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Income Tax Appellate Tribunal, NEW DELHI BENCH : SMC-II, NEW DELHI
Before: SHRI SUNIL KUMAR YADAV
Date of hearing : 15.09.2016 Date of Pronouncement : 21.09.2016 O R D E R This appeal is preferred by the assessee against the order dated 28.05.2015 of the CIT(Appeals)-XVII, New Delhi inter alia on the following grounds:- “
1. That the order of learned Commissioner of Income-tax (Appeals) is bad in law and on the facts of the case.
2. (a) That the learned Commissioner of Income-tax (Appeals) has erred in sustaining the disallowance of deduction u/s 54F of the Income tax Act, 1961 in respect of investment of Rs.42,31,000/- for purchase of plot by the appellant for construction of residential house.
(b) The Learned Commissioner of Income Tax (Appeal) erred in sustaining the finding of the Assessing Officer that investment in plot is not eligible for deduction u/s 54F of the Income Tax Act, 1961. 4. The above grounds of appeal are without prejudice to each other.
5. The Appellant craves leave to add, alter, amend and/or modify the above grounds of appeal.”
2. The issue in dispute in this appeal relates to the assessment year in which the deemed income in the hands of assessee is to be taxed on account of withdrawal of deduction u/s. 54F of the Act.
The facts in brief borne out from the record are that the assessee has sold a plot in Gurgaon for a consideration of Rs.1,76,00,000 vide Sale Deed dated 03.08.2011. The entire capital gain worked out has been claimed to be exempt u/s. 54F of the Act, but subsequently the assessee could not acquire a residential house on account of delay in allotment of the apartment by the builder within the prescribed period.
While completing the assessment for the AY 2012-13, the Assessing Officer noticed these facts and disallowed the claim of deduction u/s. 54F of the Act and made addition thereof. The assessee preferred an appeal before the CIT(Appeals), but did not find favour with him.
Now the assessee is in appeal before the Tribunal and reiterated its contentions. The ld. counsel for the assessee has placed reliance upon the proviso to section 54F of the Act with the submission that in case the assessee could not acquire the residential house within the period prescribed u/s. 54F of the Act i.e., one year before or two years after the date on which transfer took place or within a period of three years after the date of construction of residential house; the capital gain shall be charged u/s. 45 as income of the previous year in which the period of three years from the date of transfer of the original asset expires. Therefore, the capital gain can only be charged in the assessment year in which the period of three years from the date of transfer of original asset expires and not in the year in which deduction is claimed.
The ld. DR placed reliance upon the order of the CIT(Appeals).
Having carefully examined the orders of lower authorities in the light of rival submissions, I find that the main controversy revolves around an issue as to in which year the capital gain is to be charged u/s. 45 of the Act. Whether it should be in the previous year in which the immovable property was sold out and capital gain accrues, or, in the previous year in which the period of three years from the date of transfer of original asset expires. In this regard, I have carefully examined the provisions of section 54F of the Act and I find that proviso to sub-section (4) of section 54F clearly says that the amount of capital gain arising from the transfer of original asset shall be charged u/s. 45 as income of the previous year in which the period of three years from the date of transfer of original asset expires. For the sake of reference, the provisions of section 54F is extracted hereunder:- “54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— ………………. ………………. (4) ……… Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,— (i) the amount by which— (a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds (b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires ; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid.”
From the language of the section, it is clear that capital gain is to be charged u/s. 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires, and not in the year in which the capital gain accrues. In these circumstances, I find force in the contention of the assessee, but the assessee has not placed any evidence on record to establish that he has offered the capital gain in that previous year in which the period of three years from the date of transfer of original asset expires. In the absence of complete information, proper directions cannot be issued. I accordingly set aside the order of CIT(Appeals) and restore the matter to the file of Assessing Officer with a direction not to charge the capital gain in the impugned assessment year i.e. AY 2012-13, as it is to be charged in the previous year in which the period of three years from the date of transfer of original asset expires and in this regard necessary verification be made by the AO. If the assessee has not offered the capital gain chargeable to tax in that year, the AO may reopen the assessment and assess the capital gain as income of that previous year. Accordingly, the appeal of the assessee stands allowed for statistical purposes. Pronounced in the open court on this 21st day of September 2016.