ACIT, CHENNAI vs. JAYASATHYA SURESH, CHENNAI

the Order of Commissioner of Income Tax (Appeals)-V, Chennai, in dated 19.08.2014 for the AY 2010-11.

Mr.M. Palanichamy, ACIT, represented on behalf of the Revenue and Mr.D.Anand, Adv., represented on behalf of the assessee.

It was submitted by the Ld.DR that the only issue in the Revenue’s appeal was against the action of the Ld.CIT(A) in allowing the assessee’s claim for exemption u/s.54 in respect of the investment made by the assessee in the 2nd & 3rd Floor at No.2, Radha Krishna Street, T.Nagar, Chennai. It was a submission that the assessee had sold a residential flat at MRC Nagar, RA Puram, Chennai, on 04.11.2009 for a consideration of Rs.4.50 Cr. It was a submission that this had resulted in long term capital gains of Rs.1,42,97,874/-. The assessee had claimed to have invested Rs.1.75 Cr. towards construction of the 2nd & 3rd Floor at No.2, Radha Krishna Street, T.Nagar, Chennai. It was a submission that in the course of the assessment, the AO had disallowed the claim of exemption u/s.54 in respect of the investment in the residential house at Radha Krishna Street, T.Nagar, Chennai, on the ground that the said property was purchased by the assessee during the AY 2008-09 relevant to the FY 2007-08. It was a submission that the AO had obtained the Corporation Tax details from the Chennai City Municipal Corporation to show that the Corporation Tax was being paid in the name of the assessee right from the AY 2008-09 and consequently the assessee was not entitled to the benefit of deduction u/s.54 of the Act. It was a submission that the Ld.CIT(A) had allowed the assessee’s claim for exemption u/s.54 holding that the assessee had produced the letter of the builder, M/s.Real Value Promoters Pvt. Ltd. dated 24.02.2010 regarding the completion of the residential house. It was a submission that the order of the Ld.CIT(A) was liable to be reversed.

In reply, the Ld.AR drew our attention to the sale deed dated 04.11.2009 entered into between the assessee and M/s.Indo International Ltd., wherein at Page No.6, it has been mentioned that the sale consideration is an amount of Rs.4.50 Cr. and the said amount has been paid to the vendor by the purchaser by discharging an equitable mortgage by depositing of title deeds with M/s.Axis Bank Ltd., to an extent of Rs.3.30 Cr. and balance of Rs.1.20 Cr. being paid to M/s.Real Value Promoters Pvt. Ltd. It was a submission that thus an amount of Rs.1.20 Cr. was paid to M/s.Real Value Promoters Pvt. Ltd. from the sale consideration of Rs.4.50 Cr. on the sale of the flat owned by the assessee at MRC Nagar, Chennai. Further, the Ld.AR drew our attention to the letter of M/s.Real Value Promoters Pvt. Ltd., dated 24.02.2010 which was a Completion Certification informing that the construction of the 2nd & 3rd Floor of the residential building at No.2, Radha Krishna Street, T.Nagar, Chennai, with independent kitchen is complete in all respects and is ready for occupation. It was a submission that the AO has relied upon certain Corporation Tax payments for the AY 2008-09. It was a submission that the Corporation Tax was originally being levied at Rs.3,957/-, the said Corporation Tax had been revised in respect of the said property only in 2007-08 raising it to Rs.14,170/-. The revising of Corporation Tax from Rs.3,957/- to Rs.14,170/- did not mean that the 2nd & 3rd Floor of the property existed in 2007-08 itself. It was a submission that the payment for the construction of the 2nd & 3rd had been completed only on 04.11.2009 by payment out of the sale consideration in respect of the flat

We have considered the rival submissions. Admittedly, there is no dispute regarding the factum of the long term capital gains having arisen on account of the sale of the assessee’s flat at MRC Nagar. The only dispute is in regard to the allowance of the exemption u/s.54 in respect of the construction of the 2nd & 3rd floor of the residential building at Door No.21, Radhakrishnan Street, T.Nagar, Chennai-600 017. The provisions of Sec.54 require that the assessee should have either purchased another residential house within one year before the date of the sale of the capital asset giving rise to long term capital gains or such purchases has been done within two years after the date on which the transfer took place or within a period of three years after that date constructed a residential house in India. The fact that M/s.Real Value Promoters Pvt. Ltd., was doing the construction of the assessee’s residential house at 2nd & 3rd floor, No.21, Radhakrishnan Street, T.Nagar, Chennai-600 017, is also an undisputed fact. This being so, a perusal of the sale deed of the assessee dated 04.11.2009 clearly shows that an amount of Rs.1.20 Cr. has been paid to M/s.Real Value Promoters Pvt. Ltd. out of the sale consideration of the assessee’s flat at MRC Nagar. Obviously, no builder would hand over the possession of its building unless full consideration is paid and the construction is completed. When this sale deed is read along with the Completion Certification issued by the M/s.Real Value Promoters Pvt. Ltd.

In the result, the appeal filed by the Revenue stands dismissed.