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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI N. K. BILLAIYA & MS SUCHITRA KAMBLE
This appeal is filed against the order dated 10.08.2015 by the assessee passed by CIT(A)-20, New Delhi for Assessment Year 2011-12.
The grounds of appeal are as under :
“1. That the Order of learned CIT(A) partly sustaining the order of the learned Assessing Officer is bad in law and on facts and is liable to be set-aside.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. Assessing Officer in making addition of Rs. 69,42,053/- under the head Long Term Capital Gains on account of disallowance of exemption claimed u/s 54 of the Income Tax Act, 1961 by the Appellant.
That having regard to the facts and circumstances of the case, Ld.CIT(A) has erred in law and on facts in giving only partial relief to the appellant u/s 54 of the Income Tax Act, 1961 while passing order u/s 154/250 of the Act, though deposit of Rs. 75 lacs was made by the appellant under Capital Gains Scheme on 31.03.2011.
4. That Ld.CIT(A) has erred in law and on facts in totally ignoring the fact that Rs. 75 lacs has been paid by the appellant only as evident from the bank statement, though jointly held with his wife, who is separately assessed to tax and had made separate deposit of Rs. 50 lacs in Capital Gain Account Scheme which was totally ignored by learned CIT(A).
That orders passed by learned CIT(A) and learned Assessing Officer are against the principles of natural justice.
6. That the appellant craves the leave to add, amend, modify, delete any of the grounds of appeal
before or at the time of hearing and all the above grounds are without prejudice to each other.”
3. During the year under reference, the assessee had sold a property at Qutab Enclave Complex, Phase-II, Gurgaon and claimed exemption under Section 54 under the head Long Term Capital Gains. The Assessing Officer disallowed Rs. 69,42,053/- in respect of the claim of exemption u/s 54 of the Income Tax Act, 1961 made by the Assessee.
Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The Ld. AR submitted that as regards Ground No. 2 relating to addition of Rs. 69.42,053/- made under the head Long Term Capital Gains on account of disallowance of exemption u/s 54 of the Income Tax Act, the assessee sold a property at Qutab Enclave Complex, Phase-II, Gurqaon and claimed exemption u/s 54 of the Income Tax Act. 1961. The Assessing Officer disallowed claim of exemption u/s 54 of the Act, though assessee duly deposited Rs, 75,00.000/- in Capital Gain Accounts Scheme on or before 31st March 2011. In the present case, the assessee had demolished the existing residential property at Safdarjung Enclave, jointly owned by him, and had constructed four new flats. The Ld. AR submitted that deduction under Section 54 of the Act is allowable where a consideration received on transfer of a long term capital asset is utilized on the construction of residential house. The act of demolishing of the existing structure and construction of new structure would mean “reconstruction” of the house property. The expression “construction" is not defined under the Act. The Ld. AR relied upon the decision of the Hon’ble Punjab High Court in the case of Sadhu Singh S. Mulla Singh Vs District Board AIR 1962 (Punjab) 204 wherein it is held that “construction and reconstruction are interchangeable terms and in fact every reconstruction is construction.” In view of the above judgment, the Ld. AR submitted that the assessee is eligible for exemption under Section 54 of the Act as the consideration received on transfer of long term capital asset, being residential house property, is unutilized/ invested in reconstruction of the residential house property owned by the assessee. The Ld. AR submitted that the assessee had duly complied with the provisions of Section 54 of the Act and the construction was a new one and not a renovation of existing building, the old house stood demolished completely. The Ld. AR further submitted that law does not provide that the assessee is not entitled to demolish an old structure and construct a new building thereupon. The above view also finds supports from the following judgments: — CIT Vs Ashok Kumar Ralhan 2014 146 taxmann.com 416 (Delhi) — CITVs P V Narsimhan 181ITR 101 (Mad.) — CIT Vs A.R.Mathavan Pillai 219 ITR 696 (Kerela) — Jvothi Pat Ram Vs ITO 92 ITD 423 (Lucknow) — Elvis Stephenson Vs ITO (ITA No. 1924/Hvd/2011- IT AT) (Hvd.)
