TaxTMI 
TaxTMI 
2017 (5) TMI 1268
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....facts relating to the case are that during the relevant year the assessee had shown long term capital gains of Rs. 12,23,137/- from sale of a residential house in Shimla in her return filed on 04/08/2013. The said property was sold on 06/11/2012 and sale consideration received was Rs. 1 crore, being 20% share of the assessee in the property. After taking benefit of indexed cost of acquisition, long term capital gains of Rs. 74,33,137/- was computed, against which exemption u/s 54 of the Act, was claimed by the assessee, on the ground that amount of Rs. 62,10,000/- had been invested in a flat. The Assessing Officer, on perusal of the agreement for the purchase of flat with M/s ATS Estates Pvt. Ltd. New Delhi dt.15-04-2013,found that the agreement had been drawn for buying apartment in the project "ATS Golf Meadows Lifestyle at village Madhavpur, Derabassi, Mohali and as per Clause 14 of the said agreement the flat would be delivered to the assessee within a period of 36 months with a grace period of six months from the date of actual start of construction of the said tower. The AO concluded that the said flat could not be handed over to the assessee by the builder within a period of....
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....sessee reiterated the contention made before lower authorities and stated that in view of the fact that the substantial amount had been invested in purchase of a new flat before the due date of filing of return of income as specified under section 54 and the flat had been allotted to it also, the assessee was eligible to claim deduction under section 54 of the Act. Ld. Counsel for the assessee relied upon a number of case laws in this regard, which are as under: 1. Smt. Ranjeet Sandhu Vs. DCIT [2011] 16 taxmann.com210 (Chandigarh) 2. Smt. Usha Vaid Vs. ITO [2012] 25 taxmann.com 188 (ASR.) 3. CIT Vs. Smt. B.S. Shanthakumari (2015) 60 taxmann.com 74 (Karn) 4. Kishore H. Galaiya Vs. ITO (2012) 150 TTJ 444(Mum) 5. Fibre Boards (P.) Ltd. Vs. CIT (2015) 376 ITR 596 (SC) 6. ITO Vs. Narayana Rao (2016)46 ITR (Trib) 178 (Hyd) 5. Ld. DR on the other hand relied upon the order of the Ld. CIT(A) and stated that since the assessee had not complied with basic condition specified under section 54 i.e; purchase of house within two years or construction of a house within three years from the date of transfer of the original asset, the assesse....
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....see. It has been decided in number of cases that for the purpose of claiming exemption under section 54, investment of substantial amount in the new asset, is sufficient compliance. It has been held by various courts that in such circumstances the assessee is entitled to claim exemption despite the fact that the construction is not completed within three years. This issue was addressed by the Delhi High Court in the case of CIT Vs. R.L. Sood reported in 245 ITR 727 wherein the Hon'ble High Court held that the assessee having invested substantial amount in the purchase of a new asset, thus acquiring substantial domain over the new flat within the specified period, the assessee could be said to have complied with requirement of section 54 and merely because possession of the Flat was not handed over to the assessee within the specified period the said benefit could not be denied. The relevant findings of the Hon'ble High Court at para 6, 7 and 8 of the order are as under: 6. We may note that realizing the practical difficulty faced by the assessees in such situations, the Central Board of Direct Taxes issued Circular No. 471 (see [1986] 162 ITR (St.) 41), dated Octob....
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....he exemption under s. 54F of the Act on the ground that the construction of the house has not been completed. The requirement of ss. 54 and 54F of the Act is for the assessee to have either purchased a residential house being a new asset within the stipulated period or construct a residential house within a period of three years from the date of transfer. The section does not prescribe the completion of the construction of the residential house and the thrust is on the investment of the net consideration received on sale of original asset and the start of construction of a new residential asset (sic--house). In view thereof, where the assessee had invested the consideration received on sale of original asset in the purchase of the plot of land and started construction though not completed, the assessee had complied with the provisions of s. 54F of the Act and hence was entitled to the benefit of exemption claimed. Accordingly, we set aside the order of the CIT(A) and direct the AO to allow the claim of the assessee in respect of the benefit of exemption claimed under s. 54F of the Act. The grounds of appeal raised by the assessee are thus allowed" 11.2 The Amritsar Bench of the ....
