ABHAY R. AGGARWAL,MUMBAI vs. ACIT 17(1), MUMBAI

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.

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.”

In the result, appeal of the assessee is allowed.