TaxTMI 
TaxTMI 
2025 (2) TMI 1741
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.... The assessee is an individual and has filed the return of income for AY 2017-18 on 30/10/2017 declaring total Income of ` Nil. The case was selected for scrutiny and notices under section 143(2) and 142(1) of the Income Tax Act, 1961 ("the Act") were issued. In response to various notices, assessee has duly complied the notices from time to time. 4. During the assessment year under consideration, the assessee had transferred an immovable property for sale consideration of Rs. 2,15,00,000, on 18/07/2016. The assessee had computed income from capital gains of Rs. 1,58,64,162, and claimed exemption under section 54F of the Act amounting to Rs. 1,58,64,162. The assessee had invested the net sale consideration in construction of residential house on 6th floor of his existing premises. 5. The Assessing Officer referred to the provisions of section 54F and observed that the deduction is allowable if the assessee constructs one residential house after the date on which transfer of the original assets take place. The Assessing Officer observed that the assessee had already started construction of new residential house prior to sale of original asset. As per ledger account of Sanjay G....
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....see has claimed benefit spanning across four years, whereas originally the construction of the house as envisaged by the provisions of Section 54 must be completed within three years after the transfer of the original asset. pornjructed was a expenses claimed 4.14 Moreover, the very object of the provisions is defeated if the assessee indulges in claiming the benefits multiple times. The object of Section 54F is to encourage an assessee to convert any of his long term assets into a residential house subject to the condition that assessee does not own more than one residential house other than the new residential house on the date of transfer of long term asset. The Section, thus, in essence, offers some incentives to a tax payer to change its unproductive assets into a residential house. However in the instant case, this intention of the legislature is already met. The productive asset was already in existence way before the unproductive asset was transferred. In fact the benefit was already availed by the assessee for the purpose of construction of the productive asset (residential house). Therefore there is no question of allowing any further benefit for residential hous....
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....claimed the benefit of Section 54 in FY 2014-15. 4.17 Most importantly, the assessee has himself claimed in his reply dated 25.12.2019. In your Show Cause Notice, you had pointed out that I had started the Construction work of new residential house long before the capital gain arise. It is not the fact. I had constructed the house at 6 floor. The advance payments were made to various parties and actual construction started during AY 2016-17. Upto AY 2017-18, the total amount invested in the House Property is of Rs. 2,68,73,530/-. The relevant ledger account of Sanjay Gupta House is enclosed herewith. So it is very clear that the amount invested in New House Property up to AY 2017-18 is of Rs 2,68,73,530/-which is more than the Capital Gain arise of Rs. 1,58,64,162/-. So the benefit claimed u/s. 54F by me is genuine and correct. You had observed that investment in house property to claim benefit u/s. 54F should be made after the capital gain arise and within three years from the capital gain arise. But it is not the fact. In various case laws before various benches of Hon. ITAT and before the Hon. High Courts, it is already confirmed that even if the construction h....
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....nder:- Particulars Amount in (`) Income as per section 143(1) Nil Addition as discussed in Para-3 (specified business loss set off disallowed) 92,47,915 Addition as discussed in para-4 (deduction u/s 54F disallowed) 1,58,64,162 Assessed Income 2,51,12,077 Rounded off u/s 288A 2,51,12,080 The assessee being aggrieved, went in appeal before the first appellate authority. 6. The learned CIT(A) has further strengthened the addition by meticulously observing as under:- "5. Ground No 1 is directed against the Assessing Officer (hereinafter referred to as "the AO') denying the claim made under section 54F of the Act of Rs. 1,58,64,162. The brief facts of the case is that the appellant filed the return of income for AY 2017-18 on 30-10-2017 declaring total Income of Rs. Nil/-. The case was selected for scrutiny and during the course of assessment proceedings the AO found that the appellant had transferred an immovable property for sale consideration of Rs. 2,15,00,000/- on 18/07/2016. The appellant had computed income from capital gains of Rs. 1,58,64,162/- and claimed exemption u/s 54F of the Act amounting to Rs. 1,58,64,162/-. The ap....
