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TMI Blog2013 (6) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... s disallowed the claim of the assessee on the ground that the sale consideration received on transfer of assets has not been utilized in purchasing the plot, AO has disallowed it by observing that the assessee has not purchased a residential house within one year. It is categorical submission of assessee that the assessee has constructed the residential house within the stipulated period of three years as per S.54 and necessary information and evidences were also produced before AO with bank account and letters submitted. In the absence of any material to the contrary brought on record by the Revenue, inclined to accept the assessee's claim that the construction was completed within the stipulated period of three years as per Section 54. In favour of assessee. Method of computation of long term capital gains adopted by AO challenged - restriction of the cost of construction and cost of improvement to Rs.3 lakhs as against Rs. 6 lakhs claimed by the assessee - Held that:- As it is evident from the orders of the revenue authorities that the assessee has not produced enough supporting evidence to prove that she has in fact incurred expenditure of Rs.6 lakhs towards cost of construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under appeal, the assessee filed her return of income declaring total income of Rs.58,839. In the return of income, the assessee while computing long term capital gains claimed exemption under S.54 of the Act towards purchase of plot and construction of house besides deposit in capital gains account scheme. In the course of assessment proceedings, the Assessing Officer, while examining the assessee's claim of exemption u/s. 54 of the Act noted that the assessee has purchased a house bearing No.6-3-1111/14 at Somajiguda, Hyderabad on 8.1.2007 for a cost of Rs.69,61,500 inclusive of registration charges. In response to the query raised by the Assessing Officer, the assessee stated that the property purchased is an open land with old structure, which the assessee intended to dismantle and construct a new house. The Assessing Officer noted that exemption u/s. 54 is available only where the assessee purchases a residential house within a period of one year, after the date of transfer or sale of original asset. The Assessing Officer held that as the assessee purchased only an open plot for construction of a house over it and not a residential house, she is not entitled to claim exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Muneer Khan v. ITO [2010] 41 SOT 504 (Hyd.) (b) J.V. Krishna Rao v. Dy. CIT [2012] 54 SOT 44 The learned Authorised Representative continuing his arguments submitted that the only requirement u/s. 54 is the assessee must purchase a residential house within two years or construct a residential house within three years of the transfer of the original asset. It was submitted that the assessee has invested an amount of Rs.69,61,500 in purchasing a plot for constructing a residential house and has deposited an amount of Rs.64,05,000, in a capital gains account scheme. It was submitted that investment in purchase of plot for constructing a residential house is sufficient compliance for the provision contained u/s. 54 of the Act and in case construction of the residential house is not made within three years, then such income can be charged to capital gains tax only in the assessment year, in which the period of three years expires. In support of such contention, the learned Authorised Representative drew support from the Board Circular No.667 dated 18.10.1983. 8. The learned Departmental Representative submitted that for claiming exemption under S.54 of the Act, the consideration r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the plot. On going through the provisions contained in S.54 of the Act, we could not locate any such precondition/restriction. The only condition imposed under sub-section (1) and (2) of S.54 are- (a) the assessee should within a period of two years from the date of transfer, purchase a residential house or within a period of three years from the date of transfer, construct a residential house, and (b) the amount of capital gains not so utilized shall be kept in a scheme of the Central Government made in that behalf. 11. It is not in dispute that the assessee has purchased a plot of land for Rs.69,51,500 and deposited an amount of Rs.64,05,000 in capital gains account scheme. The coordinate bench of this Tribunal, while dealing with an identical issue of utilisation of money from a source other than the sale consideration received from capital asset in the case of J.V. Krishana Rao (supra), following an earlier decision of the same bench in the case of Muneer Khan (supra) held in the following manner- "9. We heard both the parties and perused the orders of the lower authorities. We have also perused the case-law relied upon by the learned counsel for the assessee. The poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther sources available to it either by borrowal or otherwise, and the assessees are eligible for relief under S.54F of the Act in respect of the entire amount of capital gains so deposited. In the circumstances, we find merit in the contentions of the assessees that inasmuch as they have made deposits of the amounts equivalent to the capital gains realized in the Capital Gains Investments Accounts, even though part of those capital gains have been utilized for other purposes, borrowing amounts equivalent to such utilised funds from Shri J.V. Laxman Rao. The assessees are entitled to relief under S.54F of the Act, as ultimately the assessees deposited the requisite amounts in the Capital Gains Accounts Schemes for exemption under S.54F of the Act within the time stipulated by the statute. We accordingly, set aside the orders of the lower authorities on this issue, and direct the assessing officer to delete the disallowance made by the assessing officer in this regard. Grounds of the assessees in these appeals are consequently allowed." 12. The ratio laid down by the coordinate bench as above squarely applies to the facts of the present case as provision contained u/s. 54 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Considering the totality of facts and circumstances of the case, we are of the view that the assessee is eligible to claim exemption of the amount of Rs.69,61,500 invested in purchase of land under S.54 of the Act. Accordingly, we direct the Assessing Officer to allow the same to the assessee. The grounds raised by the assessee on this aspect, viz. grounds No.2 and 3, are allowed. 15. In ground Nos 4, 5 and 6, the assessee has challenged the method of computation of long term capital gains adopted by the Assessing Officer, and specifically disputed the restriction of the cost of construction and cost of improvement to Rs.3 lakhs as against Rs. 6 lakhs claimed by the assessee. 16. We have heard submissions of the parties on the issue and perused the orders of the Revenue authorities. It is evident from the orders of the revenue authorities that the assessee has not produced enough supporting evidence to prove that she has in fact incurred expenditure of Rs.6 lakhs towards cost of construction and cost of improvement. In such a view of the matter, the allowance of 50% of cost of construction at Rs.3 lakhs is reasonable, and no interference is called for. We accordingly rej ..... X X X X Extracts X X X X X X X X Extracts X X X X
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