S.54F:Capital gains-Investment in a residential house Construction of additional floors would be part of
existing house-Deeming fiction under section 50C. (S.45, 48, 50C)
The assessee sold a plot of land and computed capital gains. In computing capital gain, the assessee claimed deduction u/s 54F on the ground that the sale consideration (FVC) was utilized for construction of residential house. The Ld. AO, while invoking section 50C disallowed the deduction on the ground that the requirements of section 54F were not met. The actual amount utilized for the new house was more than the FVC even as per section 50C. In appeal, the CIT (A) upheld the application of section 50C but also held that the assessee was entitled forthe deduction u/s 54F. However, the CIT (A) restricted the same to the figure computed by the assessee. According to the CIT (A) the ‘full value of consideration’ was to be adopted as per section 50C but benefit of section 54F was to be restricted to the amount declared by the assessee. In other words,the difference between ‘full value of consideration’ as per section 50C and the actual amount declared by the assessee was to be taxed as ‘capital gain’; the benefit of section 54F being restricted to the amount declared (which was also to be presumed to be ‘investment’/ utilization for s.54F) claimed by the assessee. The Hon’ble tribunal held that since the actual investment was more than eventhe FVC as per section 50C, there was no taxable capital gain. In the present case, the asssessee’s house includes ground plus 4 floors, where the ground floor is a big living room, 1st floor has a kitchen plus 2 bed rooms, 2nd floor has three bedrooms, 3rd floor has three bedrooms and fourth floor has 3 bed rooms.Thus, the said details suggest that functionally. The Commissioner (Appeals) restricting the exemption of capital gains to Rs 5,84, 837/ is not proper. (A.Y. 2008-09)
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