AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2012 (7) TMI 997
X X X X Extracts X X X X
X X X X Extracts X X X X
....o a solitary issue, namely: "that the CIT (A) was not justified in upholding the denial of the deduction claimed u/s 54 of the Act" Without prejudice "that the CIT (A) was not justified in refusing to allow the alternative claim of deduction u/s 54F of the Act" 3. Briefly stated, the facts are as follows: The assessee, is a doctor by profession, furnished his return of income for the assessment year under consideration, admitting a total income of Rs. 46.58 lakhs. The return was initially processed u/s 143(1) of the Act. The assessment was, subsequently, concluded by the AO u/s 143(3) of the Act, determining the total income at Rs. 1,86,97,010/- by computing the Long Term Capital Gains [LTCG] at Rs. 1,80,19,879/- as against Rs. 41,95,363/- declared by the assessee. 4. Aggrieved, the assessee had preferred an appeal before the CIT (A). During the course of first appellate proceedings, the assessee had raised an additional ground, the relevant portion of which , is reproduced as under: "1...the learned AO ought to have granted exemption u/s 54F of the Act alternatively under the facts and in the circumstances of the appellant's case." 5....
X X X X Extracts X X X X
X X X X Extracts X X X X
....im, enquiries were made by the Inspector of the office by the AO in the presence of Dr Reeta, appellant's wife and it was found that the said construction of the house on the property had been demolished long back and the property was a vacant site with weeds etc., and a Board stating PROPOSED SITE FOR STAR HOSPITAL & MATERNITY CENTRE. These are undisputed facts. The appellant's claim is that since he had purchased a residential house, he should be allowed exemption u/s 54 or alternately exemption u/s 54F. As exemption u/s 54 is ruled out as discussed above, the claim for exemption u/s 54F is examined. 3.7. The requirement for both the claims are similar with regard to acquisite of new asset, the only difference being that section 54 is applicable in case the original asset transferred is a residential house and section 54F is applicable where original asset is not a residential house. Acquisition of a new asset being purchase or construction of a new house within a period of 1 year before or 3 years after the transaction being common to both the sections in the present case, since the house has been demolished immediately on purchase and is lying vacant as a site for cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee to appropriate the consideration on account of capital gains to the extent that the new asset that had come into being was at the liberty of the assessee to perpetuate insofar as having purchased a site and the construction thereupon was within three years and as was also considered in the case of CIT v. Union Co. (Motors) Ltd. (supra) amounts to appropriation of the capital gains under section 54F supported by the CBDT Circular No.667 which clarifies that for exemption it was meant for construction of a residential house after demolishing the existing old structure.' 3.8. In the present case, as no new residential house has been constructed after demolishing the new asset purchased, the appellant cannot be eligible for this exemption allowable for creation of new residential units. Therefore, the appellant is not entitled to the claim for exemption u/s 54 or 54F of the Act" 6. Aggrieved, the assessee has come up with the present appeal. During the course of hearing, the submissions made by the learned A R are summarized as under: (i) that the assessee had sold the subject property for a consideration of Rs. 2.25 crores and invested a part of the capi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee had later on demolished the residential house on the aforesaid property and also true that the assessee had put up a board that 'the property was intended to be constructed as a hospital', but, subsequently gave up the idea of constructing a hospital and proposed to construct a residential house only; - that the assessee had complied with the requirements of s. 54 of the Act as he had purchased the residential house within the time allowed under the Act. The conditions required to be fulfilled have to be considered as on the date of purchase of the asset and there was no restriction on the demolition of the same after purchase; and the fact that the house purchased was sufficient to claim exemption and that there was no further requirement that the house must exist for a period of three years; - that the only restriction was that the property must not be transferred and thus, there was no violation of the statutory provisions of the Act and, therefore, exemption claimed requires to be allowed; & (viii) that the fair market value [FMV] adopted by the assessee was supported by a valuation report of the registered value whereas the AO had rej....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch was admittedly used as a commercial property at the time of sale. Moreover, in the Schedule to the Sale Deed executed on 23.7.2007, the property has explicitly been described as "All that piece and parcel of property thus totally measuring 3050 Sq.ft along with a commercial building thereon with a built up area " [source: Page 14 of PB AR]. It was the contention of the assessee that the subject property was built as a residential house which was being used as a residential house by the assessee's mother. However, as mentioned above, when the Deed of Absolute Sale executed on 23.7;2007 between the assessee and M/s. Sai Balaji Global Enterprises (P) Ltd and got registered in the Sub-Registrar's Office, the schedule property has unambiguously been described as a commercial building. Accordingly, the AO had worked out the capital gains at Rs. 1.8 crores. After due consideration of the assessee's contentions, the CIT (A) negated the assessee's request for exemption u/s 54 of the Act on the grounds that - (1) the property sold was clearly a commercial property as was evident from the Sale Deed, location of the property, the usage of the property as a commercial property prior....
X X X X Extracts X X X X
X X X X Extracts X X X X
....self conceded in the Schedule to Sale Deed (supra), the property was described as a commercial one. Taking into all these facts and circumstances of the issue as deliberated upon in the fore-going paragraphs and also in conformity with the provisions of s.54 of the Act, we are of the considered view that the CIT (A) was justified in decline to concede to the assessee's request for deduction u/s 54 of the Act as the assessee had sold the subject property as a commercial one. It is ordered accordingly 8.5 The above finding is also in conformity with the judgments rendered by various courts as relied on by the learned D R cited supra. With regard to the assessee's alternative plea of claiming deduction u/s 54F of the Act, we have duly examined the facts and also the contentions of the learned AR during the course of hearing. We decline to entertain the assessee's request for deduction even u/s 54F of the Act for the following reasons: (1) The property so purchased as per Sale Deed dated 8.3.2007 was a residential building of 15 Sqs. However, on a physical verification through his Inspector, the AO found that the said building was demolished long back and the property was a....