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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI D.T. GARASIA & SHRI RAJESH KUMAR
Per D.T. GARASIA, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 06.05.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.
The short facts of the case are as under: The assessee has shown long term capital gains on sale of land being long term of Rs.1,80,01,574/- and claimed deduction under section 54F of the Act. The date of sale of the original asset i.e.
2 Mr. Abhay R. Aggarwal Shikrapur Land at Pune is 3.08.2011 and the sale consideration was of Rs.1,90,00,000/-. The assessee has entered into agreement with Marvel Landmark Pvt. Ltd. on 21.11.2009 for acquisition of a residential house in Pune. The same was to be constructed as per the terms of the agreement under clause 5(b) and the possession was to be handed over on or before 31.12.2011. The assessee has made various payments aggregating to 1,82,57,229/- between the date of agreement and date of filing of the return on 27.07.2012. Thus, the assessee has invested entire capital gain for acquisition of new residential house. The Assessing Officer (hereinafter referred to as the AO) disallowed the entire claim but the Ld. CIT(A) has allowed the claim of payment to the extent of Rs.65,98,925/- for the period of 27.07.09 to 06.08.10 including Rs.55,52,000/- payment made towards residential house property to the builder and Rs.10,16,925/-, Rs.30,000/- towards stamp duty and registration charges respectively.
The assessee is in appeal before us for not allowing the deduction under section 54F on the ground that Ld. CIT(A) has allowed only the payment which was made after the date of transfer of capital asset i.e. for the period from 08.08.11 to 20.07.12 but did not allow the payment made prior to the transfer of the original assets. During the course of hearing the Ld. A.R. submitted that the similar issue is covered by the decision of Mumbai ITAT in the case of Kishore H. Galaiya vs. ITO (2012) 24 taxmann.com 11 (Mum).
We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that the Ld. CIT(A) has granted the deduction under section 54F up to Rs.1,51,34,250/- and rest of the amount of Rs.28,67,234/- was not qualified for 54F on the ground that section 54F mandates that hole of sale consideration has to be invested in new residential house and amount not so invested has to be invested in specified assets. We find that the similar issue had come up before the Tribunal in the case of Mustansir I Tehsilder vs. ITO in wherein the Tribunal has held as under: “10. Section 54 of the Act provides the condition that the construction of new residential house should be completed within 3 years from the date of transfer of old residential house. According to Ld A.R, section 54 is silent about commencement of construction and hence commencement of construction can precede the date of sale of old asset. In the instant case, the assessee had booked the flat much prior to the date of old flat. We notice that the Hon'ble Karnataka High Court has held in the case of CIT Vs. J.R.Subramanya Bhat (supra) that commencement of construction is not relevant for the purpose of sec. 54 and it is only the completion of construction. The above said ratio was followed in the case of Asst. CIT Vs. Subhash Sevaram Bhavnani (2012)(23 taxmann.com 94)(Ahd. Trib.). Both these cases support the contentions of the assessee. Accordingly, for the purpose of sec. 54 of the Act, we have to see whether the assessee has completed the construction within three years from the date of transfer of old asset. In the instant case, there is no dispute that the assessee took possession of the new flat within three years from the date of sale of old residential flat. Accordingly, we are of the view that the assessee has complied with the time limit prescribed u/s 54 of the Act. Since the amount invested in the new flat prior to the due date for furnishing return of income was more than the amount of capital gain, the requirements of depositing any money under capital gains account scheme does not arise in the instant case. Further, the Hon'ble High Court has held in the case of K.C.Gopalan that there is no requirement that the sale proceeds realised on sale of old residential house alone should be utilised. 11. In view of the above, we are of the opinion that the assessee is entitled for deduction of full amount of capital gains u/s 54 of the Act, as he has complied with the conditions prescribed in that section. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to allow the deduction u/s 54 of the Act as claimed by the assessee.”
4 Mr. Abhay R. Aggarwal 6. Respectfully following the same, we find that in this case the Tribunal has held that if the construction of new residential house is completed within three years from the date of old residential house and section 54 is silent about commencement of construction. Hence, the commencement of construction can precede the date of old assets. In this case, the date of sale of original asset i.e. Shrikarpur land at Pune is 30.08.2011 and assessee has entered into agreement with marvel land for acquisition of residential house on 21.1.2009 and possession was handed over on 31.12.11. Therefore, assessee has made payment prior to three years also. Therefore, the Ld. CIT(A) has not granted 54 deduction which includes maintenance charges to the builders cannot be allowed but we find that in the case of Bina K. Jain 75 taxman 145 wherein it is held that the maintenance charges also include for purchase of premises. We find that in this case the details of payments are as under: Total Cost Rs. Cost of new Flat as per Agreement 2,06,86,250 Stamp Duty 10,16,960 Registration Fees 31,100 Legal Fees 3,940 Service Tax & VAT on construction 9,90,176 (8+9+15) Reimburs. Of TDS payable u/s 194IA 45,393 (11+16) Cost of Marble Flooring differential 6,06,661 Total 2,33,80,480 Add: Maintenance and Facility Mgmt. charges 8,71,000 Total Cost 2,42,51,480
5 Mr. Abhay R. Aggarwal The assessee has made various payments aggregating Rs.1,82,57,229/- between the date of agreement and the date of filing of the return on 27.07.2012, which is exceeding the capital gains of the original asset. We find that all the legitimate expenditure for stamp duty, registration, service tax, VAT and flooring expenses included for acquiring the said flat is allowable and as per section 54 of the Act, the entire capital gain was invested for acquisition of new residential house under the construction by payment to the builder prior to date of filing the return of income as allowable under the provisions of section 54F. Therefore, we allow the same.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 24.01.2018.