In Ajay Kumar v. ITO, the division bench of the Allahabad High Court held that exemption under section 54F of the Income Tax Act will not be available when the assessee has not started construction in the purchased plot within the stipulated time.
Assessee sold his ancestral property and purchased a new plot. However, the assessee could not start the construction within the time stipulated under the statute for various reasons. The AO denied the assessees’ claim of exemption u/s 54F on ground that the constructions were not done of the residential house and merely plot was purchased for construction of residential house. the first appellate authority allowed the appeal of the assessee. However, the tribunal reversed the same on an appeal preferred by the Revenue. Aggrieved with the order, the assessee approached the High Court for relief.
The division bench comprising of Justice Bharati Sapru and Justice Vinod Kumar Misra noted that there is a conclusive finding of fact that the assessee had not even started the construction between the specified period.
It was noted that in the case of Ranjit Narang v. Commissioner of Income Tax, the Court held that the provisions of Section 54F of the Act specifically situations where the assessee in order to save himself from payment of tax of capital gains decides to either purchase or construct a house within the specified period and if he fails to do so then the statute provides as to when the capital gains are to be treated as having arisen and in which year they are to be taxed.
It was further noted that in Pawan Kumar Garg v. Commissioner of Income Tax reported in (2009) 311 ITR 397 (P & H) wherein also the Court has held that no benefit under section 54F of the Act could be given to the assessee,who had failed to fulfil the primary ingredients of proving either the constructions of a house or the purchase of a house.
In fact there is not such a whisperthat the construction had been started or that anyportion at all had been built. In view of the above decisions, the bench dismissed the appeal filed by the assessee and held that benefit of s. 54F is available to the assessee.