TaxTMI 
TaxTMI 
2023 (8) TMI 1507
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....se was selected for scrutiny under "CASS" for complete Scrutiny for the reason that assessee has claimed large refund out of self-assessment tax and taxable income was revised in the revised return of income. 4. Facts relating to this case are assessee held 60% share in the inherited property at Bandra, Mumbai which was sold during F.Y.2013-14 to Niraj Kakad Developers Pvt. Ltd [here in after in short "NKDPL"] vide sale agreement dated 25.10.2013 for a consideration of Rs. 20,88,48,040/- (assessee's share). The assessee computed capital gains of Rs. 19,85,09,802 (before exemption) and assessee has claimed deduction u/s. 54 of Income-tax Act, 1961 (in short "Act") comprising of investment of Rs. 1,00,00,000/- u/s. 54EC, claimed exemption u/s. 54 of the Act of Rs. 11,66,84,400/- and exemption u/s. 54F of Rs. 6,66,42,240/- and declared net capital gains of Rs. 51,83,162/- during the A.Y. 2014-15 and paid taxes there on. 5. The Assessing Officer after verifying the submissions of the assessee observed that assessee has claimed deduction u/s. 54F of Rs. 6,66,42,240/- by investing in the Capital Gains Account Scheme, to be paid to builder on demand on the said transaction during th....
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.... by me for claiming exemption under Section 54 contained a clause that the property will be ready in 30 months with a grace period of 6 months. However due to unfortunate circumstances and situation beyond our control the builders having run into legal troubles is unable to deliver the project. 4. I have sent him several reminders for the possession of the property as well as requesting him to accept the balance payments. 5. However, he is no position to adhere to his promises soon. 6. A suit has also been filed by me in the High court against the builder for failing to handover possession of flats to me within the stipulated time period and for breach of the agreements committed by the builder. The said suit is pending before the High Court. Also, there are numerous cases pending before the Additional Metropolitan Magistrate, Bandra and High Court of Bombay against the builder, filed in various years, for non completion of projects and default in transferring of the possession to those aggrieved parties. The builder has also defaulted in loan repayments to the lender wherein, the lenders have also filed suits against him in the High Court of Bombay for recovery of their dues....
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....Tax Appellate (Delhi) Tribunal in the case of Bal Kishan Atal v/s Assistant Commissioner of Income Tax(176 ITD 330(Delhi-Trib), where the tribunal held that: "The delay in the instant case was on account of the developer and not on account ofthe assessee. The assessee had deposited the amount in capital gain account. The balance amount could not be utilised as there was a dispute and stay by the National Disputes Redressal Commission. Accordingly, for the reasons stated hereinabove, the Commissioner (Appeals) was not justified in confirming the action of the Assessing Officer and direct the Assessing Officer to delete this addition of Rs 19 lakhs too" In the case of Commissioner of Income tax v/s Mrs. Hilla J.B. Wadia (216 ITR 376), the High Court of Bombay held that "In this connection, circular of the Central Board of Direct Taxes bearing No. 471, dated 15-10-1986 could be taken into consideration, which dealt with the investment in flats under the self-financing scheme of the Delhi Development Authority. The Board stated in the circular that when an allotment letter is issued to an allottee under this scheme on payment of the first instalment of the cost of construction, t....
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....T v. RL Sood [2000] 245 ITR727/108 Taxman 227, wherein the Hon'ble HC held that the assessee having invested substantial amount in the purchase of a new asset, thus, acquiring substantial domain over the new flat within the specified period, the assessee could be said to have complied with requirement of section 54 and merely because possession of the flat was not handed over to the assessee within the specified period, the said benefit could not be denied. 10. The legislative intent of the provisions of Section 54 should be interpreted. Adding the amount as income for the Assessment year 2017-18 would entail genuine hardships on the assessee which is not the intent of the Section 54 of the Act, the Section seeks to grant relief from capital gains to the assessee who are genuinely intending to the investing a house property. 11. In instant case, despite having made payment for the flat, the developer failed to offer possession up till the expiry of three years from the date of sale of property by him, because of reasons beyond his control which cannot be disputed. This vital fact assumes great significance as I had taken all the steps to make the investment for the purchase....
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....the contentions of the assessee and proceeded to bring the unutilized portion of the capital gains to tax of Rs. 4,99,81,680/-. 9. Aggrieved with the above order assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) after considering the detailed submissions interpreted the provisions of section 54 and 54F of the Act and sustained the additions made by the Assessing Officer. 10. Aggrieved with the above order, assessee is in appeal before us raising following grounds in its appeal: - "1. The return of income for assessment year 2017-18 was filed by the assessee on 28.02.2018 offering total income of Rs. 5,33,10,929 and subsequently filed a revised return offering income of Rs. 88,72,770. 2. The amount deposited in the capital gains account scheme, under section 54 of the Act for exemption from capital gains on sale of property that arose in the previous year 2013-14. could not be fully utilised by the assessee due to delay on part of the builder of the invested property. 3. The assessee cannot be denied exemption under the section on account of default by the builder since the section which creates liability has to be strictly construed in favour of the taxpayer. ....
