIT Vs. Kapil Kumar Aggarwal [2015 (12) TMI 1075 - PUNJAB AND HARYANA HIGH COURT] that section 54F of the Act, nowhere envisages that sale consideration obtained by the assessee from original capital asset is mandatorily required to be utilized for purposes of meeting cost of new asset. It was, therefore, held that where investment made by the assessee although not entirely sourced from capital gains but was within stipulated time and if more than capital gain earned by assessee, the assessee is entitled to exempt u/s 54F. Hon’ble Allahabad High Court in the case of CIT Vs. H.K. Kapoor [1997 (8) TMI 44 - ALLAHABAD HIGH COURT] held that exemption on capital gains u/s 54 of the Act could be allowed notwithstanding the fact that the construction of new house had begun before the sale of the old house. Thus direct the AO to allow deduction u/s 54 of the Act as claimed by the assessee. Decided in favour of assessee.
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