Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R
PER KUL BHARAT, J.M: This appeal by the Assessee is directed against the order of Ld. Commissioner of Income Tax(Appeals)-2, Bhopal, (in short ‘CIT(A)’), dated 11.12.2013 pertaining to the A.Y. 2008-09. The assessee has raised following grounds of appeal: “1. That, on the facts and in the circumstances of the case, Ld. CIT(A)-II, Bhopal has erred in confirming addition to the extent of Rs.23,89,533/- to the total income of the assessee on account of disallowance of exemption u/s 54 of the IT Act, 1961.
Shivcharan Singh
That, the Ld. CIT(A)-II, Bhopal has erred not to consider the additional evidences i.e. Photograph of the house property, permission and approval map of residential house property by Municipal Corporation, Indore Dated. 11/1/2011 and architects certificate certifying completion of house and cost of expenditure in construction of residential house property (Rs.12,53,350/-) dated. 31.07.2011 filed by the appellant, which clearly shows that construction of residential house has been commenced well before the expiry of specified period given u/s 54. Thus disallowing the exemption u/s 54 due to non furnishing of approved map by Municipal Corporation and architect’s certificate of completion of house during the assessment proceedings is unjustified. 3. That, Ld. CIT(A)-II, Bhopal has erred not to consider the fact that the entire consideration received on sale of old property has been invested for the purchase of land and even the purchase value of the land is more than the long term capital gains taxable in the hands of the appellant. Please rely on the decision held in the case of V.A. Tharabai vs. DCIT 149 TTJ 41 (I.T.A.T. Chennai) in which it was held that without purchasing land, house cannot be constructed. The first step is purchase of land which was done by the assessee. Therefore, the entire amount spent by the assessee in purchasing the land should be construed as amount invested in purchase/construction of residential house. 4. That, Ld. CIT(A)-II, Bhopal has also erred not to consider the written submission made by the appellant stating that he has invested total sale consideration in the purchase of land/construction of house before the completion of three years though the house was completed after the expiry of three years. Reliance can be placed on the following case laws in which it is held that exemption u/s. 54 is available even if the construction of new house is not completed within statutory period:- CIT vs. Sambandam Udaykumar Karnataka H.C. 72 DTR 232 CIT vs. Sardarmal Kothari 302 ITR 286 (Mad. H.C.) Mrs. Seetha Subramanian vs. ACIT 56 TTJ 417(Mad.) Smt. Ranjeet Sandhu vs. DCIT 133 TTJ 64 I.T.A.T., Chdg.”
Shivcharan Singh
Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment while framing the assessment u/s 143(3) of the Income Tax Act, 1961(hereinafter called as ‘the Act’). The Assessing Officer rejected the claim of the assessee for exemption u/s 54 of the Act. The Assessing Officer has observed that the assessee had sold a house property for sale consideration of Rs.38,55,000/-. It was stated before the AO that the assessee had purchased 4 residential plots at Indore on 15.11.2007 for sum of Rs.35,25,450/- in the joint names of assessee’s sister in law, Smt. Pritikanwar Singh and the assessee. This claim of the assessee was rejected by the AO, on the ground that the plots have been purchased in the joint names and the residential house is not constructed within the three years from the date of transfer. 3. Aggrieved by this the assessee preferred an appeal before the Ld. CIT(A) who after considering the submissions sustained the addition to the extent of Rs. 23,89,533/- against Rs.28,59,057/- made by the AO in respect of Long Term Capital Gains. 4. Now the assessee has preferred the present appeal. Ground No.1 to 4 are against rejecting of claim of exemption u/s 54 of the Act, therefore, all the grounds are being disposed of together. Ground No.5 is general in nature thus, the same does not require any separate adjudication. 5. Apropos ground No.1 to 4 the Ld. counsel for the assessee reiterated the submissions as made before the Ld. CIT(A). The Ld. counsel submitted that authorities below were not justified in rejecting the claim of exemption u/s 54 of the Act. The Ld. counsel
Shivcharan Singh
submitted that plots were purchased and application for consolidating the same was made to the concerned authority along with map. The Ld. counsel further reiterated the submissions as made in the written submissions. The Ld. counsel also placed reliance on the various case laws in support of his contention. Ld. Counsel place reliance on the decision of co-ordinate Bench of this Tribunal in the case of V.A. Tharabai vs. DCIT 149 TTJ 41 (I.T.A.T., Chenni). Ld. counsel further placed reliance on the following case laws; i. CIT vs. Sambandam Udaykumar Karnataka H.C. 72 DTR 232 (Karnataka) ii. CIT vs. Sardarmal Kothari 302 ITR 286 (Mad. H.C.) iii. Mrs. Seetha Subramanian vs. ACIT 56 TTJ 417(Mad.) iv. Smt. Ranjeet Sandhu vs. DCIT 133 TTJ 64 ITAT,(Tribunal).” In support of contention that exemption u/s 54 would be available even if the construction within statutory period, where the entire sale consideration is interested in purchase of land/construction of house. 6. On the contrary Ld. DR opposed the submission and submitted that case law would not support the case of the assessee as the assessee failed to demonstrate that the land was purchased in assessee’s name and construction was completed within the period stipulated under the provisions of the Act. He submitted that the case laws as relied upon the assessee do not help the assessee. He submitted that the case laws as relied by the Ld. counsel are one is that the exemption would be allowable even if the construction of residential property is made in joint name with spouse or
