VASALA BALAKRISHNAN RAVIKRISHNAN,CHENNAI vs. ACIT NON CORPORATE CIRCLE 6, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -5, Chennai, dated 27.06.2017 and pertains to assessment year 2013-14.

The only issue arises for consideration is disallowance of the claim of exemption under Section 54 of the Income-tax Act, 1961 (in short 'the Act').

Smt. Pushya Seetharaman, the Ld. Sr. counsel for the assessee submitted that the assessee disclosed long term capital gains of ₹76,78,300/- and claimed deduction under Section 54 of the Act on the investment made in new residential house to the extent of ₹76,78,300/-. According to the Ld. Sr. counsel, the assessee sold a residential property at Door No.20, Kalathiappa Street, Choolai along with his brother for a total consideration of ₹2 Crores by means of registered sale deed dated 22.10.2012 and 03.12.2012. The assessee’s share comes to ₹1 Crore. According to the Ld. Sr. counsel, the property was originally purchased by the assessee’s father on 27.10.1977. On the demise of the assessee’s father, the assessee inherited the property along with his brother and mother. According to the Ld. Sr. counsel, the assessee and his brother got their mother’s share by means of settlement deed dated 23.05.2012.

The Ld. Sr. counsel for the assessee further submitted that the construction was started by means of agreement with a builder in November, 2009. In fact, according to the Ld. Sr. counsel, the construction was commenced in the month of April, 2010. Due to misunderstanding in the family, the construction was halted midway.

On the contrary, Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that Section 54 of the Act clearly says that for the purpose of claiming exemption, the assessee who within a period of one year before or three years after the date on which transfer took place, shall construct a residential in India, is eligible for exemption. In this case, according to the Ld. D.R., the construction was completed. However, the construction was commenced one year before the sale of the property.

We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the assessee along with his brother sold the property and acquired a new land and commenced construction. The question arises for consideration is whether the assessee is eligible for exemption under Section 54 of the Act? The Ld. Sr. counsel by placing her reliance on the judgment of Karnataka High Court in J.R. Subramanya Bhat (supra) submitted that commencement of construction is immaterial for the purpose of Section 54 of the Act. The building was claimed to be completed. The Ld. Sr. counsel submitted that the property was assessed to property tax by Corporation of Chennai. These facts were not taken into consideration by the authorities below. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of both the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter afresh after considering the property tax assessment said to be made by the Corporation of Chennai and thereafter decide the issue, after considering the judgment of Karnataka High Court in J.R. Subramanya Bhat (supra) and decision of this Bench of the Tribunal in Mrs. Hema Harathi (supra), 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.