Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of
the Commissioner of Income Tax (Appeals) -12, Chennai, dated
12.12.2017 and pertains to assessment year 2012-13.
2 I.T.A. No.250/Chny/18
The only issue arises for consideration is denial of exemption claimed by the assessee under Section 54 of the Income-tax Act, 1961 (in short 'the Act').
Shri D. Anand, the Ld.counsel for the assessee, submitted that the assessee sold a flat of 1601 sq.ft. and undivided share of land of 240 sq.ft. alongwith common built up area and covered car park of 120 sq.ft. for a total consideration of ₹1,39,84,000/- to one Shri J. Antony on 22.03.2012. In fact, according to the Ld. counsel, the said flat was purchased by the assessee on 14.09.2007 for a total consideration of ₹11,50,000/- and incurred registration charges at ₹3,31,528/-. From the sale proceeds of the flat, according to the Ld. counsel, the assessee has purchased 1 acre and 6 centrs of land along with her husband, on 07.02.2013 for a total consideration of ₹3,20,00,000/-. The assessee has also constructed a residential building in the said land.
Referring to order of the CIT(Appeals), more particularly page 7 para 5.3, Shri D. Anand, the Ld.counsel for the assessee, submitted that the CIT(Appeals) accepted that the assessee has constructed 215 sq.ft. of building. Referring to para 5.4 of the order of the CIT(Appeals), the Ld.counsel submitted that the Inspector,
3 I.T.A. No.250/Chny/18
who was said to have inspected the premises, found that the construction was not completed. Referring to the judgment of Madras High Court in CIT v. Sardarmal Kothari (2008) 302 ITR 286 and the decision of this Bench of the Tribunal in Mrs. Seetha Subramanian v. ACIT (1996) 59 ITD 94, the Ld.counsel submitted that it is not necessary that residential building has to be completed before the due date. What is required, according to the Ld. counsel, is investment of capital gain before the due date. In this case, according to the Ld. counsel, investment of capital gain made within due date is not in dispute. Therefore, according to the Ld. counsel, the CIT(Appeals) is not justified in confirming the order of the Assessing Officer.
Referring to order of the CIT(Appeals), the Ld.counsel for the assessee, submitted that the Assessing Officer found that the assessee has deposited in the Capital gain Account at Vijaya Bank, Vadapalani Branch only on 31.07.2012. According to the Ld. counsel, for the assessment year 2012-13, the due date for filing of return of income was extended by the CBDT till 31st August, 2012, therefore, the assessee can deposit the money in the bank on or before 31st August, 2012. In fact, the assessee deposited the
4 I.T.A. No.250/Chny/18
money in the bank account on 27.08.2012, which is within the due
date fixed by the CBDT for filing return of income. Therefore, the
Assessing Officer is not justified in disallowing the claim of the
assessee. Referring to the order of the Assessing Officer, more
particularly at para 5.10, the Ld.counsel submitted that there was
electricity service connection to the residential building constructed
by the assessee. Merely because the assessee consumed only
200 units between 11.03.2015 and 13.05.2015, according to the Ld.
counsel, it does not mean that there was no building at all.
On the contrary, Ms. Anita, the Ld. Departmental
Representative, submitted that the Inspector visited the premises
and found that there was no construction and it was a vacant land.
Referring to the orders of the CIT(Appeals) and the A.O., the Ld.
D.R. submitted that the building was under progress and it was not
completed. The assessee constructed a residential house of 215
sq.ft. on a piece of land of 1 acre and 6 cents. According to the Ld.
D.R., at the best, this may be called as out-house or a servant
quarter and definitely it is not a residential house. According to the
Ld. D.R., the electricity service connection said to be obtained by
the assessee is only a temporary connection during the period of
5 I.T.A. No.250/Chny/18
construction. Therefore, according to the Ld. D.R., it cannot be
construed to be a residential building for the purpose of claiming
exemption under Section 54 of the Act.
We have considered the rival submissions on either side and
perused the relevant material available on record. The assessee
sold her residential flat alongwith covered car park and profit on
such sale of flat was invested on purchasing 1 acre and 6 centrs of
land in Kazhipattur Village, Chenglepet Taluk, Kanchipuram District.
The assessee has claimed that a residential house was
constructed. However, this fact is disputed by the Revenue. The
Revenue claims that what was purchased by the assessee is a
vacant land and also claims that the construction activity is in
progress and the building was not completed. The Revenue also
claims that the assessee has obtained only a temporary electricity
service connection for the purpose of construction.
