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TMI Blog2015 (5) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... lowable for construction of new asset, i.e. residential house. Further, even if the provisions of section 54F are considered to be applicable to extension of existing house under construction, the allowable claim of exemption has to be restricted to the extent of investment/expenditure incurred in the said residential house subsequent to the transfer of original capital asset under consideration. So far this reasoning is concerned, we find that the AO has allowed deduction without examining this aspect. Contention of the assessee is that the AO had raised a specific query in this regard and after considering the facts, submissions and case-laws allowed the deduction. But no such material is placed on record of this Tribunal that the AO during the course of hearing raised query with regard to claim of deduction of u/s.54 of the Act. Therefore, in the absence of such material, we do not see any infirmity into the finding of ld.CIT that AO failed to examine the aspect of allowability of deduction u/s.54F of the Act. After considering the totality of facts, we deem it appropriate to modify the order of ld.CIT on this issue and restore the issue of allowability of deduction u/s.54F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the cost of acquisition/improvement partly financed through borrowed funds indicated nature of holding of a business asset though shown as fixed asset in Balance sheet. This conclusion without any basis ought to be quashed. It be so held now. 5 Ld. CIT erred in law and on facts in directing AO to disallow claim made by the appellant u/s 54F of the Act since the profit from sale of land was to be treated as business income not capital gain. Ld. CIT notwithstanding the observations that profit from sale of land be treated as business income continued to hold order as prejudicial erroneous to interest of revenue on account of excess claim of deduction allowed by AO u/s 54F of the Act. This dichotomy on part of Id. CIT itself is indicative that correct proper order passed in scrutiny assessment ought not to have been subjected to revision u/s 263 of the Act. It be so held now. 6 Ld. CIT erred in facts and on law in not appreciating the fact that detailed order by AO considering relevant facts and provisions of law not being erroneous and prejudicial to the interest of revenue deserved to be upheld and ought not be subjected to revisional proceedings. It be so held now. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudicial to the interest of the revenue. The ld.CIT erred in law in disallowing the claim made u/s.54F of the Act. The ld.Sr.counsel for the assessee, Shri S.N.Soparkar reiterated the submissions made before the ld.CIT. He submitted that the ld.CIT failed to appreciate the fact that the AO had made elaborate enquiry and applied his mind on the facts and circumstances of the case after applying the mind the AO allowed the claim of the assessee. He submitted that the ld.CIT failed to apply the ratio laid down by the jurisdictional High Court in the case of CIT vs. Arvind Jewellers (2003) 259 ITR 502(Guj.), wherein it has been held that where it is found that the assessee has produced relevant material and offered explanation in pursuance of the notices issued under s. 142(1) as well as s. 143(2) of the Act and after considering those materials and explanation, the ITO has come to a definite conclusion. And merely, because that a different view can be taken should not be the basis for revising the order passed u/s. 143(3) of the Act. Reliance is also placed on the judgement of Hon ble High Court of Gujarat rendered in the case of CIT vs. R.K.Construction Co. reported at 313 ITR 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the order of ld.CIT is contrary to the judgement of the Hon ble Jurisdictional High Court rendered in the case of CIT vs. Arvind Jewellers (2003) 259 ITR 502(Guj.) 3.1. On the contrary, ld.CIT-DR supported the order of ld.CIT and submitted that the AO has not made enquiry with regard to claim of the assessee. He further submitted the claim of the assessee u/s.54F of the Act is not allowable. Therefore, the order of ld.CIT is justified as the assessment order is not only erroneous but prejudicial to the interests of the Revenue. He further submitted that the deduction would be available only when the construction is made subsequent to transfer of the original asset. 3.2. In rejoinder, the ld.counsel for the assessee submitted that the Revenue is not clear whether to treat it as a business income or the gain arising out of the transfer of capital asset. He submitted that both cannot go hand in hand. