9911796707
TMI Blog2015 (6) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... n construction of a property and the fact that provisions of section 54F(1) does not use that expression will not mean money spent for construction of residential property will not be eligible for deduction u/s. 54F of the Act. It is therefore clear that none of the grounds raised by the Revenue in the grounds of appeal has any merit and accordingly the appeal by the Revenue is dismissed. If the money is invested in constructing the residential house, merely because the construction was not complete in all respects and was not in a condition to be occupied within the stipulated period, that cannot be a ground for rejecting the benefit of deduction u/s. 54F to the assessee. The Hon’ble Court in the case of Sambandam Udaykumar [2012 (3) TMI 80 - KARNATAKA HIGH COURT] observed that the essence of the provisions of section 54F is whether the assessee who received the capital gain has invested in the house. Once if it is demonstrated that the consideration received on transfer has been invested in construction of the residential house, then though the construction is not complete in all respects and as required under law, the assessee should be given the benefit of section 54F. A rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deduction u/s. 54F of the Income Tax Act, 1961 (Act). 3. The assessee is an Individual. The assessment year under appeal is Assessment year 2009-10. For the Assessment Year 2009-10 the return of income was filed by the assessee on 30.09.2009 declaring a total income of ₹ 2,09,08,576. The case was selected for scrutiny and assessment was completed U/s. 143(3) of the Act. Following additions were made to the returned income: Returned Income 2,09,08,576 Add : Disallowance of Deduction U/s. 54F 49,27,996 Disallowance of Interest Paid in Computing Long Term Capital Gain 7,82,394 Assessed Income 2,66,18,966 4. In the return of income filed, among others, the assessee had returned gross Long Term Capital Gain of ₹ 1,65,57,000 on sale of shares. This gain arose on account of sale of shares of Musigma Inc., consideration for which was received on 04.09.2008. Out of the above gain a sum of ₹ 49,27,996 was claimed as deduction u/s. 54F on account of investment in residential property. On 21.11.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset. Where the investment is by way of construction, this requirement is not mentioned in section 54F nor is anything prescribed in the provisions about the date of commencement of constructions. This has also been endorsed by the Hon ble Karnataka High Court in the case of CIT vs J. R Subramanya Bhat (1987) 165 ITR 571. The other judicial decisions cited in the context of requirement of registration of transfer deeds support the appellant s grounds. On consideration of the facts and the applicable judicial precedents, therefore, it is reasonably concluded that the appellant s contentions arc correct. The AO is directed to allow the deduction u/s 54F. These grounds, therefore, succeed. 7. Aggrieved by the order of CIT(Appeals), the Revenue has preferred the present appeal before the Tribunal. The grounds of appeal raised by the Revenue read as follows:- 2. The ld. CIT(A) ought to have appreciated that the assessee had failed to fulfil the requisite conditions stipulated u/s. 54F for claiming deduction under the said section. 3. The ld. CIT(A) erred in directing the AO to allow the deduction u/s. 54F when there is no explicit provision regarding investment in constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal would show that there is no merit in the grounds raised by the Revenue in its appeal. Section 54F(1) lays down that any capital gain arising from transfer of long term capital asset, not being a residential house, will be allowed exemption, if the assessee has after the date on which the transfer took place, within a period of three years after that date, constructed residential house, the assessee will be entitled to claim deduction, even after the capital gain is invested in construction of a residential house. It cannot be disputed by the Revenue that the payment made by the assessee to the builder is for the purpose of construction of a residential house. It is pertinent to mention that there is no requirement regarding registration and valid title, as a condition for availing exemption u/s. 54F(1). The purport of the section is investment in construction of a property and the fact that provisions of section 54F(1) does not use that expression will not mean money spent for construction of residential property will not be eligible for deduction u/s. 54F of the Act. It is therefore clear that none of the grounds raised by the Revenue in the grounds of appeal has any meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place, or which is not utilized by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under section (1) of section 139] in an account in any such bank or institution as may he specified in and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit. According to the AO the Assessee failed to fulfill the above required condition, making the Assessee ineligible to claim deduction under section 54F. This objection in our view is also unsustainable. The requirement of the section in the case of utilization of capital gain for construction of house is to deposit the unutilized capital gain in capital gains account before the due date for filing return u/s.139 of the Act. This is clear from the language of section 54F(4) which uses the following expression. capital gain which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for purchase of property before the extended due date under s. 139(4). The contention of the Revenue that the deposit in the scheme should have been made before the initial due date and not the extended due date is an untenable contention. The Gauhati High Court in CIT vs. Rajesh Kumar Jalan (2006) 206 CTR (Gau) 361 : (2006) 286 ITR 274 (Gau) has taken a similar view that the time-limit for deposit under the scheme or utilisation can be made before the due date for filing of returns under s. 139 (4). For the reasons and discussions made above we answer the substantial question of law in favour of the assessee. The appeal is allowed. In the present case the capital gain was utilized by the Assessee on Rs . 08.06.2008 : 56,70,000 03.11.2008 : 16,97,333 12.11.2008 : 12,00,000 85,67,333 The above dates are well within the due date for filing return u/s.139 of the Act, for AY 09-10. The objection of the AO in this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arnataka High Court would show that there is no particular stage of completion of construction that is contemplated. It is not in dispute that the later the construction was completed and has occupied the residential house. In such circumstances, we are of the view that no fault can be found with the order of the CIT(Appeals) allowing benefit of deduction u/s. 54F of the Act to the assessee. 