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exemption u/sec. 54F

Anitha (Article) (29 Points)

29 August 2009

Hi,

Is exemption u/s 54f is available for constructing 1st floor of already owned building??

Pls justify ur ans with case laws r such other reference

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3 Replies

Ashish M (Chartered Accountant) (2731 Points)
Replied 30 August 2009

The following judgemnt may be of help in this regard, viz;

"where an assessee purchases ground floor of a house and later, when vendor builds first floor the assessee purchases the first floor by a seperte sale deed, the assessing authority is not justified in disallowing the assessee's claim for exemption of a capital gains on ground that ground floor and first floor constitute two residential houses and, therefore, provisions of a Sec.54F(2) are attracted.."-

- Hansa Bai Sanghi v. ITO [2004] 89 ITD 239 (Hyd.)

Juzer Sadikot (CA - innovative solutions for Imports and Exports) (1309 Points)
Replied 30 August 2009

Hi Anitha,

I would like to draw ur attention to below landmark judgement.

Exemption is not allowable if existing house is extended -

Section 54F emphasizes on construction of residential house. The said construction must be real one. It should not be a symbolic construction. A mere extension of the existing building would not give benefit to the assessee as contemplated under section 54F. Mere construction by way of extension of the old existing house would not mean constructing a residential house as contemplated under section 54F - CIT v. V. Pradeep Kumar [2006] 153 Taxman 138 (Mad.).

Thanks and regards

Juzer

RITESH KOTHARI (B.COM, FCA, DISA(ICAI)) (778 Points)
Replied 01 September 2009

DEAR ANITHA,

BOTH ASHISH AND JUZER ARE CORRECT ON THEIR CASE LAWS COZ THE FACTS AND CIRCUMSTANCE IN BOTH THE CASE LAWS ARE MUTUALLY INDEPENDENT AND EXCLUSIVE AND ARE FULLY RESOLVING YOUR QUERY.

REGARDS,

CA RITESH KOTHARI