ROSE GEORGE KOLLANUR,THRISSUR vs. ITO WARD 2(2), THRISSUR, THRISSUR

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH : COCHIN BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND Ms. PADMAVATHY S, ACCOUNTANT MEMBER

ITA No.610/Coch/2022 Assessment Year : 2014-15

Smt. Rose George Kollanur, Vs. The Income Tax Officer, 7/384, Kollanur House, Ward 2(2), Kallekundur Road, Vettikattiri Post, Thrissur. Cheruthuruthy, Thrissur – 679 531. PAN : ECBPK 8337R APPELLANT RESPONDENT

Assessee by : Shri V Ramnath, CA Revenue by : Smt. J M Jamuna Devi, Sr. AR

Date of hearing : 06.12.2022 Date of Pronouncement : 19.12.2022 O R D E R Per Padmavathy S, Accountant Member: This appeal is against the order of CIT (Appeals), National Faceless Assessment Centre, Delhi [NFAC] dated 16.3.2022 for the assessment year 2014-15. The assessee raised the following grounds of appeal:-

“The amount of Rs. 74,86,271/- has been levied as additional capital gain and an exemption of only Rs. 17,81,324/- under Section 54F of the Act has been allowed which is opposed to facts, circumstances and the law applicable to this case. 2. The Learned Income Tax Officer has failed to notice the fact that a substantial portion amounting to Rs. 98,20,984/- had

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been paid to M/s Varapradha Real Estates Pvt. Ltd., Hyderabad as investment in the construction of a residential property within three years of the date of transfer of the original asset. 3. The claim has been denied solely on technical grounds that the net sale proceeds has not been deposited in the Capital Gains Deposit Account Scheme within the due date of filing of the return. The decision of the Hon'ble High Court of Karnataka in CIT vs. K Ramachandra Rao ITA No. 74 of 2014 points to the fact that the exemption under Section 54 F must be allowed since the assessee has invested the entire sale proceeds for construction of residential property which is within the mandated three years from the date of transfer of original asset. The judgment in the case of Nipun Mehrotra vs. ACIT 2008 197 ITR 110 Bang, reinforced this point and exemption was granted on the same grounds. There are additional precedents which include I.T.O. vs. R. Srinivas I.T.A. No. 79/Bang/2014 and I. TO vs. Hiralal K Jain ITA No. 1176/Mds/2010. Moreover, it is not disputed by the A.O. that the assessee has invested the capital gains in a residential property within three years from the date of transfer of original asset. 4. For these and such other grounds that may be adduced at the time of hearing the additions made by the Learned Assessing Officer may be deleted and the tax and the interest thereon may be struck down.” 2. The assessee along with her husband sold a property inherited jointly by them measuring 200 cents of land to various persons on 27.8.2013 for a sale consideration of Rs.2,10,00,000. The assessee has entered into a contract with M/s. Varaprada Real Estate P. Ltd., Hyderabad for construction of a residential flat. An amount of Rs.98,20,984 was paid towards the construction of the flat on various dates. The assessee computed her share of capital gain to be Rs.95,61,000 and accordingly claimed the entire amount as a deduction u/s. 54F. The assessee filed a return of income for the AY 2014-15

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disclosing an income of Rs.2,93,410 on 25.11.2015. The case was selected for scrutiny under cash and statutory notices were duly served on the assessee. The AO denied the benefit of deduction u/s. 54F to the assessee on the ground that the assessee has not deposited the unutilised amount towards purchase of the new asset in the capital gains account scheme on or before the due date for filing the return of income u/s. 139(1). Accordingly, the AO made an addition of Rs.74,86,271 while completing the assessment u/s. 143(3). Aggrieved, the assessee filed the appeal before the CIT(A), who upheld the order of the AO. Aggrieved, the assessee is in appeal before the Tribunal.

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S. Bank Name Cheque Date Payment Amount Receipt T.D.S. Form No. Details Details in Rs. No. paid in 16B Rs. 1. ICICI Bank 036682 28.09.2013 Booking 100000 247 2. ICICI Bank 600822 28.09.2013 Part of 98000 247 Booking 3. TDS Online 30.09.2013 TDS 2000 249 2000 Received 4. ICICI Bank 036676 21.10.2013 Part of 770353 256 Booking

