SUBRAMANYAM BASKARAN,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

The appeal filed by the assessee is directed against order of the Commissioner of Income-tax (Appeals)-16, Chennai in ITA No.81/A-16/2012-2013, dt 30.11.2015 for the assessment year 2012-

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2013 passed u/s.143(3) and 250 of the Income Tax Act, 1961 (herein

after referred to as ‘the Act’).

The assessee has raised the following grounds of appeal:- 2.

The Brief facts of the case is that the assessee is Non 3.

Resident and filed return of income on 25.07.2012 with total income of

�4,14,010/- and the total income includes income from house

property, capital gains and other sources. The return of income was

processed u/s.143(1) of the Act. Subsequently, the case was selected

for scrutiny under CASS and notice u/s.143(2) of the Act was issued.

In compliance to notice, the ld. Authorised Representative appeared

and filed details called for vide letter dated 02.05.2014. The ld.

Assessing Officer further called for Details of rental agreement, copies

of sale deeds of the property sold and proof of claim of exemption

u/s.54F of the Act. The ld. Assessing Officer verified the Documents

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and found during the previous year the assessee sold residential

property for �1,80,00,000/- and after adjusting indexed cost of

acquisition the long terms capital gains are worked out to

�1,21,35,203/- and was claimed as exempted on investment in

another residential property at Porur. The ld. Assessing Officer found

that the assessee has entered into construction agreement in respect

of Porur Residential property with M/s. Alliance Retreat Pvt. Ltd vide

agreement dated 12.10.2007 on certain terms and conditions in

respect of schedule of property, cost of construction, payment

schedule, completion of delivery possession. The ld. Assessing Officer

perused the terms and referred at page 3 to 5 of the assessment order

and observed that as per the agreement the developer has to

complete construction of the property within 24 months before

financial year 2009-2010 and if there is any delay in project

implementation the assessee is eligible to receive compensation as per

the terms agreed. Considering the facts that the agreement was

entered on above said date and the possession to be delivered by

Builder by constructing house property in the financial year 2009-

2010. The ld. Assessing Officer is of the opinion that the assessee

claim u/sec. 54F of the Act on acquiring a new residential property

has to be partially allowed and compared with the Builder agreement

with investment amount were the assessee has paid substantial

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amounts very much prior to the sale of the property in financial year

2011-2012, and highlighted the provisions of Sec. 54 of the Act and

assumed that the assessee should have purchased house property

one year before the sale of property or within two years after the sale

of the property or construct residential house within three years of sale

of property and to obtain the benefit of construction of new residential

property, the assessee should have deposited the Long term capital

gains before due date of filing of return of income u/s.139(1) of the

Act in Capital Gains Accounts Scheme. Since the assessee has not

complied the prerequisites of capital gains account scheme and

assessee is not eligible for exemption u/s.54 of the Act. The ld.

Authorised Representative filed explanation that the assessee has

originally booked the new residential property in the year 2007 and

paid advance amounts but due to adverse real estate market

conditions and the financial hardship of the promoter and the project

could not take off till mid 2011 and Registration of undivided share of

land (UDS) was made in Feb 2012 and builder has completed the

construction of the property and Handed over occupancy in

December, 2013 and also issued completion certificate. The ld.

Authorised Representative explained the sources for investment in

new residential property being sale proceeds of property sold in

September, 2011 and loan from HDFC Bank Limited and complied the

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stipulated conditions under provisions of u/s.54 of the Act and claimed

exemption. The ld. Assessing Officer verified the information with

documentary evidence and calculated the investment in Porur

property �85,42,006/- being one year before the sale of property

were the agreement was entered by the assessee in financial year

2007-2008 and the assessee deemed to have become the owner of

the property during said period were substantial amount towards cost

of property was paid. The ld. Assessing Officer concludes by

considering the payments made one year prior to date of sale of

original property and Restricted exemption to �85,42,006/- and re-

determined Long term capital gains at �35,93,197/- and assessed total

income. Aggrieved by the order, the assessee filed an appeal before

Commissioner of Income Tax (Appeals).

In the appellate proceedings, the ld. Authorised 4.

Representative of assessee argued the grounds and reiterated the

facts and the findings of the ld. Assessing Officer. The ld. Assessing

Officer erred in restricting the Long term capital gains to

�.85,42,006/- invested before one year as against the actual sum of

�1,21,35,203/- claimed exemption u/s.54 of the Act on investment in

new residential property. The ld. Authorised Representative supported

the arguments with evidence and produced a copy of completion

certificate, sale deed copy, proof of re-investment in new property,

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purchase documents and relied on judicial decisions of Karnataka High

