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TMI Blog2017 (10) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the assessing authority who after being satisfied with the explanation offered by the Appellant passed the assessment order, the proceedings initiated under Section 263 of the Act is on a mere change of opinion which is not permissible in - law. 4. The learned CIT ought to have refrained from directing the assessing authority to disallow the deduction under Section 54F as claimed by the Appellant in respect of capital gain which was in order. 5. On the facts, the learned CIT ought to have accepted the explanation of the Appellant and refrained from exercising powers under Section 263 of the Act. 6. Without prejudice, the addition as suggested by the learned CIT is excessive, arbitrary and unreasonable and ought to be deleted in toto. 7. For these and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal may be allowed. 3. The assessment in the case of the assessee was completed under Section 143(3) on 1.12.2011 whereby the Assessing Officer determined the total income at Rs. 1,90,010 after allowing the claim of deduction under Section 54 of the Act. Subsequently, on verification of documents furnished during the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive hearing and opportunity to furnish the relevant details to satisfy the CIT that the assessee had complied with the conditions prescribed under Section 54F of the Act. The learned Authorised Representative of the assessee has further pointed out that the assessee invested a sum of Rs. 20 lakhs being advance for purchase of site on 6.7.2009 and finally the site was purchased by sale deed dt.6.5.2010 therefore the investment in purchase of new site was made within the prescribed period under Section 54F of the Act. Further the house was finally constructed in the year 2012 and therefore the assessee is eligible for deduction under Section 54F of the Act. In support of his contention he has relied upon the decisions of various High Courts as well as the co-ordinate bench of this Tribunal as under : (i) CIT Vs. Shakuntala Devi 389 ITR 366 (ii) Prin. CIT & Other Vs. C. Gopalaswamy 384 ITR 307 (iii) CIT Vs. Smt. B S Shantakumari 233 Taxmann 347 (iv) Saraswathy Vs. ITO TS-5263-ITAT-2017 Chennai (v) G. Ramesh Vs. ITO 71 taxmann.com 165 5. On the other hand, the learned Departmental Representative has relied upon the impugned order passed under Section 263 and submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee has purchased a residential property and also deposited in the specific account. Therefore the assessment order suffered from lack of adequate and proper enquiry on this issue. As far as the claim of the assessee regarding investment made in purchase of the site, we find that even if the assessee finally could not construct the new house within the time period specified under Section 54F once the assessee has invested the proceeds of sale of existing asset for the purpose of construction of new house the deduction under Section 54 cannot be denied before as the period of three years has not been expired before passing the impugned assessment order by the Assessing Officer. Therefore to that extent, we do not find any error in the assessment order passed by the Assessing Officer under Section 143(3) while allowing the claim of the assessee under Section 54F of the Act. 7. As regards the claim of deduction under Section 54 in respect of the amount deposited in capital gain account scheme when the assessee has finally constructed the house then the condition of construction of the residential house has to be seen and not the depositing the amount in the capital gain sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u 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 be dealt with in accordance with the following provisions of this section, that is to say, --- (i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in the section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l house or construction thereof. The condition precedent for claiming benefit under said provision is that the capital gains realized from sale of a capital asset should be reinvested either in purchasing a residential house or utilised for constructing a residential building. If it is established that consideration so received on alienation of property has been invested in either purchasing a residential building or spent on construction of residential building, an assessee would be entitled to the benefit flowing from Section 54 of the Act irrespective of the fact that transaction not being complete in all respects. In other words, it has to be examined or discerned from the facts of each case as to whether the assessee had undertaken such an exercise or not? 12. The main purpose of Section 54 of the Act is to give relief in respect of profits on the sale of a residential house. Necessary conditions to be fulfilled for the applicability of Section 54 are:- (i) Assessee should be an individual or a Hindu Undivided Family; (ii) Capital assets should result from the transfer of a long term capital asset; (iii) Capital gain must arise from transfer of building which is char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 9 & 10 as under : "9. That apart, co-ordinate bench of this Court in Sambandam Udaykumar's case referred to supra has examined similar issue and has held that the words used in Section 54F are 'purchased' or 'constructed' and held that the condition precedent for claiming benefit under such provision is the capital gain realized from sale of a Long Term capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. It has also been held that if the assessee has invested money in constructing the residential house, merely because the construction was not complete in all respects or such building is yet to be completed fully or the building not being in a fit condition for being occupied, would by itself not be a ground for the assessee to be denied the benefit under Section 54F of the Act. It has been held by the coordinate bench as under: "The intention of the legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are 'purchased' or 'constructed'. For such pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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