9911796707
TMI Blog2014 (11) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... any property income from the properties sold." 2. The brief facts of the case are that the Assessee filed return of income declaring income of Rs. 43,93,660/-. The Assessee is a civil engineer by profession and started his business as sub-contractor 16 years back. The Assessee has his own firms named M/s. Ashraya Constructions and M/s. Ashraya Real Estate Developers. In A.Y 2010-11 the Assessee got Rs. 1,64,22,535/- as Long Term Capital Gains but invested in purchase of new residential house as per Sec. 54 of the Act. The Assessee has in financial year 2009-10 sold two residential properties and invested the amount to purchase new residential property as per Sec. 54 of the Income Tax Act, 1961. The Assessee sold property bearing no. 17117, Matriz No. 1, Santa Inez, Panaji to Shri Arjun Mangaldas for total consideration of Rs. 81,00,000/- vide sale deed dt. 17.9.2009. The property was in the name of the Assessee. From the sale proceeds, Assessee got Long Term Capital Gains of Rs. 33,60,000/-. The Assessee sold another property bearing Flat no. E-102, Matriz no. 1258, Survey no. 235/1 Taleigao to Shri Shobhit Gupta for sale consideration of Rs. 1,60,00,000/- by memorandum of underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erties you sold during the year 2009-10. Ans. I have sold two properties in the financial year 2009-10. They are, 1) Flouse no.11/125/2, of chalta number 326 of PT sheet 77, Panaji and 2)Flat number E-102, in CABO Complex, Landscape town, Dona Paul, Talegao. Q.No.7. How much long term capital gains you got out of the above sales? Ans. I got Rs. 1,64,22,535/- as Long Term Capital Gains from the above two sales. Q.No.8. Why you have not offered the LTCG for tax? Ans. The existing flat was small and I wanted to shift to Dona Paul. I invested the LTCG to purchase the new Residential House. Q.No.9. From whom you made agreement to purchase a residential property? Ans. I Made agreement with M/s Ashray real Estate Developers to purchase the new Residential property. Q.No, 10. That means you have made agreement with your own firm to purchase residential property. Ans. Yes. As I was already into this field, I thought why I have to invest in others property so I made investment in my own Firm i.e., M/s Ashray Real Estate Developers. Q.No.16. Whether you received the flat from Ashray real estate developers? Ans. No, I have not received the flat till date as it is under construction. Q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of the view that Assessee's intention was not to offer long term capital gains for taxation and he tried to escape from the liability to pay taxes. The AO also held that the Assessee has invested for purchasing residential house but the vendor has not handed over the house to them is not acceptable because the vendor is the Assessee himself. Therefore, action of Assessee of making payment to his own firm for purchasing residential house is questionable and the AO has relied on the following decisions and disallowed the same :- 1) M.B. Ramesh Vs ITO (Kar) 320 ITR 451 "Exemption u/s 54 denied relying on Panchayat records which showed that no residential property on the site- Upheld" 2) Shantaben P. Gandhi Vs CIT (Guj) 129 ITR 218 "To claim exemption u/s 54, the construction of the new house should be within two years after the transfer of the existing house and not before the date of transfer" 3) 28 taxmann.com 286 (Chandigarh - Trib.) [2012] "Assessee would not be entitled to deduction under section 54F on her failure to construct new residential property within specified period on plot purchased by her out of sale proceeds of her old property" 4) CIT Vs V.R. Desai (Ker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not anticipated and beyond his control. The A.O., in his support has placed reliance on many judicial pronouncements, which are analysed as under: i) M. B. Ramesh vs ITO (Kar) 320 ITR 451. In this case exemption u/s 54 was denied relying on panchayat records which showed that there was no residential property on the site. In my opinion, ratio of the above quoted judgement is not applicable in the instant case, as it is not in dispute that the appellant actually constructed a residential house. ii) Shantaben P. Gandhi Vs CIT (Guj) 129 ITR 218 In this case exemption was denied as the new property was not completed within the stipulated time limit. Ratio of CIT Vs V. R. Desai (Ker) 197 Taxman 52 and V. K. S. Bawa Vs ACIT (ITAT Del) 53 ITD 232 are not applicable in the instant case because the appellant actually started construction of the house property, so he did not need to deposit money in the capital gain account. On the other hand, the appellant has placed reliance on the decision in the case of CIT Vs Sardarmal Kothari & Anr. In this case, the Hon'ble Madras High Court upheld the order of the Hon'ble ITAT. Wherein the ITAT decided as under: "In order to get the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, was issued to the assessee on 30/8/2011 and the AO passed the assessment order u/s 143(3) of the IT Act', disallowing the assessee claim u/s 54 of the IT Act, of Rs. 1,64,22,535/-. Annexure - II. 6. During the assessment year, the assessee had sold two residential house properties, specifically flat at Lawande Manor, St.Inez, Panaji, for Rs. 81.00 lacs (Purchased in June'2004) and flat at Cabo Housing Complex at Landscape Town-Phase II, for Rs. 160.00 lacs (Purchased in Sept'2005). 