Assessee can Claim Sec. 54F Deduction regardless of Construction Time Limit: ITAT

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  • Last Updated on 23 May, 2023

Section 54F Deduction

Case Details: Sharada Mohan Shetty v. Income-tax Officer - [2023] 150 122 (Bangalore-Trib.)

Judiciary and Counsel Details

    • George George K., Judicial Member & Laxmi Prasad Sahu, Accountant Member
    • G. Sathyanarayana, C.A for the Appellant.
    • Gudimella V.P. Pavan Kumar, JCIT (DR) for the Respondent.

Facts of the Case

Assessee-individual sold a plot of land in the relevant assessment year. The entire sale consideration was invested in purchasing a residential site developed by Bangalore Development Authority (BDA) and constructing a residential building. While filing the return of income, deduction under section 54F was claimed.

During the assessment proceedings, the Assessing Officer (AO) observed that neither assessee constructed a residential house within a period of three years nor deposited unutilized amount in the capital gain account before filing the return of income. To which assessee replied that since the original landlord filed writ petition before High Court against the acquisition of land by the BDA, assessee was unable to construct residential house within stipulated time.

AO rejected the assessee’s contention and denied the benefit of section 54F deduction. On appeal, the CIT(A) also upheld the additions. Aggrieved-assessee filed the instant appeal before the Tribunal.


The Tribunal noted that the assessee furnished construction plan approval letter, construction bills issued by builders and an initial construction photo. Bills issued by builders revealed that it was for construction of compound wall & shed works which clearly shows that the building was not completed within the stipulated period of 3 years from the date of the sale of capital assets. It was also noted from the documents submitted by the assessee that the landlord filed writ petition before the High Court against the acquisition of land by the BDA.

In the instant case, the assessee invested the amounts before filing the return of income as mandated in section 54F and claimed exemption under section 54F. On perusal of the documents filed by the assessee, it was observed that the assessee had genuine reason for not constructing the building within the due date as prescribed by section 54F, but the assessee intended to construct the residential house building.

Accordingly, the assessee was held to be eligible for the proportionate deduction as per section 54F, since the entire sale proceeds were not used for the new assets.

List of Cases Referred to

    • CIT v. Gold Leaf Capital Corporation Ltd. [2012] 18 166/205 Taxman 16 (Mag.) (Delhi) (para 5)
    • CIT v. Ramachandra Rao [2015] 56 163/230 Taxman 334 (Kar.) (para 7)
    • Smt. V.A. Tharabai v. Dy. CIT [2012] 19 276/50 SOT 537 (Chennai) (para 7)
    • ITO v. Mujeeb Urrehaman [IT Appeal No. 1523 (Bang) of 2019, dated 31-8-2021] (para 7)
    • ACIT v. Girish L Ragha [IT Appeal No. 116 (PNJ.) of 2014, dated 8-8-2014] (para 7)
    • Varun Seth v. Asstt. CIT [2019] 107 133/177 ITD 499 (Delhi – Trib.) (para 7).

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