9911796707
TMI Blog2007 (11) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment under section 147 of the Act and issued notice under section 148 of the Act. In response, the assessee submitted that the return already filed on 15-3-1999 be treated as return filed in response to the notice issued under section 148 of the Act. During the course of assessment it was found by the Assessing Officer that the assessee effected the transfer of his shareholdings in Tirupati Promoters Contractors (P.) Ltd. (TPCPL) and Gulab Chand Silk Mills (P.) Ltd. (GCSPL) and claimed exemption under section 54F of the Act in respect of long term capital gain amounting to Rs. 2,04,71,733 arising on the aforesaid transaction by contending that the net consideration received has been utilized by giving advance of Rs. 1.16 crores to SBPL and deposit Rs. 1 crore under Capital Gains Account Scheme, 1988. However, the Assessing Officer was of the view that the amount advanced to SBPL cannot be equated with appropriation of sale consideration towards acquisition of residential house. Accordingly, the assessee was asked to show cause, why his claim for exemption under section 54F of the Act, should not be restricted to Rs. 1,12,16,860 as per calculation given in para 3 appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad vide agreement-cum-GPA dated 11-2-1999. It was further found by the Assessing Officer that the said property consisted of a single storied structure with 5 shops/mulgics in the front portion of the building facing the main road which have been let out to tenants and the main structure housed the Canara Bank. According to the Assessing Officer these factors irrefutably proved that the property purchased by the assessee can never be treated as in compliance with the requirement of construction of residential house within three years as contemplated under the relevant provisions of the Act. In fact, the old structure has been demolished and commercial complex named G.S. Estates , constructed by the assessee, has come in its place. Accordingly, the Assessing Officer after disallowing the exemption under section 54F of the Act, determined the long-term capital gains at Rs. 1,12,16,860 and completed the assessment at an income of Rs. 1,14,56,842 including income from long term capital gains Rs. 1,12,16,860 vide order dated 28-3-2005 passed under section 143(3) read with section 147 of the Act. 4. Being aggrieved, the assessee preferred an appeal before the learned CIT(A). Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial property as alleged by the Assessing Officer. Therefore, the CIT unjustified and unwarranted both in law and facts for non-allowing the claim under section 54F of the Income-tax Act. 4.The ld. Appellate Authority erred in law treating the amount invested in Sweety Builders (P.) Ltd. Rs. 1,16,00,000 not for acquisition for residential property by alleging that the appellant and his spouse are the Directors of the Company, ignoring the fact it is a separate entity under section 2(31)( iii ) formed with the main object of dealing in real estate and construction activities and no prohibition in law, the amount cannot be given to builder for purchase/construction of residential house. 5.The ld. Appellate Authority failed to consider that, the substantial property was under the possession and occupied by the appellant, except the area of about 1001.78 sq. ft. which was occupied by 5 shops under the Tenancy rights, with a perpetual injunction against the total plinth area of 11,746.64 sq. ft. consisting of Ground and 1st floor on the land of 1613 sq. yards, and this fact was completely ignored and therefore, treating as a commercial asset against the claim of residential prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile admitting that the aforesaid grounds of appeal are not according to the provision of rule 8 of the Income-tax Appellate Tribunal Rules, 1963 submits that in all the grounds of appeal the assessee has contended the denial of exemption under section 54F of the Act and the enhancement made by the learned CIT(A) amounting to Rs. 46,16,129. In the light of the above, the learned counsel for the assessee while arguing all the grounds of appeal as common ground of appeal submits that by virtue of an order dated 4-12-1996 of the CLB appearing at page Nos. 112 to 114 of the assessee s paper book, the assessee received an amount of Rs. 2,68,62,500 through three cheques viz., dated 2-4-1997 Rs. 85 lakhs, 31-7-1997 Rs. 88 lakhs and 30-11-1997 Rs. 95,62,500 from TPCPL towards full and final settlement of value of his shareholdings of 6900 equity shares of Rs. 100 each Rs. 2,21,14,700 and unsecured loans of Rs. 47,47,800 aggregating to Rs. 2,68,62,500, the details of which are also appearing at page Nos. 136 to 139 of assessee s paper book. He further submits that to avail the benefit of exemption of capital gain under section 54F of the Act, out of the above sale consideration, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 63,96,800 was shown as investment in TPCPL, the break up of which is also appearing at page 139 of the assessee s paper book wherein the advance pertaining to the assessee amounting to Rs. 47,47,800 was duly shown and included in the total amount of Rs. 63,96,800 which clearly proves that the sum of Rs. 47,47,800 was received by the assessee against the loan and advances and the balance of Rs. 2,68,62,500 was received against the sale consideration of shares. He further submits that in the case of Sri Gopal Gupta, assessee s brother, the same Assessing Officer has accepted the amount received towards the sale of shares and the advances vide copy of return and other details appearing at page Nos. 125-128 of the assessee s paper book. 8. The learned counsel for the assessee further submits that the said residential premises known as Bait-Ul-Azeez , Nizamshahi Road, Mojamjahi Market Road, Goshamahal, Hyderabad, having ground floor and first floor with total plinth area of 11746.64 sq. feet was constructed on land area of 1613 sq. yards. Out of this, an area of 1001.78 sq. feet was occupied by five shops under tenancy rights with perpetual