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Thursday, April 25, 2013

One can avail both sec 54 and 54f deduction on investing one house


Section 54 and section 54F are independent provisions and assessee can claim exemption under both sections for investment in same house

In the instant case, during the relevant financial year, the assessee had earned long-term capital gain (‘LTCG’) out of transfer of two distinct and separate assets - one being a plot of land and the other a house property. He claimed that the entire LTCG arising from the sale of the two assets was invested in purchase of the new residential house and, hence, he was entitled to avail of exemption under sections 54 and 54F. The AO rejected such claim by holding that for claiming exemption under sections 54 and 54F the assessee had to invest in two houses. Further, the CIT(A) upheld the order of AO. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) Sections 54 and 54F are independent of each other and operate in respect of LTCG arising out of transfer of distinct and separate long-term capital assets. However, both the sections allow exemption only on purchase or construction of a new residential house;

2) The only reasoning on which the lower authorities had rejected assessee's claim of exemption under section 54 was that the assessee couldn’t claim exemption under both the sections towards investment in a single house. According to the lower authorities, for claiming exemption under sections 54 and 54F the assessee had to invest in two houses. Such an interpretation of the provisions was totally misconceived and misplaced;

3) There was also no specific bar either under section 54 or 54F of the Act prohibiting allowance of exemption under both the sections in case the conditions of the provisions were fulfilled;

4) Since long-term capital gain arose from sale of two distinct and separate assets, viz., residential house and plot of land and the assessee had invested the entire capital gain in purchase of a new residential house, he was entitled to claim exemption both under sections 54 and 54F - VENKATA RAMANA UMAREDDY V. DY.CIT [2013] 32 taxmann.com 157 (Hyderabad - Trib.)