TMI Blog2016 (3) TMI 1436X X X X Extracts X X X X X X X X Extracts X X X X ..... investment made by the assessee in the construction of the residential house property at Parsik Hills, Belapur. Benefit u/s 54F of the Act of the investment in construction of residential house property at Parsik Hills, Belapur on the ground that the property was not in livable condition to occupy owing to non-production of evidence with regard to basic amenities like place for cooking/kitchen/toilet, bathroom, approach road within the plot etc. and non production of evidences regarding any electricity or telephone or tap water connection having been granted to the structure - The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are 'purchased' or 'constructed'. For such purpose, the capital gain 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 hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2010 passed by the learned assessing officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act, 1961 (Hereinafter called the Act ) for the assessment year 2008-09. 2. The ground raised by the assessee in the memo of appeal filed with the Tribunal reads as under:- 1. That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) [here-in-after referred to as Ld. CIT (Appeals)] was not justified and grossly erred in confirming the action of the A.O. and denying the claim of the appellant u/ s 54F by holding that such exemption u/ s 54F is available for only one residential house purchased or constructed. 2. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in denying the claim of the appellant u/s 54F amounting to ₹ 62,60,601/- in respect of residential house constructed at Parsik Hill Property on the contention that the said property was not in a habitable condition. 3. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in assessing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Hills, Belapur whereby the capital gain benefit u/s 54F of the Act was worked out by the AO at ₹ 45,24,618/- computed proportionately based on net consideration invested in the Parsik Hills residential property at Belapur and the balance long term capital gains of ₹ 18,61,041/- was brought to tax vide assessment orders dated 27.12.2010 passed by the AO u/s 143(3) of the Act. 4.Aggrieved by the orders of A.O. dated 27.12.2010 passed u/s 143(3) of the Act, the assessee preferred an appeal before the CIT(A). 5. The assessee reiterated the submissions before the CIT(A) as were made before the A.O. and submitted that the assessee had invested a sum of ₹ 62,60,601/- on construction of new residential house at Parsik Hill, Belapur and also made an investment of ₹ 25,79,278/- in another residential flat at N.R.l Complex, Nerul and, thus, he utilized the net consideration for investment in two residential properties. The assessee submitted that the A.O. wrongly interpreted that benefit u/s 54F of the Act is available for one residential house whereby the AO erroneously allowed deduction for only one residential house, whereas Section 54F of the Act uses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a unity of structure, mere fact that such self contained dwelling units were occupied by different persons, will not make that house, into several houses. Thus, the reasoning behind the High Court's judgment was the unity of structure. In the case of K.G. Vyas v. ITO 16 ITD 195 (Bom), the Mumbai- Tribunal allowed exemption in respect of investments in four flats where the tax-payer purchased four flats in same building; two flats were on 1st floor and one flat each on 2nd and 3rd floor and the tax-payer was living in these flats with his big family with a common kitchen and common ration card, thus, the reasoning behind Tribunal's decision was common use of several flats. In the course of appellate proceedings before the CIT(A), the assessee was asked to furnish the appropriate evidences that residential house property at Parsik Hill, Belapur constructed by him was in livable condition. The assessee submitted that merely because the construction was not complete in all respect and it was not in a fit condition to be occupied within the period stipulated would not disentitle him for claiming the benefit u/s. 54F of the Act. It is also submitted that once the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. had allowed benefit u/s 54F of the Act with respect to investment made in the construction of new residential house at Parsik Hills, Belapur while denied the benefit u/s 54F of the Act with respect to investment made in NRI Complex, Nerul. On the other hand, the CIT(A) has allowed the benefit u/s 54F of the Act with respect to the investment made by the assessee in NRI Complex, Nerul while denied benefit u/s 54F of the Act with respect to the investment made in construction of residential house at Parsik Hills, Belapur on the ground that construction is not yet completed. The assessee submitted that before the sale of two properties, the assessee did not own any residential house. The assessee s contention that construction of Parsik Hills, Belapur were completed within three years as required u/s 54F of the Act and in November, 2007, the second residential property at NRI Complex, Nerul was purchased. The assessee stated before us that the he did not own any other residential property prior to acquisition of the afore-stated two new residential properties. The assessee also reiterated the submissions as was made before the authorities below and the same are not repeated for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2014 w.e.f. 01-04- 2015, whereby the word a has been substituted with the word one residential house. The assessee relied upon various case laws. We have observed that the case laws relied by the assessee whereby allowing investments in more than one residential flat/house relate to the benefit availed by the tax-payer u/s 54 of the Act and not to section 54F of the Act. On careful perusal of Section 54F of the Act vis- -vis Section 54 of the Act reveals that there are marked difference between the requirements stipulated under both the afore-stated Sections for availing benefit. We have analysed section 54 and 54F of the Act and observed that there are marked differences in both the sections 54 and 54F of the Act, whereby Section 54F of the Act stipulates additional conditions to be met for availing the exemption, which inter-alia, provides as under and these conditions are not existing in Section 54 of the Act: (a) Investing net consideration on transfer of capital asset in acquiring or constructing new asset instead of investing capital gains. (b) the tax-payer should not own more than one residential house, other than new asset, on the date of transfer of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dential house owned on the date of transfer of the original asset, is chargeable under the head Income from house property .] Explanation.