Section 54F exemption denied for commercial hotel construction and repeated claims on the same property

Section 54F relief was unavailable because the sixth-floor construction formed part of a hotel operated on commercial lines, with sanctioned land use remaining commercial; a floor added to such premises could not be treated as an independent new residential house merely on asserted residential use. The Tribunal also held that the same construction could not support repeated exemption claims in different assessment years, as section 54F contemplates investment in one qualifying residential house within the prescribed period. The disallowance of the section 54F claim was therefore upheld against the assessee.

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Issues: (i) Whether the assessee was entitled to exemption under section 54F of the Income-tax Act, 1961 in respect of construction on the sixth floor of an existing hotel/commercial premises; and (ii) whether the same construction could be the basis of repeated exemption claims in different assessment years.

Issue (i): Whether the assessee was entitled to exemption under section 54F of the Income-tax Act, 1961 in respect of construction on the sixth floor of an existing hotel/commercial premises.

Analysis: Section 54F grants relief only where the capital gain is invested in a new residential house. The material on record showed that the sixth floor was part of a hotel run on commercial lines and the sanctioned land use was commercial. The Tribunal found that a floor added to a commercial hotel could not be treated as an independent residential house merely because residential use was asserted for that portion. The documentary record did not rebut the commercial character of the building.

Conclusion: The claim for exemption under section 54F on this footing was not allowable and was against the assessee.

Issue (ii): Whether the same construction could be the basis of repeated exemption claims in different assessment years.

Analysis: The exemption under section 54F is linked to investment in one qualifying new residential house within the prescribed period. The Tribunal noted that the assessee had already availed relief on the same construction in earlier years and attempted to claim the benefit again for the same project. Such repeated use of the same asset for successive exemptions was held to be inconsistent with the scheme of the provision and its object.

Conclusion: Repeated exemption on the same construction was not permissible and the issue was against the assessee.

Final Conclusion: The disallowance of the section 54F claim was upheld and the assessee's appeal failed in full.

Ratio Decidendi: Exemption under section 54F is available only for investment in a qualifying residential house, and it cannot be extended to a construction forming part of a commercial hotel or used repeatedly for multiple exemption claims on the same property.

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