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....n of the Hon'ble Madras High Court in the case of CIT vs. Sardar Mal Kuthari 302 ITR 286. The Ld. counsel for the assessee has also placed reliance on the following decisions : i) Mrs. Seetha Subramanian vs. ACIT 56 TTJ 417 (Mad) ii) Smt. Ranjit Sandhu vs. DCIT 133 TTJ (Chd)(UO) 46 (2010). 5.1. The assessee had submitted application under Rule 46A on having completed the house, after the expiry of three years from the transfer of the original asset alongwith electricity bill which was not accepted by the Ld. CIT(A), which in fact, could not be submitted by the assessee before completion of the assessment. The same should have been accepted by the ld. CIT(A). Therefore, as held hereinabove, the assessee having sold an asset which is not a residential house being a long-term capital asset had invested the net sale consideration into the construction of a residential house and therefore, claim of the assessee u/s 54F is allowable. Accordingly, all other claims of the assessee are allowable. The addition made by the AO. is directed to be deleted and the order of the ld. CIT(A) is reversed. Thus, all the grounds of appeal of the assessee are allowed. 11....
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....eated as construction of flat by the assessee. Thus, in the present case, the period of three years would apply for construction of new house from the date of transfer of the old flat. 6.2 The old flat had been sold on 7.3.2006 and therefore the assessee was required to construct a new residential house by 6.3.2009. The purpose of section 54 is to allow exemption to the assessee of long term capital gain arising from sale of residential house if the capital gain is invested in construction of new residential house within a period of three years from the date of transfer and, therefore, in case, the assessee had invested the capital gains in construction of a new residential house within a period of three years, this should be treated as sufficient compliance of the provisions, of the flat It is not necessary that the possession of the flat should also be taken within the period of three years. The taking of the possession may be delayed because of many factors not under the control of the assessee due to default on the part of the builder and therefore merely because the possession had not been taken within the period of three years, the exemption cannot be denied. This as....
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....ated as cost of construction of the new asset and exemption granted thereof. The fulfillment of the condition of completion of construction or purchase of house is to be looked into only in the year in which the window period ends and if it is then found that the assessee has not constructed/purchased the house,to the extent the amount deposited in specified bank account is not utilized for the said purpose ,it is treated as capital gains of the previous year in which the period of three years expires. The provisions of section 54 are reproduced hereunder for clarity: 54. Profit on sale of property used for residence.- (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 property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased , or....
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....hat if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,-- (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. Thus clearly, as per section 54(2), exemption to the extent of amount utilized for construction is to be granted in the year of transfer of asset and the condition of completion of construction is to be looked into only after the window period provided by the Act of three years expires . The Hon'ble Supreme Court in the case of Fiber Boards (supra),has interpreted identically worded provisions of section 54G, which grants exemption on account of investment of capital gain earned from sale proceed of industrial undertaking, in another industrial undertaking, and has held that "advance" paid for the purpose of acquiring plant and machinery, land and building would amount to uti....
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....on 54G of the Act can be claimed on transfer of assets in cases of shifting of industrial undertaking from urban area to any other non-urban area. This exemption may be claimed if the capital gains arising on transfer of any of assets of existing industrial unit is utilized within one year or three years after the date on which the transfer took place for purchase of new machinery or plant for the purposes of the business of the industrial undertaking in the area to which the said undertaking is shifted. The Legislature consciously has not used the expression 'towards the purchase of plant and machinery' as in Section 54(4) of the Act in contrast to Section 54(2) of the Act wherein the words 'towards' is used before the word 'purchase'. The expression 'purchased' used in sub-clause (a) of section 54G of the Act requires to be understood as the domain and control given to the assessee. In the present case, it is not in dispute that the assessee has paid advance amount for acquisition of land, plant, building and machinery, etc., within the time stipulated in the Section, but it is not the case of the assessee that after such payment of advance amount,....