9911796707
TMI Blog2014 (11) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has made the payment on 16.3.2010 - The Assessee was required to get the house and occupancy certificate on/before 1.12.2011 - the Assessee got occupancy certificate of the property on 17.1.2014 - As per Sec. 54 the Assessee is required to get the occupancy certificate within two years but the possession was handed over to the Assessee only on 17.1.2014 - The Assessee submitted documentary evidence before us to show that after purchasing the property there was a civil suit filed by the other parties and Assessee could not start construction and licence for constructing the house was obtained by the Assessee on 16.5.2011. The Assessee's construction was delayed, therefore, Assessee has taken the contention before CIT(A) that though the Assessee has made the payment but the Assessee could not get the possession within three years – relying upon CIT vs. Sadarmal Kothari [2008 (6) TMI 15 - MADRAS HIGH COURT] - in order to get the benefit u/s 54 of the Income Tax Act, the Assessee need not complete the construction of house and occupy the same - If the Assessee has invested the money and the occupancy certificate is got delayed which is beyond the control of the Assessee, then, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naji to Shri Arjun Mangaldas for total consideration of ₹ 81,00,000/- vide sale deed dt. 17.9.2009. The property was in the name of the Assessee. From the sale proceeds, Assessee got Long Term Capital Gains of ₹ 33,60,000/-. The Assessee sold another property bearing Flat no. E-102, Matriz no. 1258, Survey no. 235/1 Taleigao to Shri Shobhit Gupta for sale consideration of ₹ 1,60,00,000/- by memorandum of understanding. The property was in the name of the Assessee and his wife. Thus, the Assessee has received Long Term Capital Gains of ₹ 1,30,62,535/- + ₹ 33,60,000/- totalling to ₹ 1,64,22,535/-. The Assessee and his wife, Smt. Ashwini Ragha planned to purchase a residential property from M/s. Ashraya Real Estate Developers (his own firm). On 16.3.2010 the Assessee and his wife made agreement with M/s. Ashraya Real Estate Developers to purchase flat at Taleigao for total consideration of ₹ 1,75,00,000/-. In the agreement of sale it is clearly mentioned that M/s. Ashraya Real Estate Developers will construct the flat and hand over to the Assessee within 2 years and that M/s. Ashraya Real Estate Developers has applied for conversion of land wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pers to purchase the new Residential property. Q.No, 10. That means you have made agreement with your own firm to purchase residential property. Ans. Yes. As I was already into this field, I thought why I have to invest in others property so I made investment in my own Firm i.e., M/s Ashray Real Estate Developers. Q.No.16. Whether you received the flat from Ashray real estate developers? Ans. No, I have not received the flat till date as it is under construction. Q.No, 17. Whether you received the occupancy certificate till date? Ans. No, I have not received occupancy certificate till date. The entire property was under litigation, so partitioning and sanad of the plot was not possible. Only in 2012 the partition was done and in the same year sanad was given. Because of this construction got delayed. M/s Ashray Real Estate Developers Will complete the construction by march, 2013 and may get occupancy certificate in march,, 2013. Q.No.18. On 07-12-2012, 1 made visit to your site where you proposed to build the flat. Along with me, you and your Chartered Accountant Mr. Shanbhag also visited the spot. In that spot there was no flat, but some construction was going on an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) Shantaben P. Gandhi Vs CIT (Guj) 129 ITR 218 To claim exemption u/s 54, the construction of the new house should be within two years after the transfer of the existing house and not before the date of transfer 3) 28 taxmann.com 286 (Chandigarh - Trib.) [2012] Assessee would not be entitled to deduction under section 54F on her failure to construct new residential property within specified period on plot purchased by her out of sale proceeds of her old property 4) CIT Vs V.R. Desai (Ker) 197 Taxman 52 CAPITAL GAINS 439 Sec. 54F -- Net sale consideration should be deposited in Capital gains account scheme in bank or utilized for construction of house before the due date of filing of return . 5) V.K.S. Bawa Vs ACIT ( ITAT, Del) 53 ITD 232 Property in legatee vests as soon as assent of executor is granted, which may be express or implied -- Mutation not done by Land Revenue authorities is not relevant -- Assessee is owner of property -- 54F claim not allowable since assessee already owns a property 6) Ranjit Narang Vs CIT (All) 317 ITR 332 Capital gains invested in bank and claimed exemption u/s 54F Not utilized within the 3 year period -- Chargeable u/s 45 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ratio of CIT Vs V. R. Desai (Ker) 197 Taxman 52 and V. K. S. Bawa Vs ACIT (ITAT Del) 53 ITD 232 are not applicable in the instant case because the appellant actually started construction of the house property, so he did not need to deposit money in the capital gain account. On the other hand, the appellant has placed reliance on the decision in the case of CIT Vs Sardarmal Kothari Anr. In this case, the Hon'ble Madras High Court upheld the order of the Hon'ble ITAT. Wherein the ITAT decided as under: In order to get the benefit u/s 54F, the assessee need not complete the construction of the house and occupy the same. It is enough if the assessee establishes that the assessee had invested the entire net consideration within the stipulated period . There is no dispute about the fact that in the instant case, the assessee paid entire amount to M/s Ashray Real Estate Developers for the purpose of construction of house, immediately on receipt of sale consideration of old houses, within the period stipulated in S.54. For circumstances beyond the control of the assessee, the construction could not be completed. In my opinion, the, facts of the instant case are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the sale deeds dated 17/09/2009 for ₹ 81.00 lacs. Enclosed find the copy of the sale deed. Annexure -- III. 8. Flat at Cabo Housing Complex at Landscape Town was owned jointly by Shri. Girish Ragha and his wife Smt. Ashwini Ragha and was sold to Shri. Shobit Gupta vide memorandum of understanding dated 01/12/2009 and subsequent sale deed dated 20/12/2010 for ₹ 1.50 