TMI Blog2017 (3) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction expenditure of ₹ 3 lakhs such as the nature of construction, permission from the competent authority for construction, date of utilization of funds for construction, bills and vouchers for various items of expenses for construction and above all whether the new building was completed within the specified period of 3 years from the date of transfer, completion certificate from competent authority and the nexus between the consideration received and the investment in the construction of house property. The Ld. Counsel for the assessee could not adduce any evidence before us to counter the above factual findings given by the Ld.CIT(A). Since the assessee failed to substantiate with evidence regarding the investment of ₹ 3 lakhs in construction of the house property, therefore, we find no infirmity in the order of the CIT(A) rejecting the claim of the assessee that an amount of ₹ 3 lakhs was utilized towards construction of the house property. - Decided against assessee Estimating the cost of acquisition @ ₹ 100/- per sq.mtr as on 01-04-1981 for the purpose of indexation - Held that:- Since the order of the CIT(A) is based on the report of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1-4-1981 was shown at ₹ 100/- per sq.ft. It was pointed out that the land as on 1-4-1981 was agricultural land and total area of the land was 45 guntas. In the year 1998, the assessee had applied for N.A. conversion of the land and the Town Planning Authorities granted permission for only 21 guntas out of 45 guntas as N.A. plot. After receiving the permission for conversion of the land as N.A. for 21 guntas (2194 sq.mtrs.) out of the 45 gunthas (4500 sq.mtrs.), the assessee sold 1580 sq. mtrs. of the converted N.A. plot in April, 2000 for a total consideration of ₹ 23,00,000/-. Since the value of the land had increased due to conversion into N.A. land, the cost of agricultural land as on 1-4-1981 was taken at ₹ 200/- per sq.mtr. Accordingly, the cost of acquisition of the agricultural land admeasuring 3240 sq.mtrs (equivalent to 1580 sq.mt. of NA land) as on 1-4-1981 in possession of the assessee was taken at ₹ 3,24,000/-. Out of the sale proceeds, an amount of ₹ 10 ,19,940/ - was deposited with capital gain account scheme in the State Bank of India, Baramati Branch under Account No.01190/015245 on 24-10-2000 besides spending a sum of ₹ 3,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses ₹ 56,730 Rs.13,72,170/- Long Term Capital Gains Rs.9,27,830/- Investment of Net Consideration Rs.23,00,000/- 1) Cost of construction Rs.10,19,490 2) Further investment ₹ 3,00,000 3) Cost of land on which Construction has been put up Rs.9,30,000 4) Development expenses and commission paid Rs.56,730 Rs.23,06,220/- 5. During the assessment proceedings, the Assessing Officer asked the assessee to explain as to how the cost of plot was taken at ₹ 2,37,000/- in the individual return while the same was taken at ₹ 3,24,000/- in the HUF return filed in response to the notice under section 148 of the Act. It was explained by the assessee that the cost of the land was taken o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had not complied with the provisions of section 54F( 4) of the Act for availing the benefit. According to the Assessing Officer, the assessee was changing its stand according to the queries raised from time to time with an intention to avoid payment of taxes on capital gain arising on transfer of land. The Assessing Officer observed that as per the provisions of sec.54F(4), the net considerations, if not appropriated towards the purchase of new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilized, should be deposited in the specified savings account before due date of filing of the return and proof thereof ought to be attached with the return of income. In the opinion of the Assessing Officer, the assessee in the present case, did not apportion any sum of the net consideration towards purchase of new asset before the due date for filing of the return. The Assessing Officer accordingly worked out the capital gain as under: Net Sale Consideration Rs.22,43,270/- Less : Expenditure incurred for transfer i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 8,93,797/- being cost of the land as against the total sale proceeds of the land of ₹ 23,00,000/-. It was accordingly argued that the whole proceeds of the land were utilized for deposit in capital gains account scheme and in the construction of the new house property and therefore, the Assessing Officer was not legally justified in taxing long term capital gain of ₹ 12,23,780/-, since the assessee had fulfilled the conditions of both the sections 54F(2) and 54F(4) of the Act. 8. However, the CIT(A) was also not satisfied with the arguments advanced by the assessee. He observed that the assessee