The Ld. AR submitted that it is not disputed that altogether a new house has been built having four units after razing old construction to the ground. The Ld. AR further submitted that multiple flats constructed have to be construed as one house and deduction u/s 54 cannot be denied. The Ld. AR relied upon the following judgments:
— CIT Vs Gita Duggal [2013] 30 taxmann.com 230 (Delhi) — CIT Vs Gita Duggal [2014] 52 taxmann.com 246 (SC) - SLP Dismissed — CIT vs D Ananda Basappa 309 ITR 329 (Kar.) — CIT v. K.G. Rukminiamma, 331 ITR 221 (Kar) — CIT vs Gumanmal Jain [2017] 80 taxmann.com 21 (Mad) — Circular No. 1/2015 dated 21-01-2015 issued by Hon’ble CBDT Moreover, the assessee had deposited Rs. 75 lakhs in Capital Gain Account Scheme on or before 31st March 2011. In view of the above, the Ld. AR prayed that the addition made of Rs.69,42,053/- is liable to be deleted.
As regards to Ground No. 3 and 4, the Ld. AR submitted that the CIT(A) has given only partial relief to the assessee u/s 54 of the Income Tax Act while passing order u/s 154/250 of the Act though deposit of Rs. 75 lacs was made by the assessee under Capital Gains Scheme on 31/03/2011 (from jointly held account with his wife). The assessee’s wife (Mrs. Mala Aneja) is separately assessed to tax and had made separate deposit of Rs. 50 Lakhs in Capital Gain Account Scheme (though bank statement is jointly held by her with the assessee). As per the provision of Income Tax Act, 1961, where amount of capital gain is not appropriated or utilized by the assessee for purchase or construction of residential house before the due date of furnishing return of income, it shall be deposited by him on or before the due date of filing return of income, in the Deposit Account in any Branch of a Public Sector Bank or IDBI Bank in accordance with Capital Gain Accounts Scheme, 1988. The amount deposited shall deemed to be amount utilized for purchase or construction of a house under Section 54. In the present case, assessee sold the property on 19/11/2010 and had duly deposited Rs. 75 lakhs in Capital Gain Account Scheme on 31/03/2011 maintained with Indian Bank, copy of Bank statement was submitted to the Assessing Officer at the time of assessment proceedings. At Para 3.3 of assessment order passed by the Assessing Officer wherein the Assessing Officer himself has accepted that “the proceeds from sale of property was deposited in Indian Bank purportedly to be used for construction of house". The Ld. AR submitted that the CIT(A) has given only partial relief to the assessee u/s 54 of the Income Tax Act while passing order u/s 154/250 of the Act, though deposit of Rs. 75 lacs was made by the assessee under Capital Gains Scheme on 31/03/2011 (from jointly held capital gain account with his wife). The assessee’s wife is separately assessed to tax and had made separate deposit of Rs. 50 lakhs in Capital Gain Account Scheme.
The Ld. DR relied upon the order of the CIT(A) and Assessment order. The Ld. DR further submitted that there is tax evasion if the assessee is allowed the claim under Section 54 of the Act.
8. We have heard both the parties and perused all the relevant material available on record. The Assessee has submitted computation of income of the assessee as well as wife of the assessee before the Assessing Officer as well as before the CIT(A). From the perusal of the same it can be seen that the assessee duly deposited Rs. 75,00,000/- which is his share in Capital Gain Accounts before 31.03.2011. The assessee demolished the existing residential property which was jointly owned by him and constructed four new flats but has claimed only as per his own share excluding the wife’s share as well. Therefore, the Assessee has rightly claimed exemption u/s 54EC as NHAI bonds of 75,00,000/- were taken by the assessee after the property was sold. All the criteria of Section 54 was fulfilled by the assessee. Thus, Ground No. 2 of the assessee’s appeal is allowed. As regards to Ground No. 3 and 4, in fact assessee’s wife got the relief for her share as claimed by her from the Revenue in respect of Capital Gains Scheme. Thus, the Assessing Officer should have not rejected assessee’s claim on the different footing which was rightly claimed by the assessee. There is no double taxation involved in the present case. Therefore, Assessing Officer as well as CIT(A) was not right in making the addition on this account. Hence, Ground No. 3 and 4 are allowed. Thus, appeal filed by the assessee is allowed.
In result appeal of the assessee is allowed. Order pronounced in the Open Court on 6th August, 2019.