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TMI Blog2017 (11) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that construction of residential house was started prior to transfer of original asset. This objection is also misplaced when the assessee is entitled to exemption u/s 54F if the residential house is purchased one year before the transfer of the original asset. Therefore, in our considered view merely because the construction was started prior to transfer of original asset, if same is completed within three years of transfer of original asset, would not come into way of entitlement of exemption. Another objection of the AO is that the assessee is having 1/8th share in the commercial land on which the new asset has been constructed. The explanation of the assessee is that by way of settlement the assessee was given absolute rights on the new asset. We are of the view that this claim of the assessee requires verification at the end of the AO. Therefore, we modify the finding of ld. CIT (A) to the extent that AO would verify from other co-owners about the factum of relinquishment of their rights into new asset. If the AO finds correctness into the claim of the assessee, he would allow the entire claim lest he would restrict the same to the extent of 1/8th of the cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction claimed under section 54F of the Act of ₹ 54,12,140/-. Aggrieved by this, the assessee preferred an appeal before ld. CIT (A), who after considering the submissions of the assessee, partly allowed the appeal of the assessee. Now the revenue is in appeal before this Tribunal. 3. Ground No. 1 and 2 relates to allowing deduction u/s 54F of ₹ 54,12,140/- and admitting additional evidence in violation of provisions of Rule 46A of IT Rules, 1962 respectively. 3.1. The ld. D/R supported the order of the Assessing Officer and submitted that the assessee could not satisfy the requirement of provisions of section 54F for claiming the deduction. He placed reliance on the judgment of Hon ble Jurisdictional High Court in the case of Zoraster and Company vs. CIT, (1987) 163 ITR 858 (Raj.). 3.2. On the contrary, the ld. Counsel for the assessee reiterated the submissions as made in the written submissions. The written submissions of the assessee are as under :- 1. There is no dispute to the fact that a residential house was constructed by the assessee. The only dispute is whether a residential house, constructed on a commercial plot is eligible for deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 54F have been found satisfied-It is established that assessee purchased a plot of land and then constructed a residential house on it-House constructed on agricultural land or on other land does not matter, but the fact that house should be constructed-Therefore, order of CIT (A) confirmed- Revenue s appeal dismissed iii. SMT. SUNITA OBEROI vs. INCOME TAX OFFICER (2009) 30 DTR 474 Capital gains-Exemption under s. 54F-Investment in property situated in a commercial block vis-a-vis residential use-When a house is located in a commercial complex, it cannot be accepted that it is a residential house or that it was used for residential purposes, in the absence of any evidence on record in support of user of the house as a residence of the assessee-Assessee has given a different address in her return-If she was really staying in that property, she should have given that address as her home address in the return-No documentary evidence viz., ration card, bank pass book, driving licence, etc. was furnished by the assessee to substantiate her claim- On the contrary, she has been receiving rental income for the same property and it was found that the property was being used o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice issued pursuant to the notice u/s 148, and reproduced in the assessment order framed u/s 143(3) r.w.s. 148 at page 3 has stated as under: a) You have claimed construction of building ( ground, 1st and 2nd floor) on plot no. 3, New Colony, Jaipur having area of 846 sq. yards which was purchased in june, 1990 from one Smt. Nilofar Begum Quareshi, as per sale deed lying on record. As per this sale deed, your share in the land is 1/8th On perusal of the above finding of the Assessing Officer it is very clear that she was the owner of the land with 1/8th portion, on which she had constructed the building, thus the objection raised regarding the ownership of the said residential house stands quashed. 4. As regards the objection of the Assessing Officer that the construction of the residential house had started 7 months before the sale of plot, the assessee humbly submits that, it has held as under by the Hon ble Allahabad High Court in the case of CIT Vs. H K Kapoor [150 CTR 128], Perusal of the above provision will show that it does not lay down that the construction of any house must be begun after the sale of the old residential house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2 Determination ( i) I have duly considered the submissions of the appellant, assessment order and the material placed on record. The brief facts of the case are that during the year under consideration, the appellant has sold a plot of land at Tarruchhaya Nagar and claimed deduction of LTCG u/s 54F, for the construction of 1st and 2nd floors at 3, New Colony, MI Raod, Jaipur. The basement, ground floor and the third floor of the said property are used by the other co-owners for commercial purpose. ( ii) The AO disallowed the claim u/s 54F in respect of 1st and 2nd floors constructed by the appellant for her residential purposes on account of four objection/findings. During appellate proceedings, the AR contested each of the four findings of the AO and placed reliance on a number of judicial pronouncements. These are being discussed as under: AO (1)- The land on which construction was done is a commercial land, no permission for the residential purpose has been given by the JDA. Hence the construction on the 1st the 2nd floors cannot be treated as residential house within the meaning of sec. 54F ( iii) It was the contention of the AR