2016 (12) TMI 546

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....-compute the capital gains by adopting the indexed cost of acquisition with reference to the year in which previous owner first held the asset and not the year in which the assessee became owner of the asset by way of inheritance." I.T.A.No.281/Mds/2015 (Assessee's Appeal): 3. The assessee has raised several grounds in her appeal, however the cruxes of the issues are as follows:- i) The learned Commissioner of Income Tax (Appeals) has erred in sustaining the order of the learned Assessing Officer who had disallowed `1,50,00,000/- being investment claimed as deduction under section 54 of the Act because the new asset was purchased beyond the period of two years. ii) The learned Commissioner of Income Tax (Appeals) has erred in sustaining the order of the learned Assessing Officer who had disallowed the claim of exemption under section 54 of the Act in respect of investment in house property outside India for Rs. 2,05,92,000/-." 4. Brief facts of the case are that the assessee is a nonresident individual filed her return of income for the assessment year 2010-11 on 26.07.2010 admitting total income of `7,568/-. The case was selected for scrutiny and notice under sectio....

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....as 28.02.2008 because she had become the owner of the property only on that date and accordingly allowed the benefit of indexation from the financial year 2008-09 as per section 48 Explanation (iii) of the Act. 6.2 On appeal, the learned Commissioner of Income Tax (Appeals) following the decision of the Hon'ble High Court of Bombay in the case CIT Vs. Manjula J.Shah reported in 355 ITR 474 held that "while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset." 6.3 Since the learned Commissioner of Income Tax (Appeals) has only followed the decision of the Hon'ble High Court of Bombay in arriving at his decision, we do not find it necessary to interfere with the order of the learned Commissioner of Income Tax (Appeals) on this issue. ITA No.281/Mds/2015 - (Assessee's Appeal): Ground No.1 : Disallowance of `1,50,00,000/- being investment claimed as deduction under section 54 of the Act: 7.1 The assessee had initially investe....

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....on record. From the facts of the case, it is apparent that the assessee had made the investment of Rs. 1,50,00,000/- for construction of the flat by making payment to the builder. The builder had defaulted due to which the delay had occurred in construction of the flat within the time limit prescribed under the Act. The fault of the builder is beyond the control of the assessee whose intention was only bonafide to comply with the provisions of the Act for entitling the benefit of deduction under section 54 of the Act. In this situation we find that the decision of the Hon'ble Madhya Pradesh High Court in the case Smt. Shasi Varma Vs. CIT reported in 224 ITR 106 cited by the learned Authorized Representative is relevant. The Hon'ble High Court had held the issue as follows:- "Held that the CBDT had issued circular No.471 dated 15.10.1986 stating that cases of allotment of flats under the self-financial scheme of the Delhi Development Authority shall be treated as cases of construction for the purpose of capital gains. Section 54 of the Act says that within two years of sale the assessee should have constructed the house but it does not mean that the construction should necessaril....

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.... appeal, the learned Commissioner of Income Tax (Appeals) relying on the intention of the legislative statutes of the beneficial provisions section 54F and 54 of the Act and considering various decisions of the higher authorities on such interpretations upheld the order of the learned Assessing Officer. 8.3 Before us, the learned Assessing Officer relied in the decision of the Hon'ble Gujarat High court in the case Leena Jugalkishor Shah Vs. ACIT in Tax Appeal No.483 of 2006 vide its order dated 14.06.2016 on the identical issue and argued that the assessee should be given the benefit of section 54 of the Act. 8.4 We have heard the rival submissions and carefully perused the materials on record. On perusing the provisions of section 54 of the Act we find that the benefit of section 54 of the Act was specifically denied for any residential house property acquired outside India by the Finance Act, 2014 w.e.f. 01.04.2015. Before that no such restriction existed in the Act. The relevant case before us is for the assessment year 2010-11. In this period, the assessee had the benefit of few Tribunal decisions in her favour on the issue which she relied while claiming the benefit of ....