during the year has received an amount of ₹ 23 lakhs on account of sale of land admeasuring 1580 sq.mtrs out of which the assessee has deposited an amount of ₹ 10,19,940/- in the capital gain account scheme of the State Bank of India, Baramati Branch and there is no dispute to the above. The assessee claimed to have invested an amount of ₹ 3 lakhs for construction of residential house. The assessee also claimed that the residential house was constructed on the land remained with the HUF admeasuring 614 sq.mtrs. for which the assessee had adopted the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Assessing Officer has not allowed the claim of indexed cost of acquisition while computing the long term capital gain is concerned he directed the Assessing Officer to adopt the cost of acquisition as on 01-04- 1981 at ₹ 100/- per sq.mtrs for indexation purpose as against ₹ 200/- per sq.mtrs claimed by the assessee. 12. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds : 1. On the facts and circumstances of the case and in law the Ld. C.I.T. (A) was not justified in rejecting the claim of the appellant that the release of land by the members of the HUF in favour of HUF for utilization in construction of residential property and therefore was required to be included in the exemption claimed u/s. 54-F of the Act. The decision of the Ld. CIT (A) was contrary to the provisions of law and without jurisdiction. The claim of the appellant be accepted. 2. On the facts and circumstances of the case and in law the Ld. C.I.T. (A) also erred in not accepting the claim of the appellant that an amount of ₹ 3,00,000/- was utilized towards construction of residential property and therefore, was required to be inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sq.mtrs for the purpose of deduction u/s.54F. The assessee accordingly calculated the long term capital gain at Nil after indexation, the details of which are already given at Para 5 of the order. We find the Assessing Officer in the assessment order allowed only the investment in capital gain account scheme amounting to ₹ 10,99,490/- as deduction u/s.54F. After allowing the development expenses of ₹ 33,730/- and commission of ₹ 23,000/- being expenditure incurred for the transfer of the land, the Assessing Officer determined the long term capital gains at ₹ 12,23,780/-. 16. We find in appeal the Ld.CIT(A) upheld the action of the Assessing Officer in disallowing the investment of ₹ 3 lakhs towards construction of the house. He also rejected the claim of the assessee that the release of land by the members of the HUF in favour of the HUF be considered as utilization in construction of residential property and thereby eligible for deduction u/s.54F of the Act. He however directed the Assessing Officer to adopt the cost of acquisition of the land as on 01-04-1981 for the purpose of indexation @ ₹ 100/- per sq.mtr as against ₹ 200/- per s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of house property and such release amounts to 'purchase' by the appellant and therefore deduction under sec. 54F is available towards cost of this land. The relevant portion of Section 54F of the Income-tax Act provides as under: 54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house . -(1) [Subject to the provisions of sub-section (4) , where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset , not being a residential house (hereafter in this section referred to as the original asset), and the a s sessee 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 residential house (hereafter 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the purpose of for determining the quantum of deduction under section 54F is not legally tenable. 5.4.2 In support of its contention, the appellant referred to the decision of Supreme Court in the case of T.N. Aravinda Reddy (120 ITR 46), Board Circular No.667 dated 18.10.1993, decision of Special Bench of ITAT, Delhi in the case of Twenty First Century steels Ltd. (94 ITD 258), the decision of Supreme Court in the case of Gwalior Rayon Silk Mfg. Co. Ltd. (196 ITR 149). The relevance and applicability of these authorities to the facts of the present case are now examined. 