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TMI Blog2015 (9) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... T. Act, various details relating to the assessee's computation of income were called for. Assessee filed the required details. The AO observed that in the computation of total income, assessee has shown long term capital gain on sale of land at Tellapur(V), Ramachandrapura (M) on 15.05.2008 and computed the capital gains at Rs. 1,48,93,906 and has claimed the net long term capital gain as a deduction u/s 54F of the I.T. Act. AO asked the assessee to clarify as to whether the house purchased by the assessee for claiming deduction u/s 54F is complete and fit for occupation within a period of three years from the date of transfer of capital asset or not. In response to the same, assessee filed a letter dated 8.11.2011 stating that the assessee has purchased land and the construction of the house was completed in March, 2011 and that the contractor has handed over the house. It was submitted that the total net sale consideration was invested in acquiring the house and due to various issues, the developer has not completed roads, drainage and water connection and hence assessee could not complete the finishing works. From these details furnished by the assessee, AO came to the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he treated the sum of Rs. 22.00 lakhs as unexplained investment and brought it to tax. Aggrieved by both the disallowances above, assessee preferred an appeal before the CIT (A). The CIT (A), after considering the assessee's contentions at length, has deleted both the disallowances made by the AO. Aggrieved by the relief given by the CIT (A), Revenue is in appeal before us. 4. Learned DR relied upon the order of the AO, while the learned Counsel for the assessee supported the order of the CIT (A). Assessee has also filed a paperbook consisting of the written submissions, bank statement of Mr. I.V. Satish, confirmation letter of Mr.Satish, balance sheet of the assessee and the relevant case law on which the assessee is placing reliance upon. 5. Having regard to the rival contentions and the material on record, we find that the undisputed fact is that assessee has sold a capital asset and has derived long term capital gain thereon. It is also not disputed that the entire net sale consideration has been invested in the construction of a residential house. The only dispute is whether the assessee is eligible for deduction u/s 54F of the I.T. Act, since the house constructed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 45: Provided that nothing contained in this sub-section shall apply where (a) the assessee,- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property." Explanation : For the purposes of this section, "net consideration", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. 10. A reading of the aforesaid provision makes it very clear that if a capital gain arises from the transfer of any long term capital asset, not being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a residential house, merely because the construction was not complete in all respects and it was not in a fit condition to be occupied within the period stipulated, that would not disentitle the assessee from claiming the benefit under section 54F of the Act. The essence of the said provision is whether the assessee who received capital gains has invested in a residential house. Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respects and as required under the law, that would not disentitle the assessee from the said benefit. 12. In fact, Madras High Court had an occasion to consider this aspect in the case of CIT v. Sardarmal Kothari [2008] 302 ITR 286 where it has been held as under: "4. The requirement of the provision is that the assessee, within a period of three years after the date of transfer, has to construct a residential house in order to become eligible for exemption. In the cases on hand, it is not in dispute that the assessees have purchased the lands by investing the capital gain and the ..... X X X X Extracts X X X X X X X X Extracts X X X X .....
7. This ground of appeal of Revenue on this issue is accordingly rejected.
8. As regards the second issue of the addition of the unexplained investment of Rs. 22.00 lakhs deleted by the CIT (A) is concerned, we find that admittedly the sum of Rs. 22.00 lakhs has been advanced by Mr. I.V. Satish to the assessee's wife who has invested the same for purchase of a site. No doubt Mr. Satish is the contractor who has received an advance of Rs. 1.00 crore from the assessee for construction of the building, but as rightly observed by the CIT (A), the sum of Rs. 22.00 lakhs advanced by Mr. I.V. Satish is not to the assessee, but to the assessee's wife, who is an independent assessee. Since the investment made in the site is by the wife of the assessee, as rightly held by the CIT (A), the said amount, if at all is to be brought to tax, it can be only in the hands of the assessee's wife and not in the assessee's hands. Therefore, we see no reason to interfere with the order of the CIT (A) on this issue as well. The ground of appeal of the Revenue on this issue is thus rejected.
9. In the result, Revenue appeal is dismissed.
Order pronounced in the Open Court on 23rd September, 2015. X X X X Extracts X X X X X X X X Extracts X X X X
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