injunction, granted by City Civil C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee s paper book, it appears that the sale of shares has taken place on or before 4-12-1996 and undisputed, the assessee has purchased the premises vide agreement of sale-cum-GPA dated 11-2-1999 which is beyond the period of two years from the date of sale of shares, as provided under section 54F of the Act and therefore, the assessee is not entitled to the exemption under section 54F of the Act. He further submits that even assuming that the assessee had purchased the property within 2 years, but, in fact, the same is a commercial property as at the time of purchase of the property there were five shops under the tenancy with a perpetual injunction granted by the Civil Court. He further submits that the learned CIT(A) vide para 3.3 and 3.4 of his order dated 22-5-2006 for the assessment year 2000-2001 has also held as under : "3.3 I have duly considered the submissions of the appellant and the material available on record. Though the agreement for sale-cum-GPA entered by the appellant in respect of house property at Gosha Mahal, Hyderabad, refers the said property as residential building, the undisputed fact remains that the said property was being used for commercial purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, agree with the Assessing Officer that the appellant was hit by the proviso to sub-section (4) of section 54F of the Income-tax Act, 1961 which provides that if the amount deposited in the Capital Gains Deposit Scheme is not utilized wholly or partly for the purchase/construction of a new residential house, then the amount allowed as deduction under section 54F shall be charged under section 45 as income from capital gains." 10. He further submits that the learned CIT(A) at page 6 of the impugned order dated 22-5-2006 has observed that on examination of the balance sheet of M/s. SBPL it is found that the company filed its first return of income for the assessment year 1998-99 where it was mentioned that the construction of commercial complex namely G.S. Plaza was in progress and no sales was made during year. It was also observed by the learned CIT(A) that a sum of Rs. 1.16 crores received from the assessee was utilized by the said company for the construction of commercial complex G.S. Plaza and not for purchase/construction of residential house for the assessee. He further submits that the assessee has incurred renovation expenses amounting to Rs. 13 lakhs and Rs. 47.75 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the assessee after reading the same para 6 of the counter affidavit dated 5-3-1998, relied on by the learned CIT(A) and learned DR, submits that in the said para No. 6 appearing at internal page 4 of the copy of petition filed before the CLB appearing at pages 118-123 of the assessee s paper book it is mentioned that I submit that the amount received by me is only towards share allotment money and the question of here being any unsecured loan does not arise , which clearly says that the assessee has received sale consideration of Rs. 2,21,14,700 after deducting the amount of unsecured loan of Rs. 47,47,800 out of the total amount received Rs. 2,68,62,500, therefore, the net sale of shares is Rs. 2,21,14,700 and not Rs. 2,68,67,750. On the other plea raised by the learned DR, the learned counsel for the assessee while relying on his earlier plea, submits that the decision relied on by the learned DR in 290 ITR 90 (Mad.) is distinguishable and not applicable to the facts of the present case. He further submits that the Commercial Complex named G.S. Plaza which is appearing in the balance sheet of SBPL is other complex and not the same which has been converted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of the original asset; and ( b )the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head Income from house property . 13. Section 54F has been inserted by Finance Act, 1982 with effect from 1-4-1983 i.e., for and from assessment year 1983-84. This section grants exemption from tax on capital gains in certain cases on investment of the net consideration in a residential house. The circumstances which must exist for application of section 54F are : ( i )the capital gain arises to an assessee being an individual or a Hindu Undivided Family, ( ii )from the transfer of any long-term capital asset, not being a residential house and ( iii )the assessee purchases within a period of one year before or two years after the date on which the transfer took place, or constructs within a period of 3 years after the date of transfer, a residential house. 14. Applying the aforesaid provisions of the Act in the assessee s case we find that ( i )The date of transfer of shares is not on record. According to learned DR the shares were transferred on or before 4-12-1996 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exemption under section 54F of the Act which is contrary to the provisions of section 54F of the Act. ( vii )At the time of hearing the assessee has drawn our attention on the site plan of the property appearing at page 53 of the assessee s paper book to show that it was residential house property. However, we find that there are two shops only whereas other documentary evidences including the judgment of Civil Court show that there are 5 shops and one Office of an Advocate, it was also claimed by the Revenue that there was a Canara Bank whereas the assessee stated that the said Bank was never housed in the said premises. ( viii )There is no material on record to show as to whether the property at the relevant time was assessed under the property tax as commercial property or residential property. ( ix )There is no evidence on record to show that the assessee has, in fact, used the said property for his residential purpose before converting the same into a commercial complex. ( x )For the purpose of deposit made in the Capital Gains Account Scheme, 1988, the due date for furnishing the return under section 139(1) of the Act, is not on record. ( xi )The intention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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