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Shri Sudershan Goyal, M/s Gopal Dass Hari Chand Versus The ITO, Ward-III (3) , Ludhiana

2016 (9) TMI 251 - ITAT CHANDIGARH

Deduction claimed under section 54 - Held that:- Merely because construction was not complete in all respect and it was not in a fit condition to be occupied within the stipulated period, would not disentitle the assessee from claiming the benefit under section 54 of the Act. The above facts, therefore, clearly prove that assessee had intention to purchase only plot because old structure and debris were removed by the owner and assessee wanted to raise the construction in the plot itself which w .....

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d to prove that practically the assessee purchased the plot and raised construction thereon for residential purposes. The assessee, therefore, would be entitled for deduction under section 54 of the Act. - Decided in favour of assessee. - ITA No. 831/CHD/2015 - Dated:- 30-8-2016 - Shri Bhavnesh Saini, Judicial Member Appellant by : Shri Tej Mohan Singh Respondent by : Shri S.K.Mittal,DR ORDER This appeal by assessee has been directed against the order of ld. CIT(Appeals)-I Ludhiana dated 28.09.2 .....

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the period stipulated having constructed residential house within the period as stipulated. 3. That the Ld. CIT(A) while sustaining addition of ₹ 24,74,000/- on account of capital gains failed to appreciate the true import of Capital Gains Scheme 1988 framed by the Central Government following which the appellant had deposited capital gains before expiry of time to file the return of income . 4. That the Ld. CIT(A) has further erred in not appreciating that having made a deposit under Capi .....

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of both the parties, perused the findings of authorities below and considered material available on record. 3. Briefly the facts of the case are that the assessee sold the property in question on 16.02.2006 for ₹ 42,97,500/- on which assessee got capital gains of ₹ 24,74,000/-. The Assessing Officer held that assessee had, instead of constructing residential house, had purchased the same as was evident from the Registration Deed dated 14.01.2009 for ₹ 26,09,100/- and further th .....

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ssee challenged the addition and assessment order before ld. CIT(Appeals) and written submission of the assessee is incorporated in the order in which assessee reiterated the same facts. The assessee explained that Assessing Officer has not appreciated provisions of Section 54(2) of the Income Tax Act because assessee made deposit in Capital Gain - B account, the amount of the capital gain within the period prescribed under section 139(1) of the Act. The assessee purchased a semi constructed plo .....

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unt spent more than ₹ 4 lacs thereon with additional amount at ₹ 3 lacs totaling to ₹ 7 lacs. The assessee referred to circular No. 667 dated 18.10.1993 in which it is explained that "if the amount of capital gain is appropriate towards purchase of plot and also towards construction of residential house thereon, the aggregate cost should be considered for determining the quantum of deduction under section 54/54F of the Act". The assessee relied upon several decisions .....

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ppeals), however, did not allow claim of the assessee and held that purchase of a house cannot be treated as purchase of plot and that the contention of the assessee that semi constructed house was purchased which was demolished and re-constructed is not acceptable in the absence of any evidence. The ld. CIT(Appeals) also noted that finding of the Assessing Officer is that amount of investment ₹ 7,84,506/- is insignificant, therefore, appeal of the assessee was dismissed denying exemption .....

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have been used by the assessee or a parent of his mainly for the purposes of his own or the parent's residence during the two years immediately preceding the date on which the transfer took place, and (2) the assessee must have, within a period of one year before or after such date, purchased or within a period of two years after such date, constructed a house property for the purposes of his own residence. When section 54 talks of house property, it does not mean an independent and complet .....

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r of the day. The assessee had two residential houses, one at Tiruppattur and another at Madras. The house at Tiruppattur which was in his enjoyment for residential purposes was sold on May 24,1974, and the assessee earned a capital gain of ₹ 32,500. The assessee put up the first floor in the other house at Madras after demolishing the first floor of the old structure and claimed exemption under section 54 of the Act. This claim was disallowed on the ground that the assessee had constructe .....

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tion within the period allowed by Section 54 and the assessee was in enjoyment of the entire property. He was, therefore, entitled to the exemption under section 54 of the Act." 6(i) Hon'ble Karnataka High Court in the case of CIT V Sambandam Udaykumar 345 ITR 389 held as under : A reading of section 54F of the Income-tax Act, 1961, makes it very clear that if a capital gain arises from the transfer of any long-term capital asset, not being a residential house and the assessee has withi .....

