TaxTMI 
TaxTMI 
TaxTMI 
2021 (7) TMI 727
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....assessee in the return of income had claimed exemption of Rs. 1,16,34,752 u/s 54F of the I.T.Act. The A.O. issued notice dated 07.11.2016 asking the assessee to show cause as to why exemption u/s 54F of the I.T.Act should not be disallowed and brought to tax as the sale consideration of plots was not deposited in capital gains scheme on or before the due date of filing of the return u/s 139(1) of the I.T.Act. In response to the show cause notice, the assessee made the detailed submission stating that the sale consideration was invested in a residential house property within three years from the date of sale of capital asset. In this context, the assessee relied on the judgment of the Hon'ble jurisdictional High Court in the case of CIT v. K.Ramachandra Rao (2015) 56 taxmann.com 163 (Karnataka). The Assessing Officer, however, vide order dated 20.12.2016, passed u/s 143(3) of the I.T.Act restricted the exemption u/s 54F of the I.T.Act to the extent of Rs. 24,44,124. The reasoning of the Assessing Officer in restricting the claim of exemption u/s 54F of the I.T.Act was that the balance amount was not deposited in capital gains account scheme within the due date of filing of the retur....
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....t. 6. Without prejudice to the above, even if it is said that house was not constructed within 3 years as the amounts were paid to the builders within the time period, relief u/s 54F should be given in line with the judicial decisions laid down in the decision of the Jurisdictional Karnataka High Court in the case of CIT v. B.S.Santhakumari - ITA No.165/2014. 7. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) is so far as it relates to the above grounds may be reversed and that the appellant be allowed. 8. The appellant reserves right to add additional grounds or elaborate on the above grounds during the appeal hearing as long as it is in relation to the above matter under dispute." 6. The learned AR has filed a brief written submission reiterating the submission made before Income Tax Authorities. The learned AR has filed two sets of paper books. One set comprising of case laws relied on, the other enclosing the submission submitted before the A.O. and CIT(A). The learned AR had also enclosed in the paper book the details of payments received for sale of original assets, the details of payment for purchase of ....
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....e. 8.1 In order to analyse the issue raised, it is necessary to examine the relevant provision, namely, section 54F of the I.T.Act, which reads as follow:- "54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereinafter 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 has within a period of three years after that date 5 [constructed, one residential house in India] (hereinafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say, - (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the new consideration in respect of the original asset, so much of the capital gain as bears to the ....
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.... exemption u/s 54F of the I.T.Act has to be granted in respect of the capital gain arising from the transfer of any long term capital asset, other than a residential house if the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India. Further, as per section 54F of the I.T.Act, exemption is to be granted if the stipulated conditions are fulfilled and the assessee's case does not fall under the exceptions to exemption specified in the proviso to section 54F(1). Also, as per section 54F(4), the requirement of depositing the amount in Capital Gain Account Scheme (CGAS) arises only if the following conditions are not satisfied: (a) Net consideration invested in new asset within one year before the date on which the transfer of the original asset took place, or (b) Not utilized by the assessee for purchase or construction of the new asset before the date of furnishing of return of income u/s 139 of the I.T.Act. 8.3 If above conditions are not satisfied, only then, such unutilized amount has to be deposited in CGAS before....
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....rs. The provisions of section 54F of the I.T.Act only provides that the sale proceed should be invested in construction of house property within three years. In other words, in order to get the benefit u/s 54F of the I.T.Act, the assessee need not complete the construction of the house in all aspects and occupy it. It is enough if the assessee established that the investment of the entire net consideration was made within the stipulated period and the construction is mostly completed. The essence of the said provision is whether the assessee who received capital gains has invested the proceeds in a residential house. Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respect and as required under the law, that would not disentitle the assessee from the said benefit. The words used in provisions of section 54F of the I.T.Act are `purchased' or `constructed' and the condition precedent for claiming benefit under such provision is the capital gain realized from sale of a long term capital asset should have been part....