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT issued a notice u/s.263 of the Act dated 08/08/2013, wherein the ld.CIT called upon the assessee as to why ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income is offered as business income. In fact, assessee obtained relief from the Appellate Authority on the ground that the provisions of wealth tax were not attracted on the said land which had become business asset after conversion into non-agricultural land. (iii) In the year under consideration, the assessee, once again, converted one of his agricultural land holding at Revenue Survey No. 11 1036 of Sevasi, Baroda during the year under consideration (02/04/2009) .since, the said land was reflected under the head 'Agricultural Land' in the Balance Sheet as on 31/03/2009. The assessee also got approval for construction on 20/01/2010. The said land was sold at ₹ 6.01 crore as per sale deed dated 27/01/2010. The payment of ₹ 6.01 crore was received by assessee through cheques dated 25/01/2010. Against the sale proceeds of ₹ 6.01 crore, the assessee has claimed payment of ₹ 1,24,96,320/- as expenditure for cancellation of development agreement with Vaibhav Corporation Pvt. Ltd. As per cancellation of development agreement with Vaibhav Construction Pvt. Ltd. dated 14/02/2008, assessee agreed to pay ₹ 1.30 crore for cost of construction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ₹ 2,58,18,842/- in construction of house because of extended due date for filing of return of income u/s. 139(1) for A.Y. 2010-11. On perusal of copy of ledger account of construction of farm house, Kanchi, it is found that assessee had invested sum of ₹ 27.46.703/- as on 31/03/2007 in the said farm house and such amount invested of ₹ 1,78.43,051.42/;- up to 01/04/2009 and investment in the said farm house up to 31/03/2010 came to ₹ 3,01,53,651.91/-. It is established from the copy of account filed during the assessment proceedings and from the balance sheet as on 31/03/2009 that the farm house was already under construction much before sale of long term capital asset. ₹ 1.78 crore was already invested up to 31/03/2009. This shows that the said asset / residential house was pre-existing and not a new asset constructed / purchased within the period as laid down in Clause (a) (b) of Sub-Section 1 to Section 54 of the Act. As per provisions of section 54F, if the residential house is constructed after the date on which transfer took place then only the deduction u/s. 54F is allowable for construction of new asset i.e. residential house. Further, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee made submissions vide letter dated 12/09/2013 and also made further submissions vide written submissions letter dated 03/10/2013. At the outset, the contention of the assessee is that these written submissions were not considered by the ld.CIT before passing the impugned order. We find that the ground for revising the assessment order as stated in the impugned order is in two folds; firstly, the ld.CIT was of the view that the gain arising out of transfer of land in question ought to have been treated by the assessee as business income as the assessee is engaged in the business of development of land and is a builder and it is further observed by the ld.CIT that in the AY 2009-10, the assessee had himself offered income from sale of non-agricultural land as business income. The said land sold in Financial Year relevant to Assessment Year 2009-10 was originally agriculture land and after conversion into non-agricultural land it was sold and the income was offered as business income. It was observed by the ld.CIT that, in fact, assessee obtained relief from the Appellate Authority on the ground that the provisions of wealth tax were not attracted on the said land which had bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise not available under the facts of the present case. We find that the ld.CIT observed that on verification of case record and the details filed during the course of assessment proceedings, it was found that the assessee has claimed deduction u/s.54F on account of investment in construction of farm house at Kanchi, Sevasi. Total investment in Farm House Kanchi upto 15/10/2010 is claimed at ₹ 4,14,53,677.91. The assessee has claimed decuction to the extent of investment during the period from 01/04/2009 to 15/10/2010 at ₹ 2,58,18,842/- in construction of house because of extended due date for filing of return of income u/s.139(1) for A.Y. 2010-11. It is further observed that in construction of farm house, it was found that the assessee had invested a sum of ₹ 27,46,703/- as on 31/03/2007 in the said farm house and such amount invested amounted to ₹ 1,78,43,051.42 upto 01/04/2009. Investment in the said farm house upto 31/03/2010 came to ₹ 3,01,53,651.91. Investment in farm house from 27/01/2010, i.e. from date of transfer of capital asset to 15/10/2010 comes to ₹ 1,67,42,135/- including cost of land ₹ 34,10,106?- on which house is clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction. But no such material is placed on record of this Tribunal that the AO during the course of hearing raised query with regard to claim of deduction of u/s.54 of the Act. Therefore, in the absence of such material, we do not see any infirmity into the finding of ld.CIT that AO failed to examine the aspect of allowability of deduction u/s.54F of the Act. After considering the totality of facts, we deem it appropriate to modify the order of ld.CIT on this issue and restore the issue of allowability of deduction u/s.54F of the Act to the file of AO for decision afresh. Thus, grounds raised in the assessee s appeal are allowed for statistical purposes. 5. Now, we take up the assessee s appeal in ITA No.1827/Ahd/2014 for AY 2010-11. The assessee has raised the following grounds of appeal:- 1. Ld.CIT(A) erred in law and on facts in dismissing appeal filed by the appellant holding the same to be beyond jurisdiction of appellate proceedings before him. Ld.CIT(A) ought to have considered written submissions; documentary evidence and caselaws relied upon by the appellant and ought to have decided issue under appeal which fell very much under his jurisdiction. It be so held now. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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