2014 (5) TMI 516

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.... year relevant to the assessment year under consideration, the assessee had transferred her share in land along with others on 15-9-2008 for a consideration of Rs.81,90,000/-. The assessee also admitted the consideration received as income from capital gains but at the same time claimed deduction of Rs.35 lakhs u/s 54EC of the Act and an amount of Rs.47,00,000/- u/s 54F towards investment in construction of new house. In support of her claim of investment in a new house, the assessee filed a valuation report of registered valuer as per which the assessee constructed built-up are of 2310 sft on 1st floor and 1722 sft in the 2nd floor and the cost of construction was adopted at Rs.1250 per sft. After adjustment, the total cost of construction was arrived at Rs.47 lakhs. It was also stated by the assessee that she had approached municipal authorities for regularisation of construction as the construction was made without approved plan. The Assessing Officer after verifying the information furnished issued a letter to the assessee on 14-9-11 calling upon her to explain why deduction u/s 54F should not be disallowed on the ground that construction of additional floor amounted to extensi....

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....eas, it was submitted, in the plan submitted under BPS, only constructed area was considered for regularisation leaving the balconies, sit outs etc., whereas in the valuation report, the total plinth area floor wise was considered. 7. The Assessing Officer after considering the submissions of the assessee, was of view that in the absence of any drawings duly certified by the valuer, assessee's contention that the difference in plinth area was due to balconies and sit outs, cannot be accepted. He therefore concluded that the consolidated plan of G+2 floors approved by the Municipal Authorities was the plan submitted along with the BPS application dated 21-4-2008 for the purpose of regularisation of unauthorised construction of the building and the plinth area and specifications mentioned therein reflect the correct/actual measurements. The Assessing Officer held that the original asset was transferred on 15-9-2008 and the construction of the first and second floors on existing ground floor was completed prior to 21-4-2008 without proper municipal approval and regularisation was sought for by application filed on 22-4-2008 under the BPS scheme before the Municipal authorities. The....

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....eds are reinvested in the residential house and it can be done in two ways i.e., either by purchase of a new house or construction of a new house. In respect of purchase of a new house, the condition to be satisfied is that the purchase should take place within a period of one year before or two years after the date on which the transfer of the original asset takes place, and if it is construction of a new house, it has to be within a period of three years after the date of the transfer of the original asset. It may be noted from this, that the conditions of reinvestment prior to the transfer of the original asset is applicable only in respect of purchase of a residential house and not for construction and the Hon'ble Legislature must have considered this aspect before legislating the provisions of section 54F. If, they had though that if the time period of one year prior to transfer of original asset is applicable for both purchase and construction, the language of the section would have been different. If the contention of the appellant is accepted it will lead to an absurd situation where the assessees start claiming exemption in respect of houses of which construction started l....

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....he construction was done during previous year 2008-09 after receipt of balance sale consideration of Rs.74,40,000/- on registration. In this context, the learned AR referred to the bank statement reflecting the deposit of Rs.74 lakh on 16-9-2008. The learned AR referring to the copy of electricity bills at page-23E, 23F of paper book and the municipal assessment at page-23F of the paper book submitted that the conclusion drawn by the Assessing Officer as well as the CIT (A) that the construction was completed prior to the sale of original asset is without any basis. So far the second issue is concerned, the learned AR submitted that the construction of additional floor over already existing house has to be treated as construction of independent unit, and hence deduction u/s 54F can be claimed by the assessee. In support of such contention, the learned AR relied upon the following decisions:- i) CIT Vs. Sardarmal Kothari and Another (302 ITR 286 (Mad) ii) Mrs.Meera Jacob vs. ITO (313 ITR 411) (Kerala) iii) CIT vs. AR Mathavan Pillai (219 ITR 696) (Kerala) 11. The learned AR submitted that section 54F being a beneficial provision should be interpreted liberally. In suppor....