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The Commissioner of Income Tax, The Dy. Director of Income-tax (Intl. Taxn.) Versus Mrs. Shakuntala Devi Since Deceased By Her Lr's, Ms. Anupama Banerji Shakunthala Devi Educational Foundation Public Trust

2016 (10) TMI 60 - KARNATAKA HIGH COURT

Entitlement to benefit under Sec.54 - adoption of date to be taken as the basis for reckoning the period of two years prescribed under Section 54 - consideration of capital gains portion - Held that:- Facts on hand would disclose that assessee had owned a flat at Mumbai and sold the same on 04.02.2003 for a total consideration of ₹ 1,70,00,000/-. Subsequent to such sale she entered into an agreement for purchasing another property for a total consideration of ₹ 3,25,00,000/- by agree .....

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the assessee for purchasing another property and reinvestment has been made within two years as contemplated under Section 54 of the Act. These facts are not in dispute. - Thus, long- term capital gains computed by virtue of sale deed stood adjusted by virtue of payment made by assessee for purchasing another property under Memorandum of Understanding dated 08.09.2003. As such, Tribunal has rightly held that date of purchase was to be taken as the basis for reckoning the period of two years .....

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on of capital gains in construction of residential house would suffice to claim the benefit of Section 54 of the Act. - Decided in favour of assessee and against the revenue - I.T.A. No. 340/2009 - Dated:- 28-9-2016 - Jayant Patel And Aravind Kumar, JJ. For the Petitioner : Sri. K. V. Aravind, Advocate For the Respondent : Sri. A. Shankar, Advocate JUDGMENT Revenue has preferred this appeal questioning the correctness and legality of the order passed by Income Tax Appellate Tribunal, Bangalore B .....

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filed by the assessee on 17.07.2003 declaring her total income as ₹ 34,59,390/-. Assessment came to be reopened under Section 147 and in response to the notice issued under Section 148, reply came to be filed by the assessee stating thereunder that original return filed is to be treated as return filed in response to the notice issued under Section 148. Accordingly, assessment proceedings came to be framed. 3. Assessing officer has noticed that assessee had sold a flat at Mumbai on 04.02. .....

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; 2003 to September' 2003 ₹ 2,40,00,000/- was paid by the assessee. By assessment order dated 31.12.2007 - Annexure - C assessing officer held that sale transaction had not been concluded, no registration of sale deed had taken place and balance consideration amount was yet to be paid and as such, deduction claimed under Section 54 of the Act came to be disallowed. 4. Being aggrieved by the same, assessee preferred an appeal before the Commissioner of Income Tax (Appeals). Appellate au .....

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54 of the Act the date of purchase was to be taken as the basis namely, entering into a agreement for purchasing the new property. It also came to be held that payment made by assessee to purchase new property fully covered the consideration of capital gains portion and as such, it came to be held that assessee was eligible for claiming exemption under Section 54 of the Act. It has been further held by the Tribunal taking of physical possession or for that matter registration of the sale deed wo .....

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sessee within two years as per Sec.54 of the Income Tax Act, is perverse, arbitrary and contrary to law?" 7. We have heard the arguments of Sri K.V.Aravind, learned counsel appearing for revenue and Sri. A. Shankar, learned counsel appearing for respondent No.1(b) and Sri. K.Arun, learned counsel appearing for respondent No.1(a) . 8. It is the contention of Sri. K.V.Aravind, learned counsel appearing for revenue that Tribunal committed an error in not considering the fact that entire sale c .....

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g the substantial question of law in favour of the appellant-revenue. 9. Per contra, Sri. A. Shankar, learned counsel appearing for assessee would support the order passed by the Tribunal and contends that it is the utilization of amount, which was received by the assessee by sale of property, which had to be reinvested for the purposes of claiming benefit under Section 54 of the Act and said exercise having been undertaken by the assessee, Tribunal on appreciation of facts had found that assess .....

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ai for a total consideration of ₹ 1,71,00,000/- on 04.02.2003 and thereby Long Term Capital Gains was arrived at ₹ 1,44,68,032/-. In the return of income assessee claimed exemption under Section 54 of the Act, contending interalia that said amount had been reinvested by her for purchase of another residential property namely, a flat at Mumbai itself for a total consideration of ₹ 3,25,00,000/- as per Memorandum of Understanding entered on 08.09.2003. It is also not in dispute t .....

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, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year 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 r .....

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set shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect 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 nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any .....

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hing 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 date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such retu .....

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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." 11. A reading of the above Section would make it explicitly clear that proceeds of sale of the property is to be reinvested within a period of two years, which would not be chargeable to tax. The intention of Leg .....

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on construction of residential building, an assessee would be entitled to the benefit flowing from Section 54 of the Act irrespective of the fact that transaction not being complete in all respects. In other words, it has to be examined or discerned from the facts of each case as to whether the assessee had undertaken such an exercise or not? 12. The main purpose of Section 54 of the Act is to give relief in respect of profits on the sale of a residential house. Necessary conditions to be fulfil .....

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) Exemption would be available only to the extent the sale proceeds are utilised; (viii) Where re-investment in a residential property is not made before due date for filing report, amount not so utilised till such date is required to be deposited in Capital Gain Account Scheme. Thus, if the above conditions are satisfied, assessee is entitled to claim benefit of the provision of Section 54. 13. Facts on hand would disclose that assessee had owned a flat at Mumbai and sold the same on 04.02.2003 .....

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