crores. Further, amount of ₹ 10.00 lacs was received towards the furniture fixtures hence the total consideration was at ₹ 1.60 crores. Enclosed find the copy of the MOU, possession letter and sale deed. Annexure -- IV. 9. The assessee invested the sale proceeds in purchase of residential house property flat at survey no. 206/10, Taleigao, Tiswadi, Panaji, Goa, from M/s. Ashraya Real Estate Developers and executed agreement to sale dated 16.05.2010 for ₹ 17500000/-. Enclosed find the copy of the agreement. Annexure - V. 10. M/s. Ashraya Real Estate Developers is a partnership firm of Shri. Girish Ragha and his wife Smt. Ashwini Ragha which is engaged in the business of undertaking land developmental work, civil construction etc., on its own. Enclosed find the copy of the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption u/s 54 of the Income Tax Act'1961, claimed by the assessee on the ground that possession of the new residential flat purchased by the assessee was not obtained within 2 years from the date of transfer and also that the assessee has purchased the flat from the partnership firm where he and his wife are the only partner. 6. We reproduce section 54 of the Income Tax Act'1961 as below: 54. [(1)] [Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset [***], being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property (hereafter in this section referred to as the original asset), and the assessee has within a period of [one year before or two years after the date on which the transfer took place purchased], or has within a period of three years after that date constructed, a residential house, then], instead of the capital gain being charged to income- tax as income of the previous year in which the transfer took place, it shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. 7. As noted above the assessee has sold two residential house properties and utilized the capital gain made on the sale of the properties towards purchase of new residential house property. Assessee had appropriated the total capital gain towards the purchase of new house property within six months from the date of sale of the house properties. 8. Although the assesee paid the amount towards the purchase of the residential house property to the developer, but the developer was not able to handover the duly completed flat to the assessee in time due to following reasons which led to delay in completion of the flat. i. Before the execution of the agreement to sale towards the purchase of the flat, the developer had carried out the following: a. Developer had purchased plot no.14, at EDCON PARADISE , Taleigao, Panaji, Goa, on which the developer had agreed to construct the building in which the assessee had booked the flat. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him within two years. 10. Further the clause 7 of the agreement with the developer reads as follows: The VENDOR shall not be liable for delay in delivery of possession of the SAID APARTMENT due to any Act of God, Force Majeur, non-availability of construction material or due to any notice/order/rule of any authority, delay in the issuance of Occupancy Certificate or such other unforeseen circumstances beyond the control of the VENDOR and the VENDOR shall be entitled to such reasonable extension of time as may be necessary to complete the construction of the SAID APARTMENT . 11. As such in all probabilities the constructed flat was supposed to be delivered to the assessee within two years, but due to unforeseen circumstances as explained above there was delay in completion of the flat, which has been completed and handed over to the assessee in January'2014. 12. Further, the assessee purchased the flat from his partnership firm M/s. Ashray Real Estate Developers, which is an independent entity doing its own business and filing income tax return, as the firm had the present project in hand as per the requirement of the assessee and also that the firm is into the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using complex for ₹ 1.60 crore. The flat at Lawande Manor was owned by Shri Girish Ragha and sold to Shri Arjun Mangaldas by sale deed. Flat at Cabo Housing complex was jointly owned by Shri Girish Ragha and his wife Smt. Ashwini Ragha and sold to Shri Shobhit Gupta by sale deed. This fact is not disputed by the AO. The Assessee has invested the sale proceeds in purchase of residential property at Taleigao, Tiswadi, Panaji from M/s. Ashraya Real Estate Developers and executed agreement to sell. M/s. Ashraya Real Estate Developers is a partnership firm of Shri Girish Ragha and his wife, Smt. Ashwini Ragha. M/s. Ashraya Real Estate Developers is engaged in the business of undertaking land development work, civil construction on its own. Assessee has executed agreement with M/s. Ashraya Real Estate Developers for purchase of new residential house and paid all this money to M/s. Ashraya Real Estate Developers. The Assessee has invested ₹ 1,64,22,535/- to purchase a new residential house from M/s. Ashraya Real Estate Developers with the agreement that the house has to be handed over within two years. As per Sec. 54 of the Income Tax Act, Assessee has sold two residential pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction and licence for constructing the house was obtained by the Assessee on 16.5.2011. The Assessee's construction was delayed, therefore, Assessee has taken the contention before CIT(A) that though the Assessee has made the payment but the Assessee could not get the possession within three years. CIT(A), in his order, relied upon the decision of the Hon'ble Madras High Court in the case of CIT vs. Sadarmal Kothari, 302 ITR 286 (Chennai) wherein it is held that in order to get the benefit u/s 54 of the Income Tax Act, the Assessee need not complete the construction of house and occupy the same. If the Assessee has invested the money and the occupancy certificate is got delayed which is beyond the control of the Assessee, then, the Assessee is entitled for deduction u/s 54 of the Act. Moreover, one more decision in the case of CIT vs. R.L. Sood, 108 Taxman 227 (Delhi) wherein it is held that if substantial amount is paid in terms of purchase agreement within the stipulated period, exemption u/s 54 is available even if the premises is handed over after the stipulated period. We find that in the instant case the Assessee has paid the amount within the time but Assessee go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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