V.SHYAMANAND,CHENNAI vs. DCIT, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -2, Chennai, dated 03.03.2017 and pertains to assessment year 2013-14.

The notice of hearing was served on the assessee by RPAD.

Shri AR.V. Sreenivasan, the Ld. D.R. submitted that the only issue arises for consideration is disallowance of the claim of the assessee under Section 54 of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. D.R., the assessee sold a property and constructed another building. The assessee sold the land at Padi for a sum of ₹2,03,00,000/- on 24.01.2013. The assessee admitted capital gain of ₹69,64,628/- and claimed exemption under Section 54 of the Act in respect of a new house property. According to the Ld. D.R., the cost of construction of the building was ₹1,00,65,780/-. The Assessing Officer found that what was sold by the assessee is a vacant land, therefore, the assessee can claim deduction only under Section 54F of the Act. According to the Ld. D.R., the Assessing Officer found that the Municipal Corporation of Chennai assessed the property as non-residential. Therefore, the assessee was found to be not entitled for deduction under Section 54F also. On a query from the Bench, as per the valuation report, it appears that the total built-up area was 7053.81 sq.ft., out of which, 1021.25 sq.ft. was found to be commercial, therefore, why proportionate allowance under Section 54F of the Act in respect of residential portion could be allowed? The Ld. D.R. submitted that the property was assessed as non-residential property by the Municipal Corporation, therefore, the assessee is not entitled for deduction under Section 54F also.

Having heard the Ld. D.R., we perused the material available on record. The Assessing Officer found that the assessee started construction of the property before the sale of property, therefore, not admissible for deduction. This Tribunal is of the considered opinion that in view of the language employed in Section 54F of the Act, the assessee can claim under Section 54F of the Act in respect of investment made within a period of one year before the date of sale of property in respect of purchase. However, the assessee may also claim the cost of construction if it is made within three years after the date of sale of the property. In this case, the date of purchase of new property is not available on record. The assessee appears to have invested in the construction of the property from the financial year 2011-12 to 2013-14. Moreover, out of total construction of 7053.81 sq.ft., 1021.25 sq.ft. of the building appears to have been commercial in nature. From the valuation report, it appears that there are some residential portions also constructed.

Since the material documents are not available on record, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the entire issue raised by the assessee is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and bring on record the date of purchase of the new asset and whether the assessee has deposited in the Capital gain account as required under statutory provision in respect of the capital gain which was not utilised before the due date of return of income and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes.