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May 2012

Section 54F of the Income-tax Act, 1961 — Deduction allowable even if the building in which investment was made was under construction and assessee had paid entire amount as advance.

By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
Reading Time 1 mins
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(2012) 49 SOT 90 (Mumbai)
ACIT v. Sudhakar ram
A.Y.: 2005-06. Dated: 31-10-2011

Section 54F of the Income-tax Act, 1961 — Deduction allowable even if the building in which investment was made was under construction and assessee had paid entire amount as advance.

The assessee earned long-term capital gain on sale of shares and claimed deduction u/s.54F in respect of investment in a new house. The Assessing Officer noted that the assessee had made investment in two new flats and the building was under construction stage and the assessee had chosen to pay the entire advance and, therefore, deduction u/s.54F could not be given.

The CIT(A) allowed the assessee’s claim. The Tribunal also held in favour of the assessee. The Tribunal noted that since the assessee has paid the full consideration before the statutory period of 2 years from the date of sale of shares and has acquired the right in the two flats which is being constructed by the builder, the benefit of deduction u/s.54F cannot be denied to the assessee.

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