Capital gains tax exemption cannot be denied for reasons beyond assessee control: HC
The Telangana High Court ruled that taxpayers cannot be denied capital gains tax exemptions under section 54F if they fail to receive property titles due to circumstances beyond their control. The court set aside an ITAT order, emphasizing that tax provisions should be interpreted liberally to benefit the assessee.
Why it matters
This sets a significant legal precedent for taxpayers in India, protecting them from penalties when real estate project delays prevent the completion of property registration.
An income tax assessee is eligible for capital gains tax exemption under section 54F of the Income Tax even if the assessee did not receive legal title of the newly purchased property due to factors beyond his or her control, the Telangana High Court held.
Pronouncing verdict in an appeal challenging the Income Tax Appellate Tribunal order confirming the decision of Hyderabad IT officials imposing penalty for evading capital gains tax, a division bench of the HC held the section 54F in essence was a ‘beneficial piece of provision and has to be liberally construed’. The bench of Justices P. Sam Koshy and Narsinga Rao Nandikonda said the ITAT order was ‘bad in law, arbitrary and therefore illegal’ while setting it aside.
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