TMI Blog2017 (8) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... new asset. Hence, it is an event which occurred subsequently and the AO cannot travel back to the AY in which assessee claimed the exemption u/s 54 and deny the exemption. - Decided in favour of assessee. - ITA No. 758/Hyd/2017 - - - Dated:- 26-7-2017 - Smt. P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member Assessee by : Shri K.C. Devdas Revenue by : Smt. N. Swapna ORDER Per S. Rifaur Rahman, A. M. This is an appeal of the assessee directed against the order of the learned Commissioner of Income-tax(A) - 2, Hyderabad, dated 28.02.2017 for AY 2012-13. 2. Briefly the facts of the case are that the assessee is carrying on traditional family business in the line of gold jewellery etc. in individual capacity under the name and style of M/s Suraj Bhan Gems and Jewellers at Hyderabad. Assessee is regularly assessed to income tax. For the assessment year 2012-13, the assessee declared his regular business income and income from house property and also claimed deduction u/s. 54 of the Act in respect of capital gain on sale of residential house property. 2.1 While completing the assessment u/s.143(3) of the income tax Act, the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 54F of IT Act, 1961 is available to purchase of residential house and such house should be real and not symbolic. If the old house is only meant for demolition, it may not satisfy the test of purchase of residential house, more particularly when it is demolished within two years. Thus, it may be a symbolic purchase of bungalow which may not pass the test of 'purchase' u/s. 54F of the Act or if it is treated as purchase, then demolition being a voluntary act, may amount to transfer as per the decision of Hon'ble S.C in the case of Mrs Grace Collis [248 ITR 323 (SC)]. The CIT(A) observed that since the assessee has extinguished his right through agreement through the builder, Provisions of Sec.54(1)(i) are squarely applicable to the facts of the case. 4.3 In view of the above observations, the CIT(A) held that it is clear from the facts of the case that the intention of the assessee is to build the commercial complex on purchase of the old residential property (as evident from the Registered document No.1511/2012 dated 5/7/2012, registered at SRO, S.R. Nagar, Hyderabad in the name of the assessee which clearly depicts at Annexure -i-A enclosed to this Registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act by making investment in residential property and the same was in agreement with the sale document which was filed before AO. He submitted that Assessee has claimed the beneficial provision u/s 54 and complied with the provisions of section 54 by making investment in residential property. He submitted that there is no provision in the Act that the assessee has to reside in the residential property or let out, as, it is enough that the property should be residential property. He further submitted that assessee has entered into a development agreement with the builder for construction of a commercial building. in the subsequent year, i.e. on 27/05/2013, the assessee granted GPA to the developer. The Developer obtained the building permit on 22/08/2014 and subsequently demolished the residential property acquired by the assessee on 05/07/2012. He submitted that all these things were taken place in the subsequent AYs 2013-14 2014-15. 6.2 As far as claim of deduction u/s 54 is concerned, the ld. AR submitted that the assessee has fulfilled the conditions u/s 54 and the claim cannot be denied to the assessee in the AY 2012-13. He submitted that since evaluation was not tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.1 The AO has denied the exemption because of demolition of building, such acts amounts to extinguishment of right and also assessee has not resided nor let out the property. Since the assessee has entered into development agreement to construct the commercial building, CIT(A)/AO opined that the intention of the assessee was merely to construct the commercial building, hence, the exemption cannot be extended to the assessee. 9.2 Ld. CIT(A) has confirmed the above view by relying on the case laws, Viz., Dilip Manhor Parekh (supra), Pradeep Kumar (supra) and Neelamalai Agro Industries (supra). Let us analyse the ratios of these decisions with the case on hand. In the case of Dilip Manhor Parekh, the coordinate bench has analysed the question before them: i.e. whether the assessee is eligible to claim deduction u/s 54F when the assessee voluntarily demolishes the property before completion of three years For that purpose, it has analysed the ratios laid down by the Hon ble Apex Court in the case of Vania Silk Mills (P) Ltd., 191 ITR 647 and Mrs. Grace Collis, 248 ITR 323. In the case of Vania Silk Mills (P) Ltd., the property was destroyed and assessee has received the compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent (JDA), the property will not loose the status of being residential property. It loses its character only on the date on which the actual demolition occurs/happens. In the given case, it is not recorded when the actual demolition took place. AO has relied heavily on the fact that assessee has entered into JDA and he has not resided nor let out the property. AO opined that the intention of the assessee was only to construct commercial property. In our view, the assessee has invested the sale consideration in the residential property and it is not disputed that the new property is residential. It is only that assessee has not resided nor let out and in the year subsequent to purchase of property, assessee has entered into JDA. In these circumstances, we are of the opinion that the AO cannot deny the exemption u/s 54 because the assessee has not demolished the house even on the day of JDA . As per the provisions of section 54, when the assessee transfers the new property within a period of three years, the assessee looses the benefits u/s 54 and the capital gain so claimed is taxable in the year in which the new asset is transferred. In the given case, the assessee has demolished ..... X X X X Extracts X X X X X X X X Extracts X X X X
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