Shivcharan Singh
dependent children. And another issue is where the assessee invested entire capital gain for construction of residential house but the builder fails to construct within the specified period. The exemption should not be denied in such case. 7. We have heard the rival contentions and perused the material on record. We need to examine in the light of facts of present case and the case laws as relied by the Ld. counsel for the assessee. Undisputed facts are that the assessee sold a house property at sale consideration of Rs.38,55,000/- on 17.09.2007 and purchased four residential plot on 15.11.2007 for a sale consideration of Rs.35,25,450/- in joint names of assessee’s sister in law, Smt. Pritikanwar Singh. Application for consolidation of plot along with map was made on 24.12.2010 and permission was granted on 11.01.2011. No evidence is placed on record suggesting that the assessee made any application seeking approval of construction of house prior to 24.12.2010. However an application dated 15.03.2010 by sister-in-law is placed on record. Thus, ex-facie no effort made by the assessee for construction of residential house within three years of sale of original capital asset except, purchasing of residential plots. Under these facts let us examine whether the law entitles the assessee for exemption u/s 54 of the Act. For the sake of clarity section 54 is reproduced herein below: “Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset [***], being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" 5
Shivcharan Singh
(hereafter in this section referred to as the original asset), and the assessee has within a period of [one year before or two years after the date on which the transfer took place purchased], or has within a period of three years after that date constructed, a residential house, then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,— (i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain. [***] [(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in
Shivcharan Singh
accordance with, any scheme30 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,— (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.”
Thus, from the above it is evident that the assessee is required to construct a residential house within three years from the date of transfer of the original asset. The provision clearly mandates the utilization of wholly or partly for the purchase or construction of new asset i.e. residential house. We have perused the case laws as relied by the Ld. counsel for the assessee. The Ld. Counsel relied upon the judgment of Hon'ble Jurisdictional High Court rendered in case of Smt. Shashi Varma vs. CIT 152 CTR 0227, in supported of the contention that the assessee had made substantial investment in purchase of plots when the Hon'ble Court held as under:
“3. We have heard counsel and perused the record. In fact, the Tribunal has taken a very pedantic approach while construing the provisions of Section 54 of the Income-tax Act. In the present case, in fact, the capital gain is Rs. 51,980 ; whereas the first 7
Shivcharan Singh
instalment towards the flat from the Delhi Development Authority was Rs. 71,256, i.e., much more than the capital gains. The Central Board of Direct Taxes also issued Circular No. 471 (see [1986] 162 ITR (St.) 41), dated October 15, 1986, and has clarified as under : " Therefore, for the purpose of capital gains tax, the cost of the new asset is the tentative cost of construction and the fact that the amount was allowed to be paid in instalments does not affect the legal position stated above. In view of these facts, it has been decided that cases of allotment of flats under the self- financing scheme of the Delhi Development Authority shall be treated as cases of construction for the purpose of capital gains." 8. It is the contention of the assessee that he has substantially invested money in construction of residential house. Admittedly, the assessee had purchased in joint names 4 plots. It is also evident from the record that an application for consolidation of these plots was made by sister-in-law of the assessee on 15.03.2010. In our considered view on the facts of the present case the Judgment of Hon'ble M.P. High Court would not be applicable as in the present case original asset was sold on 17.09.2007. The application for consolidation and construction of the house was made by sister-in- law of the assessee on 15.03.2010 i.e. after two years and 7 months and application for construction of house was made after expiry of three years i.e. on 24.12.2010 and the approval was granted on 11.01.2011. The assessee could not demonstrate that the delay in construction of the property was caused by any circumstances which were beyond his control. Therefore, we do not see any reason to interfere to the finding of the authorities below. Moreover, there
Shivcharan Singh
is no inordinate delay on the part of the legal authority to grant permission for construction of house. There is another aspect of the matter that assessee had purchased plots for the purpose of investment unless the assessee after taking possession thereof makes efforts to construct the residential house on such plots. Thus, the grounds raised in this appeal are dismissed.
In the result, the appeal of the Assessee is dismissed.
Order was pronounced in the open court on 31 .01.2018.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) CCOUNTANT MEMBER JUDICIALMEMBER Indore; �दनांक Dated : 31 / 01/2018 ctàxÄ? P.S/.�न.स.
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Private Secretary/DDO, Indore