ITAT Allows Capital Gain Exemption For Sale Of Land Having Temporary Residential Structure [Read Order]:

ITAT Allows Capital Gain Exemption u/s 54F for Sale Of Land Having Temporary Residential Structure created only 3½ months before the sale

The assessee, Suman Yadav, claimed deduction under Section 54 of the Income Tax Act, 1961, in respect of capital gains of Rs. 40,24,786, arising from the sale of an immovable property on 13.11.2017. The property was an open plot gifted by her father-in-law on 24.07.2017, with a temporary structure allegedly constructed prior to the sale.

The Assessing Officer (AO) disallowed the deduction, holding that the structure was created only 3½ months before the sale and the plot could not be classified as a residential house under Section 54. CIT(A), NFAC upheld the AO's findings that the deduction claim was an attempt to artificially qualify the asset under Section 54. Assessee, however, contended that the temporary residential structure was built on the land prior to sale and asserted that the sale of this structure along with land constituted a long-term capital asset eligible for deduction under Section 54. Tribunal agreed with Assessee as the Revenue failed to disprove the structure's residential nature. The construction of a house, even if close to the time of sale, is not ipso facto ineligible for Section 54 relief if the asset qualifies as a residential house. Section 54 relief was therefore allowed, and the disallowance was deleted.