Section 54F of the Income Tax Act

Income-tax Act, 2025: s.86

Section 54F of the Income-tax Act, 1961 corresponds to section 86 (Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house) of the Income-tax Act, 2025.

Read section 86 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 54F is CIT v. Zoom Communication (P) Ltd. (327 ITR 510), cited in 330 of the 2,628 judgments on BharatTax that turn on this section.

Leading authorities on Section 54F

CIT v. Zoom Communication (P) Ltd.
327 ITR 510 · 2010 · High Court
330
citing judgments

Penalty under section 271(1)(c) is not leviable for legally unsustainable claims if the assessee provides a substantiated, bona fide explanation without concealing facts or giving incorrect information. However, penalty is attracted if a claim is baseless, legally incorrect, and the explanation lacks bona fides.

Mysore Minerals Ltd. v. CIT
239 ITR 775 · 1999 · Supreme Court
215
citing judgments

For income tax purposes, the 'owner' of a property is the person who is entitled to receive income in their own right, bears the risks incidental to ownership, and utilizes the asset, even if the sale deed is not formally registered. This beneficial ownership is sufficient for claiming depreciation or capital gains exemption under relevant sections.

Sanjeev Lal v. CIT
365 ITR 389 · 2014 · Supreme Court
122
citing judgments

For claiming capital gains exemption under beneficial provisions like section 54, the 'date of transfer' can be the date of the agreement to sell, particularly when coupled with substantial advance consideration or an enforceable right, adopting a purposive and liberal interpretation to acknowledge the assessee's intent.

CIT v. Manjula J. Shah
355 ITR 474 · 2013 · High Court
113
citing judgments

For capital assets acquired by gift or will, the indexed cost of acquisition under Section 48 is computed with reference to the year the previous owner first held the asset. The period of holding for determining if an asset is long-term also includes the previous owner's holding period, as per Section 2(42A).

CIT v. Escorts Finance Ltd.
328 ITR 44 · 2010 · High Court
108
citing judgments

An assessee is liable to penalty under Section 271(1)(c) read with Explanation 1 if they make a claim that is incorrect in law, wholly without basis, and the explanation furnished for such a claim is not bona fide.

CIT v. K.G. Rukminiamma
331 ITR 211 · 2011 · High Court
104
citing judgments

For capital gains exemption under Sections 54 and 54F of the Income Tax Act (prior to the 2015 amendment), the expression "a residential house" includes multiple residential units and should not be construed in the singular, by applying Section 13 of the General Clauses Act.

CIT v. D. Ananda Basappa
309 ITR 329 · 2009 · High Court
97
citing judgments

For exemption under Section 54, the expression 'a residential house' allows for investment in multiple residential units that form one functional unit, as 'a' does not imply a singular number. The amendment to Section 54, effective from April 1, 2015, is prospective.

CIT v. Ramkrishna Deo
35 ITR 312 · 1959 · Supreme Court
84
citing judgments

The burden of proving that a particular income is exempt from taxation, or is not taxable, lies on the assessee. To claim an exemption or a deduction, the assessee must provide proper materials to establish eligibility.

CIT v. Gita Duggal
357 ITR 153 · 2013 · High Court
77
citing judgments

For capital gains exemption under sections 54 and 54F, the term "a residential house" does not restrict the exemption to a single residential unit and can include multiple contiguous or combined residential units treated as one house.

CIT v. Kamal Wahal
351 ITR 4 · 2013 · High Court
71
citing judgments

An assessee is eligible for capital gains exemption under Sections 54 and 54F even when the new residential house is purchased in the name of their spouse, provided the investment comes from the assessee's own funds. This allows for a purposive construction of these provisions.

Judgments on Section 54F

Chandanahalli Nagarajaiah Shashikiran, Bangalore vs. Assistant Commissioner of Income Tax Circle 2(2)(1), Bangalore

In the result, the appeal filed by the assessee is allowed for statistical purposes

ITA 1505/BANG/2024[2017-18]Status: DisposedITAT Bangalore23 Oct 2024AY 2017-18

Bench: Ms. Padmavathy S. & Shri Prakash Chand Yadavchandanahalli Nagarajaiah Acit, Circle - 2(2)(1) Shashikiran Bmtc Building No. 1954, 8Th Main, 'E' Block Vs. Koramangala Rajajinagar, Bangalore 560010 Bengluru 560095 Pan – Assps8286Q (Appellant) (Respondent) Assessee By: Shri Ravindra M. Hegde, Ca Revenue By: Ms. Neha Sahay, Jcit-Dr Date Of Hearing: 21.10.2024 Date Of Pronouncement: 23.10.2024 O R D E R Per: Padmavathy S., A.M. This Appeal Of The Assessee Is Against The Order Of The Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [Cit(A)] Dated 07.06.2024 For Assessment Year (Ay) 2017-18. 2. The Assessee Has Raised The Following Grounds Of Appeal: - “1) The Order Of The Learned Commissioner Of Income Tax (Appeal), Passed Under Section 250 Of The Act In So Far As It Is Against The Appellant Is Opposed To Law, Weight Of Evidence, Natural Justice, Probabilities, Facts & Circumstances Of The Appellant'S Case. 2) The Appellant Denies Himself Liable To Be Assessed Total Income Of Rs. 4,39,15,228/- Against The Return Of Income Of Rs. 1,46,83,360/- On The Facts & Circumstances Of The Case.

For Appellant: Shri Ravindra M. Hegde, CAFor Respondent: Ms. Neha Sahay, JCIT-DR
Section 142(1)Section 143(3)Section 234Section 234ASection 250Section 54F