TMI Blog2018 (12) TMI 1458X X X X Extracts X X X X X X X X Extracts X X X X ..... no case for capital gains and the assessee is entitled for the benefit of deduction u/s 54F. Reopening of assessment - Held that:- In the instant case, the assessee had received the land in exchange of land which is a kind component but not in cash and the entire land received by the assessee was applied for the purpose of construction of new residential house. There was no cash component received by the assessee for depositing in specified account and there was no investment. There was no finding either from the AO or by the Pr. CIT that the land was not fully utilized for the construction of the house. As per sub section 1 of Section 54, in case the assessee applied the entire net consideration for acquiring new asset, the entire net consideration is eligible for deduction u/s 54F of the Act. In the instant case, there is no dispute that the entire land received in exchange was used for the purpose of acquiring the new house and the assessee had completed the construction of the new house within the stipulated period u/s 54F. Therefore, we are of the considered opinion, that the assessee would be entitled for deduction u/s 54F as claimed. There is no error which causes prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructed the residential house within a period of three years from the date of transfer of the original asset or not? Further there was no evidence to show that the assessee has no residential house other than the new asset within the permissible period of one year from the date of transfer of original asset. The Ld. Pr. CIT viewed that in the absence of any evidence for acquiring the new asset, the assessee would not be entitled for deduction u/s 54F of the Act. It was further observed by the Ld. Pr. CIT that the assessee did not offer any rental income on the property sold during the period from April 2009 to August 2009, though the property was being used by the prospective purchaser. Thus, the Pr. CIT viewed that the assessment made by the AO u/s 147 r. w. s. 143(3) was erroneous and prejudicial to the interest of the revenue and accordingly issued notice u/s 263 calling for the explanation of the assessee as to why the said assessment should not be revised. 4. In response to the notice issued, the assessee s authorized representative appeared and filed a detailed explanation before the Pr. CIT with regard to sale of the land and acquiring of new residential property within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived from the tenant, hence the income was not admitted. The Ld. Pr. CIT viewed that as per section 22 of the Act , notional rent required to be offered for the taxation and failure to admit the notional rent renders the assessment erroneous and prejudicial to the interest of the revenue. Accordingly, the Ld. Pr. CIT set aside the order of the AO and directed the AO to make the assessment as per the directions given in the revision order u/s 263 of the Act. 6. Against the order u/s 263, the assessee filed appeal before the Tribunal. 7. We have heard both the parties and perused the material placed on record. In this case, the assessment was originally completed u/s 143(3) and subsequently, the assessment was reopened and completed u/s 147 r. w. s. 143(3) by an order dated 22. 05. 2015. The case was taken up for revision u/s 263 for the two reasons i. e incorrect claim of deduction u/s 54F and non admission of rental income. 8. Incorrect claim of deduction u/s 54F . In this case, the assessee has transferred 958. 2 sq. yds of plot along with iron sheet shed of 6656 sq. ft. by exchange deed dated 03. 08. 2009 for exchange of vacant site of 1,089 sq. yds of land with one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50C of the Act . Therefore, it is established that the assessee had received the equal amount of consideration in the form of land in exchange and the entire land was used for the purpose of construction thus there is no case for capital gains and the assessee is entitled for the benefit of deduction u/s 54F. 9. In the order u/s 263, the Ld. Pr. CIT relied on the decision of Hon ble Kerala High Court in the case of CIT Vs. V. R. Desai (197 Taxman 005). The facts of the case law relied upon by the Ld. Pr. CIT are entirely different and not applicable to the assessee s case on hand. In the case law cited by the Ld. Pr. CIT, the assessee transferred the land to the partnership firm treating it as a contribution to the capital of the firm. The firm in turn credited the capital account of the assessee with ₹ 38,62,800/- as capital contribution. However, though the assessee had received ₹ 38,62,800/- as full value of consideration of land transferred to the partnership firm the said sum was neither utilized for the purpose of construction of house nor deposited the amount in specified bank account before the due date. The full value consideration of the land brought to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge was used for the purpose of acquiring the new house and the assessee had completed the construction of the new house within the stipulated period u/s 54F of the Act. Therefore, we are of the considered opinion, that the assessee would be entitled for deduction u/s 54F as claimed. There is no error which causes prejudice to the interest of the revenue, accordingly, we set aside the order of the Ld. Pr. CIT and allow the appeal of the assessee. 11. Non-admission of rental income. The issue of admission of rental income was also examined by the AO vide questionnaire dated 27. 04. 2015 which was placed in page No. 56 of the paper book. The assessee has appeared before the AO and explained the reasons for non-admission of rental income and the said explanation was placed in page No. 49 of the paper book which was submitted to the AO vide letter dated 08. 05. 2015. During the reassessment proceedings AO has satisfied that there is no case for taxing the rental income due to non-receipt of the same from the tenant. Though the notional rent is taxable in the hands of the assessee as per section23(1)(a), having examined the issue in detail during the reassessment proceedings and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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