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2018 (2) TMI 863

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..... from the date of sale, the basic requirement for claiming relief u/s 54(1) of the Act is to be taken as fulfilled. The issue, thus, is squarely covered in favour of the assessee by the various decisions of the Hon'ble High Court. Assessee did not deposit the amount of sale receipt in the capital gains account scheme before the due date for filing of return u/s 139(1) - Held that:- If the intention is not to retain cash but to invest in construction or any purchase in property and if such investment is made within the period stipulated therein, than section 54F(4) is not at all attracted. We may clarify here that provisions of section 54(2) are almost identically worded as in section 54F(4) of the Act. Admittedly, in this case, the assessee has invested the amount for the purchase / construction of the house within the stipulated period as also observed above while deciding the first issue. The assessee has proved such investment during the assessment proceedings and, thus, the assessee has complied with the requirement of substantive provisions and, thus, is entitled to the claim of exemption u/s 54F of the Act. In view of this, we direct the Assessing officer to grant exemp .....

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..... ght to purchase the flat which was proposed to be given after four years from the date of transfer in August 2016. Thus, the Assessing officer found that conditions as per provisions of section 54 were not complied and, therefore, the claim of exemption u/s 54 of the Act of ₹ 2,97,78,977/- was not allowed. 3. Being aggrieved by the above order of the Assessing officer, the assessee preferred appeal before the CIT(A) and cited various case laws wherein it has been held that if assessee invests the capital gains in a house which is under construction and due to some reasons, the possession is delivered late to the assessee, even then, the investment of the amount will be considered towards the purchase / consideration of the house and that the assessee in these circumstances will be eligible to claim deduction u/s 54 of the Act. The Ld. CIT(A), however, did not agree with the above contention of the assessee. He tried to distinguish the case laws referred to by the assessee on the grounds that the decisions of the various Benches of the Tribunal including the decision of the Chandigarh Bench of the ITAT in the case of Smt. Ranjeet Sandhu Vs. DCIT, 133 TTJ 64 and Mumbai Benc .....

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..... nd the construction is in progress, then the benefits of exemptions, cannot be denied to the assessee. Reliance in this respect can be placed on the decision of the Jurisdictional High Court of Punjab Haryana in the case of Mrs. Madhu Kaul Vs. CIT ITA No. 89 of 1999 vide order dated 17.1.2014 and further on the decision of the Hon'ble Calcutta High Court in CIT s Bharati C.Kothari (2000) 160 CTR 0165 and also on the decisions of the various Coordinate Benches of the Tribunal. We have also gone through the provisions of sections 54 54F of the Act and we do not find any such distinction as drawn by the CIT(A) or any such dissimilarity in the wordings of the provisions from which any such conclusion can be drawn that u/s 54F of the Act the investment is to be considered and / or that u/s 54 of the Act, the house must be completed within the stipulated period of three years or that investment is not be considered. We may further point out here that even the decision of the Hon'ble Calcutta High Court is in relation to the provisions of section 54 only, wherein, the Hon'ble Calcutta High Court has categorically held that if agreement for purchase of residential flat .....

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..... he 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 (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset 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 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 mad .....

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..... ld deposit the amount earned from capital gains in a scheme framed in this respect by the Central Government till the amount is invested for the purchase / construction of the residential house. This provision, in our view, has been enacted to gather the real intention of the assessee to invest the amount in purchase / construction of a residential house. As per the provisions of sub section (1) of section 54, the assessee has been given two years time to purchase and three years time to construct a residential house subsequent to the date of transfer of the original asset. At the time of the assessment proceedings, subsequent to the date of transfer of the original asset, an assessee may claim that he will invest the amount in purchase / construction of a new house, though not have taken any steps towards that direction till then. In such a scenario, there should not be any method or procedure before the Assessing officer through which he could gather the real intention of the assessee, as the assessee, by saying so, may delay the taxation of the capital gains earned at least for three years from the date of transfer of original asset. Hence, sub section (2) puts an embargo to the .....

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..... 2) When the assessee invests the entire sale consideration in construction of a residential house within three years from the date of transfer can he be denied exemption under Section 54F on the ground that he did not deposit the said amount in capital gains account scheme before the due date prescribed under Section 139(1) of the IT Act? 10. The said question has been answered by the Hon'ble High Court in the following words:- As is clear from Sub Section (4) in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in Section 54 F(1), if the assessee wants the benefit of Section 54 F, then he should deposit the said capital gains in an account which is duly notified by the Central Government. In other words if he want of claim exemption from payment of income tax by retaining the cash, then the said amount is to be invested in the said account. If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein, then Section 54 F(4) is not at all attra .....

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