Capital gain exemption u/s 54 of the Income Tax Act,1961 is allowable to more than one Residential house, the Chennai Bench of the Income Tax Appellate Tribunal (ITAT) held as above.
Shri S. Sridhar, Advocate appeared for the assessee and Shri P. Sajit Kumar appeared for the revenue.
Smt. Parthiban Kalavathi, the assessee sold a plot of land to a builder by entering into an agreement of sale dated 11.02.2013 by entrusting by way of GPA to the sale 10832 Sq.ft. of land fully developed on her behalf and in return, the assessee withheld fully developed land of 3973 Sq.ft. The assessee also entered into a construction agreement dated 12.08.2013 with a builder for a total sale consideration of Rs.1,43,97,600/- and the builder, in turn, to give constructed four Flats No.1A, 1B, 2A & 2B at first floor and second floor, respectfully of Block C-1.
The A.O assessed this as business profit amounting to Rs. 1,44,31,642/- and made a protective assessment and also treated the income from the sale of the house property as Long Term Capital Gain, but denied the claim of deduction u/s. 54F of the Act for the reason that the assessee has invested the sale consideration in the purchase/construction of four Flats. The CIT(A) confirmed the action of the A.O
A Coram of Shri Mahavir Singh, vice president and Shri Manoj Kumar Aggarwal, accountant member observed that as per records assessee neither had any knowledge or capability about the business or property development nor had any intention to do so as the assessee gave a general power of attorney in favour of the builder accordingly.
Further viewed that the entire above transaction is purely a sale of a plot to the builder and in turn, received monetary consideration of Rs.2.85 Crore and balance 4 Flats valued at Rs. 1,44,31,642/-. The A.O was directed to treat the transaction as LTCG.
The Tribunal held that the assessee is entitled to claim of deduction u/s. 54 or 54F of the Act as the assessee has been allotted 4 residential Flats against the sale of her ancestral land or instead of development of her ancestral land and directed the A.O to allow the claim of deduction u/s. 54 of the Act. The appeal of the assessee was allowed.
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