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TMI Blog2024 (5) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition to the extent of Rs. 2,03,55,192/- since the assessee can utilize the net consideration for construction of new asset i.e. a residential house within a period of three years from the date of sale of the long term capital asset. The option to utilize any amount before one year from the date of sale is available, as per section 54F(1), only in case of purchase of a new asset. 3. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 3,30,04,128/- as such payments were made after the due date of filing of return u/s. 139(1) of the Act, as provided u/s. 54F(4) and without depositing such amount in a bank account under Capital Gains Scheme. 4. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition made on account of amount claimed to be utilised for construction of new asset by way of giving advance of Rs. 3.75 crores to various parties, without any evidence of incurring of expenditure by way of bills and vouchers. 5. On the basis of the facts and circumstances of the case and in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vide reply dated 17.08.2022, the assessee submitted all the details and on perusal of the same, the following observation was made by the Assessing Officer. Particulars Rs. Payments made to parties before the transfer of the asset 2,03,55,192 Payments made to parties after the date of filing return of income u/s. 139 3,30,04,128 No evidences such as bills / vouchers produced by the assessee for payments made to different parties 3,75,00,000 Total 9,08,59,320 Based on the above observation, the assessing officer issued a show cause notice dated 02.09.2022, wherein he recomputed the exemption / deduction u/s 54F of the Act and asked the assessee to explain as to why the exemption should not be restricted to Rs. 13,83,88,881/- and the excess amount of Rs. 4,39,25,097/- should not be disallowed and brought to tax under Long Term Capital Gain (LTCG). 5. The assessee vide his reply dated 09.09.2022 to the show cause notice of the assessing officer, had explained each and every entry as stated in Para 5 herein above along with evidences. The relevant portion of the assessee's reply is reproduced in Para 4.1.11 of the assessment order. However, the assessing officer was not sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dential house. The assessee also submitted full details of construction expenses along with supporting evidences from time to time in response to various notices issued u/s 142(1) of the Act. 10. About payments made to parties before the transfer of original assets, Rs. 2,03,55,192/-, we note that the assessee has rightly claimed the deduction u/s 54F of the Act after duly complying with the provisions of the said section. The assessee had agreed to sell capital assets with a mutual understanding between the assessee and the party and accordingly, the respective party had made advance payments of substantial amount and against the sale of plot of land at Piplod, the assessee had received advance payments from time to time to the tune of Rs. 3,29,55,430/- as per the details given hereunder before the date of transfer of original asset: Date Details of payments received Amount Rs. 24.08.2018 Cheque 000080 99,00,000 24.08.2018 Cheque 000096 79,20,000 24.08.2018 Cheque 000121 73,80,876 06.09.2018 Cheque 000099 74,25,000 06.09.2018 TDS 3,29,554 Advance of Piplod Land 3,29,55,430 Out of the said amounts, the assessee had made following payments to different parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the permission was already granted on 19.12.2018, the assessee was entitled to start construction from that day onwards at any time. The assessee had started all basic activities for construction of a new residential house and as a part of that, assessee had made advance payment to the tune of Rs. 2,03,55,192/- to the above referred parties. The assessee had assigned the composite contract for construction of a residential house to M/s United One Infra Pvt. Ltd. The said contract was given for RCC construction and masonry work inclusive of supply of basic raw material for construction as well as labour charges. Since the assessee had already received the permission for construction of a residential house as per the approved plan and since the construction was to be started, the said contractor had asked for advance payment for procurement of necessary raw material as well as for other construction activities to be carried out by it. Therefore, the assessee had made above stated payments of Rs. 99,58,587/- to the said M/s. United One Infra Pvt. Ltd. Similarly, advance payment was made to Ashok Timber Trading Co. of Rs. 1,03,96,605/- for procurement of round logs of teak wood so tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim deduction u/s 54 of the Act of Rs. 18,52,650/- and Rs. 25,40,389/- invested in the construction of new asset prior to the sale of original asset. Ground Nos. 2.1 and 2.2 raised by the assessee, therefore, stand allowed. (Para 21)" (emphasis provided) (ii) In ITO vs. Smt. Rukmani Devi Agarwal [ITA No 577/Jp/2018] the Honourable Jaipur ITAT held that deduction u/s 54B is allowable in respect of the payment for acquisition of a new asset made out of advance payment received towards sale of original asset even if the payments were made prior to the date of transfer of original asset. (iii) The Honourable ITAT Jaipur Bench in the case of ITO vs. Sarojdevi Agarwal [167 ITD 367] held that "If construction started prior to transfer of original asset, is completed within three years of transfer of original asset same will not come into way of entitlement of exemption u/s.54F". (iv) In Rahul G. Patel vs. DCIT [(2018) 173 ITD 00 /195 TTJ 1027] the Honourable ITAT Ahmedabad Bench held that If assessee invests earnest money or advance received in specified assets before date of transfer of asset, then amount so invested would qualify for exemption under section 54E. The Honourable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Accordingly, we reverse the order of the lower authorities and direct the assessing officer to grant deduction under section 54F of Rs. 79,85,761/- to the assessee." Therefore, we note that the payment made by the assessee before the sale of property should be allowable and addition to the extent of Rs. 2,03,55,192/- was rightly deleted by ld CIT(A), hence we confirm the findings of ld CIT(A). 