AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 1289
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....2016 of the property at S.No.696/2, Final Plot No.475 part/6, Plot No.6, Anandnagar Co-operative Housing Society Ltd. which was executed for the consideration of Rs. 7,25,00,000/- as sale to Shri Ramesh Shreehari Kondhare, Smt. Manda Ramesh Kondhare and Shri Girish Ramesh Kondhare. The Assessing Officer further noted that the assessee has claimed deduction of Rs. 2,26,33,135/- u/s 54 of the Act and also claimed improvement cost of Rs. 30,42,700/- which comes to Rs. 31,66,547/- after indexation while computing Long term capital gain. He, therefore, asked the assessee to submit the working of improvement cost and proof thereof. 4. In support of his claim, the assessee filed certain details i.e. a Bill - RA.01 (Final Bill) dt. 25.01.2016 for Rs. 30,42,936/- issued by M/s. Vision Buildcon and copy of the bank statement of the Account No.025910025468 held in Dena Bank. On verification of the same, the Assessing Officer noted that the assessee made payment of Rs. 19 lacs to M/s. Vision Buildcon. Further, an amount of Rs. 20 lacs was paid by Shri Ramesh Kondhare, the purchaser of the property to M/s. Vision Buildcon. He, therefore, issued a show cause notice to the assessee asking him ....
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.... in this case, the original asset was transferred on 26.07.2017 and therefore, the date of completion of the construction should be on or before 26.07.2019. Since the construction was not completed before 26.07.2019, therefore, the Assessing Officer held that the assessee failed to fulfill the conditions required u/s 54(1) of the Act. The Assessing Officer rejected the various explanations given by the assessee by observing that the property sold was under-construction property and the subsequent property purchased was also under-construction property. The Assessing Officer therefore rejected the claim u/s 54 of the Act and accordingly determined the total income of the assessee at Rs. 2,41,66,780/- which includes Long term capital gain of Rs. 2,26,33,135/-. 7. In appeal, the Ld. CIT(A) / NFAC deleted both the additions. So far as the denial of cost of improvement of Rs. 11,42,700/- is concerned, the Ld. CIT(A) / NFAC deleted the same by observing as under: "6.2. I have considered the facts of the case and appellant's submissions. The AO noted that the assessee had claimed deduction of Rs. 2,26,33,135/- u/s 54 of the Act and while working of Long Term Capital Gain, he c....
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.... same has been deleted by the CIT(A), NFAC vide order dated 10/03/2023. For the sake of clarity, relevant para 7.3 of CIT(A)'s order dated 10/03/2023 passed vide DIN & Order No.ITBA/NFAC/S/250/2022-23/1050582996(1) is reproduced as under: "7.3 GOA NO. 3 and 4 - Disallowance of Cost of improvement of Rs. 30,42,400/- and Disallowance of deduction u/s. 54 of Act. a) During the course of assessment proceedings the appellant filed the following documentary evidences before the AO for its claim of the cost of improvement and claim of deduction u/s. 54 of Act. (i) Submission filed on 15-10-2018 giving the following details: (Page 79) (a) Capital gains of loss computation statement (ii) Submission filed on 16-1-2019 giving the following details: (Page 80) 1. Balance sheet/statement of affairs along with detailed schedules 2. Bank account statement 3. Evidence is respect of investment made in properties 4. Evidence in investment in capital gains scheme account 5. Capital gains or loss computation statement (iii) Submission filed on 3-7-2019 giving the following details: (Page 81) ....
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.... Rs. 72,92,000 4. Cost of Improvement (Construction) Rs. 30,42,700 5. Year of cost of improvement F.Y. 2015-16 6. Indexed cost of acquisition Rs. 1,04,50,318 7. Indexed cost of improvement Rs. 31,66,547 8. Date of transfer (Sale Deed enclosed) 27-6-2016 9. Consideration received Rs. 3,62,50,000 10. Long-term Capital [9-6-7] Rs. 2,26,33,135 Property Purchased (i) Date of purchase 29-7-2016 (ii) Details of the new asset (Purchase deed enclosed) Plot no. 475, Anand Nagar Sahakari, Gruharchana Sanshta (iii) Consideration paid stamp duty & etc. Rs. 1,57,78,000 (iv) Amount deposited in capital gain A/c Rs. 68,56,000 (v) Exemption claimed Rs. 2,26,33,135 g) The above facts clearly show that Appellant has claimed deduction u/s 54 of Act and not u/s 54F of Act as held and disallowed by the AO. h) Appellant has submitted all the bills/vouchers regarding Cost of improvement of residential property sold before the AO during assessment proceedings. The AO did not allow the Cost of improvement due to following reasons:- i) Bills of Cost of improvement uploaded by Appellant relate to const....
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....llant regarding this issue is allowed." 8. Similarly, so far as the deduction u/s 54 of the Act amounting to Rs. 2,26,33,135/- is concerned, the Ld. CIT(A) / NFAC allowed the claim of the assessee by observing as under: "7.2. I have considered the facts of the case and appellant's submission. The AO rejected the assessee claim deduction of Rs. 2,26,33,135/- u/s. 54 of the Act on account of investment of sale proceeds of original asset to new residential house property by stating that the assessee failed to comply with condition stipulated in section 54 of the Act i.e. not completed construction within 3 years from the date of transfer of original asset i.e. before 26/07/2019. In the written submissions uploaded on the ITBA Portal, the appellant has submitted that he furnished all the relevant documents before the AO to establish that the claim of deduction of Rs. 2,26,33,135/- u/s. 54 of the Act on account of investment of sale proceeds of original asset to new residential house property was rightly made, however, the AO ignored the same and disallowed the assessee's claim of deduction u/s. 54 of the Act. Before deciding the issue, it is necessary to look into t....
