DCIT CIRCLE -6(1), HYDERABAD vs. SURYADEVARA VENKATESWARA RAO, HYDERABAD

Brief facts of the case are that in the order dated 29/12/2018 under section 143(3) of the Income Tax Act, 1961 (for short “the Act”), learned Assessing Officer made three additions. First addition is in respect of the set-off claimed by the assessee of the interest received against the interest paid. Second addition is in respect of disallowance of cost of improvement of the house property that was sold to derive long term capital gains and the third addition is by denying the deduction claimed by the assessee under section 54GB of the Act.

Insofar as this appeal is concerned, the addition made in respect of cost of construction and the deduction claimed under section 54GB(1)(iii) of the Act alone are the subject matter. At the outset, it is submitted that both these additions were made in the case of the co-sharer of the property, who happens to be the wife of the assessee. In her case also, these two additions were considered by the learned CIT(A) and by order dated 15/09/2020, the learned CIT(A)-6 in appeal No. 10679/2018- 19/A2/CIT(A)-6, additions were deleted. Revenue challenged the deletion of addition under section 54GB(1)(iii) of the Act in and allowed the deletion of addition in respect of the cost of construction to attain finality.

Insofar as the addition on account of cost of construction is concerned, learned Assessing Officer opined that it shall not be more than Rs. 800 per sqft., as against the claim of the assessee at Rs. 1300/- per sqft. In respect of the very same property, learned CIT(A) allowed the cost of construction at Rs. 1,304/- in case of the wife of the assessee. Revenue allowed it to be final without challenging the same before the Tribunal.

Now, it is not open for the Revenue to contend otherwise. The same property cannot have two different cost of construction. We, therefore, do not find any rationale in the plea taken by the Revenue and dismiss Ground No. 1.

Coming to Ground No. 2 in respect of the deduction under section 54GB(1)(iii) of the Act, according to the learned Assessing Officer, the assessee invested in the equity shares of M/s. Styrax Laboratories Ltd., but that company did not purchase the new asset within one year, namely, on or before 30/07/2017 and, therefore, in terms of section 54GB(1)(iii) of the Act, the assessee is not entitled to claim deduction. These facts are identical to the facts in the case of the wife of the assessee, who happens to be the co-sharer in the disposed of property.

In the appeal filed by her against the denial of the deduction under section 54GB(1)(iii) of the Act, learned CIT(A) dealt with this issue in extenso, and after an elaborate discussion, in the light of the decision of the Hon’ble Apex Court in the case of Fibre Boards Pvt. Ltd., (2015) 376 ITR 596 (SC) held that section 54G makes it clear that the assessee is given a window of three years after the date on which transfer has taken place to purchase new machinery or plant or acquire building or land. She also considered the question whether advance payments can be considered as purchase and answered it in the affirmative, and directed the learned Assessing Officer to delete the disallowance and allow the claim of the assessee for deduction under section 54GB of the Act.

When the Revenue preferred appeal against such a finding of the learned CIT(A), a Co-ordinate Bench of this Tribunal upheld the findings of the learned CIT(A), with the following observations:

Since the learned CIT(A) followed this view taken by the Co-ordinate Bench of the Tribunal, we do not find any illegality or irregularity in such findings. Consequently, we uphold the findings of the learned CIT(A) and dismiss ground No. 3 of the appeal.

In the result appeal of the Revenue is dismissed.