13. About payments made to party after the date of filing of return of Rs. 3,30,04,128/-, we note that assessing officer observed that the assessee had produced only a bill for the said amount dated 30.03.2021 of M/s A- Class Marble India Pvt Ltd., but the payments were made after the due date of filing the return on 31.03.2021 and further the assessee had not deposited the un-appropriated amount to the bank account under the Capital Gain Account Scheme as per the provisions of section 54F(4) of the Act. He further observed that on inquiry by issuing notice u/s 133(6) dated 25.08.2022, the said company, vide reply dated 06.06.2022 stated that it had not sold any goods to the assessee during F.Y. 2019-20. In the appellate proceedings, the submitted that the assessee had made all the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bill in respect of the expenditure of Rs. 3,30,04,128/- was issued on 30.03.2021. Thus, it is clear that the assessing officer had made wrong inquiry with the said party for F.Y. 2019-20 and since, the assessee had not entered into any transaction with the said party in F.Y. 2019-20, the said party rightly replied so. Therefore, assessing officer has wrongly alleged that the assessee has made bogus claim of having spent Rs. 3,30,04,128/- for the purpose of construction. 14. The primary goal of exemption provisions of sections 54 / 54F of the Act, are to promote housing. The procedural and enabling provisions of sub section (4) cannot be strictly construed to impose strict limitations on the assessee and in default thereof to deny him the benefit of exemption provisions. Here the opinion of Hon'ble Karnataka High Court in the case of CIT vs. A. Ramchandra Rao [277 CTR 522 (Kar)] is quite relevant wherein the following question of law was framed by the Hon'ble High Court on this issue. "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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails 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 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". The assessee also relied on the under mentioned decisions. 1 CIT Vs. Smt. B S Shanthakumari (2015) 60 taxmann.com 74 (Kar) 2 CIT Vs. SambandamUdaykumar (2012) 345 IRE 389 (Kar) 3 Goverdhan Singh Sekhawat Vs. ITO (2019) 102 taxmann.com 50 (Jaipur-Trib) 4 Ms. Moturi Lakshmi Vs. ITO (2020) 119 taxmann.com 488 (Mad) 5 Smt. BabithaKemparajeeUrs Vs. CIT (2017) 86 taxmann.com 43 (Bang-Trib) 6 Kannan Chandrashekar Vs. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mohak Stone Craft Pvt. Ltd. 22.11.2019 50,00,000 Nidhi Stone 09.09.2019 50,00,000 Nidhi Stone 16.01.2020 50,00,000 Nidhi Stone 06.07.2020 50,00,000 Nidhi Stone 21.09.2020 50,00,000 Trimurti Arts & Crafts 06.10.2019 25,00,000 Trimurti Arts & Crafts 09.10.2019 50,00,000 Total 3,75,00,000 The above amount incurred for construction of house and the amount paid as advance for supply of stones are two distinct types of transactions. The Assessing Officer observed that for claiming deduction u/s 54F, the amount of net consideration has to be appropriated by the assessee for construction of a new house i.e. the amount has to be actually incurred for construction of the new house and the payment of advance cannot be claimed as amount appropriated for construction. Accordingly, AO disallowed the same. In this connection, Ld Counsel submitted that the assessee had used special quality marble and monumental stones for construction of the building. For that purpose, the assessee was required to book a particular lot of marble / stone having the same quality and from which cut stones with art work are to be supplied as per the specified design and requirements and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific design and requirements was to be made before supply of goods and hence, the said payment was for incurring expenses towards construction of residential building and it was not a kind of parking of net consideration as alleged by the assessing officer. The assessee had paid Rs. 75,00,000/- (Rs.25,00,000 + Rs. 50,00,000) towards advance payment to M/s. Trimurti Arts and Crafts for booking of a particular lot of stone with specific size and quantity and the said party had also issued various bills as and when the material was supplied from time when the material was supplied by the said party. Further the bills were also received on supply of material within a time limit specified u/s 54F of the Act. During the course of assessment proceedings, the assessee had submitted all the details and the said party had also responded to notice u/s 133(6) of the Act and submitted its confirmation letter, cross copy of ledger account from his books of accounts and copies of all invoices along with copy of relevant bank statement reflecting the payments given by the assessee. A copy of the said confirmation letter is enclosed (Page No 103 of Paper Book). The assessee had already incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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