Skip to main content

Cost incurred on Alteration / Renovation on the purchased unit is Eligible for Capital Gain Exemption

In Income-tax Officer vs Shri. Ramakrishna M. J, Assessee, sold his property and purchased a new house within the prescribed time. The capital gain was also used for alteration / renovation on the purchased unit and to the construction of the third floor. Since he utilised the entire amount for construction of new house within the provisions of Section 54F of the Income Tax Act, assessee claimed the benefit of the provision.

However, the claim was disallowed on the ground that the same would amount to construction of new unit in addition to the unit that the assessee has purchased. The AO was of the opinion that the exemption is only available for purchase of units within two years out of the sale proceeds from the date of transfer of the capital asset. On appeal, the first appellate authority allowed the contentions of the assessee. the department challenged the order before the Appellate Tribunal.

The ITAT noted the fact that the assessee had spent an amount of Rs.32,50,000/- towards alteration made to the house and that payment was made to the contractor. The observed that the word ‘constructed’ is used in the later part of Section 54F. Upholding the first appellate order, the bench ruled that “If the interpretation as has been given by the AO is accepted, that the word used ‘purchased’ is required to be restricted only to actual purchase and if any addition, alteration or demolition of the property is carried out by the assessee for the purposes of reconstruction after the demolition and for making it convenient for his use, then the cost incurred by the assessee for that purpose would not be eligible for deduction u/s.54F, is against the very purpose of providing this deduction in the statute book. Our reading of the provision makes it abundantly clear that the purchase do not include a purchase which is not a purchase of an asset which is not incapable of being used by the assessee. The assets for the purpose of Section of 54F should be an asset purchased by the assesse and if an assessee incurs a cost for making it useful and convenient after taking approval from the competent authority, as in the present case, then the assessee is entitled to deduction u/s.54F of the Act.”

Article referred: http://www.taxscan.in/cost-incurred-alteration-renovation-purchased-unit-eligible-capital-gain-exemption-us-54f-itat-bengaluru/11319/

Comments

  1. Blogger21 October 2018 at 01:38

    This comment has been removed by a blog administrator.

    ReplyDelete

Post a Comment

Most viewed this month

Michigan House Approves 'Right-to-Work' Bill

Amid raucous protests, the Republican-led Michigan House approved a contentious right-to-work bill on  Dec 11 limiting unions' strength in the state where the (Union for American Auto Workers)  UAW was born. The chamber passed a measure dealing with public-sector workers 58-51 as protesters shouted "shame on you" from the gallery and huge crowds of union backers massed in the state Capitol halls and on the grounds. Backers said a right-to-work law would bring more jobs to Michigan and give workers freedom. Critics said it would drive down wages and benefits. The right-to-work movement has been growing in the country since Wisconsin fought a similar battle with unions over two years ago. Michigan would become the 24th state to enact right-to-work provisions, and passage of the legislation would deal a stunning blow to the power of organized labor in the United States. Wisconsin Republicans in 2011 passed laws severely restricting the power of public s...
Post a Comment
Read more

Power to re-assess by AO and disclosure of material facts

In AVTEC Limited v. DCIT, the division of the Delhi High Court held that AO is bound to look at the litigation history of the assessee and cannot expect the assessee to inform him.  In the instant case, the Petitioner, engaged in the business of manufacturing and selling of automobiles, power trains and power shift transmissions along with their components, approached the High Court challenging the re-assessment order passed against them. For the year 2006-07, the Petitioner entered into a Business Transfer Agreement with Hindustan Motors Ltd, as per which, the Petitioner took over the business from HML.  While filing income tax return for the said year, the petitioner claimed the expenses incurred in respect of professional and legal charges for the purpose of taking over of the business from HML as capital expenses and claimed depreciation. Article referred: http://www.taxscan.in/assessing-officer-bound-look-litigation-history-assessee-delhi-hc-read-order/8087/
Post a Comment
Read more

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more