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TMI Blog2012 (9) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of Rs.45,00,000/- in which the share of the assessee was Rs.22,00,000/-. The assessee claimed that he along with his wife had jointly purchased another flat being Flat No.302 in Wing -A, 3rd Floor in Rajyog Residency, Rajendra Prasad Road, Mulund (W), Mumbai-80 for a total consideration of Rs.35,00,000/-. The assessee had made total payment of Rs.13,50,000/- till 26.12.2007 including a registration charges of Rs.15,000/-. The assessee, therefore, claimed that he was entitled to claim exemption u/s 54 of the Act as the capital gain had been invested in the new residential flat. The assessee computed the long term capital gain from sale of the flat after deducting the indexed cost of acquisition at Rs.9,98,411/- which was claimed as exempt u/s 54 of the Act as the amount invested in flat was more than capital gain. 3.1 The AO however, observed that under the provisions of section 54, the assessee was required to utilize the amount of capital gain towards purchase of another residential flat within one year before or within two years after the date of transfer of old flat or to construct residential house within a period of three years from the date of transfer of the old f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dential flat within a period of three years. It was also pointed out that the possession of the flat had been delayed primarily due to the delay in completion of construction by the builder for various reasons, and therefore, merely on this ground the claim of exemption u/s 54 could not be allowed. The assessee placed reliance on the judgment of the Hon'ble Bombay High Court in the case of CIT Vs Mrs. Hilla J.B.Wadia (216 ITR 376) and several other judgments in support his claim. 4.1 As regard the deposit of unutilised amount in the capital gain account scheme, it was submitted that the assessee had paid only a sum of Rs.1,00,000/- as booking amount before the due date of filing of return of income for the assessment year 2006-07 and therefore, the assessee was required to deposit the balance amount in the capital gains account scheme which could not be done due the ignorance of law. However, it was submitted that intention of the assessee from the beginning was that he wanted to purchase a new residential house against the sale of old residential house. The assessee had kept the entire amount of capital gains in the savings bank accounts which had been utilized for construction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ception to the section 139(1) and considering this, there was no default as the entire capital gain had been invested within the due date u/s 139(4). The reliance for the said proposition was placed on the judgment of the Hon'ble Punjab and Haryana High Court in the case of Ms.Jagrity Aggarwal (339 ITR 610). Moreover, it was also submitted that default, if any was only a technical default, and for this reason, claim of exemption could not be denied. Secondly, it was also pointed out that the entire amount of capital gain had been kept in the saving bank account of the assessee and had not been utilized for any other purposes and, therefore, it was urged that the claim of the assessee should not be rejected. Reliance was placed on the decision of the Tribunal in the case of Jagan Nath Singh Lodha (supra). The Ld. AR for the assessee further submitted that the possession of the flat had ultimately been taken by the assessee on 31.8.2009 as per the copy of the letter dated 31.10.2009 of the builder placed at pages 31 and 32 of the paper book. 5.2 The Ld. DR, on the other hand, strongly supported the orders of the authorities below. It was argued that three years time limit for cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The total amount paid by the assessee to the builder was Rs.14,62,500/- till 16.2.2009. In the back drop of this factual position, it is required to be seen whether the assessee had fulfilled the conditions of section 54 of the Act so as to make him eligible for claim of exemption u/s 54 of the Act. The first condition is that the capital gain should have been invested in the purchase of new residential house within a period of two years from the date of transfer or for construction of new residential house within a period of three years from the date of transfer. In the present case, the assessee had booked the new flat with the builder and as per agreement, the assessee was to make payment in installments and the builder was to handover the possession of the flat after construction. It has therefore to be considered as a case of construction of new residential house and not purchase of flat. This position has been clarified by the CBDT in circular No.472 dated 16.12.1993 in which it has been made clear that the earlier circular No. 471 dated 15.10.1986 in which it was stated that acquisition of flat through allotment by DDA has to be treated as a construction of flat would app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had also been ultimately taken on 31.8.2009. Therefore, in our view, the claim of the exemption in this case cannot be denied on the ground that the possession of the flat had not been taken within the period of three years. 6.3 The other objection raised by the Revenue is that the assessee till the due date of filing of the return of income u/s 139(1) for the relevant year, had paid /utilized only a sum of Rs.1,00,000/- towards the construction of flat and therefore the balance amount of capital gain was required to be deposited in the capital gain account scheme which had not been done. The case of the assessee is that the default committed by the assessee was due to ignorance of law and intention of the assessee was always to utilize the amount for construction of flat and the assessee had kept the amount in the savings bank account which was utilized towards the construction of flat. In our view, this is only a technical default and on this ground the claim of exemption cannot be denied particularly when the amount had been actually utilized for the construction of residential house and not for any other purpose. The view is supported by the decision of the Jodhpur Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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