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TMI Blog2012 (11) TMI 950X X X X Extracts X X X X X X X X Extracts X X X X ..... dential house without getting it converted to residential area. Again as per Revenue, failure to comply with the conditions specified in Sec.54F had happened in the previous year relevant to the impugned Assessment Year itself and therefore, assessee could not have deferred the long term capital gains tax to Assessment Year 2009-10. 3. Short facts apropos are that assessee had filed return for impugned Assessment Year declaring an income of Rs. 6,32,71,995/-. During the relevant previous year, assessee had sold shares held in one M/s. Alpump Limited, which gave rise to capital gains of Rs. 11.13 crores. Against such capital gains, deduction of Rs. 1.80 crores was claimed for investments made under section 54EC of the Act and deduction for Rs. 3.47 crores was claimed for investment under section 54F of the Act. There is no dispute regarding the claim of deduction under section 54EC of the Act, on which both parties are one. Dispute between the assessee and the Revenue is limited to the deduction claimed under section 54F of the Act. On the latter claim, Assessing Officer noted that assessee had acquired 8 acres 40 cents of land for a sum of Rs. 2.41 crores. As per Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived within a period three years on the end of the third year, he had offered the amount as capital gains and paid taxes. As for the withdrawal made from Capital Gain Account Scheme, assessee submitted that he was not aware that such withdrawals were required to be made under any particular forms and that there was any non-compliance with such procedure. 5. Ld. CIT(A) after considering the above submissions of assessee, was of the opinion benefit of Sec.54F would be available to him since CBDT Circular No.667 dated 18.10.1993 had clarified that cost of plot acquired by assessee would be eligible for exemption along with the cost of construction. As per Ld. CIT(A), when assessee was unable to use the net consideration before the due date of filing the return, he was entitled to deposit such sum in an account opened under Capital Gains Scheme. The amounts, which assessee was unable to use, were deposited in an account under Capital Gain Account Scheme. If the amounts so deposited were not used for the purpose of construction or purchase of a residential house, it would be charged to tax as capital gains at the end of the specified period. As per Ld. CIT(A) sub-section (4), which de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was unable to start any construction activity in the said land, and had offered the entire amount after the end of the three year period for tax just as a delaying techinque. Just because, assessee had received electricity connection or had sent plan for approval would not be a reason to construe that assessee had any intention to construct a house, when no such construction was possible in an agricultural land. 7. Per contra Ld. Authorised Representative of assessee supporting the order of CIT(A) submitted that in the first place there was no restriction for construction of at least a farm house in an agricultural land. According to him, the land acquired was only one acre and not 8.04 acres as mentioned by Assessing Officer. Since for construction of a farm house also approval from local authority was necessary, assessee had prepared a plan and moved for this purpose. Assessee had received electricity connection in the premise for pursuing the construction activity. Unfortunately due to restrictions imposed by Coastal Zone Regulations, permission for construction was not forthcoming and without such approval, assessee could not lawfully go ahead with the construction work. Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sputed by the Revenue at all. There is also no dispute that he had obtained power connection. In the face of these facts to say that assessee had no intention to construct residential house is not correct. In our opinion, if the assessee had no intention to construct a house, he would not have got a plan prepared by an architect and submitted it to the local authority for approval along with a site plan. May be it true that due to Coastal Zone Regulations, no construction was possible in the said land. But we cannot say that assessee, when purchasing the land, was aware that on account of the Coastal Zone Regulation, he could not construct a residential house therein. Even Coastal Zone Regulations by itself does not deny the right of construction, but places a number of constraints for such construction. Having not obtained approval for the plan within three years, assessee had offered the same to Capital Gain Account Scheme in Assessment Year 2009-10. A Look at Section 54F at this juncture is very much necessary. "Section 54F. Capital Gain on Transfer of Certain Capital Assets Not to be Charged in Case of Investment in Residential House. (1) Subject to the provisions of sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me period. Here, assessee had suo motu offered the sum in Assessment Year 2009-10 as capital gains. As already mentioned, the circumstances do not warrant a conclusion can be drawn that assessee had no intention to construct a residential house from the very beginning. In the case of Smt V.A. Tharabai (supra), Co-ordinate Bench held that without purchasing land, house cannot be constructed . First step was purchase of land. If the next step could not be put forward, thereafter, on account of a reason, which was beyond control of assessee, then the amount spent by the assessee in purchasing the land had to be considered as amount invested for purchase /construction of residential house. Assessee here, having offered capital gains for tax in Assessment Year 2009-10 as stipulated in proviso-1 of section 54F of the Act, could not be saddled with the same liability for the impugned Assessment Year as well. Ld. CIT(A) was justified in directing the Assessing Officer to grant the assessee deduction under section 54F of the Act for impugned Assessment Year. No interference is required in the order of CIT(A). 10. When Cross objection were taken up, Ld. Counsel for assessee submitted that h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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