TaxTMI 
TaxTMI 
2015 (1) TMI 1230
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.... individual who is the Managing Director of M/s. SEC Industries P. Ltd., The returns of income for both the years under consideration were filed by him on 28.08.2009 and 31.07.2010 declaring total income of Rs. 2,65,81,270 and Rs. 1,27,37,210 for A.Ys. 2009-2010 and 2010-2011 respectively. As declared in the said returns, long term capital gain of Rs. 79,35,642 and Rs. 99,13,046 had arisen to the assessee from the sale of flats in A.Ys. 2009-2010 and 2010-2011 respectively and deduction of Rs. 79,35,642 and Rs. 85,43,720 was claimed by the assessee in respect of such long term capital gain for A.Ys. 2009-2010 and 2010-2011 respectively on account of investment made in the construction of residential house at Plot No.995, Survey No.102/1 in Jubilee Hills Co-operative Housing Society. During the course of assessment proceedings for A.Y. 2009- 2010, the claim of the assessee for deduction under section 54 came to be examined by the A.O. for the first time. On such examination, he found that the following expenditure aggregating to Rs. 78,11,375 was incurred by the assessee for providing amenities such as lift, stair case, air conditioner, furniture etc., in the existing house which wa....
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.... by MCH. iii. Valuation report dated 1.7.2003 iv. Ledger account for cost of construction from 10.3.2001 to 31.3.2010. v. Letter of municipality on completion of house dated 28.6.2010. vi. Revised municipal assessment order dated 29.12.2011. 5.1. Relying on the above additional evidence, it was submitted on behalf of the assessee before the Ld. CIT(A) that after the purchase of Plot No.995 in 1987, a temporary structure was constructed on the said plot. It was submitted that the said structure, however, was demolished by the assessee before the commencement of construction of new house in the year 2002. It was submitted that the construction of new house was delayed and the same was completed in the year 2010 as per the completion certificate issued by the Municipality on 28.06.2010. It was pleaded that the expenditure in question incurred in both the years under consideration thus was for construction of a new house and since the same was incurred to make the new house habitable, the assessee was entitled to claim deduction under section 54. As regards the commencement of construction of new house in the year 2002, it was contended on behalf of the assessee that the....
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....specifies the date by which construction should be completed and therefore, the fact that the assessee had initiated construction much before the transfer of a capital asset did not disentitle him from claiming deduction under section 54. He also held that the expenditure incurred by the assessee for providing facilities like electrical and other fixtures, ward-robe and sanitary fittings etc., was necessary to make the new house habitable and therefore, such expenditure was eligible for deduction under section 54. He however, found that expenditure incurred by the assessee for certain items, which did not form an integral and inalienable part of the house such as marble statue, furnitures, fittings etc., was not required to be incurred to make the house habitable and since such expenditure was incurred mainly to decorate the new house of the assessee, he held that it was not eligible for deduction under section 54. Such expenditure as identified by the Ld. CIT(A) for both the years under consideration was under : Assessment Year 2009-2010 a. Marble Statue Rs.3,00,000 b. Glass and glass fittings (including Glasses, permets, curtain cloth, sheer blinds, honey comb b....
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....e habitable. Accordingly, he has restricted the claim of the assessee for deduction under section 54 only to the extent it is on account of expenditure incurred by the assessee to make the house habitable and the department has not raised any ground specifically in the present appeals disputing this aspect of the matter. 8. The grievance of the Revenue as projected in the common ground raised in these appeals is that the construction of house having been started way back in the year 2002-2003, the investment made by the assessee in the construction of the said house cannot be regarded as investment in construction of the new house eligible for deduction as envisaged in section 54. The provisions of section 54 to the extent relevant in this context are reproduced below : "Profit on sale of property used for residence. 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 p....