2016 (4) TMI 867

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.... deposited an amount of Rs. 80,00,000/- in capital gains accounts on 30-07-2010 (wrongly submitted and noted as 06-09-2010) and later purchased a semi-finished house on 16-06-2011 for a cost of Rs. 3 Crores and completed construction of house by 12-07-2012 (total investment was about Rs. 4 Crores). An application for obtaining occupancy certificate was made to GHMC on 10-08-2012 accompanied by relevant certificate dt. 20-07-2012 issued by principal architect that the construction has been completed. No certificate however, was issued by GHMC. Assessee did not file return of income u/s. 139(1) on or before 31-07-2010, but filed the same u/s. 139(4) on 24-02-2011, claiming deduction of the entire Long Term Capital Gains u/s. 54F in investing in a new house. 3. In the scrutiny assessment completed, assessee did not respond to various notices. AO completed assessment u/s. 144 ex-parte and brought the entire sale consideration to tax, disallowing the claim of Section 54F and also cost of acquisition. AO was of the opinion that assessee has not furnished evidence for completion of house within three years as per the provisions, nor deposited the amount in Capital Gains account within ....

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....ew of the judicial precedents on the subject, we do not see any merit in Revenue's contentions both on facts and on law. In the result, Revenue's appeal is dismissed. 6. In ITA No. 1049/Hyd/2014, assessee has raised the following grounds: "2. The learned CIT(A) should have appreciated that the entire sale consideration of the asset amounting to Rs. 1,90,00,000 having been utilized in purchase/construction of a new asset amounting to Rs. 3,22,50,000 the deduction should have been allowed under section 54F of the Act as the same was in substantial compliance to the provisions of the said section instead of sticking to technicalities in an incentive provision and limiting the deduction to only Rs. 80,00,000/-. 3. The learned CIT(A) should have allowed indexation of the cost of acquisition of the original asset amounting to Rs. 6,00,000 which was acquired in the year 2000-01". 6.1. As far as Ground No. 2 is concerned, as already stated earlier, the Ld. CIT(A) gives a finding that assessee has constructed the house before the due date of three years. The CIT(A) has considered the issue as under: "5.10 It is undisputed that the property purchased vide sal....

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.... by the jurisdictional ITAT. 5.14 For the purpose of deciding the present appeal, reference may be made to the relevant provisions of the Greater Hyderabad Municipal Corporation Act, 1955 which are reproduced below: "Section 455: Completion of certificates, permission to occupy or use: (1) Every person shall within one month after the completion of the erection or re-erection of building or the execution of any such work as is described in Section 343 deliver or send or cause to be delivered or sent to the Commissioner at his office, a notice in writing of such completion accompanied by a certificate in the form specified in the bye-law signed and subscribed in the manner so specified, and shall give to the Commissioner all necessary facilities for the inspection of such building or of such work and shall apply for permission to occupy the building. (2) No person shall occupy or permit to be occupied any such building, or use or permit to be used the building or part thereof affected by any work, until:- a) permission has been received from the Commissioner in this behalf; or b) the Commissioner has failed for twenty-one days af....

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....he relevant Laws/Rules to have received the certificate on 31.8.2012 (i.e. after 21 days) which is before the specified date u/s. 54. 5.18 The decision in the case of Satish Bora and Associates also refers to the fact that such deemed issue of occupancy certificate would be applicable provided there are no major deviations in the plan. There is no evidence on record to show that any such major deviation took place". 6.2. After the above discussion, Ld. CIT(A) however, granted deduction u/s. 54F to the extent of Rs. 80,00,000/- only instead of entire capital gain. The investment in new house is more than the capital gain/sale consideration. The only issue which might have restrained the Ld. CIT(A) could be the reason that assessee had deposited only Rs. 80 Lakhs and not entire sale consideration. 6.3. The Hon'ble Karnataka High Court in the case of CIT Vs. K.Ramachandra Rao (supra) answered the question in favour of assessee holding that when assessee had invested the entire sale consideration in construction of a residential house within the three years from the date of transfer, could he be denied exemption under section 54F on the ground that he did not deposit....