TaxTMI 
TaxTMI 
2013 (1) TMI 61
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....facts of the case are that he assessee had sold a property during the year for a sum of Rs. 21 lakhs which was purchased on 12.12.1974. After reducing the indexed cost of Rs. 13,77,500/- capital gain from the sale of said property was worked at Rs. 7,22,500/-. The assessee invested a sum of Rs. 15,46,898/- in the purchase of plot on which residential house was to be constructed. On the basis of this investment proportionate deduction u/s 54F was claimed. However, the house could not be constructed. During assessment proceedings the AO observed that as per provisions of section 54F the assessee was required either to purchase within a period of one year before or two years after the date on which the transfer took place or complete the construction of residential house within a period of three years. Though the assessee purchased the plot the assessee was also required to complete the construction of a new house till 31.3.2010 and since admittedly no construction had taken place, the deduction u/s 54F could not be allowed. Accordingly he disallowed deduction u/s 54F. 4. On appeal before the ld. CIT(A) it was mainly submitted that the assessee had purchased plot on which construct....
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....(iv) Asstt. CIT v. Gagandeep Kaur [ITA No. 655/Chd/2005] (copy of order enclosed). On a specific query by the Bench whether the assessee had taken any steps to construct the house for example, sanction of plan, the ld. counsel of the assessee admitted that plans were not prepared and sanction could not be obtained and he does not have any evidence to show that the assessee really wanted to start construction. The ld. counsel of the assessee submitted that in any case suitable direction may be issued for adjustment of taxes paid in AY 2011-12 in the current year because no income can be taxed twice. 7. On the other hand, the ld. DR for the revenue strongly supported the orders of AO and the ld. CIT(A). He further submitted that admittedly the construction of the house never commenced and therefore, the assessee was not entitled to deduction u/s 54F. The decisions relied on by the ld. counsel of the assessee are distinguishable on the facts of the case involved in those cases. He also submitted that the Tribunal had no power to give direction in respect of any other year in view of the decision of Hon'ble Supreme Court in case of ITO v. Murlidhar Bhagwandas [1964] 52 ITR 335. ....
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....on 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 [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 residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original ....
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....ised amount in accordance with the scheme aforesaid. Explanation.- [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] " Plain reading of the above section clearly shows that deduction under this section is allowable only in case where the assessee within a period of one year before or two years after the date on which the transfer took place purchases, or has within a period of three years after that date constructed the residential house. Therefore, if the assessee has not purchased or constructed the house within the specified period the deduction is not available. No doubt the proviso to sub-section provides that in case the amount of capital gain has been deposited in the specified account as provided in sub-section (4) and the same could not be used for construction then such capital gain would be charged in the previous year in which the period of three years expires from the date of transfer of original asset. It is a settled position of law that proviso provide exception to the rule. In case before us the proviso carves out an exception only in those cases where the amount had been deposited in the specified account and could not be used for the purpose of construct....
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....l gain the law prevailing in AY 1990-91 was applicable or law prevailing in 1993-94 in which the capital gain became chargeable because of the proviso would be applicable. Thus the facts are totally distinguishable. In any case it is to be noticed that in this case the assessee had deposited the money in the specified account that is why the proviso to Section 54F was applicable. In case before us, the money has not been deposited in the specified account, therefore, there is no question of application of the proviso. 8(2) The second case relied on by the ld. counsel of the assessee is that of Smt. V.A. Tharabai's case (supra). In that case assessee sold property in 2006 and immediately thereafter purchased a landed property to construct a house. In that case the owner of the property had purchased on the authority of POA and the owner of land had filed injunction before the Civil Court and the Civil Court granted an injunction and ordered a status quo. The house could not be constructed because of this order. The Tribunal allowed deduction u/s 54F because of these special circumstances i.e. construction was not allowed in view of the Court order despite purchase of land whereas....
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....that the assessee had not denied the liability to capital gain tax. The Tribunal allowed the deduction by observing that even if it is presumed that the amount of capital gain tax was offered for wrong year the same will not make any difference because the tax slab for both years remain same. In our opinion, this decision is totally distinguishable because the plan for house never got sanctioned and it is not clear from facts whether construction had commenced or not. With due respect to this decision we are of the opinion that it is not correct position of law that tax can be offered in any year wrongly or rightly. It is settled position of law that income has to be assessed in the hands of the correct assessee in the correct AY. Further even if the tax rate may remain same if the Government is entitled to recover the tax in AY 2002-03 and if the same is paid in AY 2004-05, the Government stands to loose on interest. Therefore, this cannot be taken as a precedent particularly when full facts are not spelt out in the order. 8(5) In the case before us, admittedly no plans were made, therefore, there is no question of getting the same approved. Apart from this, the ld. counsel of ....