TMI Blog2022 (11) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... fied time framed. Merely because the assesssee has not able to deposit or deposited with a delay of 31 days in the capital gain account he cannot be denied with the benefit of section 54(1) of the Act. The above view has been fortified by the judgment of Hon ble High Court of Karnataka in the case of CIT Vs. Ramachandra Rao [ 2015 (4) TMI 620 - KARNATAKA HIGH COURT] wherein the very same substantial question of law has been decided in favour of the assessee. Thus CIT(A) has rightly deleted the addition made u/s 54 and the order of the Ld. CIT(A) requires no interference. Accordingly, we do not find merit in the Grounds of Appeal of the Revenue. - I.T.A. No. 607/DEL/2020 - - - Dated:- 2-11-2022 - Shri B. R. R. Kumar, Accountant Member And Sh. Yogesh Kumar U.S., Judicial Member For the Appellant : Shri Raj Kumar, C. A.; And Shri Satish Aggarwal, C. A. For the Respondent : Shri Vivek Vardhan, JCIT; ORDER PER YOGESH KUMAR U.S., JM This appeal is filed by the Revenue for assessment year 2016-17 against the order of the ld. Commissioner of Income Tax (Appeals)-10, New Delhi [hereinafter referred to as CIT (Appeals)] dated 11.11.2019. 2. The Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31.03.2016 for Rs. 8,75,00,000/-. The assessee has earned Long Term Capital Gain of Rs. 6,20,94,441/- as calculated in the assessment order. The assessee claimed deduction under section 54 of the Act for Rs. 5,70,94,441/- for construction of new house. Ld. AO denied the claim under section 54(1) of the Act made by the assessee on the ground that the amount remained uninvested till 05.08.2016 which was due date of filing the ITR under section 139(1) of the Act. The capital gain account deposit was delayed by 31 days. Therefore not eligible for deduction under Section 54(1) of the Act. 9. It is not in dispute that there was 31 days delay in depositing the amount in the capital gain account i.e. the due date for filing return under section 139(1) of the Act for assessment year 2016-17 i.e. 05.08.2016. But the deposit of Rs. One crore each were made by the assessee on 26.09.2016 and 27.09.2016 in the capital gain account. Further it is also not in dispute that the assessee had paid the entire capital gain deposits along with interest accrued thereon directly from the capital gain deposit to the parties for expenses relating to construction for new house between 02.11.2017 to 03.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or [two 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 (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,-- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub- section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance 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 wholly or partly for the purchase or construction of the new asset within the period specified in sub- section (1), then,-- (i) the amount by which-- (a) 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of Section 54F to cases which are mentioned in the said proviso. That is to be eligible for the benefit under Section 54F(1) the assessee should not be owning more than one residential house other than the new asset acquired or he should not purchase any residential house other than the new asset within a period of one year after the date of transfer of residential asset or constructs any residential house other than the new asset within a period of three years after the date of transfer of the residential asset. In the entire scheme there is no prohibition for the assessee putting up construction out of sale construction received by such transfer of a site which is owned by him as is clear from the language used. It is open for the assessee to put up a residential construction or to purchase a residential house. It is not the requirement of law that he should purchase a residential site and then put-up construction. Therefore, in the instant case admittedly the assessee has purchased a vacant site on 31.3.2001. He sold the original asset on 27.8.2003 on which date he was already owning a site. In fact even before sale of the original asset he had started construction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee cannot be justified for the following reasons: Section 54(2) cannot be read in isolation and on the other hand, application of Section 54(2) should take place only when the assessee failed to satisfy the requirement under Section 54(1). While the compliance of requirement under Section 54(1) is mandatory and if complied, has to be construed as substantial compliance to grant the benefit of deduction, the compliance of requirement under Section http://www.judis.nic.in 54(2) could be treated only as directory 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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