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TMI Blog2013 (10) TMI 776X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for deduction u/s 54F – Decided against the Assessee. - I.T.A. No. 2394 & 2610 /AHD/2012 - - - Dated:- 11-10-2013 - Shri D. K. Tyagi, J.M. And Shri Anil Chaturvedi, A.M.,JJ. For the Appellant : Shri J. P. Shah. A. R. For the Respondent : Shri O. P. Batheja, Sr. D. R. ORDER Per Shri Anil Chaturvedi,A. M. 1. These cross appeals arise out of order of CIT(A)-XVI, Ahmedabad dated 09.08.2012 for A.Y. 2009-10. 2. The facts as culled out from the order of lower authorities are as under. 3. Assessee is an individual who filed her return of income for AY 2009-10 on 27.3.2010 declaring total income of Rs 2,57,080/-. The case was selected for scrutiny and thereafter the assessment was framed u/s 143(3) vide order dated 18.11.2011 and the total income was determined at Rs 1,29,72,360/-. Aggrieved by the order of AO, Assessee carried the matter before CIT(A). CIT(A) vide order dated 9.8.2012 granted partial relief to the assessee. Aggrieved by the aforesaid order of CIT(A), the Assessee is now in appeal before us and has raised the following grounds. 1. The CIT(A) erred in rejecting the claim of deduction u/s. 54F of the appellant of Rs. 58,87,176/- despite the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d converted her plot of land into stock in trade and thereafter constructed flats for sale (2) the intention of the Assessee was to make profit out of sale of extra flats being constructed (3) Assessee had received the advance payments from some of the customers even prior to the commencement of construction (in financial years 2006-07, 2007-08 and 2008-09) (4) AMC had given commencement certificate in the name of the Assessee (5) Assessee had termed the construction as "construction WIP" in the balance sheet for AY 2008-09 (6) the copies of the bills reveal that the bills were in the name of Assessee s family members and therefore it proved that the adult family members were actively engaged in the activity of Assessee of construction business. He thus prepared the trading account and worked out the net profit of Rs 64,32,143/- (working at page 17 18 of the order) and considered it to be income from undisclosed sources and added to the income of the Assessee. He also noticed that the 4 flats retained by the assessee for her own use were on two different floors, independent units and not interconnected and municipal taxes were also levied for each unit separately and therefore ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus, the principle requirement is that at the time of conversion of an asset into stock in trade, some business activity must have been carried on by the assessee. In the instant case, facts available on records, as also admitted by the A O in his narration of facts, clearly indicate that at the time of conversion the appellant was not engaged into any business activity. She was merely a lady owning a residential property, acquired by gift from her father, which was demolished to be converted into a multi storied residential premise. Thus the basic condition enunciated in section 45(2) r w s 2(47)(iv) are not fulfilled and consequently Id A.Os. argument that the same are applicable in appellants case fails. In the case of CIT vs B K Bhaumik 245 ITR 0614, Hon'ble Delhi High Court had held that even though it is true that question whether profit in a transaction has arisen out of adventure in the nature of trade is a mixed question of law and facts, it is equally well settled that the expression " adventure in nature of trade" postulates the existence of certain elements in the adventure, which in law would invest it with the character of trade or business. Further, the question w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. With respect to claim of deduction u/s 54F, the claim of Assessee was negated by CIT(A) by holding as under: 2.10 As far as facts of the present case are concerned, there is no dispute regarding the status of the assessee being an individual. There is also no dispute as the amount of capital gains has been earned, by the assessee on transfer of a long term capital asset not being a residential house, since in this case the long term capital gains has primarily been earned on the transfer of 50% ownership of the land hitherto owned by the assessee. The fundamental controversy however lies in the satisfaction of condition at c) above. As per the I T Act, the assessee claiming deduction ought to have purchased a residential house within a period of one year before or two years after the date on which the transfer takes place. In the present case, there is no occasion of any purchase of residential house. Thus, the appellant case falls in the second limb of the condition i.e. construction of residential house should have been completed within three years from the date on which the transfer takes place. The appellant incidentally does not satisfies this condition also for several r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord, the B U Permission of the building was given by the Ahmedabad Municipal Corporation vide its certificate dated 23-10-2008. Thus, no construction activity was carried out after the said date. As per details / evidences on record, the permission to construct the building was obtained by the appellant from Ahmedabad Municipal Corporation vide their approvals given on 26-07-2006 01-02-2007. Thus, the building under consideration was constructed between the period 01-02- 2007 to 23-10-2008. Consequently, the fundamental conditions of constructing a residential house within three years after the date of transfer is not fulfilled by the appellant. The appellant has actually constructed the building / residential house in a period before the actual date of transfer. Hypothetically assuming that the appellant rests her claim from the date of banakhats or agreement to sale executed with the buyers of flat in 2007. It is seen that Hon'ble Apex Court has categorically laid down in the case of Suraj Lamps, supra that agreements to sale are not to be considered for the purposes of transfers. In the instant case, the ownership and possession of the property i.e. the flat has been given b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant before making the impugned additions. The arguments furnished by the appellant, inter alia, that the old items were reused in the new structure were found to be unsatisfactory. There is no denying the fact that demolition of a bunglow for construction of new structure involves cost. The appellant by not disclosing such cost, in her books of accounts has thus committed the default of not disclosing the true cost of construction. The estimation made by the Id A O, of Rs. 2,,00,000/- on this account has found to be absolutely fair and reasonable. Similarly, there can be no dispute that the demolition of the bunglow resulted in scrap items of the nature discussed by the Id A O in his order. The argument forwarded by the appellant that the same were reused is a totally unacceptable hypothesis since as rightly observed by the Id A O, no person would put old items in a new building. The estimation made by the Id A O, of Rs. 1,00,000/- on this account has also been found to be absolutely fair and reasonable. It is pertinent to note that during the course of current appellate proceedings also the appellant has not been able to bring forth any cogent evidence that could have indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding was constructed between 1.2.2007 and 23.10.2008 and the BU permission was granted by AMC on 23.10.2008 meaning thereby that no construction activity took place after 23.10.2008. For grant of deduction u/s 54F in case of construction of a residential house, the condition is that the assessee has within a period of three years after the date of transfer of long term asset, constructed a residential house. In the present case, since the construction took place prior to the date of transfer, we are of the view that CIT(A) has rightly appreciated the facts and by his well reasoned order held that Assessee is not eligible for deduction u/s 54F. Before us, the Ld. A.R. could not bring any decision of any High Court in support of his contention where it has been held that even the construction of residential house before the date of transfer would be eligible for deduction u/s 54F. Further, the case laws relied upon by the Ld. A.R. are distinguishable on facts. 13. In the case Smt. Tarulata Shyam Ors. vs. CIT (1977) 108 ITR 345 (SC) the H'ble Apex Court has held that there is no scope for importing into the statute words which are not there. Such importation would be, not to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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