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ears to he 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 of the Act. Section 54F of the Act is a beneficial provision of promoting the construction of residential house. Therefore, the provision has to be construed liberally for achieving the purpose for which it was incorporated in the statute. The intention of the legislature was to encourage investments in the acquisition of a residential house a .....

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ial house or in constructing at residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favour of the assessee before the period stipulated, he cannot be denied the benefit of section 54F of the Act. Similarly, if he has invested the money in construction of a residential house merely because the construction was not complete in all respects and it was not in a fit condition to be occupied within the period stipulated, .....

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assessee from the benefit. During the previous year relevant to the assessment year 2006-07 the assessee sold shares in a company for a consideration of ₹ 4,18,08,725. Part of the proceeds of the sale to the extent of ₹ 2,16,61,570 were invested in purchase of house property. The assessee accordingly claimed exemption under section 54F. The Assessing Officer found that the flooring work, electrical work, fitting of door shutters and window shutters were still pending. Therefore, the .....

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f the shares. The developer acknowledging the amount had given particulars of the stage of construction. According to him, only minor fittings like window shutters and some electrical work were required to be made. The assessee had produced before the authorities the registered sale deed dated November 7, 2009, showing the transfer of the property in his favour. The assessee had been put in possession of the property and he was in occupation. The assessee had invested the sale consideration in a .....

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the object of giving benefit to the assessee by exempting the capital gain on the sale of property used for residence from being charged to income tax and also that sub-section (2) of Section 54 of the Act, simply mentions that the unutilized portion of the capital gain on the sale of property used for residence could be deposited by the assessee before the date of furnishing return of income under section 139 of the Income Tax Act. 8. The facts as noted above, are not in dispute that assessee .....

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7,84,506/- which was considered by the ld. CIT(Appeals) to be insignificant and that purchase of house was not treated as purchase of the plot. Therefore, claim of the assessee for exemption under section 54 of the Act was denied. The assessee claimed before ld. CIT(Appeals) that the property so purchased was a semi constructed plot and after demolishing the part of the construction, assessee raised new construction. The assessee filed copy of the Sale Deed in the Paper Book which shows that ass .....

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ction are mentioned in the books of account. The assessee in the residential building account has shown that on 03.01.2009, assessee has paid ₹ 85,000/- to one of the owner of the property under sale Shri Arun Nagpal against the sale of building material which was lying in the property under sale. Receipt to that effect was also executed by Shri Arun Nagal and is placed on record. This amount is added in the residential building account. Further, Shri Arun Nagpal has also executed another .....

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receipt to that effect and also issued a receipt that since property in sale was partially constructed and incomplete and she has lifted all debris from this property and she has received the payment from the assessee. 9. The ld. counsel for the assessee also filed various bills to show that further building material was purchased in raising construction in the property under consideration. The authorities below have not given any adverse finding against the residential building account and rec .....

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al lying in the property for considerable amount to the assessee and they have also confirmed that they have lifted all the debris from this property. It would, therefore, clearly prove the contention of the assessee that the assessee purchased only semi constructed plot and prior to registration of the sale deed in his favour, substantial payments were made to the buyers and during the same period, the part construction raised in the property in question was removed by the owner and all the deb .....

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sed part construction in the property by spending the amount of ₹ 7.85 lacs in property in question within the period prescribed in law. May be construction was not fully completed, but Section 54 is a beneficial provision promoting the construction of residential house. Therefore, the provision has to be construed liberally for achieving the purpose for which it was incorporated in the Statute. The intention of the legislature was to encourage investments in acquisition of residential hou .....

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disentitle the assessee from claiming the benefit under section 54 of the Act. The above facts, therefore, clearly prove that assessee had intention to purchase only plot because old structure and debris were removed by the owner and assessee wanted to raise the construction in the plot itself which was also raised partly. The income tax authority shall have to act on human probabilities by considering surrounding circumstances. 10. I may refer to Board's circular No. 667 dated 18.10.1993 a .....

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deduction is itself dependent upon the cost of such new asset. It has been represented to the Board that the cost of construction of the residential house should be taken to include the cost of the plot as, in a situation of purchase of any house property, the consideration paid generally includes the consideration for the plot also. 2. The Board has examined the issue whether, in cases where the residential house is constructed within the specified period, the cost of such residential house can .....

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