TaxTMI 
TaxTMI 
2017 (10) TMI 1435
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.... Rs. 17,20,167/- Total investment in1.25 acres nanja land Rs. 2,37,20,167/- Investment made in capital gains account scheme Rs. 20,20,000/- 3. To verify whether any residential house was built or constructed by the assessee in the nanja land, the AO caused an enquiry and found from them that there was an incomplete structure at one corner of land and it does not have any kind of resemblance of a completed residential house and a vast area land was kept unutilised. No residential house was constructed and completed within 3 years. Further, the AO found from the electrical connection obtained that assessee's intention was not to construct a wholly residential property but an intention to construct commercial property and hence held that the assessee is in eligible to claim deduction u/s 54F. Aggrieved, the assessee filed an appeal before the CIT (A) . 4. Before the CIT(A), the assessee submitted that for claiming the deduction u/s 54F, it is sufficient if the construction commenced within the period of three years from the date of sale of original asset. Explaining various reasons for the delay in the completion of construction, t....
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....ring the period stipulated in Sec 54F. 2.3) The Ld ClT(A) failed to appreciate that the assessee has obtained the electricity connection from the TNEB under Tariff No V, which will be given for electrical connection which more than 25% of the built up area is utilized for commercial purpose. This stands evidence to decide that the assessee's intention was not to construct a wholly residential property but with an intention to construct a structure with commercial purpose. 2.4) The Ld CIT(A) ought to have appreciate that the decision of ITAT C Bench ,Chennai in the case of K.V. Vijayaraghavan Vs. DCIT Company Circle (I},Chennai.(2017) 78 Taxmann.com 177 (Chennai Trib) in violation to section u/s 54F(3), for purpose of construction of a shopping complex. This stands evidence to decide that the assessee's intention was not to construct a wholly residential property but with an intention to construct a structure with commercial purpose." The DR invited our attention to the petition filed for condonation of delay. On the merits canvassed the delay is condoned. The Dr argued the case supporting the assessment order and on the lines of grounds of appeal. Per c....
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....s were not there and no electric supply has been provided to the building yet. No flooring and plastering of walls had been carried out. To have a correct view of passing scrutiny order, the entire place was nearly photographed and videographed,, which shows the exact position of the so called residential house property. For the claim of deduction u/s. 54F, the construction of residential house should have been completed by 06.11.2013. The place has been visited on 20.12.2013, beyond 45 days of the due date for completion of construction as per section 54F of the IT Act and found to be very much incomplete, emphasis supplied and utilization of land is very minimal for the building, leaving a vast area of land untilized. Hence it is evident that the claim of deduction u/s. 54F of Rs. 2.60 crores (which is the cost of 1.25 acres of nanja land itself) is untenable and needs to be disallowed. Soft copy of photos and video submitted" 6.2 It is seen from the copy of the remand report sent by the ACIT, Noncorporate Circle (5)-1 to the CIT (A) dated 26.08.2016, which is in the paper book, that the ITI inspected "the property on 17.08.2016 and found that the said propertyis a land ....
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....ed by the assessee and her three sisters at Rs. 1,42,283 and set off against the same a sum of Rs. 75,000 which he estimated as the cost of building constructed by the assessee for her residential purposes under s. 54 . Doing so, he arrived at the capital gain for the purpose of assessment at Rs. 67,283 and included the same in the total income. Against the order of the ITO, the assessee filed an appeal before the AAC and questioned the correctness of the computation of the capital gain at Rs. 1,42,283. In this case , the AAC went further into the question whether the deduction of Rs. 75,000 representing the cost of construction of the new residential house could be set off against the entirety of capital gain arising on the sale of building as well as the land or should be limited to the extent of capital gain arising on the sale of the building and land "reasonably appurtenant" to the building. The provisions of s. 54(1) were construed by the AAC as permitting the set-off of the amount spents on the construction of a new building for residential purposes only against the capital gain arising on the transfer of the building and land, which is "reasonably appurtenant" to the bui....
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.....T. Act and the Urban Ceiling and Regulation Act, 1976, cannot be imported into s. 54 of the I.T. Act. In our opinion, that expression is used in s. 54 of the I.T. Act in a wider sense. It is, therefore, imperative that the tax authorities will have to determine the extent of land appurtenant to a building transferred, taking into consideration a variety of circumstances that may be relevant for the purpose. It is not possible to lay down infallible tests to be applied for the determination of the extent of land appurtenant to a building, as the tests vary depending upon the facts and attendant circumstances of each case. For instance : (1) If the building together with the land is treated as an indivisible unit and enjoyed as such by the persons occupying the building, it is an indication that the entire extent of land is appurtenant to the building; (2) If the building has extensive lands appurtenant thereto and even if the building and the land have been treated as one single unit and enjoyed as such by the occupiers, an enquiry could be made to find out whether any part of the land contiguous to the building can be put to independent user without causing any detriment to the ef....
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....hat there is no material on record to indicate that the land was put to any non-residential user and the building and land was not treated as a single unit in the past, it is clear that the ITO did not apply his mind to the matter. If the ITO applies his mind and makes an appropriate enquiry to determine the extent of land appurtenant to the building in the present case, he may conceivably come to a conclusion that the entire extent of land appurtenant to the building could be treated as "land appurtenant" to the building. We see no reason why this enquiry directed by the AAC should be shut out, inasmuch as there is no legal infirmity in giving a direction to the ITO make an appropriate enquiry. In our opinion, the Tribunal was in error in coming to the conclusion that the AAC was not justified in directing the ITO to enquire into the matter for the above purpose. 21. In the absence of necessary details, it is not possible for this court to indicate any answer to the question referred, that is to say, whether the entire land or any part of it could be treated as appurtenant to the building for the purpose of applying the provisions of s. 54 of the I.T. Act. We, therefore, ....