TaxTMI 
TaxTMI 
2014 (6) TMI 40
X X X X Extracts X X X X
X X X X Extracts X X X X
....,19,891/-. Particulars of the entire land acquired are as under:- Khasara No. Area Date of purchase Amount Share of the assessee 731 0.43 feet 25.01.1991 42000 ½ share / Rs. 21000 28 0.63 feet 31.05.1994 151200 ½ share / Rs. 75600 27.29 1.51 feet 01.06.1994 362400 ¼ share of Rs. 90600 2.1 Income under the head 'long term capital gain' of Rs. 77,23,448/-has been computed by the assessee as under:- Sale consideration of Vimalpura Land on 03/10/2008 Rs. 20881079 Less: Vimalpura land - 1. Indexed cost of acquisition F.Y. 1991-92 42000/199 x 582 = 122834 2. Vimalpura Land F.Y. 1991-92 170000/259x582 = 382008 Rs. 504842 Long term capital gain Rs. 20376237 Deduction u/s 54F Rs. 12652789 (Investment in house property u/s 54F Of Rs. 12966275) taxable LTCG Rs. 7723448 3. The assessee has claimed exemption under section 54F of the I.T. Act, 1961 (hereinafter referred to as 'the Act' in short). The Assessing Officer has called for the complete details regarding this claim. The assessee filed reply dated 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,534/-. The above mentioned flat is only another residential flat within condition of section 54F as prior to it assessee is having only Mahaveer Nagar residential house. The other alleged flats are not residential flats as appearing in balance sheet as assessee has never occupied them for residential purposes, as these are for investment purposes, according also shown under investments is balance sheet. The assessee has invested in ATS Paradiso, Greater Noida (U.P.) amounting to Rs. 51,23,000/- and possession of it has been taken on 10/07/2010, copy enclosed. The another investment was in ATS prelude - Golf Medow Chandigarh amounting to Rs. 29,90,000/- its possession is pending. The heritage city flat was jointly owned by brother Om Prakash possession taken on 08/03/1999 it was also for investment purposes letter enclosed. 3. It has already been explained that assessee has utilized amount of capital gain for purchase of new residential house i.e. amounting to Rs. 79,66,275/- given to builder and further Rs. 10 lac against supervision and interior work. Thus total amounting to Rs. 89,66,275/- and balance Rs. 40 lac has been deposited in capital gain account, evident of sam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt was paid in cash. The Assessing Officer has computed the income of the assessee as under:- A Income from Long Term Capital Gain 2,04,37,654/- B Income from other sources 1,34,63,204/- Gross Total Income 3,39,00,858/- Deduction under Chapter VIA (i) u/s 80C 1,00,000/- (ii) u/s 80 G (Eligible for 50% of contribution Rs.. 8,00,000/-) 4,00,000/- 5,00,000/- Total income 3,44,00,858/- Rounded of 3,34,00,860/- 4.1 Aggrieved, assessee preferred appeal before Ld. CIT(A) against the order of Assessing Officer. After making lengthy discussions, Ld. CIT(A) has also dismissed the appeal of the assessee. The assessee is further aggrieved. He has filed this second appeal by raising the following grounds:- 1. The Ld. CIT(A) had denied the claim of assessee u/s 54F of I.T. Act and had erred in holding that assessee owned to 'Residential Houses' (ATS-Noida Flat and ATS-Chandigarh Flat) on the date of transfer of original asset, under proviso (a)(i) to section 54F(1) by overlooking the apparent fact that the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding the paper book filed by the assessee, we have found that the following facts are not disputed by the parties:- (1) that the assessee got his share in the compensation of Rs. 208.81 Lac from jointly owned land consequent upon acquisition thereof by the Rajasthan State Industrial Development and Investment Corporation Ltd. (RIICO) on 05/06/2008 and has earned the long term capital gain (LTCG) of Rs. 203.76 Lac in this process. (2) that the assessee invested his share of compensation of Rs. 208.81 Lac before 30/09/2009 (i.e. due date of filing of ROI for A.Y. 2009-10). The details of entire investment are as under:- 1. Investment under section 54F Rupees (a) Payment for residential flat of Emaar - MGF (a builder) at Gurgaon 89.66 Lac (b) Deposit in Capital Gain account with BOB 40.00 Lac 2. Offered for Tax as LTCG 77.23 Lac Assessee had following houses & bookings as on 05/06/2008:- S. No. Properties and their address Year of acquisition Share of the assessee Whether assessed under section 22 1 Residential House S-225, Mahaveer Nagar, Jaipur Around 15 years back 100% YES, as self occupied house 2 Business office Fl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....where- (a) the assessee,- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property". Explanation.-For the purposes of this section,- "net consideration", in relation 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in sub-section (1), then,- (i) the amount by which- (a) 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 the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds (b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as 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 the unutilised amount in accordance with the scheme aforesaid. From the plain and normal reading of the above sections one can easily construe that this provision aims at encouraging either construction or purchase of a residential house out of a capital gain arising from the sale of certain capital assets. The title above the main section is very clear in this direction. We would like to repeat this title to emphasize our point of view:-  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in this section, the assessee has booked one flat in the Emaar-MGF, Gurgaon and has treated the booking amount paid as an 'investment made' in the purchase of a new-asset i.e. a residential house in consonance with