SHRI. MAKAM ADINARAYANA SRIDHAR,BANGALORE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE- 3(2)(1), BANGALORE

“1. The order of the Authorities below in so far as it is against the appellant is opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the appellant's case.

The learned A.O. is not justified in denying the deduction claimed by the appellant u/s. 54F of the Act under the facts and in the circumstances of the appellant's case.

The appellant craves leave of your Honour to add, alter, amend, rectify, and delete any of the grounds urged above. 4. For the above and other grounds that may be urged at the time of hearing of the appeal, the appellant humbly prays that the appeal may be allowed and Justice rendered.” Brief facts of the case are as under: 2. The assessee is a retail trader of cement filed its return of income for year under consideration on 25/09/2013 declaring total income of Rs.36,16,000/-. The return was processed under section 143(1) of the Act and case was selected for scrutiny. Notice under section 143(2) was issued along with notice under section 142(1) of the Act, calling for various details. In response to the statutory notices, the representative of assessee appeared before the Ld.AO and filed requisite details as called for. 3. During the assessment proceedings Ld. AO observed that, assessee purchased agricultural land of 3 Acres and 39 Guntas at the Doddaballapura taluk on 02/05/1986. The assessee applied for conversion of the land from agricultural to residential within 2 years of purchase of land. She was issued the land conversion certificate on 27/06/1988. The Ld.AO observed that the land was developed into residential layout of approximately 60 sites after convergent at the sites were sold from 1991 onwards till 2011. The balance 12 sites were sold during financial year relevant to assessment year under consideration.

The assessee claimed profit on sale of approximately 12 sites amounting to Rs.61,00,000/- as long term capital gain, the details of which are as under: Sl.No. Date of Sale Site No Size Name of the Amount Purchaser 1 04-06-2012 34 60 X 40 Vision Developers 7,80,000/-

The Ld.AO rejected the submissions by holding that assessee claimed long term capital gain on sale of plots which were developed in 1990 and the sale commenced from 1990-91. He observed that total of 120 plots were carved out from the agricultural land and sold over the years which amounts to business carried out by assessee and the sale of plots during the year was brought to tax as business income.

The Ld.AO further denied the exemption claimed by assessee under section 54F due to reclassification of long term capital gains as business income.

Aggrieved by the order of Ld.AO, assessee was in appeal before the Ld.CIT(A). 8. The Ld.CIT(A) after considering the submissions of assessee granted the sale proceeds for Rs.61 Lacs received on sale of 12 plots to be computed as LTCG. However, for considering the claim of exemption under section 54F the Ld.CIT(A) was of the view that assessee did not comply with the requirement of provisions to be eligible to claim deduction under section 54F. 9. Aggrieved by the order of Ld.CIT(A) assessee is in appeal before us now. The only issue that is alleged by the Ld.AR is in respect of denial of claim of exemption under section 54F in respect of investment in purchase of flat made by assessee on sale of the 12 residential plots. 10. It has been submitted by the Ld.AR that assessee had advanced payments of Rs.50 Lacs towards purchase of 2 flats that did not materialise and the amount was invested in purchase of site. He submitted that the cancellation agreement was entered into between the parties on 24/06/2014. It was also submitted that the purchase of new site took place after one year after the date of transfer of original asset and no construction commenced till the date. It has been submitted that assessee had invested the sum towards purchase of site within the live period of limitation which cannot be overlooked.

On the contrary the Ld.Sr.DR submitted that assessee has failed to comply with the requirements of section 54F and therefore has been rightly denied by the authorities below.

We have perused submissions advanced by both sides in light of records placed before us. 13. We note that Ld.CIT(A) has not verified the submissions made by assessee in respect of purchase of site. Merely on surmises, the deduction is denied. In our opinion it is a fit case to be remanded to Ld.CIT(A) to carry out necessary verification. Assessee is directed to file all relevant documents in respect of purchase of site in support of its claim. The Ld.CIT(A) is directed to verify all the relevant documents and to consider the claim in accordance with law. Accordingly this ground raised by assessee stands allowed for statistical purposes. In the result appeal filed by assessee stands allowed for statistical purposes. Order pronounced in the open court on 31st August, 2021