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....e Learned Income Tax Officer disallowed the claim of Appellant for the following reasons:- 1. The Assessee has to construct residential house AFTER the date on which transfer of the Original assets take place. (Para 4.2 to Para 4.6 of AO's Order). 2. Significant amount of construction expenses were already incurred on the construction. (1,36,45,598/-) (Para 4.12 of AO's Order) 3. On same property, exemption u/s 54F is being claimed in AY 2014-15, 15-16 and lastly AY 2017-18. (Investment of Sale proceeds arising out of two different assets in two different Assessment years under two different provisions against same property) (Para 4.7 to 4.12 of AO's Order) 4. Assessee has claimed benefit spanning across four years whereas originally the construction of the house as envisaged by the provisions of Section 54 must be completed within three years after the transfer of original assets. (Para 4.13 AO's Order) & 4.16 of A.O's order) 5. Land use was for Commercial purposes. 4. So basically there is no dispute as regards calculations of Capital gains. However the claim of exemption u/s 54F is disallowed for above reasons....
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....ardarmal Kothari (2008) 302 ITR 286 (Madras High Court) relying on the observation of Supreme Court held Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. Madras High Court has made this observations. Following decisions of Supreme Court in CCE VS Favourite Industries, (2012) 7 SCC 153 and GP Ceramics (P) Ltd. VS Dy. Commissioner, Trade Tax (2009) 2 SCC 90). ii) Significant amount of construction expenses were already incurred in the construction (13645593/-). The Assessee himself stated that in AY 2014-15 & 15-16, entire Capital amount was utilised mostly in giving advance for various goods and services for residential house and claim was made u/s 54F. Courts have consistently held that deduction u/s 54F cannot be enied where Assessee invested into purchase of flat before expiry of statutory period, benefit of deduction u/s 54F could not be denied on the ground that building was under construction stage. (ACIT VS Sudhakaran (101....
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....ra State, the land use of R-2 zone is classified and permissible for residential cum commercial mix use. Even in the commercial zone, Buildings or Premises are permissible for mix use same as in R2 zone. Copy of both Development control rules are attached for your ready reference. Accordingly, Local Sanctioning Authority who sanctions the map, has sanctioned it for residential cum commercial use. Accordingly the residential portion was sanctioned. Thus this cannot be a ground to reject the contention of Claim u/s 54F. Except to state that site is of commercial sanction, nothing is stated by Assessing Officer to reject the claim. Hence Appellant requests that this may please be rejected. PRAYER:- In view of above facts it is submitted that negativeing the claim of deduction u/s 54F at Rs. 158,64,162/- is unwarranted, uncalled for and claim of Assessee of deduction u/s 54F at Rs. 1,58,64,162/- is liable to be allowed." 5.2 I have carefully considered the facts of the case, the submission of the appellant and evidences on record. Section 54 F of the Act reads as under:- "54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee....
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....ial house, the income from which is chargeable under the head "Income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such new asset is transferred. (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of....
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....sale, purchased a residential house. (ii) within two years after the date of transfer of the original capital asset; purchased a residential house and. (iii) within a period of three years after the date of sale of the original asset, constructed a residential house. 5.4 The above exemption would not be available if any of the below mentioned conditions: (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asse I asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and 5.5 The AO on analysis of records found that in the A.Y 2015-16, the appellant has claimed benefit of provisions of section 54F. The AO on verification of also found from the case records for A.Y 2014-15 that the appellant has claimed the benefit of section 54 of the Act as well. The appellant submitted a copy of sanction map against which the benefit of se....
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....fact that construction started in Asst Year 2015-16 and culminated in Asst Year 2017-18 and in course of this period claimed exemption u/s 54F for gain on two different properties on same residential house. Section 54F does not provide for exemption on investment in renovation or modification of an existing house. Construction of a house only qualifies for exemption on the investment like addition of a floon of a self contained type to the existing house would have qualified for exemption. However, the appellant has not been able to prove that a whole new floor has been constructed for which exemption is claimed u/s 54F and such new construction is different from the one where exemption u/s 54/54F was claimed in earlier years. In fact is its admitted fact that exemption under section 54F for gain on two different properties are claimed on same residential house. 5.9 It is seen that the appellant transferred a property on 13.08.2013 on the basis of which the appellant had claimed benefit of section 54 in A.Y 2014-15. Therefore, such property had to be completed by 13.08.2016 as per the provisions of section 54. The appellant has submitted during the course of appellate proc....