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TMI Blog2023 (3) TMI 1551X X X X Extracts X X X X X X X X Extracts X X X X ..... utory notices were issued to the assessee. The assessee filed reply, after verification of the details furnished it was noted that during the impugned assessment year under consideration, the assessee sold a plot of land on 08/09/2014 admeasuring 371.70 square meters situated at HSR Layout, Bangalore for a consideration of Rs. 2 cores. In the rerun of income, the long term capital gain was worked out to Rs. 1,86,63,291/- and clamed deduction u/s 54F of the Act. Being invested the entire sale consideration towards purchase of two residential BDA sites bearing No.196 and 197 admeasuring 360 square meters each and constructed a residential building at site No.197. During the assessment proceedings, the assessee was asked to substantiate the claim of deduction made u/s 54F of the Act. In response, the ld.AR of the assessee submitted as under:- "The property was acquired by late Mohan K Shetty, the husband of the assessee and the property was transferred from the deceased to the assessee in June 2009. The particulars of the property transferred are enclosed herewith. The property was duly declared in the assets and liabilities statement of late Mr Mohan K Shetty and the Asset was acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion work of the residential house. As per the provisions of the Act, in an event that the assessee is not in a position to invest in the new Capital Asset on or before the time limit u/s 139(l), she has to channelize the investment through a mandatory account specified under CGAS-88. The assessee has failed to undertake the same and unutilized amount has not been invested in CGAS-88 account before filing the return of income. 9. From the above, it is clear that the assessee has not fulfilled the two conditions to claim deduction u/s 54F of the Income Tax Act that the assessee has not constructed a residential house within a period of three years after the date of sale of capital asset and not deposited unutilized amount in the capital gain account before filing the return of income. Therefore, a letter dated 05-12-2017 was sent to the assessee proposing to disallow the deduction claimed u/s 54F and requiring the assessee to furnish her objection if any in this regard on or before 13-12-2017. The letter was served on the assessee on 07-12-2017. The assessee did not respond to the said letter and it is presumed that the assessee has no objection for disallowance of her claim for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the order the assessee, with the grievance of disallowing the Capital Gain exemption by the assessee, hence the appeal has been filed before the Honorable Bench with Grounds of appeal. Ground No. No 1: Disallowance of Capital gain exemption u/s 54(f) for Rs. 1,86,63,291/- 1. The learned Assessing Officer did not allow the exemption claimed by the assessee for having invested the amount in the construction of new house property. 2. The assessee sold a plot at HSR Layout, Bangalore bearing No.1156 on 81h September 2014 for Rs. 2,00,00,000/- and consequently a Capital Gain of Rs. 1.86,63,291/- is declared in the Income Tax Return. 3. In order to claim exemption from capital gain the assessee decided to buy a site and construct a house under the provisions of Section 54F of the Income Tax Act, 1961. 4. The assessee purchased a site developed by the Bangalore Development Authority (BDA) from the site allotee Shri. Ravikumar N and others at Arkavathi Layout, Site No. 196 and 197 formed by the Bangalore Development Authority in survey No. 82 2 of Tharisandra village, Bangalore, totalling for Rs. 1,86,00,858/- (including Stamp Duty and Registration Charges) on October and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slowly mobilized the sources and restarted the construction. 11. The honest efforts of the assessee to construct a new residential house and avail the exemption U/s 54F should not be deprived of the benefit for the reason of delay in completion of construction, which is beyond the control of the assessee. 12. It is submitted that this case is covered by the following judgements: The Income Tax Officer, Bangalore Vs Mujeeb Urraliman [ITA No. 5 Bing/2019/ Assessee had purchased the residential site and used portion of net sale ration for construction of new house and not appropriated the balance sale consideration in investment in construction of residential house or deposit into account notified by the central Govt. to avail exemption u/s 54. Hence assessee was entitled for exemption to the extent of amount used for purchase of residential site only. Capital gains - Exemption under section 54 - Assessee purchased residential site and used portion of net sale consideration for construction of new house - Assessee not appropriated the balance sale consideration either in investment in.in'iion of residential house or deposit into account notified by Central Govt. Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence that law never dictates a person to perform a duty that is impossible to perform. It was impossible for the assessee to construct the residential house within the stipulated period of three years. But she has purchased the land utilising the entire consideration received on the sale of the old property. It means that the assessee has invested the entire consideration received on sale of the old asset in acquiring/constructing a residential house property. In the special facts and circumstances of the present case, therefore, it is necessary to hold that the amount utilised by the assessee to purchase the land was in fact utilised for acquiring/constructing a residential house. Without purchasing land the house cannot be constructed. The first step should be the purchase of land. That was done. No step could be put forward thereafter, for reasons already stated. Therefore, the entire amount spent by the assessee in purchasing the land should be construed as amount invested in purchase/construction of residential house. In view of the above, the assessee is entitled for exemption under section 54F. The intention of the statute provided in section 54F has been fully satisfied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al building should be constructed within the period of 3 years from the date of the sale of the capital asset. The assessee also unable to establish, when the construction of the new residential building was completed, therefore he requested that the order of the authorities should be upheld. 9. After hearing rival contentions and perused the material available on record, on going through the order of the authorizes below, we noticed that the assessee sold capital assets and claimed exemption u/s 54F of the Act. On perusal of the documents submitted by the assessee, we note that the assessee has furnished Construction plan approval letter, construction bills issued by SKS builders & initial construction photo at page 61 to 65. From the bills issued by builders, it was for construction of compound wall & shed works it clearly shows that the building was not completed within the stipulated period of 3 years from the date of sale of capital assets. We also noted from the documents submitted by the assessee that the landlord Smt. Chanamma filed writ petition before the Hon'ble High Court of Karnataka against the acquisition of land by the BDA. We further note from the order of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the residential site for constructing a new residential house. To that extent, proportionate deduction to be granted to the assessee. However, the CIT(Appeals) granted deduction u/s. 54F of Rs. 2,48,83,672, though assessee has not deposited that portion in the net sale consideration into the account scheme notified by the Central Govt. For this purpose, it is appropriate to go through the provisions of section 54(2) of the Act which are as follows:- "54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (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 3 [constructed, one residential house in India], then, instead of the capital gain being charged to income-tax as income of the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount not so utilised shall be charged under section 45 as the 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 such amount in accordance with the scheme aforesaid." 10. The contention of the ld. AR is that in view of the judgment of the Hon'ble High Court of Karnataka in the case of CIT v. K. Ramachandra (supra), the assessee is entitled for deduction u/s. 54 to the full extent as granted by the CIT(Appeals) as the intention of the assessee was not to retain cash, but to invest in construction of new residential house property. The delay in investment was beyond the control of the assessee. However, we observe from the answer to question No.2 in the same case, in para 4.1, that if such investment is made in the bank account as stipulated in section 54(2) or invested in constructed of new residential house within the stipulated period, then assessee is entitled for deduction u/s. 54 of the Act. If the assessee failed to deposit into the bank account and also failed to construct the new residential house within the stipulated time, then assessee cannot t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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