THE ITO,, GUNTUR vs. SRI KALARI VENKATA RASAIAH (HUF), GUNTUR

आदेश / O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

This appeal filed by the revenue is directed against order of the

Commissioner of Income Tax (Appeals)-1 {CIT(A)}, Guntur vide ITA

No.105/CIT(A)-1/GNT/2014-15 dated 30.5.2016 for the assessment year

2011-12.

ITA No.400 /Vizag/2016 Sri Kalari Venkata Rosaiah (HUF), Guntur 2. The assessee filed return of income declaring total income of

Rs.30,12,840/- on 29.7.2011. The case was selected for scrutiny and

during the assessment proceedings, the A.O. found that the assessee

has sold two properties during the year under consideration and

declared the long term capital gains of Rs.56,07,945/- in respect of

property sold vide document No.7469/2010 dated 30.7.2010 against the

sale consideration of Rs.1,15,84,034/- and in respect of property vide

document No.1030/2010 dated 30.10.2010, the assessee declared

capital gain of Rs.22,67,990/- against the sale consideration of

Rs.46,08,000/-. The aggregate long term capital gain declared by the

assessee was ` 78,79,929/- and claimed the deduction u/s 54F of the

Act in respect of purchase of residential house property at Visadala

village, Medikonduru Mandal, Guntur district. The property was

purchased on 7.7.2000 for consideration of Rs.1.56 crores vide

document No.1988/2010. In the assessment proceedings the A.O.

caused enquiry by deputing the Inspector, with regard to the nature of

property purchased and found that the said property was used for

running junior college by NRI Educational Society for a monthly rent of

Rs.30,000/- and there are no residential houses located in the vicinity of

the said property. Further, there was no kitchen, living room, bed

rooms, etc. and the class rooms are constructed with RCC roof and the

ITA No.400 /Vizag/2016 Sri Kalari Venkata Rosaiah (HUF), Guntur asbestos cement sheets and the building was surrounded by agricultural

lands. Hence, the A.O. held that the property in question is not a

residential house, and accordingly, held that the assessee is not entitled

for deduction u/s 54F of the Act, and the same was disallowed and

added back to the income.

before the CIT(A) and the Ld. CIT(A) allowed the appeal of the

assessee. Hence, the revenue is in appeal before us.

amenities in the house such as kitchen, bed room etc. and the entire

building was used for running the education institution. The A.O.

deputed the Inspector and caused the enquiries which revealed that the

said property was used for the purpose of running the NRI Educational

Academy and there are no amenities which are required for residential

house, hence, argued that the A.O. has rightly disallowed the claim of

the assessee u/s 54F of the Act, which required to be upheld.

purchased a residential house and as per the provisions of section 54F

of the Act, if the assessee purchases residential house, the assessee is

entitled for deduction u/s 54F of the Act. The extent of the house and

usage of house is not material for considering the deduction u/s 54F of

ITA No.400 /Vizag/2016 Sri Kalari Venkata Rosaiah (HUF), Guntur the Act. The only requirement is the assessee required to purchase a

residential house within 2 years or construct a house within 3 years after

the date on which, the asset was transferred. The assessee has

furnished the sale deed before us and the sale deed establishes that the

asset purchased was residential house along with sheds.

on record and gone through the orders of the authorities below. In this

case, the assessee had sold the properties vide document No.7469/2010

dated 30.7.2010 for a consideration of Rs.1,15,84,034/- and another

property for a sum of Rs.46,08,000/- which resulted in long term capital

gains and the assessee claimed the deduction u/s 54F of the Act for the

entire amount of Rs.78,79,929/-. The sale proceeds were invested for

purchase of residential house in Guntur city vide document dated

7.7.2010 and there is no dispute. As per the sale deed, the property

purchased by the assessee is a residential house along with sheds. In

the sale deed schedule, it was mentioned that the property was RCC

building and sheds. As per provisions of section 54F of the Act, it is

sufficient if the assessee purchases the residential house within a period

of one year before or 2 years after the date on which the transfer took

ITA No.400 /Vizag/2016 Sri Kalari Venkata Rosaiah (HUF), Guntur place or construction within a period of 3 years. For ready reference we

extract relevant part of section 54F of the Act, which reads as under;

“54F(1) [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long term capital asset, not being a residential house (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] (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,--

(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45”.

allowing the deduction u/s 54F of the Act, i.e. investment was made

within the time limit allowed under I.T act. Property purchased by the

assessee was residential house, which is established by the sale deed.

The revenue has not brought on record any evidence to controvert the

fact that the impugned property was not a residential house when it was

purchased. Therefore, we do not find any reason to interfere with the

order of the Ld. CIT(A) and the same is upheld.

ITA No.400 /Vizag/2016 Sri Kalari Venkata Rosaiah (HUF), Guntur 8. In the result, the appeal of the revenue is dismissed. The above order was pronounced in the open court on 4th Apr’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

#वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 04.04.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-