For exemption u/s. 54F approval of building plan is not necessary

The Hon’ble Chennai ITAT has in the case of B.Sivasubramanian,v/s ITO has held that there is no condition in the provisions of SEC 54F of the I.T Act,1961 that warrants  that the building plan of the residential house constructed should be approved by the Municipal Corporation or any other competent authority. If any person constructs a house without approval of building plan, he will be raising construction at his own risk and cost. As far as for availing exemption u/s.54F, approval of building plan is not necessary and benefits of sec 54F cannot be denied.

Brief facts of the case were that for AY.2006-07, the assessee had sold shares. The Long Term Capital Gain from the sale of shares was worked as `3,33,985/-. The assessee was not entitled for exemption u/s.10(36) and 10(85) on Long Term Capital Gain as the sale of shares was not made through recognized stock exchange. The assessee utilized the sale proceeds of the shares in construction of a residential house after demolishing the old house and thus claimed exemption u/s.54F of the Act. Since, the assessee had constructed a new residential house in place of the old existing building, the assessee did not get the plan approvel from the Municipal Corporation. However, on 08-02-2007, the Salem Corporation issued an interim order which shows that the assessee has put up new construction without the permission of the Salem Corporation.

The benefits of sec 54F was denied to the assessee by the A.O as well as the cit(a) but the Hon’ble ITAT bestowed the benefits by observing as under”The provisions of section 54F mandates the construction of a residential house, within the period specified. However, there is no condition that the building plan of the residential house constructed should be approved by the Municipal Corporation or any other competent authority. If any person constructs a house without approval of building plan, he will be raising construction at his own risk and cost. As far as for availing exemption u/s.54F, approval of building plan is not necessary. The approved building plan, certificate of occupation etc. are sought to substantiate the claim of new construction. In the present case, the fact that the assessee has raised new construction is evident from the interim order issued by the Corporation of Salem.
We are of the considered opinion that in view of the above facts, it is evident that the assessee has put up a new construction in place of old residential building, thus, the assessee is entitled to claim exemption u/s.54F. “