the provisions of section 54F which does not suffer with the prohibitions of section 54F(4) or the proviso 54F(1)(b)(a)(i). This submission seems to be contradictory at the first sight. But, when this issue is examined it is not noticed that there is neither contradiction in assessee's claim nor there is inherent contradiction in the Act. The Act is very clear. It speaks about 'investment' in the new-asset (refer the title of this section). The term 'purchased' or 'constructed' used in section 54F(1) may not necessarily mean that the new-asset must have been transferred in the name of the assessee and the investment made by way of booking a flat and if such investment is proved it must be treated as an ample compliance of this proviso when it is examined in the light of the aim and object with which the legislators have enacted this beneficial provision. On the other hand the "transfer of ownership" in other flats is material because t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee had 50% share. The assessee had booked two flats one each at Noida & Chandigarh and had made advance bookings on the date of transfer i.e. on 05/06/2008. But neither possession had been taken nor ownership had transferred of those flats in the name of the assessee till that date. The assessee has booked one new residential house at Emaar-MGF, Gurgaon in the year 2009 i.e. after the date of 05/06/2008. The assessee has treated this new residential house at MGF, Jaipur as a new asset and the house at Mahaveer Nagar, Jaipur, as his sole residential house. Regarding two flats booked, one each at Noida and Chandigarh, the case of the assessee is that assessee has not become owner of those houses until 05/06/2008 as neither possession of the same had been given to him. According to him, on 05/06/2008 he owned only one residential house and therefore, he is entitled for exemption under section 54F of the Act in respect of new asset booked at Emaar-MGF, Gurgaon. It is stated that in those two flats, assessee has only 'Right to Acquire Flat'. 9. On the other hand, the case of Ld. Sr. D.R. who has relied on the orders of the authorities below, is that these two flats one e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alaji Share Trading Company. Therefore, the DDA flat was not acquired within one year from the date of transfer of capital asset. Hence proviso to section 54F is not applicable in the case of assessee." 10. Undisputedly, the assessee became owner of the Noida flat only on 10/07/2010 and has not acquired ownership of the Chandigarh flat till date. Thus, picture becomes clear in respect of proviso (a)(i) to section 54F of the Act that the residential house mentioned therein has a different connotation because 'house' means building in its normal residential conditions which is found fit for living by human-beings and not a house under construction' and this house should be completely owned by the assessee at the relevant time. The Legislators in their wisdom have used two different terms to refer to the original residential house sold as 'old asset' and by referring to the new residential house to be purchased or constructed as the case may be, as 'new asset'. The collective reading of this section makes it clear that two conditions should be satisfied and both are co-exist at the relevant time of transfer of original asset (1) the assessee must owned t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... different meaning. That house needs to be. This owner means a legal owner who is entitled to receive income from the property in his own right. This house should be real and not symbolic. In the absence of possession, registration, title etc., question of assessing 'income from house property' under section 22 of the Act does not arise. Thus, Ld. CIT(A) has failed to differentiate between the nature of asset owned by the assessee when a flat is booked he has a 'right to acquire' and this 'right to acquire', is not equivalent to 'own' a house. On the other hand the parameters which apply to investment of 'capital gain' in the construction - purchase of a house within two years of sale of the original asset. That is why the CBDT has issued circular Nos. 471 dated 15/10/1986 and circular No. 672 dated 06/12/1993 which clarify that the amount paid towards booking as to be treated towards 'construction' for the purpose of section 54/54F. This assessee made payment to the builder Emaar - MGF Gurgaon before 30/09/2009 for buying a II residential house. Builder has promised to give possession of the house before 05/06/2010 i.e. within 2 year....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave been very selectively & prudentially used by the legislature. This benefit is against the capital gain arising out of transfer of any long term capital asset not being a residential house and which has been referred to as an 'original asset' subject to a condition that if the 'net-sale-consideration' is invested either in purchasing/constructing a residential house or in constructing the same within the period prescribed in this section. However, if the assessee owned more than one residential house other than the new asset on the date of transfer of the original asset, this benefit is not available to him. In the given case, undisputedly, the assessee had sold a capital asset in the form of land on 03/10/2008 and earned long term capital gain of Rs. 2,03,76,237/- (this LTCG has been calculated by the Assessing Officer at Rs. 2,04,37,654/-) as there was some error in the computation filed by the assessee with the return because in the indexing of the cost of land in F.Y. 1991-92, the assessee's half share was not considered. The assessee has claimed exemption under section 54F (1)(b) of the Act to the extent of Rs. 1,26,52,789/- as against total investment o....