Thursday, February 23, 2017

No sec. 54F relief if newly acquired house is instantly demolished: Chennai ITAT

Facts:

a) Assessee sold two shops and a residential building for certain amounts. These amounts were deposited in the capital gains scheme account in a nationalized bank. Later on, the assessee withdrew this amount and purchased a residential plot and claimed the benefit of section 54F.

b) Assessing Officer (AO) disallowed claim of the assessee on the ground that the new asset purchased was instantly demolished by the assessee and, further, he had proceeded to construct a shopping complex.

c) CIT (Appeals) affirmed the order of the AO. Aggrieved assessee filed the instant appeal before the Tribunal.

Tribunal held in favour of revenue as under:

1) The Parliament in its wisdom had enacted section 54F in the Finance Act, 1982 with a view to encourage housing construction. Thus, the intention of the legislation was not for destruction of residential building but for promoting the construction of the residential housing units.

2) If the benefit of section is extended where the new residential building is demolished without constructing another residential building within the time limit prescribed under the Act, then the purpose of the Act is defeated.

3) In the case CIT v. V. Pradeep Kumar [2006] 153 Taxman 138 (Madras), it had been categorically held that "the burden is on the assessee to prove that he had actually constructed a new residential house for the purpose of the exemption under section 54F. Section 54F emphasizes construction of residential house. The construction must be a real one. It should not be a symbolic construction. Mere construction by way of extension of the old existing house would not mean constructing a residential house as contemplated under section 54F."

4) Since assessee had demolished the newly acquired residential house instantly for the purpose of construction of a six floored shopping complex, exemption under section 54F was rightly disallowed. - [2017] 78 taxmann.com 177 (Chennai - Trib.)
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