TMI Blog2017 (5) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the above ground of appeal of the assessee are rejected. The assessee has offered long-term capital gain in A.Y. 2013-14 and paid taxes thereon. This means that the said amount of long-term capital gain is being taxed twice, which cannot be intention of the Legislature. Therefore, we direct the AO to verify the claim whether the assessee has disclosed this long-term capital gain amount in A.Y. 2013-14, and if found correct, the AO should reduce then the said amount be reduced from taxable long-term capital gain of A.Y. 2013-14, and resultant refund of tax if any would be adjusted against the demand of assessment year under consideration i.e. A.Y. 2010- - I.T.A. No. 637/Ind/2014 - - - Dated:- 27-3-2017 - SHRI C.M.GARG, JUDICIAL MEMBER, AND SHRI O.P.MEENA, ACCOUNTANT MEMBER For The Appellant : Shri Ashish Goyal and Shri N.D. Patwa, Advocates For The Respondent : Shri Mohd. Javed, Sr. DR ORDER PER O.P. MEENA, ACCOUTANT MEMEBR. 1. This appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-Ujjain; [in short the CIT (A) ] dated 18.07.2014. This appeal pertains to Assessment Year 2010-11. This appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the orders of lower authorities are that the assessee is individual and derives income from catering business. The assessee has filed return of income on 28.02.2011, declaring total income of ₹ 3,92,330/-. The assessee along with his wife and son have sold a piece of land admeasuring 3.607 hectares situated at R.G. Survey No. 1634, Ujjain on 22.03.2010 for a sale consideration of ₹ 2,25,00,000 in which assessee s share of consideration was at ₹ 1,12,50,000. The assessee has claimed cost of indexation at ₹ 9,62,1010 and after deducting the same, long term capital gains was computed at ₹ 1,02,87,899/-. Out of this net long term capital gains of ₹ 3,47,749/- was offered to tax and balance of ₹ 99,40,150/- was claimed as exemption under section 54F of the Act being purchase of three plots of land for ₹ 87,90,150/- and ₹ 11,50,000/- were kept towards construction on said plots of land. The investment of ₹ 87,88,135/- was made in purchase of three plots of land being Plot No. 381 on 15.03.2010 for ₹ 28,89,910/- [PB31] Plot No. 382 on 15.023.2010 for ₹ 30,59,235/- [PB37] and Plot No. 383 on 15.03.2010 for ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased a residential house, within a period of one year before the date on which transfer took place or constructed a house within a period of three years after the date on which the transfer took place nor deposited the amount of net sale consideration in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame and, for the purposes of sub-section (1) of Section 54F. Mere purchase of plot does not suffice the conditions laid down in the section 54F of Income Tax Act, 1961. In the light of above facts, the AO disallowed the long term capital gains of ₹ 99,40,150 and added to the income of the assessee. 4. Being, aggrieved the assessee filed an appeal before the ld. CIT (A). The Ld. CIT (A) observed that the assessee has sold the land on 22.03.2010 and as per the requirement of law; he has to invest in the construction of house on or before 23.03.2013. The AO along with Shri Subhash Maheshwari, Advocate (counsel for the appellant) and Shri Pawan Bafna (son of the assessee) inspected the site and found that no construction was done within a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al asset. In support of the claim that investment can be made out of borrowed money in acquisition of new asset, the AR has relied in the case of Bombay Housing Corporation v. ACIT (2002) 76 TTJ (Mum) 25: 81 ITD 545(Mum) wherein the AO has held that sale consideration was not invested in specified assets and the assessee had diverted sale consideration of ₹ 3.55 crores to various partners and investment had been made in specified assets by borrowing an amount of ₹ 1.42 crores. The ITAT held that what the section requires is that it is necessary for the assessee only to invest an amount, which is arithmetically equal to the net consideration in the specified assets. It cannot be the intention of the section that other normal transaction or activities of an assessee should be curtailed or that the sale price should be immobilized. There may be various reasons like the buyer does not discharge the sale consideration, money is blocked somewhere else etc. Therefore, even if borrowed money is invested in new asset, exemption shall be allowed. 