Section 54F requires only the assets to be purchased within specified time, date of booking / payment not relevant

Shri Gopilal Laddha V/s. ACIT (ITAT Bangalore), I.T. A. No.1356/Bang/2012, Date of Pronouncement: 31.10.2013

Authorized Representative submitted that as per section 54F(1), the only condition required to be satisfied for the assessee to avail the exemption thereunder was that the assessee should within a period of one year before or two years after the date of transfer, purchase or within a period of three years construct a residential property. It is submitted by the learned Authorised Representative that there is no dispute with regard to the fact that the assessee received compensation of Rs.84,61,701 as compensation for acquisition of the land i.e. the old asset acquired for the Bangalore Metro on 21.7.2008. The learned Authorised Representative further submitted that there was also no dispute with regard to the fact that the assessee acquired a residential flat at Gokulam, Kanakpura Road, Bangalore for Rs.50,98,720 by registered sale deed dt.11.9.2008 and therefore has satisfied the conditions required for being allowed exemption u/s.54F of the Act as claimed at Rs.46,11,166. The learned Authorised Representative contended that since various courts have held that the only condition to be satisfied is that the new residential property should be purchased within the specified period of one year before or with two years after the sale of the old capital asset, which has been done by the assessee in the case on hand, the assessee is entitled to be allowed exemption under section 54F of the Act. The issues raised by the authorities below to deny the assessee the said exemption u/s.54F viz. (i) that the booking for the said flat was made by the assessee on 19.1.2006; (ii) that a loan of Rs.40 lakhs was taken from Syndicate Bank on 24.5.2006 towards investment in the said flat being more than one year, prior to sale acquisition of the said property on 21.7.2008, the learned Authorised Representative submits, is not material, since the assessee has acquired the new property i.e. ;the flat, only on 11.9.2008 by Registered Sale beed and not before that. The learned Authorised Representative submits that all acts by the assessee to book the said flat in 2006 and availing of housing loan for investing therein in 2006 do not confer ownership of the said property in the said flat. In this view of the matter, the assessee prays that he is entitled to be granted exemption u/s.54F of the Act as claimed by it. In support of the assessee’s claim for deduction u/s.54F of the Act, the learned Authorised Representative inter alia relied on the following judicial pronouncements -

(i) CIT V Arvinda Reddy T N (1979)120 ITR 46.

(ii) ITO V K C Gopalan (2000)107 Taxman 591 (Kar)

(iii) Fatima Bai V ITO (2009) 32 bTR 243 (Kar).


There is no dispute that the LTCG on this transaction is Rs.76,80,240. How the Assessing Officer on examination of the assessee’s claim for exemption under section 54F of the Act, restricted the assessee’s claim from Rs.46,11,166 to Rs.6,23,433 for the reasons that :-

(i) though the asset i.e. the flat was purchased by the assessee by Regd. Sale beed dt.11.9.2008, the booking was made on 9.1.2006 and

(ii) a Housing Loan of Rs.40 lakhs was taken from Syndicate Bank on 24.5.2006 which was invested in the said property before 31.3.2007

We do not agree with the view of the authorities below that both these investments amounting to Rs.44,70,852 being made more than one year prior to the date of receipt of compensation of Rs.84,61,701 for the asset, on 21.7.2008, the assessee would not be eligible for exemption under section 54F of the Act to the extent claimed but only for Rs.6,23,133. In our view, the amounts paid by the assessee on booking of the asset i.e. flat at Gokulam, Kanakpura Road on 9.1.2006 and the housing loan of Rs.40 lakhs availed from Syndicate Bank for investment in the purchase thereof have not vested the assessee with ownership of the new asset. The assessee has been vested with the ownership of the new flat at Gokulam, Kanakpura Road only by virtue of the Registered Sale beed dt.11.9.2008. In this view of the matter, we find that the authorities below have erred in restricting the exemption under section 54F of the Act to Rs.6,23,433. Rather, we are of the view that the assessee is entitled to exemption under section 54F of the Act to the extent of Rs.46,11,166 as claimed by it and the net LTCG on sale of the above property would be Rs.30,41,414 as given in the revised computation of LTCG (supra). The Assessing Officer is directed to allow the assessee exemption under section 54F of the Act accordingly.