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2016 (9) TMI 385 - ITAT CHENNAI

2016 (9) TMI 385 - ITAT CHENNAI - TMI - Claim for exemption u/s. 54F denied - construction of swimming pool - Held that:- The assessee has invested in construction of swimming pool and lawn adjacent to the existing House property constructed in the year 2003 and the construction was confirmed by the independent enquiry report of Inspector of Income Tax referred in assessment order. The ld. Authorised Representative could not controvert the finding of the ld. Assessing Officer and relied only on .....

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perty’’ and the ld. Commissioner of Income Tax (Appeals) dealt on the disputed issue. We are of the opinion that the assessee is not eligible for exemption u/s. 54F of the Act for construction of swimming pool and we uphold the order of the Commissioner of Income Tax (Appeals) - Decided against assessee - I.T.A. No. 1123/Mds/2016 - Dated:- 27-7-2016 - SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Shri. G. Baskar, Advocate For The Respond .....

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ion of the Assessing Officer in denying claim for exemption u/s. 54F of the IT Act. 2.2 The Commissioner of Income-Tax (Appeals) failed to note that what had been acquired by the assessee is a residential property and as such exemption u/s.54F is rightly allowable. 2.3 The Commissioner of Income-Tax (Appeals) failed to consider the facts of the case and the submissions made before him in the proper perspective . 3. The Brief facts of the case are that the assessee is a proprietor of M/s. First C .....

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nd that the assessee has claimed exemption of Long Term Capital Gains u/s.54F of the Act and called for the property information. In compliance the assessee explained that he has sold Residential house property at Valsaravakkam on 24.09.2009 and the said property was purchased alongwith other co-owner in the year 1994. The total cost of acquisition towards the assessee s share is ₹ 9,39,240/-. The assessee further explained by letter dated 13.02.2013 that at the time of acquisition of prop .....

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r details for the enquiry and correctness of claim. The assessee has purchased vacant land at Baywatch Boulevard, Waterland Drive, Kottivakkam, Chennai. The payments are made in the year 2007 being ₹ 77,00,000/- on 29.11.2007 and ₹ 23,00,000/- on 06.12.2007, total aggregating to ₹ 1,00,00,000/- and the sale deed was registered on 24.09.2010. These payments are made prior to sale of residential house property in the year 2009. The assessee claimed exemption u/s.54 of the Act on .....

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nd that the assessee has not invested in Capital Gains Investment Scheme. The ld. Authorised Representative explained that the assessee paid the purchase consideration in the year 2007 and took possession of property after Registration of sale deed on 24.09.2010 and compiled the provisions u/s.53A of the Transfer of Property Act, 1882. The ld. Assessing Officer found that the assessee has completed the transaction of purchase of property by paying entire purchase consideration in the year 2007-0 .....

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ted in purchase of vacant land prior to mandatory date of one year from date of sale. The ld. Assessing Officer deputed the Inspector of the Department to verify the property and on enquiry report dated 08.03.2013 it was found the swimming pool was constructed by the assessee on the property acquired at Kottivakkam in year 2007 and the swimming pool cannot be termed as residential house . The ld. Assessing Officer issued show cause notice to assessee for denial of exemption u/s.54 of the Act vid .....

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he present case as the assessee has constructed Residential house in the year 2003 and no activity of construction took place during the stipulated period. The assessee has constructed only swimming pool and lawn on the land adjacent to the building and is evident from the photographs submitted by the ld. Authorised Representative on 13.03.2013 and also the assessee has not complied the conditions of Capital Gains Deposit Scheme. With these observations, the ld. Assessing Officer denied exemptio .....

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vidence, findings of the ld. Assessing Officer and submissions by the assessee has dealt on the provisions of Sec. 54 of the Act at page 5 and provisions of Sec 53A in transfer of property Act and judicial decisions relied at page 6 to 8 and concluded that since the assessee has invested in purchase of piece of land adjacent to the existing House property and as per the assessee s own submissions constructed lawn and outdoor swimming pool by utilizing the sale proceeds. The definition of House p .....

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erred in confirming the findings of the ld. Assessing Officer irrespective of submission of evidence and the assessee is eligible for exemption of residential house as the sale proceeds were utilized. The ld. Authorised Representative explained that it is a continuous process of construction on the plot of residential house and being part of land apparent to building takes the character of a residential house and relied on the decision of Delhi Bench of Tribunal in the case of Addl. CIT vs. Nare .....

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ions cited. The ld. Authorised Representative contention that the assessee has sold vacant land at Valsaravakkam in 2009 and utilized the sale proceeds in construction of Residential house and claimed exemption u/s.54 of the Act. Prime facie to claim exemption u/s.54 of the Act, the assessee has to comply the conditions as per definition of Sec. 54 of the Act as under:- 54. [(1)] [Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undiv .....

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ate [constructed, a residential house], then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- (i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain .....

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spect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain . On perusal of the definitions and the facts of the case stated hereunder:- 01 Date of sale of Residential Property. : 24.09.2009 02 Due date of filing of Return of Income u/s.139(1) of the Act : 30.09.2010 03 Conditions as per Sec. 54 of the Act : (i) One year prior to date of sale of or .....

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g pool and lawn as per assessee s submissions. : During Aug 2009 to Jan 2010. We on perusal of the facts and documentary evidence found that the first criteria the assessee should invest the Long Term Capital Gains in residential house within stipulated period. The definition of Residential house for exemption u/s.54 of the Act has to be construed with liberal meaning Denotes the place where the assessee eats, drinks and sleeps and should be understood in the normal sense for claiming benefit u. .....

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