TaxTMI 
TaxTMI 
TaxTMI 
2024 (10) TMI 1203
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....7 on 30.03.2017 declaring a total income of Rs. 98,43,820/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The Assessing Officer (AO) during the course of assessment noticed that the assessee had sold a property for a consideration of Rs. 18,70,00,000/- and after claiming deduction towards selling expenses and indexation on cost of acquisition has arrived at a long term capital gain of Rs. 12,81,11,799/-. The AO further noticed that the assessee has claimed exemption u/s. 54 of the Income Tax Act, 1961 (the Act) to the tune of Rs. 12,06,51,057/- and offered the long term capital gain of Rs. 74,60,742/- to tax. The AO also noticed that the assessee has claimed exemption u/s. 54 of the Act towards investment in house property which was under construction and not completed. The assessee furnished before the AO a valuation report certifying the total amount spent on construction to the tune of Rs. 6,66,93,130/-. The assessee also furnished the bank statement wherein the cash withdrawals to the extent of Rs. 4,78,19,230/- is withdrawn towards construction of the said house property. The AO did not allow the exemption claimed by the assess....
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....nstructed by the Supreme Court in the case of Giridhar G Yadalam [2016] 65 taxman.com 148 was related to wealth tax and not regarding section 54. Regarding the utilisation of capital gains, it is clear that the appellant has fulfilled the conditions as prescribed for making a claim under section 54 of the Act and hence the disallowance of Rs. 3,86,23,200/- as estimated unutilised portion of capital gains as held by the Assessing Officer cannot be sustained. As a result, the appeal is allowed." Aggrieved, Revenue is in appeal before the Tribunal. 5. The learned D.R. submitted that the Hon'ble Supreme Court in the case of Giridhar G. Yadalam (supra) has considered the issue of benefit under Wealth Tax on the property under construction and held that: - "16. We have already pointed out that on the plain language of the provision in question, the benefit of the said clause would be applicable only in respect of the building 'which has been constructed'. The expression 'has been constructed' obviously cannot include within its sweep a building which is not fully constructed or in the process of construction. The opening words of clause (ii) also become important ....
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....If we accept the argument of the assessee, in such a case, assessee would be given the exemption from payment of wealth tax in the initial years and the same benefit would be denied in Page 15 15 the year when it is found that construction was abandoned and, therefore, not complete. It would result in granting of benefit in the previous year(s), though that was not admissible. Such a situation cannot be countenanced. Presumably, because of this reason, the Legislature wanted to treat only that land to be excluded from the definition of 'urban land' at the stage when the building has been fully constructed on the said land." The learned D.R. accordingly argued that the property, the construction of which is still not completed cannot be considered for the benefit u/s. 54 of the Act. 6. The learned A.R., on the other hand, relied on the order of the Hon'ble Jurisdictional High Court in the case of PCIT vs. C. Gopalaswamy [(2016) 384 ITR 307 (Kar)] to submit that in the said decision the Hon'ble High Court has considered the decision of the Hon'ble Supreme Court in the case of Giridhar G. Yadalam (supra) and distinguished the same. The learned A.R. further argued....
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....ssee furnished the construction agreements and other documentary evidences in support of the claim that the money has actual been invested in the construction of the property. The assessee also furnished certificate from BBMP in support of the claim that the house construction is completed. The CIT(A) allowed the claim of exemption u/s. 54 of the Act as made by the assessee and deleted the addition made by the AO by placing reliance on the decision of the Hon'ble Jurisdictional High Court in the case of Sambandam Uday Kumar (supra). 8. The limited issue for our consideration in this appeal is whether the exemption u/s. 54 of the Act can be allowed based on the amount utilised out of the sale consideration towards construction of the property even if the construction is not complete. In this regard we notice that the Hon'ble Karnataka High Court in the case of C. Gopalaswamy (supra) has considered similar issue and held that: - "6. We have heard the learned counsel for the parties and perused the record. 7. If the reasons recorded by the Tribunal as considered as it is, the issue is already covered by the decision of this Court in case of CIT vs. Sambandham Udayakumar r....