5.4.3 In the case of T.N. Aravinda Reddy, four brothers, members of Hindu coparcenary, partitioned their family properties, leaving a common house in the occupation of their mother. The assessee (the eldest brother) sold his own house attracting charge to capital gains tax. He, however, acquired the' common house from his three brothers who executed three separate release deeds for a consideration of ₹ 30,000 each, adjusted towards the extra share agreed to be given. The question raised by Revenue was whether said release deeds in favour of assessee would constitute purchase of a house prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of such residential house can be taken to include the cost of the plot also. The Board are of the view that the cost of the land is an integral part of the cost of the residential house, whether purchased or built. Accordingly, if the amount of capital gain for the purposes of section 54, and the net consideration for the purposes of section 54F, is appropriated towards purchase of a plot and also towards construction of a residential house thereon, the aggregate cost should be considered for determining the quantum of deduction under section 54/54F, provided that the acquisition of plot and also the As per the above Board circular, if the amount of capital gain for the purposes of section 54, and the net consideration for the purposes of section 54F, is appropriated towards purchase of a plot and also towards construction of a residential house thereon, the aggregate cost should be considered for determining the quantum of deduction under section 54/54F, provided that the acquisition of plot and also the construction thereon, are completed within the period specified in these sections. In the present case, there is no such appropriation towards cost of the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee. The object being that in computation of the net income, the statute provides deductions, exemptions or depreciation of the value of the capital assets from taxable income. The facts in the case of the present appellant are totally different. It may be true that a provision for deduction, exemption or relief should be construed reasonably and in favor of the assessee. When the admissibility of deduction under sec 54F is subject to certain conditions including utilization of sale proceeds towards purchase or construction of a new house, it cannot be said that the deduction should be allowed by liberal construction or interpretation of such provisions even when basic conditions for deduction are not fulfilled. In this connection, reference can be made to the decision of the Apex Court in the case of Petron Engineering Construction (P) Ltd. Vs. CSDT reported in 175 ITR 523 wherein it is observed as under:- .... It is true that an exemption provision should be liberally construed but this does not mean that such liberal construction should be made doing violence to the plain meaning of such exemption provision. Liberal construction will be made wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion received and the investment in the construction of house property. The Ld. Counsel for the assessee could not adduce any evidence before us to counter the above factual findings given by the Ld.CIT(A). Since the assessee failed to substantiate with evidence regarding the investment of ₹ 3 lakhs in construction of the house property, therefore, we find no infirmity in the order of the CIT(A) rejecting the claim of the assessee that an amount of ₹ 3 lakhs was utilized towards construction of the house property. The request of the Ld. Counsel for the assessee to set aside the issue to the file of the Assessing Officer also does not have any merit in absence of any material before us. Ground of appeal No.2 by the assessee is accordingly dismissed. 20. So far as the third ground is concerned, i.e. estimating the cost of acquisition @ ₹ 100/- per sq.mtr as on 01-04-1981 for the purpose of indexation as against ₹ 200/- per sq.mtr claimed by the assessee we find the Ld.CIT(A) while deciding the issue has dwelt upon the issue at para 6 of the order which reads as under: 6. The next ground of the appeal relates to not allowing the claim of indexed cost of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sq. mt.) as claimed now. The only reason stated by the assessee for adopting FMV at ₹ 200/- per sq.mt. is that the conversion to NA was given only to 50% of the total agricultural land in the year 1998 by Town Planning Authority and therefore, the value should be taken at ₹ 200/- per sq. mtr. as on 01/04/1981. This claim of the assessee that the FMV as on 01/04/1981 should be taken ₹ 200/- per sq. mt. cannot be accepted as what is relevant to be considered is the FMV of the property as on 01/04/1981 and not in the year 1998 when the conversion was granted by the Town Planning Commission. The conversion in the subsequent year i.e. in the. year 1998 does not enhance the fair market value in the year 1981 and what is to be reckoned is the FMV of the land as on 01/04/1981 which the valuer has estimated @ ₹ 100/- per sq. mtr. Therefore, the new claim of the, assessee that the cost of acquisition is ₹ 200/- per sq. mt. as on 01/04/1981 is only an afterthought after the issue of notice u/s.148 to the assessee. The cost of acquisition as on 01.04.1981 as estimated at ₹ 100/- in the valuer's report also appears to be reasonable given the fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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