that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be mentioned that the provisions of section 54F mandates the construction of a residential house within the specified period. However, there is no condition that the building plan of the residential house constructed should be approved by the municipal corporation or any other competent authority. If any person constructs a house without approval of a building plan, he will be raising construction at his own risk and cost. In the instant case under consideration, it is an undisputed fact that the JMC approved the building plan of a commercial complex on the land under consideration. The essential requirement for claiming deduction u/s 54F is to see whether a residential house was constructed or not. The AO has not disputed the construction of a residential house by the appellant for which it claimed deduction u/s 54f of the Act. Therefore, in view of the above discussion and the judicial pronouncements of Hon ble ITAT, Jaipur, this ground of AO for rejection of claim of appellant u/s 54F does not hold good. AO (2)-The assessee is the owner of 1/8th portion of land only. Hence construction of 1st and 2nd floors on the entire area of land cannot be treated as in ownership of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership. ( xi) During appellate proceedings, a copy of the purchase deed dated 02.06.1990 of 1/8th share of the plot No. 3, New Colony, Jaipur has been filed which shows that the appellant purchased the property from Smt. Nilofar Begum for a consideration of ₹ 1,99,000/-. This clearly establish the ownership of the appellant over 1/8th share of the plot No. 3, New Colony, Jaipur. Therefore, this ground of AO for rejection of claim of the appellant u/s 54F does not hold good. AO(4) Date of construction is 9.04.2008, and the sale of plot of land is 22.10.2008. Thus the construction has started almost seven months before the sale of original asset, and as per the provisions of sec 54F the assessee is not eligible for deduction. ( xiii) It may be mentioned that as per provisions of section 54F of the Act for claiming deduction, a residential house property is to be constructed within a period of three years from the date of transfer of any long term asset. It may be mentioned that in the case of CIT vs. H.K. Kapoor 150 CTR 128, it has been held by the Hon ble Allahabad High Court that: Perusal of the above provision will show that it does not lay down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the new capital asset, i.e, residential house, is ill-founded and misconceived. The requirement of sub-section (4) is that if consideration was not appropriated towards the purchase of the new asset one year before date of transfer of the original asset or it was not utilized for purchase or construction of the new asset before the date of filing of return under section 139 of the Act, the balance amount shall be deposited in an authorized bank account under a scheme notified by the Central Government. Further, only the amount which was utilized in construction or purchase of the new asset within the specified time frame stand exempt and not the entire consideration received. 14. Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in form of a residential house. Once an assessee falls within the ambit of a beneficial provisions, then the said provision should be liberally interpreted. The Supreme Court in CCE v. Favourite Industries, [2012] 7 SCC 153 has succinctly observed:- 21.Furthermore, this Court in Associated Cement Companies Ltd. V. State of Bihar [(2004) 7 SCC 642], while expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above, discussion it is evident that none of the four objections of the AO for denying exemption u/s 54F is sustainable and thus it is held that the AO was not justified in denying exemption u/s 54F of the Act. Hence this ground of appeal is allowed. The issue of entitlement of benefit of section 54F of the Act would depend upon the facts of each case. In the present case, the assessee is seeking exemption on the ground that it has constructed a residential house. Such benefit of deduction is available if the assessee is in position to demonstrate that all conditions as envisaged in the provision of section 54F have been fulfilled. As per section 54F(1) there has to be a transfer of capital asset referred to as original asset, and such transfer gives rise to capital gain. For availing benefit of exemption from tax, the assessee is required to prove that it has purchased a residential house within one year before or two years after the transfer of the original asset or has within three years after the date of transfer constructed the residential house in India. 3.4. In the present case, there is no dispute so far construction of house is concerned. The objection of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w asset. Ground No. 1 of the revenue s appeal is partly allowed for statistical purpose in the terms indicated hereinbefore. 4. Apropos to Ground No. 2, ld. D/R could not point out the violation of Rule 46A by ld. CIT (A). Hence ground no. 2 of the Revenue s appeal is dismissed. 5. In the result, the appeal of the revenue is partly allowed for statistical purposes. 6. Now we take up the Cross Objection No. 10/JP/2016 of the assessee. The effective ground of the assessee is in respect of confirming the action of the AO in issuing notice u/s 148/147 and re-opening of the assessment. 7. We have heard the rival submissions and gone through the orders of the authorities below. The ld. CIT (A) has rejected the ground of the assessee by observing in para 3.1.2. as under :- 3.1.2. Determination : I have duly considered the submissions of the appellant, assessment order and the material placed on record. In this case assessament u/s 143(3) was made on 14.11.2011 determining total income at ₹ 9,00,540/-. The case was subsequently reopened u/s 147 of the Act and the assessment was completed on 29.10.2014 at a total income of ₹ 63,12,680/-. The appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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