-For the purposes of this section,- 11[***] 12[***] net consideration , in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (2) Where the assessee purchases, within the period of 13[two years] after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head Income from house property , other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head Capital gains relating to long-term capital assets of the previous year in which such reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires ; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid. Explanation.- 16 [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]] As is observed from the perusal of the provisions of Section 54F of the Act that there exists additional conditions in Section 54F of the Act for availing benefit such as that the tax-payer should not own more than one residential house other than the new asset purchase/constructed on the date of transfer of original asset, that the tax-payer will not purchase any residential house other than the new asset within a period of one year after the date of transfer of the original asset or construct any residential house other than the new asset within a period of three years after the date of transfer of the original asset and any such conditions does not exist in section 54 of the Act for availing the benefit. Thus, it is clear that assessee shall be entitled for benefit u/s 54F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parsik Hill, Belapur, considering the fact that the assessee has made investment in the property being construction of new residential house at Parsik Hill, Belapur and invested an amount of ₹ 62,60,601/- on construction of a new residential house at Parsik Hills and section 54F of the Act being a beneficial provision of promoting the construction of residential houses, the provisions of Section 54F of the Act are to be liberally construed for achieving the purpose for which it was incorporated in the statute. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are 'purchased' or 'constructed'. For such purpose, the capital gain 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.Thus, benefit u/s 54F of the Act cannot be denied to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 45: Provided that nothing contained in this sub-section shall apply where (a) the assessee,- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head Income from house property. Explanation : For the purposes of this section, net consideration , in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. 10. A reading of the aforesaid provision makes it very clear that if a capital gain arises from the transfer of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if he has invested the money in construction of a residential house, merely because the construction was not complete in all respects and it was not in a fit condition to be occupied within the period stipulated, that would not disentitle the assessee from claiming the benefit under section 54F of the Act. The essence of the said provision is whether the assessee who received capital gains has invested in a residential house. Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respects and as requited under the law, that would not disentitle the assessee from the said benefit. 12. In fact, Madras High Court had an occasion to consider this aspect in the case of CIT v. Sardarmal Kothari [2008] 302 ITR 286 where it has been held as under: 4. The requirement of the provision is that the assessee, within a period of three years after the date of transfer, has to construct a residential house in order to become eligible for exemption. In the cases on hand, it is not in dispute that the assessees have p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in favour of the assessee and against the revenue. Thus, in our considered view, the assessee shall be entitled for benefit u/s 54F of the Act with respect to investment of ₹ 62,60,601/- made by the assessee in construction of residential house property at Parsil Hills, Belapur amounting to ₹ 45,24,618/- as allowed by the AO and we set aside the orders of the CIT(A) in this regard and restore the orders of the AO. We order accordingly. 10. In the next ground of appeal, the assessee has challenged the action of the CIT(A) in confirming the action of the A.O. in assessing the agricultural income earned by the assessee amounting to ₹ 1,89,548/- as income under the head income from other sources . The A.O. noticed that the assessee has shown agricultural income of ₹ 1,89,548/- but the assessee did not produce any positive proof showing that the assessee has received the agricultural income of ₹ 1,89,548/- during the year. Moreover, the assessee could not produce any proof regarding the basic activities such as ploughing, weeding, harvesting etc carried out to claim agricultural income, hence, the A.O. treated the said income of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acs (approx.) . In the assessment year 2005-06, the Tribunal in ITA No. 6614/Mum/2009 has set aside and restored the matter to the file of the A.O. and it is stated before us by the ld. Counsel for the assessee that the A.O. in his further proceedings pursuant to Mumbai- Tribunal directions in second round of litigation, again held the said income to be income from other sources in the assessment order framed pursuant to the order s of the Mumbai-Tribunal and the assessee in the second round of litigation has not challenged the said assessment order of the A.O. before the appellate authorities. The ld. D.R. submitted that the assesse has not challenged the findings of the A.O. for the assessment year 2005-06 whereby the A.O. did not allow the said income as agricultural income, hence, the said finding has become final. The ld. DR stated that the said income cannot be considered as agricultural income as no evidence has been produced by the assessee to show that on the said agricultural land, the assessee is carrying out agricultural operations directly or through care-taker. No certificate from the revenue authorities to corroborate that the assessee is earning agricultural incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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