TMI Blog2005 (6) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... sale executed at Nashik on 8th Sept., 1998 between Kalpataru Construction Developers/Builders on one side and Mr. P.K. Datta on the other side for purchase of Unit No.2, Row Housing Scheme on Plot No. 54-55-56B, R.S. No. 712/1 in D'Souza Colony, Nashik with purchase consideration of Rs. 3,82,500, and bank pass book with Bank of Maharashtra, Canada Corner Branch, bearing account No. 6345, being the account opened under Capital Gains Account Scheme, 1988. The ITO pointed out that for availing of the benefit under s. 54 one of the two conditions, namely, (i) the assessee has purchased a residential house within a period of one year before or two year after the date of transaction of sale, or (ii) has constructed a residential house within a period of three years after the sale of the old residential house, should be satisfied. In this connection, the ITO pointed out that the assessee had entered into an agreement with the builder, Kalpataru Construction, on 8th Sept., 1988. He further pointed out that the aforesaid bank account, bearing No. 6345, was merely a savings account and not an account maintained under Capital Gains Account Scheme, 1988. From this savings account, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house at Pune on 26th June, 1990 for a sum of Rs. 3.75 lakhs. The assessee had booked a flat at Nashik with Kalpataru Construction on 8th Sept., 1988 for a consideration of Rs. 3,82,500. It was further mentioned that the consideration seems to have been enhanced subsequently to Rs. 4.80 lakhs. Till the date when the residential house at Pune was sold, i.e., 26th June, 1990 an amount of Rs. 1.15 lakh had been paid to the builder (as per the paper book filed, the payments aggregate to Rs. 1.55 1akhs). It is also mentioned that two amounts of Rs. 1.50 lakhs and Rs. 1 lakh were paid to the builder on 27th June, 1990 and 13th May, 1991 respectively. The entire cost of Rs. 4.80 lakh was paid by the assessee by 15th Feb., 1993. It is also mentioned that in the return of income, the assessee had claimed exemption under s. 53 and s. 54F on the ground that the entire capital gains on sale of Pune property had been invested in the new property at Nashik by 30th June, 1991. The learned CIT(A) pointed out that the assessee had not constructed the new residential property on his own. He had booked a row-house with M/s Kalpataru Construction, developers and builders, who handed, over the possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid facts, the assessee claimed the whole of capital gains accruing on sale of Pune residential house was exempt under the provisions of s. 54. However, the ITO held that the new residential house was purchased after one year of the date of the sale of the old house and the sale consideration of the old house was not deposited in Capital Gains Account Scheme. Therefore, he denied exemption under s. 54 but allowed exemption under s. 53 on prorata basis. The CIT(A) took the view that the assessee had not constructed the row-house but had purchased it beyond the period of two years from the date of the sale of the old residential house at Pune and, accordingly, held that the assessee was not entitled to any exemption under s. 54. In the background of aforesaid facts and findings, it was submitted that there is no dispute regarding the fact that capital gains of Rs. 3.20 lakhs accrued on sale of residential house at Pune. The construction of the new residential property started on 5th Feb., 1990, by which time the assessee had paid a sum of Rs. 1.55 lakhs as advance for construction of the row-house. The major portion of the construction was completed by 30th Nov., 1991 when municipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. From various paragraphs of the agreement, it is seen that the developers/builders had entered into a development agreement with one Shri Shailendra Arvind Sukathankar, the original owner, for development of land admeasuring about 747.00 sq. mtrs. As per this development agreement, developer proposed to construct row-houses with independent approaches on the land belonging to the original owner. The assessee applied to the developer for allotment of the row-house to be constructed on the said land as per plan attached with the agreement. In accordance with this agreement, the assessee agreed to purchase Unit No.2 admeasuring 158 sq. mtrs. as shown in the plan as his share in the land measured 117 sq. mtrs. In terms of this agreement, the assessee was required to pay various sums aggregating to Rs. 3,82,500 from the date of booking till the date of possession. The agreement enjoined upon the assessee not to commit any default in payments of instalments and in case of default or breach of any term or condition of the agreement, the developer was entitled to terminate the agreement and sell off row-house to any other person. The agreement also provided for charging interest @ 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Rs. 4 lakhs in March, 1973. In October 1973, the agreement was made between the society and the assessee under which the society agreed to allot a Flat No.7 in the building to be constructed, for which the assessee agreed to pay a sum of Rs. 2,59,360 to the society. Out of this amount, a sum of Rs. 30,000 was payable towards allotment of shares in the society. The balance amount of Rs. 2,29,360 was to be treated as loan to the society. It was agreed that the society will attempt to construct the building within a reasonable time but the assessee was not entitled to cancel the agreement or claim any damages. Out of the sum of Rs. 2,59,360 payable by the assessee, a sum of Rs. 2,51,238 was paid by the assessee in November 1974, i.e., within a period of two years from the date of conveyance of the property to the society. On these facts, the Tribunal held that the assessee was entitled to relief under s. 54 of the IT Act. On a reference, the Hon'ble Bombay High Court pointed out that s. 54 has to be interpreted in the manner in which residential properties are being constructed in a city like Bombay where looking to enormous cost of land, co-operative societies are being formed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nements through co-operative societies in metropolitan town like Bombay on the lines of benefit given to the assessee's acquiring flats in metropolitan town like Delhi by the board in respect of acquisition of flats in self-financing schemes of the DDA. The relief was given in the case of Mrs. Wadia on a concession with a hope that concession will be formalized through the subsequent notification of the Board. In the first place that did not happen. Secondly, in the instant case, property has been acquired in a small town of Nashik, where problems faced by the assessee in Bombay and Delhi are not encountered. Further, Mrs. Wadia was the owner of the land which was conveyed to the society for construction of tenements and she also agreed to acquire a tenement in the society. That is not the case here. Therefore, the facts of those cases are not at all in pari materia with the facts of the instant case. But the Hon'ble Court also laid down the criterion of domain over the new property. 4.2 The learned counsel of the assessee further relied on the decision of Hon'ble Karnataka High Court in the case of CIT vs. J.R. Subramanya Bhat. The facts of the case were that the assessee was ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transferee-assessee had purchased the share of each brother and, therefore, he was entitled to exemption under s. 54(1). The question in that case was whether release amounts to purchase and the Court held the matter in favour of the assessee. However, that is not the case here. The question before us is whether the assessee had constructed the row-house or had purchased the row-house and for this purpose we will have to examine the terms and conditions of proprietary agreement embodied in agreement of sale made on 8th Sept., 1988 between the developer/builder and the assessee. 4.4 The learned counsel also relied on the decision of Hon'ble Calcutta High Court in the case of CIT vs. Smt. Bharati C. Kothari. The facts of the case were that the assessee sold her flat on 30th April, 1981 and entered into an agreement for purchase of a flat on 29th April, 1982. The entire amount of purchase consideration for the new flat was paid within a period of three years from the date of sale of old flat. The AO was of the view that exemption under s. 54(1) was available to the extent of investment made during the period of two years of the sale of old flat. The Tribunal held that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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