I am getting some emails regarding the above subject. On perusal of certain papers, I have drawn the following conclusion which may be helpful for the income tax assessees having some capital gains on property income.
The exemption u/s 54F is for those assesses who gets long term gains on any asset other than house property and who uses all the sales consideration within a specified period for purchase or constructing a residential house. The specified period in case of house purchase is one year before or two years after the date of transfer of asset on which gains were made. However, for construction of house, section 54 provides, time limit of three years.
- First we have to distinguish between construction of house and purchase of house. Construction of house or flat includes purchase of land and then construct or both land with construction in the case of flat or house. Outright purchase of ready made house and flat comes under purchases. The sale by DDA/TNHB/any state housing board/self-financing institutions like co-operative housing societies for construction of houses will come under construction category.
- If construction is doneby govt agency like DDA or housing society or any self financing agency with the assurance of handling over house within the specified period that is allowed by income tax dept for capital gains, capital gain benefit can be allowed by Income tax dept even if the house is not completed within 3 years. But the condition will be that the assessee should have paid full amount or substantial amount to the said agency and substantial amount of construction is done. It is intention of Govt of india to see that assessee is in the right earnest to own residential property. Thus even if completion certificate is not given by the said agency, the assessee can claim capital gains benefit to the extent of money given based on proof showing substantial constuction was done and completion delay is due to construction agencies and beyond the control of assessees. In this case, IT dept should give the benefit. It should not insist on sale transfer deed etc.
- The payment of substantial amount is insisted in order to avoid usage of some unethical practice by co-operative housing agencies who may use liberal condition to their advantage to help assessees and avoid construction of houses.
Cases useful in above matters:
Smt. Shashi Varma. v. Commissioner Of Income Tax
Commissioner of Income-tax v. R.L. Sood
Satish Chandra Gupta v. Assessing Officer  54 ITD 508
Hope this will be useful to readers .
C.R. Venkata Ramani