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Income Tax Appellate Tribunal, “ C ” BENCH, AHMEDABAD ds le{kA
Before: SHRI WASEEM AHMED
आदेश / O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is the appeal filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-5, Vadodara, dated 07.08.2015 in the Assessment Year (AY) 2012-13.
The grounds of the appeal raised by the Revenue are as under: 1. On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in by directing the AO to allow deduction u/s 54F of the I.T. Act, 1961 without appreciating findings of the AO and the facts and circumstances established on records shows that assessee had not fulfilled the condition laid down as per provision of the I.T. Act, 1961 and exemption claimed u/s 54F of the I.T. Act was erroneous.
ITA No.3422/Ahd/2015 DCIT vs. Smt. Jagrutiben Harishkumar Chokshi Asst.Year –2012-13 - 2 -
That the appellant craves leave to add to, amend, or alter the above grounds as may be deemed necessary.
Relief claimed in appeal It is prayed that the order of the CIT(A) be set aside and that the AO be restored.”
The only issue raised by the Revenue in the grounds of appeal is that Ld. CIT(A) erred in allowing the deduction of Rs. 75,11,815.00 u/s 54F of the Act though the conditions laid down under the provisions of Act were not fulfilled.
Briefly, state facts are that the assessee is an individual and offered her income under the head house property, LTCG, and income from other sources in her return of income.
4.1 During the year under consideration the assessee had sold a non agricultural plot of land on 20th June 2011 for a total consideration of Rs. 1,22,39,332/- and offered long term capital gain of Rs. 15,17,806/- on such plot of land. The computation of LTCG offered by the assessee is as under: Sale consideration: Rs. 1,22,39,332/- Less: Index cost of acquisition (Rs. 20,66,943/-) Less: Index cost of Improvement (Rs. 11,42,768/-) LTCG Rs. 90,29,611/- Exemption u/s 54F (Rs. 75,11,815/-) Offered LTCG Rs. 15,17,806/-
ITA No.3422/Ahd/2015 DCIT vs. Smt. Jagrutiben Harishkumar Chokshi Asst.Year –2012-13 - 3 - 4.2 As such the assessee during the year under consideration had purchased a non-agriculture plot of land worth of Rs.1,01,82,000/-and claimed exemption under section 54F in respect of the same.
4.5 However the AO rejected the claim of the assessee made u/s 54F of the Act as the assessee could not furnish any evidence regarding the construction of the house.
The AO also observed in his order that during the hearing on 19th 4.6 January 2015 the representative of assessee admitted that house is under construction. However, the AO was of the view that the house should have been constructed within the 3 years from the date of transfer of the land i.e. 20/6/2014.
4.7 Accordingly, the AO held that the assessee could not comply with the provisions of section 54F of the Act and added back Rs. 75,11,815/- in respect of exemption claimed u/s 54F of the Act to the total income.
Aggrieved, assessee carried the matter before Ld. CIT(A). The assessee before the ld. CIT-A claimed that he has purchased a plot of land no. 14, TP Scheme No., FP 74,78,79,83, & 84 at village ankodia from the land owners & developers M/s Corner Point Infrastructure Pvt. Ltd for Rs. 101.82 lacs including stamp duty & registration fees of Rs. 4.82 lacs.
ITA No.3422/Ahd/2015 DCIT vs. Smt. Jagrutiben Harishkumar Chokshi Asst.Year –2012-13 - 4 - The assessee further contended that seller of such plot (M/s Corner Point Infrastructure Pvt. Ltd) has already obtained permission of construction from VUDA i.e. local authority on 17th august 2009 vide permission no. UDA/Permission/Plan-7/11/2009. The assessee also submitted this fact is clear from page 5 of the sale deed no. 4161 dated 30-3-2012.
5.1 The Assessee before the CIT(A) also submitted that land purchased is a residential plot of land with the permission to construct the residential house on it. Therefore the exemption u/s 54F of the Act should be allowed.
