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Shri S. Tejraj Ranka Versus The Assistant Commissioner of Income Tax, Circle 7 (1) , Bangalore.

Eligibility for deduction u/s 54F - AO was of the view that the value shown in the registered sale deed can be considered as investment in a residential house for allowing exemption u/s 54F - Held that:- Assessee has parted with a sum of ₹ 54,70,887 to acquire a “ residential house”, in the sense, a house which is habitable. Therefore as far as proceedings under the Act are concerned, the Assessee cannot be denied the benefit of deduction u/s.54F of the Act. The fact that there was underva .....

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t that there was discrepancy between the amount set out in the registered document and the agreement with the builder has already been noticed by the State Registration Authorities and the Assessee is contesting those proceedings. Those proceedings will not have any bearing with regard to the claim of the Assessee for deduction u/s.54F of the Act, as the factum of investment in acquiring a residential house and payment of ₹ 54,70,887 has been established and not disputed by the Revenue. - .....

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ary, income from partnership business from two firms, called M/s Tyre Gallery and M/s Car Gallery, which is exempt u/s 10(2A) of the Income-tax Act, 1961 [ the Act ] and income from other sources. Return for assessment year 2007-08 was filed on 30/11/2007 declaring a total income of ₹ 17,17,194. The total income of the assessee was assessed by the AO at ₹ 28,47,194 as against declared income of ₹ 17,17,194. The only issue that arises for consideration in this appeal is regardin .....

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54F of the Act as the Assessee had purchased a flat, being Flat No. C 503, Block- C in a project known as ESPERANZA BY UKN Phase - I in Varthur Hobli, Bangalore South Taluk [hereinafter referred to as the property ]. 4. In the course of asst. proceedings, the assessee produced before the AO three documents relating to purchase of property for availing exemption u/s 54F of the Act viz., (i) Agreement for sale dated 17/5/2007 under which undivided share of land and Flat with a built up area of 20 .....

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Park ₹ 3,00,000 c. Upgradation cost, additional features & other infrastructure to the flat Rs.22,98,000 d. Incidental Charges:- Electricity Deposit : ₹ 1,62,000 Water & STP Deposit : ₹ 30,375 Club House Membership : ₹ 75,000 Sinking Fund towards Maintenance : ₹ 1,51,875 Service tax on Deposit : ₹ 28,042 Legal Fees : ₹ 10,000 Rs.4,57,292 GRAND TOTAL Rs.52,60,292 (c) Registered Sale deed by the developer, Esperanza by UKN dated 25/6/2008 wherein .....

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nt in residential house of ₹ 24,15,595. The proportionate deduction u/s 54Fof the Act was computed by the AO as follows: 34,34,640 X 24,15,595 36,00,000 = ₹ 23,04,640 6. The AO accordingly computed LTCG as follows:- Long Term Capital Gains : Sale Value : 36,00,000 Less: Cost : 1,65,360 Capital Gains 34,34,640 Less : 54F : 23,04,640 LTCG chargeable : 11,30,000 7. The AO was of the view that the investment of ₹ 52,50,292 contained in the letter of EXPERANZA BY UKN, the developer, .....

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so as to be eligible for deduction u/s 54F of the Act. 8. Aggrieved by the order of the AO, the Assessee preferred appeal before the CIT(Appeals). Before CIT(A), the Assessee pointed out that the total investment in purchase of the property was a sum of ₹ 52,60,292 and stamp duty and registration fee of ₹ 2,10,595; in all a sum of ₹ 54,70,887. The entire payment to the builder and incurring of stamp duty were through cheques and the details of the cheque payments are given in .....

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ies which make the residential house complete in all respects, have to be incurred by the purchaser of flat. These amenities need not be included in the registered document. The value of these amenities if included in the sale deed would involve payment of stamp duty and registration charges on their value. These amenities need not be legally treated as part of immovable property. There is, therefore, no illegality on the part of the Assessee in making the claim for deduction u/s.54F of the Act .....

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as of the view that the Assessee was indulging in undervaluation of property to avoid stamp duty and registration charges on registration of the property at the correct value. Thereafter, the CIT(A) found that under the agreement dated 17.5.2007, the developer agreed to sell undivided share of land, residential flat for ₹ 44,55,000 and ₹ 2,00,000 for one covered car park. The CIT(A) found that under Schedule E to this agreement, there was a time schedule for payment by the Assessee t .....

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) therefore, the agreement between the parties was not acted upon. That there was no basis for the claim of the Assessee that there was basic cost and upgradation cost as the said claim is not supported by any document. According to CIT(A), the apartment replete with all its features existing as on 23.6.2008 constituted an item of immovable property in totality, and it was registered as such before the Sub-Registrar. The description of the property recorded in the sale deed therefore, constitute .....

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ered document. The CIT(A) accordingly confirmed the order of the AO. 10. Aggrieved by the order of the CIT(A), the Assessee has preferred the present appeal before the Tribunal. 11. We have heard the submission of the learned counsel for the Assessee who reiterated submissions made before the CIT(A). The learned DR relied on the order of the CIT(A). 12. We have given a careful consideration to the rival submissions. The relevant provisions of Sec.54F of the Act, in so far as it relevant for the .....

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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 in India] (hereinafter 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 .....

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emption u/s.54F of the Act. The term residential house is not defined in the Act. Therefore the said expression should be understood in the normal sense of a house, which is habitable. There is no dispute that the Assessee in fact paid a sum of ₹ 52,60,292 to the developer for acquiring a flat which was habitable with all amenities in place. The confirmation of the developer/builder is on record. In addition to the same, the Assessee also incurred stamp duty and registration charges of  .....

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for a consideration of ₹ 44,55,000 + registration charges of ₹ 2,00,000 as per schedule E to this Agreement. Schedule E refers only to the cost of the built up area of 2025 sq.ft. at ₹ 2,200 per sq.ft. Par-II of Schedule-E and Article IV of the Agreement gives a list of other charges to be paid by the Assessee. 15. The next document is the registered sale deed dated 25.6.2008 which is for a sum of ₹ 22,05,000 which is towards undivided share of land and flat together wit .....

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