Capital Gain Exemption u/s - 54F

Holding of legal title or Possession of Flat is not necessary. If the tax payer pays full consideration or substantial portion of it (in terms of the purchase agreement) with in the period prescribed, the exemption under section 54 is avialable. This rule is applicble even if possession is handed ver after the stipulated period or the sale deed is registered later on.

Refer Circular No. 471, dt October 15, 1986 and Circular No. 672, dated December 16, 1993

Mrs. Seetha Subramanian. vs Assistant Commissioner Of Income-Tax. [59 ITD 94] ITAT , Madras :- CIT , after enquiry by an Inspector found that the house is not completed and passed order u/s 263 by which he disallowed the claim of assessee u/s 54F ruled as under. Before the Tribunal, the contention of the assessee was that the provisions of section 54F is a beneficial provision for promoting the construction of residential houses. Therefore, the said provision has to be construed liberally and for achieving the purpose for which it was incorporated in the statute. In support of the said contention the assessee relied upon the decision in the case of Bajaj Tempo Ltd. The assessee also relied upon certain circulars issued by the CBDT. One of the circulars was Circular No. 471, dated 15th October, 1986. This was issued by the CBDT clarifying the position that where an assessee acquires a flat by an allotment under the self-financing scheme of the Delhi Development Authority, the allotment itself is sufficient compliance for getting the benefit under section 54F, even though the assessee has not paid all the instalments due under the said scheme. Later by another Circular No. 672, dated 16th December, 1993, the CBDT has issued clarification extending the same benefits for acquisition of houses or flats on allotment under similar schemes. Therefore it was contended that the intention of the Legislature was to invest in the acquisition of a residential house and completion of construction or occupation is not required. We find force in the argument of the learned counsel for the assessee. The said intention is very clear from the two circulars issued by the CBDT, where it was held that an assessee is entitled to the benefit of sections 54 and 54F, if an assessee gets an allotment under the self financing scheme and pays the first instalment of the cost of construction. From that it is clear that in order to get the benefit under section 54F the assessee need not complete the construction of the house and occupy the same. Admittedly in the present case, the assessee had invested the entire net consideration within the stipulated period and in fact has even constructed the entire residential property, except some finishing to make it fit for occupation. As the assessee has substantially completed all the work of construction and has invested the entire net consideration, it has to be inferred that the assessee has complied with the conditions provided under section 54F.

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i totally agree with kavitha

 So can i ask a small doubt MIthesh..what happens if the assessee purchases a land for nearly the full amt of net consideration and uses the balance small portion of net consideration to construct may be say some 5% of the total construction within the said 3 yrs...still here the entire amt is invested as cost of land also forms a part of house for exemption....Now will we get the exemption..am askin out of basic curiosity