SMT. MANGAMMA,BANGALORE vs. DCIT, BANGALORE

The assessee has raised the following grounds:

The learned CIT (Appeals) – II, Bangalore has erred in holding that the cost of construction was to be taken at Rs.1,20,000 per sq without appreciating the fact that the Assessing Officer in the Remand Report dt.21.2.2012 has accepted the value at Rs.1,50,000 per sq exclusive of the value relating to the other amenities as certified by the Approved Valuer. 4. The learned CIT (Appeals) – II, Bangalore has erred in not adjudicating the grounds urged by the appellant as regards the quantum of deduction admissible under Section 54F of the Act. 5. The learned CIT (Appeals) – II, Bangalore has erred in holding the cost of construction was t be taken at Rs.1,20,000 per square without any supporting material evidence ignoring the valuation report of an Approved Valuer. 6. The appellant craves leave to add, alter, amend and delete any of the grounds at the time of hearing. For these and other grounds that may be urged at the time of hearing, the appellant respectfully prays that your Hon'ble Authority may be pleased to pass an order setting a side the orders of the authorities below and to direct the Assessing Officer to allow the deduction under Section 54F of the Act amounting to Rs.1,00,75,940 as certified by an approved valuer in the Valuation Report, dated 3.12.2010 and further be pleased to pass such other orders granting such other relief that your Hon'ble Authority may deem fit in the interest of equity and justice.” 3. During the year under consideration, the assessee sold a property bearing No.104 (BBMP Katha No.5 – Property ID 47-57-5), New Kalisipalya Extension Layout, 4th Cross, Bangalore. The sale consideration as per the sale document is shown as Rs.60 Lacs. The assessee has reported a long term capital gain of Rs.8,85,244/- in the return of income. The AO recomputed the capital gain by adopting the sale value consideration of the property as determined by the stamp duty authorities at Rs.1,01,81,000/-. Thus, the AO has taken into consideration the guidance value of the property as determined by the Sub- Registrar in terms of Section 50C of Income Tax Act, 1961 ( in short ‘the Act’). The AO allowed the exemption under section 54F of the Act to the extent of Rs.26,55,734/- for the investment of Rs.45 Lacs made in the capital gain account scheme out of the sale consideration. Consequently the AO brought to tax the balance amount of capital gain of Rs.50, 66, 244/-. Aggrieved by the order of the assessing officer, the assessee filed an appeal before the CIT(Appeals) and contended that the assessee has invested a sum of Rs.1,01,81,000/- in construction of a new house which is within the time period as per section 54F of the Act. Thus, the assessee claimed the deduction under section 54F for the full amount of capital gain determined by the AO. The CIT(A) issued a remand order and after considering the remand report has estimated the cost of construction of the house at the rate of Rs.1,20,000/-per square though the specific unit whether ‘feet’ or ‘yard’ or ‘meter’ has not been mentioned. Thus, the grievance of the assessee is only regarding the estimated CIT(Appeals) as against the claim of the assessee at Rs.2,75,000/- per sq.ft.

Before us, the learned A.R. of the assessee has submitted that the assessee has given the full details of the cost of construction which is inclusive of purchase of site for Rs.21.00 Lacks and the other expenses of construction of the house, total amounting to Rs.1,01,81,000/-. The learned A.R. of the assessee has contended that since the entire sale consideration as determined by the AO by invoking the provisions of section 53C has been invested by the assessee in construction of new house within the time period as prescribed under section 54F – then, the assessee is entitled for deduction under section 54F of the Act for the full amount of capital gain computed by the AO. He has relied upon the decision of Honourable jurisdictional High Court in case of Gouli Mahadevappa Vs. ITO reported in 356 ITR 90 and submitted that the Honourable High Court has held that whatever amount is invested in the new residential house, within the prescribed period under section 54F of the Act, the assessee should get the benefit of deduction irrespective of the fact that the funds from other sources are utilised for the construction of new residential house.

On the other hand, the learned DR has submitted that the CIT(Appeal) issued a remand order and after the remand report by the AO the CIT(Appeal) has estimated the cost of construction therefore, no interference is required in the impugned order of the CIT(Appeal). He has relied upon the order of the CIT(Appeal).

We have considered the rival submissions as well as relevant material on record. The dispute before us is limited regarding the determination of cost of construction for the purpose of the amount invested in construction of new house for claiming deduction under section 54F of the Act. The assessing officer restricted the deduction under section 54F only to the extent of the amount which was deposited by the assessee in the capital gain account and therefore, the proportionate deduction was allowed in respect of the capital gain computed by applying the provisions of section 50C of the Act. The CIT(Appeal) accepted the contention of the assessee that the assessee has made an investment for construction of new house however the value of the construction as claimed by the assessee has not accepted by the CIT(Appeal). The CIT(Appeal) has estimated the cost of construction by observing in paragraph 3.8 as under:

In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 30th day of May, 2016.