2014 (8) TMI 1164 - AT - Income Tax

Disallowance of claim of exemption u/s 54F - capital gains arising out of sale of long term capital asset - Held that - We find that the assessee has placed the electricity as well as Internet bill before the CIT(A) and the copies of the property tax receipt were not filed before either of the authorities below. In our opinion, these documents go to prove that the assessee had, in fact, completed the construction within the period of three years from the date of sale of the property. However, in our opinion, these documents have not been verified by the authorities below and therefore, the issue needs to be remitted to the file of the AO for verification of these details filed by the assessee. We remit the issue back to the file of the AO only to examine the veracity and authenticity of the documents filed by the assessee and if the documents are found to be genuine, then the AO is directed to allow exemption u/s 54F of the Act. In the result, the assessee s appeal is allowed for statistical purposes.

Summary

Issues:
1. Disallowance of claim of exemption u/s 54F of the Income-tax Act, 1961.
2. Commencement and completion of construction of a house for claiming exemption u/s 54F.

Analysis:
1. The appellant, an individual, filed an appeal against the order confirming the disallowance of the claim of exemption u/s 54F of the Income-tax Act, pertaining to the capital gains from the sale of a long-term capital asset. The Assessing Officer disallowed the claim, stating that the construction of the house began before the sale, and the construction was not completed within the stipulated time frame. The appellant cited legal precedents to support the claim, but the AO rejected the contentions and brought the capital gain to tax. The CIT(A) upheld the AO's decision, leading to the appellant's appeal before the ITAT.

2. The appellant argued that the construction of the house commenced before the sale but was completed within the three-year period from the sale date, as required by sec.54F of the Act. Legal arguments were presented, referencing relevant court judgments. The Revenue contended that the appellant failed to provide evidence of completion within the stipulated time. The appellant submitted various documents, including bills, property tax receipts, and bank statements, as evidence of completion within the required timeframe. After considering the arguments and evidence, the ITAT found that the construction had indeed commenced before the sale, but legal provisions should be interpreted liberally to achieve the statute's purpose. Citing previous court decisions, the ITAT held that completion within the stipulated time frame qualifies for exemption u/s 54F. The ITAT directed the AO to verify the authenticity of the documents provided by the appellant and allow the exemption if found genuine, thereby allowing the appeal for statistical purposes.