TaxTMI 
TaxTMI 
2018 (11) TMI 640
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....ntly, the Ld. Pr. CIT has taken up the case for revision and found that the assessee has sold the site admeasuring 300 sq. yards together with RCC slabbed building thereon situated at Vidyuthnagar, Visakhapatnam to four persons namely (i) Mr. Vaziruddin Ahmed Sidduiqi (ii) Mr. Habibuddin Ahmed Jafri (iii) Mr. Iqbal Hussain Farooqui and (iv) Mr. Javvad Ahmed Qureshi, all being the residents of Lawsons Bay Colony, Visakhapatnam by sale deed document No. 71/2010 dated 15. 01. 2010 for a consideration of Rs. 99,45,000/-. The market value of the property was also of the same consideration. The assessee claimed the deduction u/s 54 of the Act for acquiring the new property or asset. The assessee acquired vacant site admeasuring 350 sq. yards situated at Akkayyapalem from Sri K. S. N. Murthy vide document No. 2064/2008 dated 25. 09. 2008 for a consideration of Rs. 65,45,000/-. In the return of income filed for the assessment year 2010-11, the assessee claimed the cost of the new property including the cost of the land and the cost of construction of house at Rs. 1,01,49,000/- as deduction u/s 54 of the Act. The Ld. Pr. CIT has taken up the case for revision and observed that the assessee ....
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....t in the year 2008, the year of executing the MoU. Therefore, the Ld. Pr. CIT viewed that the MoU is back dated and an after thought to claim undue deduction u/s 54 of the Act. Therefore, the Ld. Pr. CIT held that the assessee has not satisfied the conditions laid down u/s 54 of the Act to claim the deduction u/s 54 of the Act, since, the property on which the capital gains exemption was claimed was acquired before the sale of the impugned property thus viewed that the assessee is not entitled for deduction u/s 54 of the Act. Accordingly, held that the assessment order passed u/s 147 r. w. s. 143(3) dated 27. 03. 2015 was erroneous and prejudicial to the interest of the revenue. The Ld. Pr. CIT set aside the assessment order passed u/s147 r. w. s 143(3)dated 27. 03. 2015 and directed the AO to redo the assessment as per law. 4. Aggrieved by the order of the AO, the assessee is in appeal before this Tribunal. 5. During the appeal hearing, the Ld. AR argued that in this case, the assessment was reopened u/s 147 for the purpose of verification of capital gains which is evident from the assessment order. A notice u/s 148 was issued by the AO and the assessee furnished the complet....
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....from the date of entering into sale agreement and completed the construction, the Ld. AR argued that the intention of the legislature to encourage the housing has satisfied and there is no prejudice caused to the revenue, hence requested to allow the deduction u/s 54 of the Act. 5. 2. Even otherwise, the Ld. AR submitted that as per the provisions of section 54 of the Act, for claiming deduction u/s 54, the assessee is required to construct residential house within 3 years from the date of transfer of the property. In the instant case, the assessee has constructed the property within the three years period and there is no prejudice caused to the department. Having constructed the property within 3 years period of time, the assessee satisfied the conditions laid down for making the deduction u/s 54 of the Act. Therefore argued that the assessee is entitled for deduction u/s 54 and accordingly requested to quash the order passed by the Ld. CIT u/s 263. The Ld. AR relied on the decision of Hon'ble Madras High Court (2018) 97 taxmann. com 74 (Madras) in the case of C. Aryama Sundaram Vs. CIT-3, wherein Hon'ble High Court held that not only the cost of construction of new property in....
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.... per the MoU dated 29. 06. 2008, the buyers agreed to facilitate the acquisition of the residential house in exchange for the impugned property. Both the purchase and sale transactions were meant to be facilitated simultaneously and also argued that as per law it is not mandatory to register the MoU. The assessee has paid the sum of Rs. 65,45,000/- to the owner of the new asset on 25. 09. 2008 which was arranged only by the buyers as per MOU, vide cheque drawn Kanakamahalakshmi Cooperative Bank. The assessee further stated that the entire sale consideration was received by the assessee on 25. 09. 2008 on the date of registration of new site along with cash of Rs. 31,00,000/- to fund the cost of construction from the buyers Hence, the sale for all practical purposes was completed on 25. 09. 2008 itself. The buyers of the land and the parties for MoU are one and the same. Thus, argued that the date of MoU should be reckoned for the transfer of the property. As per the date of MoU, the purchase of the new site as well as the completion of construction was within the period of 3 years which is the time available for claiming the deduction u/s 54. The assessee explained the provisions o....