5.2 The Ld. CIT(A) agreed with the contention of assessee and reversed the order of AO. The Ld. CIT(A) has held as under: 6.4 The Assessing Officer has disallowed claimed exemption u/s 54F of the Act mainly on the ground that the construction of the residential house was not complete even after three years of the sale of the original asset and in the opinion of the Assessing Officer, completion of construction within three years of the date of sale is a condition precedent for claiming exemption u/s 54F of the Act. Since this condition was not fulfilled, the Assessing Officer denied claimed exemption u/s 54F to the assesee. In this regard, the assessee has argued that once the amount received on sale of original asset was invested in the new asset within three years of the date of sale, the assessee was eligible for exemption u/s 54F and completion of the construction of the residential house beyond a period of three years could not lead to denial of claimed exemption. In this regard, the assesee placed reliance on the decisions of Hon'ble Madras High Court in the case of CIT vs Sardarmal Kothari [2008] 302 ITR 286 (MAD), where it was held that in order to get benefit u/s 54F, assessee need not complete construction of house and occupy the same. 6.5 It is clear from the material available on record that the assesee had invested a sum of Rs.1,01,82,000/- out of the Capital Gains in plot
ITA No.3422/Ahd/2015 DCIT vs. Smt. Jagrutiben Harishkumar Chokshi Asst.Year –2012-13 - 5 - no. 14, Final Plot No. 74,78 &79, village Ankodia, which was purchased for construction of residential house. The intention of the assessee for construction of a residential house is evident from a copy of development/construction permission from VUDA, a copy j of the Lay out plan and building plan submitted by the assessee, copies of various other statutory approvals for construction of residential house, submitted by the assessee and copies of Balnce Sheets for A.Y. 2013-14 and 2014-15 submitted by her, showing investment in construction of house. Hon'ble Madras High Court has, in CIT vs Sardarmal Kothari [2008] 302 ITR 286 (MAD), held that in order to get benefit u/s 54 F of the Act, assessee need not complete construction of house and occupy the same. Hon'ble ITAT, Mumbai has, in the case of Hasmukh N. Gala vs ITO in ITA No. 7512/Mum/2013, has also held that once the amount of Capital Gains has been invested by the assessee in a new asset within available time, even if the construction of the new asset is not completed within three years, exemption u/s 54 of the Act cannot be denied to the assessee. Considering the above discussion and particularly the decision of Hon'ble Madras High Court in the case of Sardarmal Kothari (supra), the Assessing Officer is directed to allow exemption u/s 54F to the assessee. The assessee succeeds on this ground of appeal.” 5.3 Aggrieved by the order of Ld. CIT(A) Revenue is in appeal before us.
The ld. DR before us submitted that the construction of the residential house was not constructed within the time specified which is compulsory for claiming the exemption under the provisions of section 54F of the Act. The ld. DR relied on several judgments in support of his claim. The ld. DR vehemently supported the order of the AO.
On the other hand the ld. AR submitted that there was approval for the construction of the house and the expenses were incurred on the same. He accordingly prayed for the deduction of the capital gain under section 54F of the Act. The ld. AR placed his reliance on several
ITA No.3422/Ahd/2015 DCIT vs. Smt. Jagrutiben Harishkumar Chokshi Asst.Year –2012-13 - 6 - judgments in support of his claim. The ld. AR vehemently supported the order of the ld. CIT-A.
We have heard the contentions of both the parties and perused the materials available on record and case law cited by both the parties. The only issue in the present appeal is with regard to the claim of exemption u/s 54F made by the assessee which was disallowed by the AO. But subsequently the assessee in first appeal succeeds before the Ld CIT(A).
8.1 At the outset we note that there is no doubt that the plot purchased by the assessee is a residential plot and the permission for constructing the residential property is already taken from the local authority by the seller of such plot. The fact of permission obtained from the local authority is mentioned on sale deed itself.
