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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR
ORDER PER MAHAVIR PRASAD, JM:
The appeal has been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)-10, Ahmedabad (‘CIT(A)’ in short) vide Appeal No. CIT(A)-10/DCIT.Circle-1(2)/73/2014-15dated 03.10.2018 arising in the assessment order dated 02.02.2015 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY. 2010-11.
Ashwinkumar Govindlal Panchal vs. DCIT] A.Y. 2010-11 - 2 - 2. The grounds of appeal raised by assessee read as under:
“1 The first ground of appeal is disallowance of exemption u/s. 54F of Rs. 39,95,263/- claimed on long term capital gains on sale of residential property. Learned DCIT as well as Ld. CIT(Appeals) has erred on the facts of the case and disallowed exemption of Rs.3995263/- claimed u/s 54F on long term capital gains on sale of residential property on date 27/10/2009, though same long term capital gains are invested for purchase of Residential Property Plot on date 21/07/2009. All details for purchase & sale of properties & its sources, purchase & sale deeds of properties & working of long term capital gains & exemption from long term capital gains were well explained during course of assessment proceedings.
2. The Second ground of appeal is disallowance of interest expense of Rs. 3,15,247/- Learned DCIT as well as Ld. CIT(Appeals) has erred on the facts of the case and disallowed interest expenses of RS. 315247/- paid to the depositors illegally, incorrectly so same should be deleted. In fact, Deposits were received in saving bank account of Ashwin Govindlal Panchal who is proprietor of Ashwin Fasteners. Sir deposits were also used for the purpose of business so interest on deposits paid by him are legal and correct & are allowable expenses.”
In this case, assessee had sold one residential plot on 27.10.2009 and also purchased one residential plot on 21.07.2009 that is during the same year and calculation of long term capital gain rupees Nil. Assessee claimed benefit of Section 54F of the Act as he has sold and purchased the residential plot but learned AO did not agree with the contention of the assessee. Section 54 of the Act contemplates as under:
“54. (1) 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" (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, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it Ashwinkumar Govindlal Panchal vs. DCIT] A.Y. 2010-11 - 3 - 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:
45[Provided that where the amount of the capital gain does not exceed two crore rupees, the assessee may, at his option, purchase or construct two residential houses in India, and where such option has been exercised,— (a) the provisions of this sub-section shall have effect as if for the words "one residential house in India", the words "two residential houses in India" had been substituted; (b) any reference in this sub-section and sub-section (2) to "new asset" shall be construed as a reference to the two residential houses in India:
Provided further that where during any assessment year, the assessee has exercised the option referred to in the first proviso, he shall not be subsequently entitled to exercise the option for the same or any other assessment year.] (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 accordance with, any scheme 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,— Ashwinkumar Govindlal Panchal vs. DCIT] A.Y. 2010-11 - 4 - (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. Explanation.—[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]”
Learned AO observed that exemption under Section 54 of the Act is available if the property sold as residential house, the income of which is chargeable under the head ‘income from house property’. But, in this case, the property sold is not residential house and assessee had not declined income under the head ‘income from house property’. Accordingly, the AO held that the assessee is not liable for exemption under s.54F of the Act.
Apart from the claim of Section 54 of the Act, the assessee also claimed interest expenses with tune of Rs.3,15,247/- on the ground that he received deposits in savings bank account in its proprietorship, namely, M/s. Ashwin Fastners and deposits were used for business purpose. But, learned AO disallowed the claim of the assessee on the ground that the assessee has unsecured loans were used for business purposes not for the purchase of the land, hence disallowed interest expenses.
Thereafter, the assessee preferred first statutory appeal before the learned CIT(A) who had confirmed the order of the learned AO on the ground that assessee purchased the plot of land for constructing house on 21.07.2009 and started the construction on 04.12.2007. As per assessee, he spent Rs.66,67,010/- upto 26.10.2012 on construction of the house. But, he did not file any evidence of undertaking the construction on the said plot. Though, the assessee filed copy of ‘House Purchase Account’ in the Ashwinkumar Govindlal Panchal vs. DCIT] A.Y. 2010-11 - 5 - books and there were some entries in the account regarding purchase and construction material but not supporting documents were filed before the learned CIT(A). Therefore, he confirmed the action of the AO.
So far Second ground regarding disallowance of interest of Rs. 3,15,247/- is concerned, learned CIT(A) confirmed the action of the AO as assessee could not submit any documents/evidences whether amount was spent for purchase of land or building material etc.
Now, assessee came before us by way of second appeal.
We have gone through the relevant records and impugned order. The question before us is whether benefit of Section 54 of the Act can be given to the assessee or not. In support of its contention, the assessee filed certain details, such as, copy of the electricity bill of June 2012 and September & October 2012 and copy of draft and receipt, payment of scheme, charges and the receipt dated 21st July, 2011 had also filed. Building material purchase bill dated 12.04.2010 and other relevant documents before us by way of a paper book stating that these documents are vital for disposing of appeal of the assessee. As claim of the assessee has been rejected by the lower authorities for the ground that assessee has not started building construction activity within three years. The benefit of Section 54F of the Act cannot be given. As the assessee could not file all the relevant details before the lower authorities at our direction assessee could file certain directions which are important for adjudication of the case. In our considered opinion and in the interest of justice, we give one more chance to the assessee and set aside the matter back to the file of the AO with the direction to go through the paper book filed by the assessee before us and thereafter decide the matter as per law.
Ashwinkumar Govindlal Panchal vs. DCIT] A.Y. 2010-11 - 6 - 9. In the result, this ground of appeal is allowed for statistical purposes.
10. Now, we come to Ground No.2, in this case assessee has taken loan for business purpose as interest of Rs.3,15,247/- has been paid on unsecured loans in a proprietary firm of the assessee. Since, the amount has not been used for construction of house, therefore, same cannot be allowed and we do not find any infirmity in the order passed by the lower authorities and therefore, we confirm the action of the lower authorities.
In the result, this ground of appeal of the assessee is dismissed.
In the combined result, appeal of the assessee is partly allowed.
This Order pronounced in Open Court on 22/04/2022
Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 22/04/2022 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।