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....ansactions was practically 'Nil". c. Accordingly, the Assessee entered into a binding Memorandum of Understanding (MOU) dated 29TH Jun 2008 with the Buyers wherein the latter agreed to facilitate acquisition of a residential house in exchange for the Property. Both purchase and sale transactions were meant to be to be facilitated simultaneously. It may be noted that under law, it is not necessary to register an MOU- although it is a legally enforceable document under the Law of Contract. d. The Assessee then acquired the new property through a sale deed 25. 09. 2008 and the consideration was paid to the owner Sri K. S. N. Murthy for Rs. 65. 45 lacs arranged wholly by the Buyers vide Cheques drawn on Kanakamahalakshmi Cooperative Bank (the Buyers bankers details given in the Purchase Document). The buyers had initially arranged funds from out of their own resources and had proposed to formalize the transaction by executing registration of sale deed of the Property after availing a housing loan from bank. e. Consequent on payment of sale consideration by the Buyers in the form of direct payment to Sri K. S. N. Murty, the Assessee took possession of the new ....
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....n of new house iv. Bank statement, Memorandum of Understanding dt 29. 06. 2008 between Assessee & Buyers etc. - b. The learned AO had issued a notice u/s 148 seeking reassessment and the Assessee had replied that the original return filed could be treated as compliance with notice. c. However, subsequently, the Assessee on seeking professional help, detected a glaring mistake apparent on record in her return. In Schedule CG of her return for AY 2010-11, the assessee while computing long-term capital gains had erroneously shown the gross consideration instead of deducting the indexed cost of acquisition/improvements which is eligible towards reinvestment claim u/s 54. It may be noted that the Assessee had purchased her house site in Nov 1983 and had constructed one floor admeasuring about 1344 sq ft during FY 1985-86. Subsequently, in FY 1994-95 she had constructed the first floor consisting of 1344 sq ft in addition to back yard shed of about 189 sq. ft. The cost of land was Rs. 26,500/- (including registration cost) and the construction cost was approx. Rs. 2,35,200/- and Rs. 3,02,400/- (for ground floor & first floor respectively). d. Sec. 54 f....
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.... 13Q. 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 159 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 utillsed 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 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....
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....ykumar [Karnataka High court) [2012] 19 taxmann. com 17 (Kar. ) it was held that "Sec 54F is a beneficial provision for promoting the construction of residential house & requires to be construed liberally far achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement. " c. In another case, CIT vs Shahzada Begum [1988] 33 TAXMAN 311 (AP). states that "Section 54(1) of the Income-tax Act, 1961- Capital gains - profit on sale of property used for residence - Assessee sold her self-occupied property and paid a substantial sum cut of its sale proceeds for acquiring another house within one year of sale. though sale deed was registered only after period of one year from date of sale - Whether in view of fact that apart from payment of substantial purchase consideration, assessee also secured possession of house property purchased within specified period of one year, she was eligible for exemption under section 54(1) - Held, yes" d. In RI Sood Vs. ITO [1994] 49 TTJ 282 (Del 'B' Bench}, it was held that for the purpose of section 54, the....
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....ection 54 of the Act even in respect of a self- occupied residential house. Circular; No. 538, dated 13-7-1989. In view of the above, I request you to kindly drop the purported reassessment proceedings since all the facts as stated above have been disclosed in the return and further there is no income which escaped assessment - both of which are essential pre-requisites of sec. 147" 7. 2. The assessee also submitted a letter dated 01. 12. 2014 before the ITO, Ward-1(3) on change of jurisdiction from ITO Ward-4(1) to Ward-1(3) reiterating the submissions made earlier. From the above, it is evident that during the assessment proceedings, the assessee has furnished all the details and the entire information before the AO. The assessee also explained the legal position of sale agreement, MoU and the claim for deduction u/s 54 of the Act. From the facts of the case it is established that after analyzing the entire factual and the legal position, the AO allowed the deduction u/s 54 holding that the assessee is entitled for deduction. It is apparent from the record that the AO has taken a conscious decision to allow the deduction u/s 54 on the facts and circumstances ....
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....d in capital gain or alternatively constructed a new residential house in India within a period of three years from the date of the transfer of the residential property which resulted in the capital gain. (II) If the amount of capital gain is greater than the cost of the residential house so purchased or constructed, the difference between the amount of the capital gain and the cost of the new asset is to be charged under Section 45 as the income of the previous year. (iii) If the amount 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 lard the cost of materials used in the construction, the cost of labour and any other cost relatable to the acquisition and/or con....