6. The Ld. A.R. has further relied in the case of ACIT v. Subhash Sevaram Bhavnani [2012] 23 taxmann.com 94 (Ahmedabad Trib) where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed as withdrawn. Hence, the tribunal held that exemption u/s. 54F could not be denied where the assessee has invested sale consideration for purchasing land. 8. The Ld. A.R. submitted that CBDT Circular No. 667 dtd. 18.10.1993, quoted by the ld. CIT (A) also laid down that the cost of construction shall also include cost of land 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. However, in the case of assessee, no construction has taken place due to the circumstances beyond the control of the assessee, as the approval of merger was received late. 9. As an alternative ground of appeal, the Ld. A.R. submitted that if the long-term capital gain is to be taxed in the A.Y. 2010- 11, then the AO therefore, be directed to reduce the long-term capital gains declared by the assessee in A.Y. 2013-14. The Ld. A.R. further relying in the case of Hon ble High Court of Kerala in the case of Malayalam Plantation (India) Ltd. v. CIT (1990) 53 Taxman 541 (Ker) /184 ITR 505 (Ker) submitted that the Tribunal has got power to direct the ITO to allow d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t before the expiry of due date of filing of return of income under section 139(1) of the Act. Therefore, the AO and CIT (A) were right in disallowing the exemption under section 54F of the Act. 12. We have heard the rival submissions of both the parties and have perused the material available on record. It is observed that the claim of the assessee for exemption under section 54F was disallowed by the AO on the ground that when he inspected the property it was found that the assessee has not constructed a residential house on plot of land purchased for on 87.50 lakh before the expiry of 3 years prescribed time limit from date of transfer of original asset. The AO also noted that the assessee has not deposited the amount of ₹ 11.50 Lakh in capital gains account as required under section 54F (4) of the Act. In order to appreciate the provision of section it would be relevant to produce the provision of section 54F which reads as under: 54F. (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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red under the provisions of section 54F (4) of the Act. Therefore, this amount is taxable in A.Y. 2010-11 only. This view is fortified from decision of Hon`ble Bombay High Court in the case of Humayun Suleman Merchant v. CCIT [2016] 387 ITR 421) (Bom) 2016-TIOL-1949-HC-MUM- held as under: Failure to deposit the amount of consideration not utilized towards the purchase of new flat in the specified bank account before the due date of filing return of income u/s 139(1) is fatal to the claim for exemption. The fact that the entire amount has been paid to the developer/builder before the last date to file the ROI is irrelevant. Therefore, the claim of exemption u/s. 54F was prima-facie not in accordance with law . 14. In view of this matter, we are of the considered view that by failing to deposit the amount of ₹ 11.50 in capital gains scheme account rendered the assessee as ineligible for the claim of exemption under section 54F of the Act. Similarly, the balance amount has also not been utilized towards construction of residential house; hence, the AO was right in disallowing the exemption of ₹ 11,50,000/- under section 54F(4) of the Act. Thus, we find that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire amount of capital gains has not been used towards purchase of plot of land and construction thereon. The unutilized amount of ₹ 11.50 lakh was not deposited in bank account before expiry of due date under section 139(1) as required under section 54F (4) of the Act. Further the amount of ₹ 87.90 Lakhs also used for purchase of plot of land and not for construction of residential house. Therefore, the assessee cannot be allowed to take postpone of the tax liability for three years without satisfying any of the condition laid down u/s 54F of the Act. Therefore, the claim of long-term capital gain is to be seen as whole and in piecemeal amount as part can be taxed in one year and balance can be taxed in another year. Therefore, said decision is distinguishable on facts. Further, the CBDT Circular No. 667 dtd. 18.10.1993 will come in effect only, when the assessee makes construction on the plot of land so purchased. In this case, the assessee has not been able to construct the residential house on the plot of land purchased. Hence, the assessee cannot take help of circular also. 17. The learned counsel has not been able to show that the assessee had complied with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance of provisions of section 54F. What was expected from the assessee was to prove on record that the assessee had purchased or constructed a house within the period specified under section 54F, which the assessee had failed to prove on record. The AO rightly rejected the claim of the assessee and order of learned CIT (A) is on the correct footings, which requires no interference. Therefore, the above ground of appeal of the assessee are rejected. 18. With regard to alternative ground no. 3 of appeal, wherein it has been claimed that if long-term capital gain is taxed in A.Y. 2010-11, then direction may be given to the AO to reduce the amount of long-term capital gains suo-motu offered to tax in A.Y. 2013-14 by the assessee. The AR has relied in the case of Hon ble Kerala High Court in the Malayalam Plantation (India) Ltd. (supra) where in it was held that Tribunal could issue direction to allow such deduction in another year to avoid double taxation. We also aware of the facts that the assessee has offered long-term capital gain in A.Y. 2013-14 and paid taxes thereon. This means that the said amount of long-term capital gain is being taxed twice, which cannot be intention of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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