TaxTMI 
TaxTMI 
2013 (6) TMI 219
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....y on 23.3.1985. Thereafter the assessee entered into a development agreement with M/s Tibrewala Builders for construction of flats over the said property on 50:50 sharing basis. Accordingly, five flats fell to the share of the assessee, which were claimed to have been sold by her during the year under consideration for a total consideration of Rs.1,79,00,000. For the assessment year under appeal, the assessee filed her return of income declaring total income of Rs.58,839. In the return of income, the assessee while computing long term capital gains claimed exemption under S.54 of the Act towards purchase of plot and construction of house besides deposit in capital gains account scheme. In the course of assessment proceedings, the Assessing Officer, while examining the assessee's claim of exemption u/s. 54 of the Act noted that the assessee has purchased a house bearing No.6-3-1111/14 at Somajiguda, Hyderabad on 8.1.2007 for a cost of Rs.69,61,500 inclusive of registration charges. In response to the query raised by the Assessing Officer, the assessee stated that the property purchased is an open land with old structure, which the assessee intended to dismantle and construct a new h....
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.... purchase of the plot. He submitted that S.54 of the Act cannot be interpreted in a manner to suggest that the investment in the new asset should only be out of the sale consideration received from transfer of the old original assets. In support of such contention, the learned Authorised Representative relied upon the following decisions of the coordinate Bench of the Tribunal- (a) Muneer Khan v. ITO [2010] 41 SOT 504 (Hyd.) (b) J.V. Krishna Rao v. Dy. CIT [2012] 54 SOT 44 The learned Authorised Representative continuing his arguments submitted that the only requirement u/s. 54 is the assessee must purchase a residential house within two years or construct a residential house within three years of the transfer of the original asset. It was submitted that the assessee has invested an amount of Rs.69,61,500 in purchasing a plot for constructing a residential house and has deposited an amount of Rs.64,05,000, in a capital gains account scheme. It was submitted that investment in purchase of plot for constructing a residential house is sufficient compliance for the provision contained u/s. 54 of the Act and in case construction of the residential house is not made within three....
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....in one year, the CIT(A) has disallowed the claim of exemption by holding that the assessee has purchased the plot by utilising fund from a different source and not out of the sale consideration received from the sale of flats. According to the CIT(A), for claiming exemption us. 54 of the Act, the assessee should have utilsied the sale consideration received from sale of flats towards purchase of the plot. On going through the provisions contained in S.54 of the Act, we could not locate any such precondition/restriction. The only condition imposed under sub-section (1) and (2) of S.54 are- (a) the assessee should within a period of two years from the date of transfer, purchase a residential house or within a period of three years from the date of transfer, construct a residential house, and (b) the amount of capital gains not so utilized shall be kept in a scheme of the Central Government made in that behalf. 11. It is not in dispute that the assessee has purchased a plot of land for Rs.69,51,500 and deposited an amount of Rs.64,05,000 in capital gains account scheme. The coordinate bench of this Tribunal, while dealing with an identical issue of utilisation of money from a sourc....
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.... of the Tribunal relied upon by the learned counsel for the assessees before us, we hold that the capital gains earned by the assessee can be utilised for other purposes, and as long as the assessee fulfils the condition of investment of the equivalent amount in the scheme specified or in the asset qualifying for relief under S.54F, by securing the money spent out of the capital gains or from other sources available to it either by borrowal or otherwise, and the assessees are eligible for relief under S.54F of the Act in respect of the entire amount of capital gains so deposited. In the circumstances, we find merit in the contentions of the assessees that inasmuch as they have made deposits of the amounts equivalent to the capital gains realized in the Capital Gains Investments Accounts, even though part of those capital gains have been utilized for other purposes, borrowing amounts equivalent to such utilised funds from Shri J.V. Laxman Rao. The assessees are entitled to relief under S.54F of the Act, as ultimately the assessees deposited the requisite amounts in the Capital Gains Accounts Schemes for exemption under S.54F of the Act within the time stipulated by the statute. We a....
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....4. Even assuming that the construction was not completed within the period of three years, which, of course, is not the case in the present appeal, if at all any disallowance has to be made, then, it has to be made in the year in which the period of three years expires and not in the impugned assessment year, in which the department is obliged in the first place to grant deduction under S.54 of the Act. Considering the totality of facts and circumstances of the case, we are of the view that the assessee is eligible to claim exemption of the amount of Rs.69,61,500 invested in purchase of land under S.54 of the Act. Accordingly, we direct the Assessing Officer to allow the same to the assessee. The grounds raised by the assessee on this aspect, viz. grounds No.2 and 3, are allowed. 15. In ground Nos 4, 5 and 6, the assessee has challenged the method of computation of long term capital gains adopted by the Assessing Officer, and specifically disputed the restriction of the cost of construction and cost of improvement to Rs.3 lakhs as against Rs. 6 lakhs claimed by the assessee. 16. We have heard submissions of the parties on the issue and perused the orders of the Revenue author....