The Assessing Officer disallowed the claim of the assessee
on two grounds. The first ground of disallowance is that the capital
gain was not deposited within the due date for filing return of
income, in the Capital Gain Account. As per the orders of both the
authorities below, the assessee deposited the funds only on
6 I.T.A. No.250/Chny/18
27.08.2012 at Vijaya Bank, Vadapalani Branch. The second ground
of disallowance of exemption is that the building was not completed and it was in progress.
Let’s now examine the first ground of disallowance, namely,
non-deposit of capital gain in the Capital Gain Account within the due date. The provisions of Income-tax Act very clearly says that in case the capital gain was not invested, it has to be deposited in a
specific account within the due date for filing return of income. The due date of 31.07.2012 was further extended to 31.08.2012 by CBDT. Therefore, the assessee had to deposit the money on or before 31st August, 2012. In this case, the assessee admittedly deposited the amount on 27.08.2012. Therefore, there cannot be any disallowance on this ground.
Now coming to completion of building, this Tribunal is of the considered opinion that what is contemplated in the provisions of Income-tax Act for claiming exemption under Section 54 of the Act
is investment of funds for the purpose of construction. The moment assessee invested the entire capital gain for the purpose of purchasing a residential house or construction of residential house,
the condition stipulated in the provisions to claim exemption is
7 I.T.A. No.250/Chny/18
satisfied, therefore, the Assessing Officer cannot disallow the claim
of the assessee. In this case, the Assessing Officer is not disputing the fact that the assessee has invested the funds. What is disputed is that the construction was not completed. In view of judgment of
Madras High Court in Sardarmal Kothari (supra) and the decision of this Tribunal in Mrs. Seetha Subramanian (supra) and the CBDT circular No.471 dated 15th October, 1986 and in No.672 dated 16th
December, 1993, mere investment of the capital gain in the construction of residential premises is more than sufficient for claiming exemption under Section 54 of the Act. Therefore, in the second ground of disallowance also, the Assessing Officer fails.
Now the Assessing Officer claims that the assessee has constructed only 215 sq.ft. of house. It is not in dispute that what is
constructed is 215 sq.ft. of residential house. The CIT(Appeals) rejected the claim of the assessee on the ground that it is not fit for human habitation. Since the construction was admittedly in
progress, it may not be fit for human habitation as claimed by the Revenue authorities. But, the fact is that the assessee has invested the entire capital gain in purchasing the land and to construct the
8 I.T.A. No.250/Chny/18
building, which is not in dispute. The Madras High Court in
Sardarmal Kothari (supra) has observed as follows:-
“6. The Tribunal has also taken note of its own earlier order in the case of Mrs. Seetha Subramanian vs. Asstt. CIT (1996) 56 TTJ (Mad) 417 : (1996) 59 ITD 94 (Mad), wherein the Tribunal has held that, in order to get the benefit under s. 54F, the assessee need not complete the construction of the house and occupy the same. It is enough if the assessee establishes that the assessee had invested the entire net consideration within the stipulated period. The said view taken consistently by the Tribunal has been applied in these cases also. The Tribunal has distinguished the Delhi High Court judgment in the case of D.P. Mehta vs. CIT (2001) 168 CTR (Del) 321 : (2001) 251 ITR 529 (Del), relied on by the Revenue in their favour to non suit the assessees for exemption. In our view the Tribunal has distinguished the same rightly because in the cited case, there was a factual finding by the authorities that the assessee himself has admitted that the construction put up was only a garage and service quarters and it was not fit enough for occupation of the assessee. That factual finding is totally absent in these cases. There is no material to entertain these appeals. The appeals fail and the same are dismissed. Consequently, connected miscellaneous petition is also dismissed.”
In view of the above finding of Madras High Court, this
Tribunal is of the considered opinion that since the assessee has
invested the entire funds in purchasing the land to construct the
residential property, there cannot be any denial of exemption under
Section 54 of the Act. The construction was admittedly in progress
and the assessee also obtained temporary electricity service
9 I.T.A. No.250/Chny/18
connection which also supports the case of the assessee. Therefore, this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of both the authorities below are set aside and the disallowance made by the Assessing Officer is deleted. The Assessing Officer is directed to grant exemption under Section 54 of the Act as claimed by the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the court on 16th November, 2018 at Chennai.
sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member
चे�नई/Chennai, �दनांक/Dated, the 16th November, 2018.
Kri. आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-12, Chennai 4. Principal CIT-3, Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.