TaxTMI 
TaxTMI 
2026 (3) TMI 55
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....on u/s 54 of the Act cannot be denied. 2. That, the Ld. CIT(A) further erred in upholding the disallowance of deduction of Rs. 2,86,42,500/- claimed u/s 54 of the Act without properly appreciating that the provisions of sec. 54 are beneficial in nature and the investment made by the appellant in purchasing the plot of land for the purpose of construction of a residential house has to be held to be an investment, thus satisfying the conditions of sec. 54 of the Act." 3. The only issue raised in the grounds of appeal is against the order of ld. CIT (A) confirming the disallowance of deduction of Rs. 2,86,42,500/- as made by the ld. AO on account of failure of the assessee to satisfy the conditions u/s 54 of the Act. 4. The facts in brief are that the assessee filed the return of income on 02.08.2016, declaring total income at Rs. 8,87,100/-. The case was selected for scrutiny. The notice u/s 143(2) and 142(1) of the Act along with questionnaire were issued and served upon the assessee. During the course of assessment proceedings, the ld. AO noted that the assessee has sold a house property acquired in F.Y. 2004-05, situated at 76, Cotton Street, Kolkata-700007 to M/s V....
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....principle that construction carried out without sanctioned plan is illegal and unauthorized. The ld. CIT (A) further noted that Act cannot be interpreted for grant of exemption for action which are not a legally compliant and thus, dismissed the appeal. 6. After hearing the rival contentions and perusing the materials available on record, we find that the assessee sold a residential house to M/s M/s Vidhi Vyapaar Pvt. Ltd. for consideration of Rs. 6,25,00,000/- from which the assessee earned the long-term capital gain of Rs. 5,48,40,817/-. The assessee applied the capital gain to the extent of Rs. 5,46,52,500/- on payment of purchase of land, architect fee and deposit in capital gain account scheme as detailed above. The assessee was granted provisional allotment of land as per agreement with Urbana on 01.09.2015, to whom Rs. 2,80,70,000/- was paid. We also note that the assessee started the construction of the house on the said land. However, the construction could not be completed within three years upto 15.06.2018, since the building plan were sanctioned by the KMC not in time. Consequently, the ld. AO disallowed the payment made on account of purchase of land as well as paym....
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.... respect "that by itself would not disentitle the assessee to the benefit flowing from Section 54F". In fact, appellate Commissioner has not only taken note of the judgment of the co-ordinate bench of this Court in Sambandam's Uday kumar case (supra), but had also taken note of the judgment of High Court of Madras in the case of CIT v. Sardarmal Kothari[2008] 302 ITR 286, which was on similar facts as obtained in Sambandam Uday kumar's case (supra) and as such in the instant case, Appellate Commissioner allowed assessee's appeal noting that the appeal filed by the revenue against the order of High Court of Madras before Apex Court in CC Nos.3953-3954/2009 had been dismissed on 06.04.2009." 6.1. Similarly, the case of the assessee is squarely covered by the decision of the Hon'ble Chandigarh High Court in case of Bhavna Cuccria Vs. ITO (2017) 82 taxmann.com 306 (Chandigarh) wherein it was held as under: - "11.5 Even otherwise we find that section 54 gives a window period of three years, from the date of transfer of original asset, for the construction of a new house and two years for purchasing a new house. Further as per the section the amount utilized f....
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....ect 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 the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme 11 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or....
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....has taken place to "purchase" new machinery or plant or "acquire" building or land. We find that the High Court has completely missed the window of three years given to the assessee to purchase or acquire machinery and building or land. This is why the expression used in section 54G(2) is "which is not utilized by him for all or any of the purposes aforesaid....". It is clear that for the assessment year in question all that is required for the assessee to avail of the exemption contained in the Section is to "utilize" the amount of capital gains for purchase and acquisition of new machinery or plant and building or land. It is undisputed that the entire amount claimed in the assessment year in question has been so "utilized" for purchase and/or acquisition of new machinery or plant and land or building. 37. The High Court is not correct when it states:- "31. The word 'purchase' is not defined under the Act and therefore, has to be construed in the commercial sense. In many dictionaries, the word 'purchase' means the acquisition of property by party's own act as distinguished from acquisition by act of law. In the context in which the expressio....
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....ose of his business in the said area. If the High Court is right, the assessee has to purchase and/or acquire machinery, plant, land and building within the same assessment year in which the transfer takes place. Further, the High Court has missed the key words "not utilized" in sub-section (2) which would show that it is enough that the capital gain made by the assessee should only be "utilized" by him in the assessment year in question for all or any of the purposes aforesaid, that is towards purchase and acquisition of plant and machinery, and land and building. Advances paid for the purpose of purchase and/or acquisition of the aforesaid assets would certainly amount to utilization by the assessee of the capital gains made by him for the purpose of purchasing and/or acquiring the aforesaid assets. We find therefore that on this ground also, the assessee is liable to succeed. The appeals are, accordingly, allowed and the judgment of the High Court is set aside.' 12. In view of the interpretation given to the word "utilized" used in section 54G of the Act by the Supreme Court and considering that the condition specified in section 54G(2) are identical to that in sect....
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.... agreement with M/s Dhatri Constructions Pvt. Ltd. for construction of a residential house over the said plot for a total consideration of Rs. 45 lakhs. However, as it appears, this agreement ultimately were not acted upon and the assessee on 18/01/2010 entered into another agreement of sale with M/s Fima Properties Pvt. Ltd. and M/s Dhatri Constructions Pvt. Ltd. for purchase of flat admeasuring 2528 sft. in Block B Tower 12 in Fima Hilltop Project in survey No. 129/77 TS No. 26, Ward No. 12, Syed Nagar, Fast Lancer, Shaikpet Village, Hyderabad as described in the 2nd Schedule of the agreement of sale. Part B of the aforesaid 2nd Schedule further reveals that the total consideration for sale of the aforesaid flat is Rs. 1,15,35,000/- out of which the assessee having already paid Rs. 64 lakhs to M/s Dhatri Constructions Pvt. Ltd. agreed to pay the balance of Rs. 51,35,000/- in the name of M/s Dhatri Constructions Pvt. Ltd. On the very same day i.e. on 18/01/2010 a registered sale deed was executed between the assessee and with 7 other persons being represented by their development agreement-cum-general power of attorney holder M/s Fima Properties Pvt. Ltd. for purchase of undivided....
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....n precedent for claiming benefit u/s 54F is the capital gain realized from the sale of capital asset should have been 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 it was not in a fit condition to be occupied within the period stipulated that would not disentitle the assessee from claiming the benefit u/s 54F of the Act. Once the assessee demonstrates that the consideration received on transfer has been invested either purchasing a residential house or in constructing a residential house even though the transactions are not complete in all respects and as required under the law that would not disentitle the assessee from availing benefit u/s 54F of the Act. Even investment made in purchasing a plot of land for the purpose of construction of a residential house has been held to be an investment satisfying the conditions of section 54F of the Act. Though there cannot be any dispute with regard to the above said proposition of law, the assessee is required to prove the act....