TaxTMI 
TaxTMI 
2017 (2) TMI 989
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....6): "The learned Commissioner of Income Tax (Appeals) has erred in confirming the order of the learned Assessing Officer who had made addition of Rs. 7,34,750/- under the head "unexplained investment invoking the provisions of section 69 of the Act." 3. Brief facts of the case are that the assessee is an individual engaged in the capacity as Managing Director of M/s. Ambika Appalam Co.Pvt.Ltd., filed his return of income for the assessment years 2004-05 & 2005-06 on 30.10.2004 & 29.10.2005 declaring income of Rs. 6,17,310/- and Rs. 1,17,976/- respectively. There was a survey in the business premises of M/s.Ambika Appalam Co. P.Ltd., on 7.8.2009, thereafter the assessments in the case of the assessee were reopened for both the assessment years 2004-05 & 2005-06 and the reassessment was completed for both the assessment years on 30/12/2010. ITA No.455/Mds/2014: Ground : Disallowance of expenses u/s.54F of the Act:- 4. The assessee had sold two shops in Brindavan Society, Thane, Mumbai for an amount of Rs. 15,00,000/- and also sold the residential property no.114, Ushman Road, T.Nagar, Chennai for an amount of Rs. 1,08,00,000/-. These amounts were deposited in the capital gai....
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....n the case of ACIT vs. Oilip Manhar Parekh (2013) (31 Taxmann. Com 386), the IT AT Mumbai Bench D has decided against the assess on issues similar to the present case. In the referred case, the appellant has purchased a new residential house with the sale proceeds and claimed deduction u/s.54F on such new residential house. The said residential house was demolished within two years from the date of purchase. The AO has disallowed the benefit u/s.54F (3) , since the new residential house was 'transferred' within three years from the date of purchase. The ITAT has observed as under, "7.We have heard Id.Departmental Representative whose main contention was that section 54F is a beneficial provision which has to be considered strictly. The object was to encourage assesses to utilize funds for construction of a new residential house whereas, in the instant case, though residential bunglow was purchased it was demolished within two years which does not serve the purpose." It was also held that the demolition of house would fall within the definition of transfer. It was held by the Tribunal as under: "13 ..... From the reading of the decision of Apex Court in the case of V....
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....ussion, I am of the considered opinion that even though the sale proceeds of the capital gains were used in the purchase of a residential building within the time limit prescribed, the appellant is not entitled for the exemption available under 54F of the Act since the same was demolished within no time and shopping complex of six floors was constructed on that site. The disallowance made by the A.O is in order. The ground is dismissed." 5. Before us, the learned Authorized Representative vehemently argued stating that the assessee has complied with the provisions of the Act and therefore he is entitled to the benefits under section 54 of the Act. The learned Authorized Representative further relied in the decision of the Mumbai Bench of the Tribunal in the case Shri Dilip Manhar Parekh Vs. DCIT in ITA No.6169/Mds/2013 dated 15.04.2016, The decision of the Hon'ble Bombay High Court in the case CIT-21 V/s. Mr.Abhay Ahuja in IT appeal (L) No. 1583 of 2012 dated 24/01/2013, and the decision of the Mumbay Bench of the Tribunal in the case ACIT V/s. Dilip Manhar Parekh in ITA No. 37/Mum/2012 dated 30/01/2013. 6. The learned Departmental Representative, on the other hand, relied on th....
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....ss of the asset, it was not a transfer and did not attract the provisions of section 45 which related to transfer and not to mere extinguishment of a right. Hence, an extinguishment of right not brought about by transfer was outside the purview of section 45." On identical situation the Hon'ble jurisdictional Madras High Court in the case Neelamalai Agro Industries Ltd. Vs. CIT had followed the aforesaid order of the Hon'ble Apex Court. However, in the present case before us, the issue is with respect to claiming of deduction under section 54F of the Act. The Parliament in its wisdom had enacted Section 54F of the Act in the Finance Act, 1982 with a view to encourage housing construction. Thus the intention of the legislation was not for destruction of residential building but for promoting the construction of the residential housing units. If the benefit of section 54 is extended where the new residential building is demolished without constructing another residential building within the time limit prescribed under the Act, then the purpose of the Act is defeated. Further, as rightly pointed out by the learned Commissioner of Income Tax (Appeals), the Hon'ble jurisdictional Madras....