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TMI Blog2019 (1) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... at was purchased was a plot of land and not a residential house - Held that:- In this case the assessee has investment the net sale consideration in a plot of land and had advanced money to the builder for construction. This action as per the propositions of the Courts is sufficient compliance of Section 54F of the Act. Mere investment would be enough - AO without any material holds the agreement entered into by the assessee with M/s. Hill View Builders as an afterthought. No investigation is done nor any material contrary to the evidence produced by the assessee is brought on record. Such an action of AO cannot be countenanced. The assessee has discharged the burden of proof that lay on her. The onus shifted to the revenue and this burden is not discharged by the revenue. Thus, we hold that the Assessing Officer was wrong in denying the claim of the assessee for deduction u/s 54F Exemption u/s 54F on the deposit made by the assessee in the Capital Gains Accounts Scheme - Held that:- As decided in the case of ITO vs. K.C. Gopalan [1999 (9) TMI 955 - KERALA HIGH COURT] has taken a similar view that it is not necessary that the very same consideration that is received on sale of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee is an individual and derives income from business, capital gains and other sources. During the year, the assessee sold two plots of land at P.S. Maligore, Dist. Darjeeling, bearing deed no. 12646, measuring 19 kathas for ₹ 95,00,000/- and another plot of land bearing deed no. 12464, measuring 1 katha, for ₹ 5,00,000/-. The total sale consideration received on sale of these two plots was ₹ 1,00,00,000/- (Rs.One Crore Only). The assessee claimed that there was a typographical error in the computation of income, inasmuch as, the purchase of a plot of land was wrongly reflected as purchase of flat. The Assessing Officer disbelieved him on the ground that the alleged mistake that was sought to be rectified was after issual of notice. The said plot of land was purchased for ₹ 32,40,000/-. Enquiries made by the Assessing Officer through the inspector revealed that the plot of land is vacant. After considering the replies of the assessee along with evidence that she had entered into an agreement with M/s. Hill View Builders on 20/06/2014, for construction of phase one of her residential house on this plot in Darjeeling and that she had already paid &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of consideration at ₹ 1,20,87,661/-, u/s 50C of the Act, as against ₹ 1 Crore/-, actually received by the assessee and computed the LTCG at ₹ 68,71,421/-. Aggrieved the assessee carried the matter in appeal without success. The ld. CIT(A) for the reasons given in his order confirmed the order of the Assessing Officer. 3. Further aggrieved the assessee is before us. 4. Before us, the ld. Counsel for the assessee submitted that a) Investment in the plot is evidenced by registered documents and has to be considered as good evidence and cannot be rejected as an afterthought. b) Evidence of the assessee having entered into a development agreement for construction of a house and of having paid the builder/developer ₹ 20 Lakhs/-, cannot be rejected without investigation or collection of contrary evidence. c) Borrowed money can be used for deposit in Capital Gain Account Scheme. d) Value as per Section 50C of the Act, cannot be applied for computing deduction u/s 54F of the Act. He relied on a number of case-law in support of each of the above contentions. Written submissions were also filed. 4.1. The ld. D/R, on the other hand, controver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held by the coordinate bench of ITAT Jaipur in the case of Gyan Chand Batra Vs. ITO (2010) 6 ITR 147. The relevant portion of the order is extracted below: From sub-s. (1) of s. 50C, it is clear that in case the consideration received is less than the value adopted by stamp valuation authority then the value so adopted is to be taken as full value of the consideration for the purposes of 5. 48. Sec. 50C provides a deeming provision for considering the full value of consideration as the value adopted for stamp duty. In modern statutes, the expression 'deem' is used a great deal and for many purposes. It is at times used to introduce artificial conceptions which are intended to go beyond legal principles or to give an artificial construction of a word for phrase, Thus the artificial meaning of full value of the consideration has been given in s. 50C for the purpose of s, 48. One is entitled to ascertain the purpose for creating a statutory fiction. After ascertaining the purpose, full effect must be to the statutory fiction and it should be carried to its logical conclusion and to that end, it be proper and even necessary to assume all those facts on which alone fict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the meaning of full value of consideration is concerned as deeming provision mentioned in s. 50C is for specific asset and for the purpose of s. 48. Hence the assessee is entitled for deduction under s. 54F.