SANGEETA UBEROI,NEW DELHI vs. ACIT, NEW DELHI

The present appeal has been filed by the assessee against order dated 07.10.2010 passed by Ld. CIT (A)- XXIII, New Delhi for assessment year 2006-07 on following grounds of appeal:

Brief facts of the case are as under:

During the assessment proceedings it was observed that assessee had generated long term capital gain from sale of property to tune of Rs.1,44,46,680/-. Assessee had claimed exemption under section 54F of the Act amounting to Rs.43,69,578/- by purchasing residential plot at D-123, Sector-48, Noida. Assessee was asked to furnish details in respect of land purchased as well as the investment made u/s 54F before 31.03.2006. Ld. AO observed that assessee was showing total cost of construction for year under consideration to the extent of Rs.1,58,465/- on land of worth Rs. 42 Lacs approximately. Ld. AO also observed that by way of an order of court the date of sale was shifted to be November 2005. Ld. AO observed that claim of deduction under section 54F comprised of following amounts: Cost of land : Rs. 41, 72, 543/- Commission to broker : 37, 570/- Rs. 42, 11, 113/- Less cost of construction : Rs. 1, 58, 465/-

Assessing officer disallowed claim of deduction under section 54F on following basis:

Aggrieved by assessment order, assessee preferred appeal before Ld. CIT(A) who confirmed disallowance made by assessing officer.

Aggrieved by order of Ld. CIT(A) assessee is in appeal before us now.

The only issue raised by assessee is in respect of the disallowance under section 54F of the Act.

Ld. counsel submitted that assessee had sold immovable property on 09.03.2006 and had earned long term capital gain amounting to Rs.14,446,680/-. Subsequently, assessee purchased plot for construction of residential property at D-123, sector 48, Noida for Rs.43,69,578/-. As the same has been invested in purchase of residential plot and construction thereon, said sum was claimed for exemption under section 54F. Ld. counsel submitted that corresponding capital gain arising there from at Rs.1,44,466/- was duly disclosed in return of income filed and part of sale proceeds were invested in construction of residential house on which exemption under section 54F was claimed amounting to Rs.43,69,578/-. Ld. Counsel submitted that assessee had submitted photograph of site at plot, inspection certificate from valuer dated 30.06.2008 and copy of contract for construction of house, before assessing officer, vide letter dated 05.12.2008. He thus submitted that assessee is entitled to claim of exemption under section 54F for year under consideration. Ld. Counsel referred to the compilation of paper book wherein following decisions has been enclosed: a) CIT versus Sambandam Udaykumar reported in 345 ITR 389 (Kar.) b) CIT versus Smt. by S Shantakumari reported in 233 taxman 347 (Kar)

On the contrary Ld. DR submitted that, assessee had not sought any approval from Noida Authorities for construction of alleged residential house. She submitted that in the letter referred by Ld. Counsel, exact date of commencement of construction is not a specified. According to her letter of Noida Authorities clearly mentioned date of commencement of construction as “may be” 27.02.2009. She further submitted that assessee has also not applied for a completion certificate, had construction actually completed.

Ld. DR further submitted that assessing officer had issued summons under section 131 to M/s Kaushik Associates who had issued a certificate of construction. He submitted that said M/s Kaushik Associates were not traceable at the address provided and also did not respond to summons issued. Ld. DR further submitted that assessee had sold the asset on 10.10.2005, accordingly period of 3 years ended on October or November 2008. She submitted that by this time there was no construction on property and there has been no documentary evidence submitted by assessee during the course of assessment proceedings to support his claim of any construction being completed of a residential unit. She submitted that an inspector was appointed for physical verification who has also apparently mentioned an approximate period during which the construction would have been done. 11. Ld. DR also submitted that decisions relied upon by Ld. Counsel cannot be applied to facts of present case as the basic existence of residential unit itself is in question. In decisions that has been referred to and relied upon by Ld. Counsel. She submitted that there is construction that is in existence which itself is the distinguishing feature from the present facts of case. 12. In rejoinder Ld. Counsel has submitted that actual date of transfer of capital asset was 06.03.2006 as assessee had received entire sale consideration on October 2005 and sale agreement was entered into on 06.03.2006. He submitted that transfer was thus completed on March 2005 accordingly; time period for construction of residential unit was to expire on March, 2008. He submitted that for assessee to avail exemption under section 54F could have purchase residential house within a period of one year before date of transfer whereas assessee has admittedly purchased a plot by transfer deed dated 01.12.2005 and not residential house. It has been submitted that subsequent construction started after the transfer took place on 06.03.2006. He submitted that assessee’s claim of exemption for construction of house has to be considered for a period of 3 years after date of transfer.

Ld. Counsel referred to letter dated 24.04.2009 and 01.10.2009 whereby compounding fees has been levied by Noida Authorities, for not obtaining prior approval of building plan which itself implicates that said structure was pre- existing as on that date. Ld. Counsel submitted that assessee had no dealings with said M/s Kaushik Associates either before or any time thereafter and does not have any kind of association with them. He submitted that assessee was also unable to locate the said M/s Kaushik Associates and their whereabouts so as to assist assessing officer, after gap of 3 to 4 years. He submitted that assessee was not regularly dealing or associated with said party and hence absence of M/s Kaushik Associates should not be considered against assessee.

We have perused submissions advanced by both sides in the light of records and judicial proceedings placed before.

It is observed that year under consideration is in which transfer of property took place. It is further observed that during the year under consideration assessee has invested an amount of Rs.41,72,543/- out of capital gain earned in purchase of a plot on 01.12.2005 and has incurred a cost of Rs. 1,58,465/- towards construction, which has been claimed for purposes of section 54F. The authorities below has disallowed claim of assessee on the basis of a report dated 08.12.2008 of inspector sent by assessing officer, wherein it has been reported that property at D-123, sector 48, Noida was vacant plot as on 08. 12. 2008. It is also pertinent to note that during remand proceedings while matter was pending before First Appellate Authority, inspector has reported that two rooms on ground floor are built as on 14.06.2010 which is inhabited by servant, who goes to work in morning and comes back in the night.

The argument advanced by Ld. counsel regarding regularizing plan of construction with Noida Authority by payment of penalty amounting to Rs.36,000/- approximately, being compounding fees, is supported by letter dated 04.01.2010 issued by Noida Authority and issuance of challan dated 24.04.2009, placed at page 15 and 16 of paper book. Assessee has thereafter, made payment of said amount as on 01.10.2009, receipt of payments being made by assessee is placed at page 17 of paper book. These documentary evidences go to prove that assessee regularised its default with authorities.

Section 54F has been introduced by legislature to promote housing scheme, being a beneficial provision must be construed liberally. If assessee has invested the capital gains earned from sale of immovable property into plot and, for construction of a residential house, the exemption cannot be denied to assessee. For the year under consideration it is observed that assessee has claimed an amount of Rs.1,58,465/- towards construction cost which cannot be denied under the present scenario.

However, we may at this juncture mention that admittedly assessee has not invested the balance capital gain amount into any specified capital gains account as per sub-class 4 of section 54F. There is nothing on record for the year under consideration to prove that balance capital gains have been paid for purposes of construction of proposed residential house. As the requirement is construction of a residential house as per the section and that assessee has incurred cost of construction on the plot which has not been denied by authorities below exemption to that extent is available for the year under consideration. Accordingly the ground raised by assessee for the year under consideration is allowed with the above directions. In the result appeal filed by the assessee stands allowed. Order pronounced in the open court on 25th April, 2017.