TaxTMI 
TaxTMI 
2006 (6) TMI 139
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....t. Ltd. for a consideration of Rs. 4,85,98,920/- in the year under consideration. He also purchased a flat in a building, namely, Samudra Mahal, situated at Dr. Annie Besant Road, Mumbai, for a consideration of Rs. 3,46,95,443/-. According to the assessee, this flat was in an inhabitable condition and, therefore, he had to incur an expenditure of Rs. 28,66,675/- in order to make the flat habitable. In the return filed, the assessee claimed exemption under section 54F in respect of both the amounts mentioned above. In the course of assessment proceedings, the Assessing Officer asked the assessee to explain as to how the exemption could be allowed in respect of the sum of Rs. 28,66,675/-. In response to the same, the assessee, vide lett....
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....f purchase involves execution of an agreement, payments pursuance of this agreement, payment of stamp duty, registration of the deed of transfer, payment of transfer fee to the society and getting the shares in the Co-operative Housing Society transferred to one's name. When all these actions are over, the process of purchase is complete. Therefore, when sections 54F(1) and 54F(1)(a) and (b) are read together, it is amply clear that 'cost of new asset' means "cost of purchase of new asset". It cannot include cost of improvements or cost of renovation as these activities are subsequent to the 'purchase'. b. The assessee has relied upon the decisions in the cases of Challapalli Sugar Ltd. v. CIT 98 ITR 167 (SC) and Arvin....
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.... is purchased, the requirement of section 54F stands complied with and, therefore, any amount spent thereafter in respect of such house would not qualify for exemption under section 54F. The stand of the assessee is that, incentive provisions should be construed liberally. According to him, an incomplete house which is inhabitable cannot be considered as purchase of residential house and, therefore, any sum incurred to make such house habitable would form part of cost of purchase. So, the entire dispute centers round the interpretation of the provisions of section 54F of the Act. Therefore, it would be appropriate to reproduce the relevant portion of the provisions of section 54F as under: "54F. (1) Subject to the provisions of sub-sectio....
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....is stage, it would also be useful to refer to the Board's Circular No. 471, dated 15-10-1986, which reads as under: "1. Capital gains tax.- Whether investment in a flat under the Self-financing Scheme of the Delhi Development Authority would be construction for purpose of sections 54 and 54F of the Income-tax Act, 1961. Sections 54 and 54F of the Income-tax Act, 1961, provide that capital gains arising on transfer of a long-term capital asset shall not be charged to tax to the extent specified therein, where the amount of capital gain is invested in a residential house. In the case of purchase of a house, the benefit is available if the investment is made within a period of one year before or after the date on which the transfer took ....
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....e allottee has to bear the increase, if any, in the cost of construction. Therefore, for the purpose of capital gains tax, the cost of the new asset is the tentative cost of construction and the fact that the amount was allowed to be paid in instalments does not affect the legal position stated above. In view of these facts, it has been decided that cases of allotment of flats under the Self-financing Scheme of the Delhi Development Authority shall be treated as cases of construction for the purpose of capital gains." The above Circular clearly shows that object of sections 54 and 54F was to augment the investment in residential accommodation. Considering the said object, the Board took the view that payment to Delhi Development Authority,....
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....distinction between expenditure incurred on making the house habitable and the expenditure on renovation. We may visualize a situation where assessee may buy a habitable house but the assessee may like to incur expenditure by way of renovation to make it more comfortable. He may not be happy with the quality of material used by the builder and, therefore, he may incur the expenditure on improvement of the house. Such expenditure cannot be equated with the expenditure on making the house habitable. Whether the house purchased by the assessee was in a habitable condition or not would depend on the state of condition of the house at the time of purchase. Hence, this aspect would have to be kept in mind while adjudicating such issue. In the pre....