SECTION 54F EXEMPTION NOT
AVAILABLE FOR ADDITION / MODIFICATION / EXTENSION MADE TO EXISTING HOUSE
In its judgment dated 22nd August,
2012, HIGH COURT OF
KERALA in the case of
Pushpa vs. Income tax
Officer held that exemption under section 54F in respect of Capital Gains
will not be available for addition or modification or extension made to the
existing house.
Facts
of the Case
In the present case assessee i.e. pushpa was taking
exemption U/S 54F in respect of capital gains for additions or modification in
the existing house.
This is objected by ITO and now case is before High
Court of Kerala.
Issue
for Consideration
The issue
raised in the present case is as to whether the exemption will be available to
the assessee in respect of additions or modification made in the existing house
under section 54F of the IT Act.
Judgment
ü Sec.
54F provides that capital gains on transfer of capital assets shall not be
charged in cases of investment in new residential house.
ü The section pointedly says that such eligibility would be available if the assessee has, within the period prescribed, constructed or purchase, a residential house.
ü For the purpose of that section, the residential house so constructed is referred to as new asset.
ü The object sought to be achieved by that provision is to exclude capital gains on transfers of certain capital assets from being charged provided the new asset is a residential house.
ü The section pointedly says that such eligibility would be available if the assessee has, within the period prescribed, constructed or purchase, a residential house.
ü For the purpose of that section, the residential house so constructed is referred to as new asset.
ü The object sought to be achieved by that provision is to exclude capital gains on transfers of certain capital assets from being charged provided the new asset is a residential house.
ü Obviously, a new house is not something which is either an extension or addition made to an existing structure.
ü As noted by this Court in Mrs. Meera Jacob(supra), the exemption is available only when the investment is in the construction of a house and not for investment in modification or renovation.
ü Sec. 54F does not provide for exemption on investment in renovation or modification of an existing house and what gains exemption is only construction of a house.
ü Reverting to the case in hand, the Tribunal adverted to the entire materials and has categorically found that there is nothing on record to show that the capital gains was actually utilized for the construction of a new house.
ü Therefore no exemption shall be given U/S 54F for any addition, modification or extension of existing house.
Regards
CA. Mona Singhal
Partner
Arpit Gupta & Associates
Chartered Accountants
701, Nirmal Tower,
26, Barakhamba Road,
Connaught Place, Delhi-110001
Mobile:- +91-9873082769
Website: www.caaga.co.in
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