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....e account which has not been utilised for any other purpose by the Assessee. The Assessee has complied with all the requirements of the Act to be able to benefit from the beneficial provisions of the Act 5.3. Based on the above, the intent and the action of the assessee were very clear that he intended to invest in a new property as provided by the Income Tax Act, 1961. It is the default on part of the Builder in not being able to complete the project in time and not handing over the possession of the property, which was beyond the control of the Assessee. 5.4. The Assessee also used legal remedy by filing a suit in the Hon'ble Bombay High Court against the builder. A copy of the same is attached as Annexure 5. Despite the action, the Builder was unable to complete the building and hand over the possession of the flats to the assessee. The default is on part of the builder and the assessee, being the aggrieved party, cannot be taxed for such sum lying unutilized in the Capital Gain scheme account. As already stated, the assessee is willing to pay out the remaining consideration as and when the builder is ready to restart the construction and demands the money as per progres....
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....taxmann.com 222 (Karn.) (Refer Annexure 6). It was held that the date of agreement to purchase should be taken as the date of purchase of the new property. As such if assessee has entered into the agreement to purchase and invested the capital gain, it is immaterial that part of the consideration is yet to be paid or registration has not been completed. Deduction u/s. 54 should be allowed. 7.3. In the case of Pr. CIT v. C. Gopalswamy [2016] 384 ITR 307/[2017] 81 taxmann.com 78 (Karn) (Placed at PB Page No. 168-172) it was held that where the assessee has entered into an agreement with a builder and invested the capital gain for purchase of a residential unit, he is entitled to deduction u/s. 54 irrespective of the fact that builder has not completed the construction or has not yet handed over the flat. 7.4. In the case of CIT v. R.L. Sood [2000] 245 ITR 727/108 Taxman 227 (Delhi) (Placed at PB Page No. 173-175) it has been held that since substantial amount of the consideration was paid within the time, the deduction u/s. 54 will be available though the possession and registration was made later. 7.5. In the case of Smt. Shashi Varma v. CIT [1997] 224 ITR 106 (MP) (Placed at ....
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....registered in his name and this cannot be the reason for denying the claim of the assessee for deduction u/s 54 of the Act. In view of the above facts of the case, we are of the view that the assessee is entitled for deduction u/s 54F of the Act, because the assessee has already invested a sum of Rs. 18.60 lakhs in the residential property under construction within the time limit prescribed u/s. 54F of the Act. Accordingly, this issue of assessee's appeal is allowed". 7.9. Reliance be also placed on the order passed by The Income Tax Appellate (Delhi) Tribunal in the case of Bal Kishan Atal vs Assistant Commissioner of Income Tax (176 ITD 330(Delhi-Trib), (Placed at PB Page No. 200-208) where the tribunal held that "The delay in the instant case was on account of the developer and not on account of the assessee The assessee had deposited the amount in capital gain account. The balance amount could not be utilised as there was a dispute and stay by the National Disputes Redressal Commission Accordingly, for the reasons stated hereinabove, the Commissioner (Appeals) was not justified in confirming the action of the Assessing Officer and direct the Assessing Officer to delete th....
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....lief. 7.13 In the case of Satish Chandra Gupta v. Assessing Officer (1995) 54 ITD 508 (ITAT, Delhi Bench) (Placed at PB Page No. 215- 228) where the assessee had purchased a site and could not complete the construction of the house within the prescribed period of three years and the house was constructed and completed subsequently, the Delhi Bench granted relief on the ground that the delay had occurred on account of reasons beyond the control of the assessee. 7.14. In the case of Narasimha Raju Rudra Rao v. Asstt. CIT [2013] 35 taxmann.com 90/143 ITD 586 (Hyderabad-Tribunal) (Placed at PB Page No. 229-233) the ITAT held as under: Provision contained under section 54F being a beneficial provision has to be construed liberally In various judicial precedents it has been held that the condition precedent for claiming benefit under section 54F is only that the capital gain realized from the sale of capital asset should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If the assessee has invested the money in construction of residential house, merely because the construction was not complete in all respects and i....
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....tion midway. Aggrieved with, the assessee has filed a suit in the Hon'ble High Court as of now it is fact on record that the assessee was not able to utilize the funds deposited in the capital gains account scheme due to the fact that the builder could not proceed with completion of the project. It is also fact that assessee has entered into an agreement with the builder with the indemnity clause in case builder fails to complete the project in time. It is also fact that assessee has filed the suit before Hon'ble High Court with the main ground for objections is about the capital gains liability. However, we observe that Assessing Officer interpreted the indemnify clause entered by the assessee in the purchase agreement that assessee has got the compensation or he may get the compensation without there being any concrete evidences on record or he is aware of the fact that the case is still pending before Hon'ble High Court. He is also aware of the fact that the issue is still unresolved and there are no evidences on record to show that assessee has already indemnified with the tax liability. Therefore, in our considered view it is fact on record that the assessee cannot....