11. For the reasons given above, we do not find any merits in this appeal by the Revenue and the same is dismissed. CO 86/Bang/2015 12. As far as cross objection by the assessee is concerned, the grounds of appeal read as follows:- 2. On the facts and circumstances of the case and the law applicable, the interest on borrowed funds utilized for acquisition of property constituted cost of acquisition and same should have been allowed as such while computing the Long Term Capital Gain on sale of property. 13. The facts and circumstances under which the aforesaid issue arises for consideration are as follows. One, M/s. Concorde Housing Corporation (hereinafter referred to as Concorde Housing ), a developer of residential layout of sites as well as builder, developed housing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Rs. . Sale consideration from Concorde property land 36,81,926 Less: Indexed cost of acquisition 9,90,920 = ₹ 12,01,491 480X 582 Interest paid on borrowing: Rs. 7,82,394 19,83,885 16,98,042 Building Concorde property building 22,14,080 Less: Cost of construction 22,14,080 16. The Assessing Officer accepted the aforesaid claim of the assessee. The only objection of the AO was with regard to claim of assessee for deduction of a sum of ₹ 7,82,394 which was interest paid on borrowing, which was claimed as deduction while computing long term capital gain on sale of land. According to AO, Section 48 provides the mode of computation for charging capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated by the assessee as one holistic transaction routed through a common ledger. The assessee placed reliance on the decision of Hon ble Andhra Pradesh High court in CGT v. Ethirajalu, 93 ITR 366 and the jurisdictional ITAT decision in T.S. Krishnamurthy v. DCIT, ITA No.569/Bang/2012 dated 14.2.14, wherein the concept of possession and the expression held were held to be words not having the same meaning. 18. The CIT(A), however, rejected the aforesaid contention and held as follows:- 8.3 For purposes of considering assessibility under the head of Capital Gains , the interpretation of the word held is much wider than notions of ownership and the Hon ble Supreme Court in the case of CIT vs Podar Cement Pvt Ltd. (1997) 226 ITR 625 held that the owner is the one who effectively controls the property and not merely the one who holds title to the same (emphasis added). In the appellant s case, in spite of the appearance of the sale deed having been registered in respect of land the effective possession and control of this capital asset remained with the Concorde Group, and its possession along with the constructed villa, was handed over to the appellant in FY 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quated to possession as understood in legal parlance. The assessee having acquired title to the land as early as on 21.10.2004 and having sold the land together with Villa under an agreement dated 5.5.2008, it is to be held that the transaction of sale has to be bifurcated as one relating to land and the other relating to building. As far as the transaction of sale of land is concerned, the gain on such sale should be construed as long term capital gain because the assessee held the land for a period of more than 36 months. The conclusions of the CIT(Appeals) that the expression held as used in the definition of long term capital asset in the Act means physical possession, in our view, is erroneous and is not contemplated by the provisions of section 2(42A) of the Act. The law is well settled that when there is a transfer of capital asset being land together with building and where the land is held for a period of more than 36 months and the building held for less than 36 months, the capital gain on land and building has to be bifurcated as one relating to land and the other relating to building. If the land is held for more than 36 months, then capital gain on sale of land has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-term capital assets. In the case of buildings or land, separate deduction is provided under s. 80J(b) of the Act. It is relevant to note when s. 80T grants deduction, it uses the expression both the buildings or land or any rights in building or lands. The question that arises for consideration is whether it is possible to bifurcate the capital gains that arises on the sale of the land and building, when it is sold as one unit. The decision of this Court in Park View Enterprises (cited supra) makes it clear that the Indian law recognises dual ownership of the land and building. The Privy Council in Narayan Das vs. Jatindranath AIR 1923 PC 135 has also taken the view that having regard to the law in India it is possible to have separation of ownership of the building from the ownership of the land. This view of the Privy Council was approved by the Supreme Court in Bishan Das vs. State of Punjab . In so far as the definition of capital asset is concerned, as already seen, the definition of capital asset includes property of any kind and the land held by the assessee is a capital asset and the building held by the assessee is also a capital asset and it is possible to bifurcate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are also of the opinion that where the land having been held for more than a prescribed period, the gains arising from the sale of the land could be considered as a long-term capital gains, though the building thereon was a new construction held for a period less than 36 months. Since the Tribunal has come to the correct conclusion by applying the well settled principles of law, we are of the opinion that no referable question of law arises out of the order of the Tribunal. Therefore, we reject the tax case petition. No costs. 17. We are therefore of the view that bifurcation of capital gain as made by the assessee should be accepted. We, however, desist from making any observations with regard to claim of assessee for deduction of interest paid on borrowings while computing long term capital gain on sale of land, as the same is not subject matter of appeal before us. With these observations, the appeal of the assessee is allowed. 21. It can be seen from the aforesaid order of the Tribunal that the assessee did not raise the issue with regard to deduction of ₹ 7,82,394 which was interest paid on borrowing claimed as deduction while computing long term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
