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Smt. Babitha Kemparaje Urs Versus Commissioner of Income Tax, Mysore

2017 (10) TMI 581 - ITAT BANGALORE

Revision u/s 263 - claim of deduction under Section 54F - Held that:- The Hon'ble High Court in the case of Prin. CIT Vs. C. Gopalaswamy (2016 (6) TMI 643 - KARNATAKA HIGH COURT) has held that the condition precedent for claiming benefit under Section 54/54F is that capital gain realize from capital asset should have been invested either in purchase of residential house or in constructing the residential house. If after making the entire payment merely a registered sale deed has not been execute .....

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been invested either in purchasing a residential house or in construction of residential house even though the transactions are not complete in all respects as required under the law that would not disentitle the assessee from benefit. - The assessee has established a prima facie case of claim of deduction under Section 54F. Therefore when the CIT has not afforded an effective opportunity of hearing and the Assessing Officer has not conducted a proper enquiry, then in the facts and circumsta .....

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Pramod Singh, CIT (D.R) ORDER Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the revision order dt.27.03.2014 of Commissioner of Income Tax, Mysore under Section 263 of the Income Tax Act, 1961 (in short 'the Act'). 2. The assessee has raised the following grounds : 1. On the facts and in the circumstances of the case, the conditions precedent being absent, the proceeding initiated under Section 263 of the Act was opposed to law and the order passed under .....

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Act is on a mere change of opinion which is not permissible in - law. 4. The learned CIT ought to have refrained from directing the assessing authority to disallow the deduction under Section 54F as claimed by the Appellant in respect of capital gain which was in order. 5. On the facts, the learned CIT ought to have accepted the explanation of the Appellant and refrained from exercising powers under Section 263 of the Act. 6. Without prejudice, the addition as suggested by the learned CIT is exc .....

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assessment proceedings the CIT, Mysore noticed that the assessee had deposited a sum of ₹ 11,50,000 in capital gain scheme on 14.12.2009 and purchased a site on 6.5.2010 for ₹ 21,60,000. The CIT noted that the assessee had not complied with the condition prescribed under Section 54F of the Act for claiming the deduction as the assessee has not deposited the amount in capital gain account scheme before the due date of filing the return of income and also has not constructed the new h .....

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F in respect of the amount deposited in capital gain account scheme as well as in respect of the investment made for purchase of site. Accordingly, the CIT set aside the assessment order and directed the Assessing Officer to pass fresh order as per the directions given in the impugned order. 4. Before us, the learned Authorised Representative of the assessee has submitted that during the course of assessment proceedings under Section 143(3), the Assessing Officer issued the notice under Section .....

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0 whereby the assessee purchased a new site for construction of house. Thus after considering the reply and details filed by the assessee, the Assessing Officer was satisfied with the claim and allowed the deduction u/s. 54F while passing the scrutiny assessment. He has further submitted that the CIT has not granted sufficient opportunity before passing the impugned order. Thus the assessee was not afforded an effective hearing and opportunity to furnish the relevant details to satisfy the CIT t .....

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2012 and therefore the assessee is eligible for deduction under Section 54F of the Act. In support of his contention he has relied upon the decisions of various High Courts as well as the co-ordinate bench of this Tribunal as under : (i) CIT Vs. Shakuntala Devi 389 ITR 366 (ii) Prin. CIT & Other Vs. C. Gopalaswamy 384 ITR 307 (iii) CIT Vs. Smt. B S Shantakumari 233 Taxmann 347 (iv) Saraswathy Vs. ITO TS-5263-ITAT-2017 Chennai (v) G. Ramesh Vs. ITO 71 taxmann.com 165 5. On the other hand, the .....

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date of transfer of the existing asset is not eligible for deduction under Section 54F as the construction of the new house was not completed within the period prescribed under Section 54F. 6. We have considered the rival submissions as well as the relevant material on record. As regards the sufficient and proper opportunity of hearing was not given by the CIT before passing the impugned order, we find that the show cause notice under Section 263 was issued on 28.02.2014 and the case was posted .....

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ned order without granting an appropriate and effective opportunity of hearing to the assessee. The learned Authorised Representative has pointed out that the assessee has finally completed the construction of the house in the year 2012 however the relevant record could not be furnished before the CIT for want of proper opportunity. Thus it is manifest from the record that the show cause notice under Section 263 was issued by the CIT at the fag end of the expiry of two years from the end of the .....

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d in the order that the assessee has purchased a residential property and also deposited in the specific account. Therefore the assessment order suffered from lack of adequate and proper enquiry on this issue. As far as the claim of the assessee regarding investment made in purchase of the site, we find that even if the assessee finally could not construct the new house within the time period specified under Section 54F once the assessee has invested the proceeds of sale of existing asset for th .....

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ed in capital gain account scheme when the assessee has finally constructed the house then the condition of construction of the residential house has to be seen and not the depositing the amount in the capital gain scheme. The Hon'ble High Court in the case of Prin. CIT Vs. C. Gopalaswamy (supra) has held that the condition precedent for claiming benefit under Section 54/54F is that capital gain realize from capital asset should have been invested either in purchase of residential house or i .....

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benefit u/s.54/54F cannot be claimed. Once it is demonstrated that the consideration received on transfer of the asset has been invested either in purchasing a residential house or in construction of residential house even though the transactions are not complete in all respects as required under the law that would not disentitle the assessee from benefit. The Hon'ble High Court has reiterated its view again in the case of CIT Vs. Shakuntala Devi (supra) wherein the relevant facts were recor .....

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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 that assessee had been paid a sum of ₹ 2,40,00,000/- as advance between 12.04.2003 to 24.09.2003 as against the total consideration of ₹ 3,25,00,000/-. The Assessing Officer, as already noticed hereinabove, denied the exemption and brought the entire capital gain to tax. Section 54 of the Act which provides for claiming exemption rea .....

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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, 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 ( .....

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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 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. [(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of th .....

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ccordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset: Provided that if the amount deposited under this sub-section is not utilised wholl .....

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sale of the property is to be reinvested within a period of two years, which would not be chargeable to tax. The intention of Legislature was to encourage the investment in the acquisition of residential house or construction thereof. The condition precedent for claiming benefit under said provision is that the capital gains realized from sale of a capital asset should be reinvested either in purchasing a residential house or utilised for constructing a residential building. If it is establishe .....

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ection 54 of the Act is to give relief in respect of profits on the sale of a residential house. Necessary conditions to be fulfilled for the applicability of Section 54 are:- (i) Assessee should be an individual or a Hindu Undivided Family; (ii) Capital assets should result from the transfer of a long term capital asset; (iii) Capital gain must arise from transfer of building which is chargeable as 'income from house property'; (iv) Property should be a residential house; (v) Assessee m .....

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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 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 agreement dated 08.09.2003. Said agreement came to be entered into within six months from the date of sale i.e., 04.02.2003 and assessee had paid a total consideration of ͅ .....

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spute. 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 prescribed under Section 54 of the Act for extending the benefit flowing therefrom. In the instant case consideration paid by assessee under Memorandum of Understanding d .....

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onstructed and held that the condition precedent for claiming benefit under such provision is the capital gain realized from sale of a Long Term capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. It has also been held that if the assessee has invested money in constructing the residential house, merely because the construction was not complete in all respects or such building is yet to be completed f .....

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realized should have been invested in a residential house. The condition precedent for claiming benefit under the said provision is the capital gain realized from sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favour of the assessee before the period stipulated, he cannot be .....

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