Dear friends...........please see this case law....
M.Vijaya Kumar v. Income tax officer, ward 1(1), Bangalore [2010] 122 ITD 15 (BANG.)
Section 54F of the Income tax Act, 1961 - Capital gains - Exemption of incase of Investment in Res. house - Assessment year 2004-05 - Assessee had invested in shares and earned LTCG - out of said LTCG he bought a HP and after demolishing said property, started constructing a new building - For relevant A.Y., he claimed exemption exemption under 54F inrespect of investment made towards construction.... Lower authoritie denied claim of deduction by restricting exemption to cost of purchase of land and building .....Whether exemption under section 54F can be claimed on construction of a res. house after demolishing of old structure - held yes...Whether since assessee would not have constructed a house unless old building was demolished and moreover, he had constructed a res. house on same site where old building was demolished within stipulated period specified in sec 54F, lower authorities erred in restricting exemption to cost of land and building and not to cost of construction incurred on very site where old house stood demolished - held Yes....
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