TDS Online 21.10.2013 TDS 7782 259 7782 Received 5. 036686 28.06.2014 Part 968354321 6. ICICI Bank ICICI Bank Online 20.07.2014 TDS 9782 426 9782 Received 7. ICICI Bank 036689 24.12.2014 Part 733601 538 7031 Received 8. 088355 16.05.2015 Part 733601 776 7031 Received 9. ICICI Bank 088358 19.09.2015 Part 972604 951 10. ICICI Bank Online 19.09.2015 TDS 9820 953 9820 Received 11. HDFC 12. ICICI Bank 088360 20.11.2015 Part 1966302 1067 18750 Received 13. ICICI Bank 088362 04.01.2016 Part 983151 1176 9375 Received 14. ICICI Bank 088363 20.01.2016 Part 983151 1198 9375 Received 15. ICICI Bank 4688 Received 545867 20.02.2016 Part 491575 1307 1396 9371 Paid 16. ICICI Bank 545870 20.06.2016 Final 990908 17. Total 9820984

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Ramachandra Rao (supra) has considered a similar issue of deduction u/s. 54F in case where the amounts are not deposited in the capital gains account scheme before the due date for filing the return of income, but is spent within the stipulated period towards acquisition of new assets. The relevant extract of the decision are as below:-

“4. Re.Point No. 1 Section 54(F) deals with capital gains on transfer of certain capital assets not to be charged in case, of investment on house. It reads as under: 54F. Capital gain on transfer of certain capital assets not to be charged income of investment in residential house.— (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,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where — (a) the assessee, —

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(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date, of transfer of the original asset, is chargeable under the head "Income from house property". Explanation. - For the purposes of this section - ** ** ** "net consideration", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (2) Where the assessee purchases, within the period of [two years] after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, 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 such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, 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 such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to

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long-term capital assets of the previous year in which such new asset is transferred. (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under.." section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset: Provided that 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

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(ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid.' Section 54F(1) provides, 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 and the assessee 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, the capital gain shall be dealt with in accordance with the said provision. This is subject to the provisions of Subsection (4). Sub-section (4) stipulates if the amount of net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which transfer of the original asset took place or which is not utilized by him for the purchase or construction of the new asset before the date of furnishing the return of income under Section 139 of the Act shall be deposited by him before furnishing such return in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under Section 139(1) of the Act in an account in any such bank or institution as specified and utilized in accordance with any scheme which the Central Government may, by notification in the official gazette framed in this behalf. Sub-section (4) is attracted only to a case where the sale consideration is not utilized either for purchase or for construction of a residential house. It has no application to a case where the assessee invests the sale consideration derived from the transfer either in purchasing the property or constructing the residential house within the period stipulated in Section 54F(1). The proviso to Section 54F puts an embargo on the JYOTI application of Section 54F to cases which are mentioned in the said proviso. That is to be eligible for the benefit under Section 54F(1) the assessee should not be owning more than one residential house other than the new asset acquired or he should not purchase any residential house other than the new asset within a period of one year after the date of transfer of residential asset or constructs any residential house other than the new asset within a period of three years after the date of transfer of the

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residential asset. In the entire scheme there is no prohibition for the assessee putting up construction out of sale construction received by such transfer of a site which is owned by him as is clear from the language used. It is open for the assessee to put up a residential construction or to purchase a residential house. It is not the requirement of law that he should purchase a residential site and then putup construction. Therefore, in the instant case admittedly the assessee has purchased a vacant site pri-31.3.2001. He sold the original asset on 27.8.2003 on which date he was already owning a site. In fact even before sale of the original asset he had started construction on such site by availing loan from the Bank. In terms of Section 54F(1) all investments made in the construction of the residential house of the said site within a period of one year prior to 27.8.2003 would be eligible for exemption under Section 54F(1). Similarly all investments in the said construction after 27.8.2003 within a period of three years therefrom is also eligible for exemption. Therefore, the argument that such investment in putting up a residential construction cannot be made on a site owned by him to be eligible for exemption is without any substance. Both the Appellate Authorities have rightly extended the benefit to the assessee and there is no error committed by them which calls for interference. 4.1 Re.Question No.2 : "As is clear from Sub-section (4) in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in Section 54F(1), if the assessee wants the benefit of Section 54F, then he should deposit the said capital gains in an account which is duly notified by the Central Government. In other words if he want of claim exemption from payment of income tax by retaining the cash, then the said amount is to be invested in the said account. If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein, then Section 54F(4) is not at all attracted and therefore the contention that the assessee has not deposited the amount in the Bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct."

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Pronounced in the open court on this 19th day of December, 2022.

Sd/- Sd/- ( N V VASUDEVAN ) ( PADMAVATHY S ) VICE PRESIDENT ACCOUNTANT MEMBER

Bangalore, Dated, the 19th December, 2022. /Desai S Murthy / Copy to:

Assistant Registrar, ITAT, Bangalore/Cochin.