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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
Assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-2, Thiruchirapalli, in 2/TRY dated 21.03.2017 for assessment year 2006-07.
:-2-: ITA No. 965/Mds/2017
Shri. A. Nazumudeen, the assessee, is the owner of a commercial complex filed his return belatedly on 05.03.2009. The AO re-opened the assessment u/s. 148 and completed the re-assessment on 27.12.2010. While making the re-assessment, the Assessing Officer noted, inter alia, that the assessee did not admit capital gain on the sale of his land within the Sirkali municipality. When he proposed to make an addition, the assessee claimed deduction u/s. 54F in the re-assessment proceedings. Since, the claim was not made in the original return, and the assessee was having more than one residential house and other compliances as required u/s. 54F were not made, the AO refused to grant the deduction u/s. 54F and assessed the capital gain.
Aggrieved, the assessee filed an appeal before the CIT(A)-2, Trichy and the CIT(A), inter alia, dismissed this issue. Aggrieved, the assessee filed this appeal.
The AR submitted that the CIT(A) failed to appreciate that the conditions prescribed to make the said claim for deduction/tax exemption were complied with concurrently and ought to have appreciated that the proviso to section 54F of the Act was wrongly applied/pressed into service by the Assessing Officer in from para 4.5 of the assessment order. The CIT(A) also failed to appreciate that the purposive construction of the tax exemption provisions under consideration would fortify the said claim and ought to have appreciated that having not disputed the fact of the residential units in one
:-3-: ITA No. 965/Mds/2017 floor which should be considered as a single unit, the sustenance of rejection of the claim of tax exemption u/s. 54F of the Act was wrong, erroneous, unjustified, incorrect and not sustainable in law and the CIT(A) failed to appreciate that there was no violation of the said condition of not owning more than one residential house other than the new asset on the date of transfer of the original asset, thereby vitiating the decision rendered.
4. Per contra, the DR invited our attention to the assessment order and the order of the CIT(A) and submitted that the assessee purchased a site in Laxman Nagar, Mayiladuthurai on 04.03.2005, constructed a building in two floors. The construction of the ground floor was over in March 2006 and he has occupied it as per EB card produced before the AO. He has constructed residential houses in the first floor and let out to various tenants, which have separate EB connections and municipal numbers. He sold the land at Sirkali municipality on 17.08.2005, but has not deposited the sale consideration or the capital gains in the capital gains account scheme as required u/s. 54F. He has neither utilised the sum for the construction nor completed the construction as required u/s. 54F. Further, the assessee owned more than one residential house, other than the new asset, on the date of transfer of original asset. In the facts and circumstances, the CIT(A) has rightly distinguished the case law in the case of CIT vs V.V.R. Karpagam (Madras High Court) and held that “the assessee is in possession of a commercial
:-4-: ITA No. 965/Mds/2017 complex in which one floor entirely consists of many residential units and the hence, the claim of the assessee that all the residential units is a single unit is not acceptable. The claim of deduction u/s. 54F dismissed” which is correct and hence, the order of the CIT(A) may be confirmed.
The AR rebutted saying that the assessee is not having more than one residential units, other than the new asset, on the date of transfer of the original asset and the ratio of the Madras High court in the case of CIT vs Gumanmal Jain reported in TCA No 33 of 2017, dated 03.03.2017 (2017) 98 CCH 0093 is applicable.
We heard the rival contentions and gone through the orders of the lower authorities. It is not clear from the order, whether the assessee had more than one residential unit, other than the new asset, on the date of transfer of the original asset. The copies enclosed with original return as on 31.03.2006 show that the assessee is having agricultural lands, shop at Big Bazar, St. Mayiladuthurai, Land and Building Nazim Complex, House site account etc. Further, the assessee has also admitted short term capital gains on sale of building at 3/6 Town extension, Mayiladuthurai. Further, various requirements u/s. 54F i.e., as to when the constructions of the ground floor & first floors were completed, when each of the units were occupied, the sources for the impugned constructions, whether the sale consideration or :-5-: ITA No. 965/Mds/2017 capital gains, as the case may be, was deposited in the capital gains account scheme etc were not clearly brought on the orders. In view of the above facts and circumstances, the orders of the lower authorities are set aside and the exemption claim u/s. 54F is remitted back to the AO. The AO shall re- examine the claim, afresh, and decide the issue in accordance with law, after giving adequate opportunity to the assessee
In the result, the assessee’s appeal is treated as allowed for statistical purposes.
Order pronounced on Monday, the 20th day of November, 2017 at Chennai.