Court in the case of CIT vs. Subramanya Bhat (1987) 165 ITR 571

and ITAT decision of ACIT vs. Subhash Sevaram Bhavnani (2012) 23

taxmann. 94(Ahd) and Hon’ble Delhi High Court decision in the case

of CIT vs. Ashok Kumar Ralhan (2014) 46 Taxmann.com 416 and the

action of the ld. Assessing Officer that the assessee is entitled for

exemption only in respect of amount invested before one year of sale

of property under the provisions of Sec. 54 of the Act is not correct

and prayed for allowing the appeal. The ld. Commissioner of Income

Tax (Appeals) considered the grounds and findings of the ld. Assessing

Officer and judicial decisions. The ld. Commissioner of Income Tax

(Appeals) relied on the provisions u/s.54 of the Act and observed that

the assessee has entered into agreement with Builder in financial

year 2007-2008 and for construction of property much earlier than sale

of property in September, 2011 and concurred with the findings of the

ld. Assessing Officer and distinguished the decision relied by ld.

Authorised Representative and held that the assessee is entitled for

exemption u/s. 54 of the Act only for payment made during one year

prior to date of sale and confirmed the order of the ld. Assessing

Officer. Aggrieved by the Commissioner of Income Tax (Appeals)

order, the assessee filed an appeal before Tribunal.

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submissions made in the assessment and appellate proceedings and

argued the grounds and explained the circumstances. The fact that

the assessee has original booked the property in the year 2007 and

due to unfavourable financial condition of the promoter, the project

could take off in mid 2011 and UDS share of land was registered in

February, 2012 after the sale of property in September, 2011 and new

residential property was handover to the assessee in December, 2013

as per completion certificate issued dated 12.12.2013. Further, the

assessee has obtained loan from HDFC Bank Limited for the purpose of

new residential property. The findings of the ld. Assessing Officer

relying on judicial decisions cannot be considered and the ld.

Authorised Representative also dealt on the provisions of Sec. 2(47)

of the Act and provisions of Sec. 53A transfer of property Act and

supported the case with judicial decisions and payment details. Further

placed reliance on the judgment of Delhi High Court in the case of CIT

vs. R.L. Sood (2000) 245 ITR 72 and prayed for allowing the appeal.

orders of Commissioner of Income Tax (Appeals) and vehemently

opposed the grounds.

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record and judicial decisions cited. The crux of the issue emphasized

by the ld. Authorised Representative that the ld. Commissioner of

Income Tax (Appeals) erred in confirming the findings of the ld.

Assessing Officer in granting partial exemption u/s.54 of the Act. The

provisions of Sec. 54 are beneficial and stipulated conditions shall ne

mandatorily be complied. The provisions of Sec. 54 as under:-

‘’54. [(1)] [Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset [***], being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (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], then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—

(i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or

(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain

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arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain’’. The contention of the ld. Assessing Officer that the assessee is eligible

for exemption only in respect of payments made before one year of

date of sale and restricted the claim to �.85,42,006/- are dealt as

under:-

Date of entering into construction agreement 12.10.2007 Sale of property Sept 2011 Due date of filing of return u/sec. 139(1) of the Act. 31.07.2012 Due date of filing of return u/sec. 139(4) 31.03.2014 Undivided share of land registered by Builder Feb 2012 Completion certificate issued by the builder 12.12.2013

The ld. Authorised Representative further explained that the assessee

has also obtained loan from HDFC Bank for construction and

demonstrated that the undivided share of land of new property was

registered in Feb. 2012 after sale of property in September, 2011 and

the assessee took the possession of House Property in December,

2013, and relied on Judicial orders. The ld. Authorised Representative

drew our attention to page 149 referring to the Villa completion

certificate dated 5.12.2013 and ledger account copy of the Builder at

page no.150 & 151 were payments made by the assessee for the period 1st April 2007 to 11th March, 2015, are disclosed. On verification

of the ledger account for payments made one year before the sale of

property in September, 2011, we find on comparing the payments for

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said period with the contention of the ld. Assessing Officer that

assessee had paid only �85,42,006/- and confirmed by the ld.

Commissioner of Income Tax (Appeals). There exist difference in

amounts paid by the assessee, and require reconciliation. Considering

the apparent facts, materials, information, judicial decisions and

ledger accounts we are of the opinion that the Ledger Accounts shall

be verified by the Assessing Officer and therefore set aside the order

of Commissioner of Income Tax (Appeals) and we remit the disputed

issue to the file of the ld. Assessing Officer for verification and

Reconciliation of payments and the assessee shall be provided with

adequate opportunity of being heard before passing the order on

merits and the appeal is allowed for statistical purpose.

In the result, the appeal of the assessee is allowed for 8.

statistical purpose.

Order pronounced on Friday, the 29th day of July, 2016, at Chennai.

Sd/- Sd/- (चं� पूजार�) (जी. पवन कुमार) (CHANDRA POOJARI) (G. PAVAN KUMAR) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य /ACCOUNTANT MEMBER चे�नई/Chennai �दनांक/Dated: 29.07.2016 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF