TMI Blog2019 (11) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... utilisation was made within such time, the Revenue is bound to grant deduction. Therefore, this Court is of the view that the matter needs to go back to the first respondent for considering the issue as to whether the disputed amount, claimed by the assessee as deduction, has been utilised by the petitioner towards the additional construction within the time limit prescribing under Section 54(1) and thereafter, to pass fresh order accordingly in the light of the findings and observations rendered supra. Accordingly, the writ petition is allowed and the matter is remitted back to the first respondent to pass a fresh order accordingly - W.P.No.16249 of 2018 - - - Dated:- 5-11-2019 - Mr. Justice K. Ravichandrabaabu For the Petitioner : Mr.Abdul Ravoof For the Respondents : Mrs.Hema Muralikrishnan Senior Standing Counsel ORDER This writ petition is filed challenging the order of the first respondent dated 08.03.2018, in rejecting the petition filed by the assessee under Section 264, wherein and whereby the assessee sought for enhancement of the deduction of ₹ 1,02,13,527/- as the additional cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 29.06.2015 after taking into account the additional expenditure incurred by the petitioner towards acquiring the new Capital Asset within the prescribed time limit of 3 years. An overall expenditure of ₹ 4,08,54,108 was incurred towards additional cost of construction in which 1/4th share of HUF comes to ₹ 1,02,13,527. The petitioner submitted before the first respondent all the details and particulars of extra expenditure incurred towards the additional cost of construction to justify the above claim of deduction of ₹ 1,02,13,527/-. However, the first respondent rejected the request of the petitioner through the impugned order. Hence, the present writ petition. 3. The respondent filed a counter affidavit, wherein it is stated as follows: It is wrong to state that the first respondent had accepted that the total additional expenditure by the petitioner was ₹ 379 lakhs. The first respondent has not accepted any additional cost of construction to be allowable under Section 54. Only a sum of ₹ 150 lakhs was deposited into the Capital Gains Deposit Account within the stipulated time. Rest of the claim of the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements in the form of a directory provision to ensure that the mandatory condition under Section 54(1) is complied within the prescribed time limit of three years. The interpretation of exemptions to the benefit of Revenue does not mean that the rightful claims of assessees shall be denied to obtain unjust enrichment to the revenue. The non compliance of Section 54(2) has not caused any loss to the revenue. The respondents have not disputed that the petitioner have not complied with the conditions in Section 54(1). The capital gain transaction involves two legal entities namely the petitioner herein in his individual capacity as well as the Kartha of Venkata Dilip Kumar (HUF). The capital gain is accounted in the proportion of 75%:25% respectively of the above named legal entities. The Income Tax Appellate Tribunal by its order dated 24.01.2019 has set aside the Income Tax Officer s restriction on the cost overrun of ₹ 229 lakhs to ₹ 12.21 lakhs and has directed the Income Tax Officer to re-examine all documents. When the above order applies to 75% of the transaction, it must also apply to the balance HUF 25%. In the light of the above order passed by the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Income Tax Department and its accounts are being assessed under PAN AAIHV5089G. The petitioner HUF and the Kartha of the HUF in his individual capacity owned a property situated at No.5 (Old No.3), Seshadri Road, Alwarpet, Chennai-18 with 1/4th share and 3/4th share respectively over the same. The said property was developed by entering into a development agreement on 15.04.2013 with the developer. While the 3/4th share of the property, on completion of its development, was agreed to be released in favour of the developer or his nominees, 1/4th share of the said property is agreed to be retained by the petitioner HUF. Accordingly, the petitioner HUF and the Kartha in his individual capacity deposited a portion of the amount received as consideration towards the above development project into capital gain deposit account. In sofar as the petitioner HUF is concerned, it is stated that a sum of ₹ 1.50 crores was deposited in the capital gain deposit account with State Bank of India. The Revenue allowed deduction of the said sum of ₹ 1.50crores under Section 54 of the Income Tax Act. However, the petitioner claims further deduction to the tune of ₹ 57.25 lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a period of three years after that date, constructed, one residential house in India, then the capital gain shall be dealt with in accordance with the provisions made under Section 54(1)(i)(ii) instead of being charged to income tax as income of the previous year in which the transfer took place. In other words, to put it precisely, the capital gain so landed in the hands of the assessee, instead of being dealt with as income, will be dealt with by giving deduction to such capital gain, provided the assessee has satisfied the requirement contemplated under the above said provision. For seeking benefit of deduction under Section 54, the assessee should have purchased one residential house either one year before the transfer or two years after the date of such transfer or constructed a residential house within a period of three years after the date of such transfer. Therefore, it is evident that the intention of the legislature for granting deduction under Section 54 is that the assessee should be given the benefit of not taxing the capital gain so received by treating it as income, if he has purchased the house one year before or two years later or constructed the same within thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry in nature. If the assessee with the material details and particulars satisfies that the amount for which deduction is sought for under Section 54 is utilised either for purchasing or constructing the residential house in India within the time prescribed under Section 54(1), the deduction is bound to be granted without reference to Section 54(2), which compliance in my considered view, would come into operation only in the event of failure on the part of the assessee to comply with the requirement under Section 54(1). Mere non compliance of a procedural requirement under Section 54(2) itself cannot stand in the way of the assessee in getting the benefit under Section 54, if he is, otherwise, in a position to satisfy that the mandatory requirement under Section 54 (1) is fully complied with within the time limit prescribed therein. 15. At this juncture, the Division Bench decision of the Karnataka High Court made in ITA No.47 of 2014 in the case of the Commissioner of Income Tax vs. Shri K.Ramachandra Rao, is relevant to be quoted, wherein while considering the scope of Section 54F(1) to 54F(4) of the Income Tax Act, it has been observed as follows: If the intent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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