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TMI Blog2013 (8) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... HVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER For the Petitioner : Shri Narendra Sharma, Advocate For the Respondent : Shri A. Sundararajan, Jt. CIT(DR) ORDER PER N.V. VASUDEVAN, JUDICIAL MEMBER This appeal by the assessee is against the order dated 03.02.2012 of the CIT(Appeals)-III, Bangalore relating to assessment year 2008-09. 2. The only issue that requires consideration by the Tribunal in this appeal is as to whether the revenue authorities were justified in denying the benefit of exemption to the assessee u/s. 54 of the Act. The facts giving rise to the present appeal are as follows. 3. The assessee is an individual. On 07.05.07 the assessee sold residential flat situated at Embassy Crown, Aga Abbas Ali Road, Bangalore for a sale consideration of ₹ 2,65,00,000. There was a long term capital gain of ₹ 2,34,59,601 on such sale. The assessee claimed exemption of a sum of ₹ 1,22,00,000 u/s. 54 of the Act. Under section 54 of the Act, if an assessee who is an individual, derives long term capital gain from transfer of a long term capital asset, being a residential house and the assessee, (a) within a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date on which the transfer of the capital asset which gives rise to the capital gain has taken place. The second mode of acquisition specified in section 54(1) of the Act is construction of a residential house and the period within which the construction of residential house has to be done by the assessee is within a period of three years after the transfer of the capital asset which gives rise to capital gains takes place. According to the AO, the sale deed dated 4.5.2010 was the document evidencing purchase of the property and since the purchase of the property had taken place two years after the date on which the transfer of the capital asset giving rise to capital gains had taken place, the AO denied the benefit of exemption u/s. 54 of the Act to the assessee. In other words the AO held that the mode in which the Assessee claimed exemption u/s.54 of the Act was purchase of a residential house and not construction of a residential house. 8. The assessee had placed reliance on Board Circular No.471 dated 15.10.1996 and Circular No.672 dated 16.12.1993. The assessee also submitted that as per the agreement dated 12.09.2007 entered into by the assessee with M/s. Century Chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng developed by the developer. The assessee also pointed out that as per the terms of the agreement between the assessee and the developer, the developer agreed to construct a flat to the assessee which is described in Schedule-C of the agreement measuring about 2522 sq.ft. in the 3rd floor. The assessee drew attention to the following clauses in the agreement for sale:- 4. DELIVERY OF APARTMENT (i) The Vendor agrees to construct and deliver the Schedule C Property to the Purchaser as per the specifications contained in Schedule E hereunder and execute the sale deed conveying the Schedule B Property and the Schedule C Property to the Purchaser on or before June 2008, upon the Purchaser performing all the terms and conditions of the agreement and paying the total sale consideration aforesaid to the Vendor. (ii) The Vendor hereby agrees to complete the construction of the residential apartment building and to hand over possession of the Schedule C Property within the period mentioned above under normal conditions and subject to force majeure, availability of cement, steel and other essential items for the construction and also subject to unforeseen events like acts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a flat amounts to construction or purchase for the purpose of section 54. 5.2. From a perusal of the agreement of sale entered into with the builder, it is seen that the flat was purchased on installments. In terms of the agreement (Para 4) the builder committed to execute the sale deed for the property before 30 June 2008, and also agreed to pay a specified penalty in case of delay in handing over the flat to the buyer. The schedule of installments attached to the agreement also mentioned 30 June 2008 as the date for the payment of the last installment, following which only a nonrefundable C posit would remain payable. From the agreement as found above, it is abundantly clear that the full purchase consideration of the flat was to have been cleared by 30th of June 2008. Yet, the AO has clearly brought out in the order that the larger amount of ₹ 65 lakhs was paid in three installments starting March 2010. There was thus a gap of a full two years from March 2008 to March 2010 when no payment was made by the appellant. The agreement itself was signed in September 2007, by which time an advance amount of ₹ 1 lakh had already been paid. The appellant entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he should be deemed to be a constructor of the flat rather than its purchaser, thus claiming the benefit of a threeyear period for the investment. I find that the AO has been within his rights to deny the benefits of section 54 to the appellant. In view of this, these three grounds of appeal do not succeed and they are accordingly dismissed. 15. Aggrieved by the order of the CIT(Appeals), the assessee has preferred the present appeal before the Tribunal. 16. We have heard the rival submissions. The ld. counsel for the assessee reiterated the contentions as were put forth before the CIT(A). Our attention was drawn to the following decisions:- CIT Vs. Smt Bharti C Kothari [2000] 244 ITR 352 (Cal) ACIT, Circle 25(3) Vs. Smt. Sunder Kaur Sujan Singh Gadh [2005] 3 SOT 206 (Mum) Kishore H Galaiya Vs. ITO, Ward 8(2)(3) [2012] 24 taxmann.com 11 (Mum) CIT Anr. Vs. Sambandam Udaykumar [2012] 345 ITR 389 (Kar) CIT vs. Sardarmal Kothari Anr. [2008] 302. ITR 286 (Mad) CIT Vs. Ajitsingh Khajanchi [2008] 297 ITR 95 (MP) Narasimha Raju Rudra Raju Vs. ACIT [2013] 35 taxmann.com 90 (Hyd. Trib) Circular No.471 dt. 15 October 1986 [1986] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial house within a period of three years after the date of transfer of capital asset giving rise to capital gains. The decisions relied upon by the ld. counsel for the assessee clearly support the plea raised on behalf of the assessee. The Hon ble Calcutta High Court in the case of Smt. Bharti C. Kothari (supra) took the view that when an agreement for purchase of a new flat is entered into and the amounts are paid in instalments to the developer and where the entire purchase price is paid within three years from the date of transfer of capital asset giving rise to capital gains, then it is to be held that the capital gain has been invested in construction of a house and the benefit of exemption u/s. 54 of the Act has to be allowed. The Mumbai Bench of the Tribunal in the case of Smt. Sunder Kaur Sujan Singh Gadh (supra) has taken the following view:- Section 54(1) is to be applied in two situations viz., purchase of residential house, and construction of a residential house. The condition laid down in the case of purchase of the residential house is that the house must have been purchased one year prior to the sale of the capital asset or two years subsequent thereto. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of transfer. In the present case, the assessee had booked the new flat with the builder and as per agreement, the assessee was to make payment in installments and the builder was to hand over the possession of the flat after construction. It has therefore to be considered as a case of construction of new residential house and not purchase of flat. This position has been clarified by the CBDT in circular No.472 dated 16.12.1993 in which it has been made clear that the earlier circular No. 471 dated 15.10.1986 in which it was stated that acquisition of flat through allotment by DDA has to be treated as a construction of flat would apply to co-operative societies and other institutions. The builder would fall in the category of other institutions as held by Mumbai Bench of Tribunal in the case Smt. Sunder Kaur Sujan Singh Gadh (supra) and therefore booking of the flat with the builder has to be treated as construction of flat by the assessee. Thus, in the present case, the period of three years would apply for construction of new house from the date of transfer of the old flat. (emphasis supplied) 22. The Hon ble Karnataka High Court in the case of Sambandam Udaykumar ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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