Rikant Pittie sold shares of Easy My Trip Planners Ltd. in March 2021, generating substantial long-term capital gains. To claim relief under Section 54F, which provides exemption from capital gains tax if the proceeds are reinvested into a new residential property, Pittie: Purchased a residential house in Gurgaon. Incurred significant renovation expenses to make the property livable. The Core Issue: The primary issue was whether Pittie's renovation expenses, incurred within the extended deadline announced by the CBDT due to the COVID-19 pandemic, could qualify for deduction under Section 54F. Section 54F Overview: Section 54F offers a capital gains tax exemption for individuals or Hindu Undivided Families (HUFs) who sell long-term capital assets (other than residential property) and reinvest the proceeds in a new residential property. The exemption is available if: The property is purchased within one year before or two years after the date of transfer, or The property is constructed within three years of the transfer. The entire capital gains must be reinvested to avail the full benefit. Partial reinvestment may result in partial exemption. Key Points from the Ruling: Extended Deadline for Investments and Payments: Due to the COVID-19 pandemic, the CBDT issued circulars (No. 12/2021 and 1/2023) that extended the deadline for making investments or payments for claiming exemptions under Section 54 to 54GB to March 31, 2023. This allowed taxpayers extra time to make investments in residential properties, which was particularly beneficial for those who had transactions delayed due to the pandemic. Eligibility of Renovation Expenses: The ITAT ruled that renovation expenses incurred within the extended deadline (i.e., by March 31, 2023) qualify for deduction under Section 54F. This decision is critical because it broadens the scope of eligible expenses for the purposes of claiming capital gains exemptions. In this case, Pittie’s renovation expenses were deemed eligible for deduction, as long as they were incurred within the extended deadline provided by the CBDT. Partial Deduction Allowed: The CIT(A) had earlier reviewed the bills and payments submitted by Pittie and allowed a deduction of ₹36.07 crore under Section 54F, excluding certain expenses (like those related to air conditioning and furniture, which are not considered part of the renovation but instead fall under capital improvements or personal expenses). Precedent in Other Cases: The ruling aligns with similar decisions, such as a ITAT Bengaluru bench decision, which held that expenses incurred on alterations or renovations of a purchased property are eligible for capital gains exemption under Section 54F. Impact and Implications: Clarification on Renovation Expenses: The ITAT’s judgment clarifies that expenses related to the renovation of a new residential property (purchased with long-term capital gains) within the extended deadlines are eligible for tax deductions under Section 54F. This is particularly relevant for taxpayers who may have faced delays in completing their property investments due to the pandemic. Extended Deadlines Benefit Taxpayers: The CBDT's extended deadline until March 31, 2023, provides significant relief to taxpayers, especially during the pandemic period when construction and renovation activities were delayed. Important Precedent: The ruling sets an important precedent for future cases, especially in the context of COVID-19-related extensions. It helps taxpayers understand the scope of what qualifies for deductions under Section 54F, particularly in terms of renovation expenses. Potential for Future Disputes: While this ruling is favorable for Pittie, it’s likely to generate more interest among taxpayers and tax authorities. There might be future disputes over the nature of expenses (e.g., whether certain costs like furniture, air-conditioning, etc., are part of renovation or personal expenses) and their eligibility for deduction.