TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 864
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....reafter, another notice under Sections 143(2) read with Sections 129 and 142(1) of the said Act was issued. 4. The appellant assessee sold a residential house property at No.137, Sundar Nagar, New Delhi on 15.1.2010 in favour of one Smt.Vanadana Manchanda, for a total consideration of Rs. 12,50,00,000/- and the total long term capital gain that arose to the appellant assessee was Rs. 10,47,95,925/-. In the meanwhile, on 14.5.2007, the appellant assessee purchased the property with superstructure thereon at No.138, JorBagh, New Delhi for a total consideration of Rs. 15,96,46,446/-. After demolishing the existing superstructure, the appellant assessee constructed a residential house at a cost of Rs. 18,73,85,491/-. Thus, the appellant assessee claimed entire long term capital gain as exempt from tax under Section 54 of the said Act. 5. The Assessing Officer held that only that part of the construction expenditure incurred after the sale of the original asset would be eligible for exemption under Section 54 of the said Act and based on records held that cost of construction incurred after the sale of the original asset was Rs. 1,14,81,067/-. Exemption of Rs. 1,14,81,067/- ....
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....rther argued that the appellant assessee was entitled to full exemption under Section 54 of the said Act. The learned Tribunal ought to have directed the Assistant Commissioner of Income Tax to complete the assessment by granting the appellant assessee full exemption under section 54 of the said Act. 11. The appeal of the appellant assessee was admitted on the following questions of law: i.When capital gain arises from sale of building and/or land appurtenant thereto and a residential house is constructed within three years from the date of such sale, whether the cost of the new asset, which is eligible for set-off against capital gain, would include the cost of the land, if such land had been purchased three years prior to sale of the property from which capital gain arose ? ii.Whether, in computation of cost of new asset contemplated in Section 54(1) of the Income Tax Act, the cost of land can be segregated from the cost of the constructed house property ? 12. Section 45(1) of the said Act provides that any profits or gains arising from the transfer of a capital asset effected in the previous year, save as otherwise provide in, inter alia, Section 54 shall....
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....the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that 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....
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....ount of the capital gain is equal to or less than the cost of the new residential house, the capital gain shall not be charged under Section 45. 20. What has to be adjusted and/or set off against the capital gain is, the cost of the residential house that is purchased or constructed. Section 54(1) of the said Act is specific and clear. It is the cost of the new residential house and not just the cost of construction of the new residential house, which is to be adjusted. The cost of the new residential house would necessarily include the cost of the land, the cost of materials used in the construction, the cost of labour and any other cost relatable to the acquisition and/or construction of the residential house. 21. A reading of Section 54(1) makes it amply clear that capital gain is to be adjusted against the cost of new residential house. The condition precedent for such adjustment is that the new residential house should have been purchased within one year before or two years after the transfer of the residential house, which resulted in the capital gain or alternatively, a new residential house has been constructed in India, within three years from the date of the transfe....