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.... be dealt with in accordance with the following provisions of this section, that is to say, - (i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged u/s 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain. [(2)] The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before th....
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....ce purchased, or within a period of three years after that date constructed, one residential house in India. Now coming to the facts of the instant case, it is seen that the original asset was sold on 27/06/2016 and the appellant purchased a new house at Plot no. 475, Anand Nagar Sahakari, Gruharchana Sanstha on 29/07/2016. The AO denied the appellant's claim by observing that property so purchased was a plot and construction was not done on the said plot within 3 year of transfer of original asset. However, this observation of the AO is factually not correct. In respect of the same property, the CIT(A), NFAC, Delhi in appellant's wife case, who is a co-owner of the property under consideration, vide order u/s. 250 of the Act 10/03/2023 has already held that property purchased by the appellant on 29/07/2016 was not a plot. For the sake of clarity, relevant para 7.3 of CIT(A)'s order dated 10/03/2023 passed vide DIN & Order No. ITBA/NFAC/S/250/2022-23/1050582996(1) is reproduced as under:- "7.4 Deduction u/s 54 of Act a) AO has wrongly held that Appellant claimed deduction u/s. 54F of Act. In fact the appellant has claimed deduction u/s. 54 of Act of Rs....
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.... in appellate order dated 10/03/2023, in appellant's wife case who is a co-owner of property under consideration. In the case of the appellant, the AO has failed to record any findings that at the time of purchase of new property, the same was not habitable. It might have that in appellant's case subsequent construction on purchased property was completed but the pendency of work does not preclude the assessee from availing of the rebate U/s. 54 of the Act. In this regard, I may refer the following decisions:- a. In the case of C.I.T. Vs. Sardarmal Kothari reported in (2008) 302 ITR 286, the Hon'ble Madras High court have held that "In order to get the benefit U/s. 54F the assessee need not complete the construction of the house and occupy it, and it was enough if the assessee established the investment of the entire net consideration within the stipulated period." b. CIT Vs. Sambandam Uday Kumar reported in (2012) 345 ITR 389 (Karnataka H.C.). c. The Hon'ble ITAT, Jodhpur bench in the appeal No.365/JU/2009 in the case of ACIT Vs. Mahabir Prasad dated 11/02/2013, held that "As per settled, the nature of the property at the point of time of its purc....
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....rd to the transfer of the long term capital asset and deduction claimed u/s. 54 of the I.T. Act, 1961. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 11,42,700/- made by the AO and allowing the same as cost of improvement, without appreciating that the said payment was made by the assessee to Shri Ramesh Kondhare on 26/08/2019 i.e. after transfer of the asset and after issuance of show cause notice by the AO and therefore, the same was an afterthought. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting, the addition of Rs. 2,26,33,135/- made by the AO and allowing the deduction u/s 54 of the I.T. Act, 1961 in respect of investment in new asset, irrespective of the fact that the condition laid down in the said provisions that the construction of the new residential house should be completed within the period of three years from die date of transfer of the original asset, was not fulfilled in the case. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring that the information obtained by the AO from the Loc....
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....r, the payment has been made only after the issue of show cause notice. We find the Ld. CIT(A) / NFAC allowed the claim of cost of improvement, the reasons of which are already reproduced in the preceding paragraphs. We do not find any infirmity in the order of Ld. CIT(A) / NFAC on this issue. We find the identical addition was made by the Assessing Officer in the hands of spouse of the assessee i.e. another co-owner. We find the Ld. CIT(A) / NFAC deleted the said addition and although the Revenue has filed an appeal against the order of CIT(A) / NFAC challenging the deduction u/s 54 / 54F of the Act, however, no such ground was raised by the Revenue on the issue of cost of improvement in the hands of the spouse of the assessee. Once the Revenue has accepted the cost of improvement in the hands of the spouse of the assessee being the co-owner to the extent of her share, we find no reason as to how and why the Revenue is aggrieved against the order of CIT(A) / NFAC on this issue. Further, we find the CIT(A) / NFAC has given justifiable reasons while deleting the cost of improvement and the Ld. DR could not rebut the findings of the Ld CIT(A) / NFAC by producing any contrary material....
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....on sale of above mentioned property and added the same to the total income of the assessee and passed order u/s. 144 of the Act. 4. The ld. CIT(A) had given a finding on this issue that the claim of the assessee was deduction u/sec. 54 of the Act of Rs. 2,26,33,135/- as evident from ITR and computation of income filed for the A.Y. 2017-18 by the assessee and the AO had wrongly held that assessee had claimed deduction u/sec. 54F of the Act. Therefore, the adjudication conducted by the AO was on a wrong premise. Accordingly, the ld. CIT(A) in detailed order from para 7.4 onwards examined all the documents/evidences required to claim deduction u/sec. 54 of the Act and all those documents/evidences had been filed by the assessee before the AO as well. After examining all those details, the ld. CIT(A) held that the assessee had satisfied the conditions for claiming deduction u/sec. 54 of the Act, and hence, the matter was allowed in favour of the assessee. 5. We observe from the documents/materials filed on record that the assessee had never claimed deduction u/sec. 54F, but had rather claimed deduction u/sec. 54 as rightly held by the ld. CIT(A). The requisite details....