On perusal of balance sheet of the assessee dated 31st march 8.2 2014/2015 and ledger of Sevasi home construction for the year 2013-14 & 2014-15, we note that assessee has incurred expenses on construction of residential property. The relevant extract of the balance sheet is reproduced as under:
ITA No.3422/Ahd/2015 DCIT vs. Smt. Jagrutiben Harishkumar Chokshi Asst.Year –2012-13 - 7 - ASSETS as on 31-3-2014 AMOUNT Rs. ADVANCED TO Chokshi Parth Harish 79,21,800.00 Info System Pvt Ltd. 37,500.00 House construction (Sevasi) 7,18,403.00
ASSETS as on 31-3-2015 AMOUNT Rs. OTHER INVESTMENT Agri. Land Muval (24-05-14) 30,76,005.00 House Construction (Sevasi) 12,03,456.00
8.3 Thus the only dispute is that assessee could not construct the residential house within the period of three years from the date of transfer of old property as stipulated in the section 54F of the Act.
8.4 In this regard it is worth to mention here that it is settled law that the provisions of section 54F of the Act are beneficial to assessee. Therefore the same should be read liberally. Since the provisions of section 54F of the Act is a beneficial provision to assessee, we are inclined to hold that the benefit of the provisions of section should not be denied merely because assessee could not complete the construction of house within three years from the date of transfer.
ITA No.3422/Ahd/2015 DCIT vs. Smt. Jagrutiben Harishkumar Chokshi Asst.Year –2012-13 - 8 - 8.5 In this regard we also find support from the Hon’ble Madras High Court in case of CIT vs. Sardarmal kothari reported in 302 ITR 286 which is as under: “In order to get the benefit under section 54F, the assessee need not complete the construction of the house and occupy the same. Circular No. 667, dated 18-10-1993 ([1993] 204 ITR (St.) 103) would not in any way advance the case of the revenue to come to the conclusion that in order to have the benefit under section 54F, the construction should have been completed.”
8.6 We also find the support from the order of this Tribunal in the case of Vinod Ugardas Patel Vs. ACIT in ITA 529/Ahd/2014 dated 02.01.2017 wherein it was held under :
“8. We have considered the rival submissions. The controversy in the instant case revolves around the eligibility of deduction of S. 54F in the facts of the case. In this instant case, the assessee has claimed deduction under section 54F on the ground that a plot of land has been purchased on which residential house was constructed by the assessee. It is the case of the assessee that the assessee is entitled to the benefit of benevolent provision of section 54F on deployment of net consideration arising on sale of 'original asset' ( transfer of a long term capital asset not being a residential house) for the purpose of construction of residential house notwithstanding delay in construction within the stipulated period of 3 years. At the threshold, we find ourselves in agreement with the proposition canvassed on behalf of the assessee that section 54F of the IT Act is a beneficial provision for promoting the construction of residential house and therefore requires to be construed liberally for achieving that purpose. The intention of literature is to encourage investments in the acquisition of residential house and completion of construction or occupation is not the strict requirement of the law so long as the consideration has been appropriated for construction of a residential house. The condition of construction of residential house within a period of 3 years has been somewhat read down and relaxed by the judicial precedents as relied upon by the assessee. We, thus observe that merely because the construction could not be completed within a stipulated period of three years after the date
ITA No.3422/Ahd/2015 DCIT vs. Smt. Jagrutiben Harishkumar Chokshi Asst.Year –2012-13 - 9 - of transfer of original asset as contemplated under section 54F of the Act, this by itself would not act as an handicap for availing benefit of 54F.”
Respectfully, following the judgments as discussed above we do not find any reason to interfere in the order of ld. CIT-A. Hence, we dismiss the ground of appeal raised by the Revenue.
In result appeal of the revenue is dismissed. This Order pronounced in Open Court on 25/09/2018
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