7. Flat at Lawande Manor was owned by Shri. Girish Ragha and was sold to Shri. Arjun Mangaldas by executing the sale deeds dated 17/09/2009 for Rs. 81.00 lacs. Enclosed find the copy of the sale deed. Annexure -- III. 8. Flat at Cabo Housing Complex at Landscape Town was owned jointly by Shri. Girish Ragha and his wife Smt. Ashwini Ragha and was sold to Shri. Shobit Gupta vide memorandum of understanding dated 01/12/2009 and subsequent sale deed dated 20/12/2010 for Rs. 1.50 crores. Further, amount of Rs. 10.00 lacs was received towards the furniture & fixtures hence the total consideration was at Rs. 1.60 crores. Enclosed find the copy of the MOU, possession letter and sale deed. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and his wife Smt. Ashwini Ragha formed in year 2006 and are carrying on the business of civil constructions, real estate development and work contracts. Further, it should also be noted that Shri. Girish Ragha is a qualified Civil Engineer and Smt. Ashwini Ragha is a qualified Architect and both of them look after the business of the partnership firm in very professional manner. Further, the partnership has executed number of real estate contracts and files its income tax returns under PAN AAMFA9760F 5. AO has disallowed the exemption u/s 54 of the Income Tax Act'1961, claimed by the assessee on the ground that possession of the new residential flat purchased by the assessee was not obtained within 2 years from the date of transfer and also that the assessee has purchased the flat from the partnership firm where he and his wife are the only partner. 6. We reproduce section 54 of the Income Tax Act'1961 as below: 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 there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanied 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 if 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 not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. 7. As noted above the assessee has sold two residential house properties and utilized the capital gain made on the sale of the properties towards purchase of new residential house property. Assessee had appropriated the total capital gain towards the purchase of new house property within six months from the date of sale of the house properties. 8. Although the assesee paid the amount towards the purchase of the residential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs which were outside the control of the developer and are out to be condoled. 9. Further, the clause 6 of the agreement with the developer in regard to the delivery of the flat reads as follow: "The VENDOR shall complete and deliver possession of the SAID APARTMENT within a period of 24 months from the date of Agreement". As such the assesee had purchase the residential flat to avail the benefit of section 54 of the Income Tax Act and has also confirmed that the same will be delivered to him within two years. 10. Further the clause 7 of the agreement with the developer reads as follows: "The VENDOR shall not be liable for delay in delivery of possession of the SAID APARTMENT due to any Act of God, Force Majeur, non-availability of construction material or due to any notice/order/rule of any authority, delay in the issuance of Occupancy Certificate or such other unforeseen circumstances beyond the control of the VENDOR and the VENDOR shall be entitled to such reasonable extension of time as may be necessary to complete the construction of the SAID APARTMENT". 11. As such in all probabilities the constructed flat was supposed to be delivered to the assessee within two years, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were raised by us with the CIT (A) and also the documents were submitted during the course of the assessment proceedings as such assessee request for taking the above on record and disposal of the appeal while upholding natural justice." 5. We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that the Assessee has sold two properties; Flat at Lawande Manor for Rs. 81 lacs and Flat at Cabo Housing complex for Rs. 1.60 crore. The flat at Lawande Manor was owned by Shri Girish Ragha and sold to Shri Arjun Mangaldas by sale deed. Flat at Cabo Housing complex was jointly owned by Shri Girish Ragha and his wife Smt. Ashwini Ragha and sold to Shri Shobhit Gupta by sale deed. This fact is not disputed by the AO. The Assessee has invested the sale proceeds in purchase of residential property at Taleigao, Tiswadi, Panaji from M/s. Ashraya Real Estate Developers and executed agreement to sell. M/s. Ashraya Real Estate Developers is a partnership firm of Shri Girish Ragha and his wife, Smt. Ashwini Ragha. M/s. Ashraya Real Estate Developers is engaged in the business of undertaking land development work, civil construction on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee got occupancy certificate of the property on 17.1.2014. As per Sec. 54 the Assessee is required to get the occupancy certificate within two years but the possession was handed over to the Assessee only on 17.1.2014. The Assessee submitted documentary evidence before us to show that after purchasing the property there was a civil suit filed by the other parties (copy filed at pg. 143-172 of the paper book) and Assessee could not start construction and licence for constructing the house was obtained by the Assessee on 16.5.2011. The Assessee's construction was delayed, therefore, Assessee has taken the contention before CIT(A) that though the Assessee has made the payment but the Assessee could not get the possession within three years. CIT(A), in his order, relied upon the decision of the Hon'ble Madras High Court in the case of CIT vs. Sadarmal Kothari, 302 ITR 286 (Chennai) wherein it is held that in order to get the benefit u/s 54 of the Income Tax Act, the Assessee need not complete the construction of house and occupy the same. If the Assessee has invested the money and the occupancy certificate is got delayed which is beyond the control of the Assessee, then, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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