-CIT vs. Ace Builders (P) Ltd. (2005) 195 CTR (Born) 1 . (2006) 281 ITR 210 (Born) and CIT vs. Assam Petroleum Industries (P) Ltd. (2003) 185 CTR (Gau) 71 : (2003) 262 ITR 587 (Gau) applied. (Paras 7.3 to 7.5) 13. Considering the facts and circumstances of the case and also applying the ratio of the case laws discussed above, we are of the view that the assessee is eligible for exemption u/s 54 of the Act, if the net sale consideration is invested in construction or purchase of new residential house. In the present case on hand, the assessee has invested net sale consideration for construction of new residential house property. Though, the full value of consideration as defined u/s 50C of the Act is more than the net sale consideration as referred in section 54F(1) of the Act, once the net sale consideration has been fully applied under the provisions of section 54 of the Act, then the deeming consideration as defined u/s 50C of the Act cannot be brought into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net consideration in respect of the original asset which has been transferred and where the net consideration is fully invested in the new asset, the whole of the capital gains shall not be charged under section 45 of the Act. The net consideration for the purposes of section 54F has been defined as 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. In other words, the consideration which is actually received or accrued as a result of transfer has to be invested in the new asset. In the instant case, undisputedly, the consideration which has accrued to the assessee as per the sale deed is ₹ 24,60,000 and the whole of the said consideration has been invested in the capital gains accounts scheme for purchase of the new house property which is again not been disputed by the Revenue. The consideration as determined under section 50C based on the stamp duty authority valuation is not a consideration which has been received by or has accrued to the assessee. Rather, it is a value which has been deemed as full value of consideration f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount: 20.06.204 51,000/- 14.02.2014 800,000/- 18.02.2015 500,000/- 19.02.2015 600,000/- 26.02.2015 250,000/- Total 2,201,000/- The assessee has produced the agreement with M/s Hill View Developers and proof of payment of ₹ 22,01,000/- to the developer as evidence. M/s Hill View Developers have not been examined by the Assessing Officer. No enquiry was made nor efforts made to gather evidence to controvert the stand of the assessee. The evidence filed was not believed. The balance amount was to be paid at the time of handing over of the constructed house. The issue before us is whether on these facts, the assessee is eligible for the claim of deduction u/s 54F of the Act. 7.2. The Hon ble Madhya Pradesh High Court in the case of Sashi Verma vs. CIT, 1997 224 ITR 107 MP, held as follows:- Section 54 of the Act of 1961 only says that within two years, the assessee should have constructed the house but that does not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y itself would not disentitle the assessee to the benefit flowing from Section 54F . In fact, appellate Commissioner has not only taken note of the judgment of the co-ordinate bench of this Court in Sambandam's Udaykumar case (supra), but had also taken note of the judgment of High Court of Madras in the case of CIT v. Sardarmal Kothari [2008] 302 ITR 286 , which was on similar facts as obtained in Sambandam Udaykumar's case (supra) and as such in the instant case, Appellate Commissioner allowed assessee's appeal noting that the appeal filed by the revenue against the order of High Court of Madras before Apex Court in CC Nos.3953-3954/2009 had been dismissed on 06.04.2009. 9. That apart, co-ordinate bench of this Court in Sambandam Udaykumar's case (supra) 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 117 Taxman 538 (CAL.), has opined as follows:- 7. If the assessee has invested sale proceeds in a house, which is being constructed by the third party for her, in our considered view, entitles the assessee for the benefit of the exemption under section 54(1). If the benefit is not given to the assessee, though she has invested the sale proceeds in the house which is being constructed for her, that view may not be in conformity with object behind the provisions. The purpose behind this exemption is that when assessee sells her residential house and if she purchases any new house or acquired the new house from that sale proceeds, the assessee is exempted from the capital gain tax. 7.5. The sum and substance of the propositions laid down by the various High Courts is that, the claim of deduction u/s 54F of the Act is to be allowed if after selling a property, the assessee invests the sale consideration towards purchase of a residential property or for the construction of a residential property though the construction of the house property is not completed within the stipulated period of three years. This view is also supported by the Circular No. 667 issued by the CBDT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of section 54F and other relevant provisions - Held, yes - Whether since money has no colour, all that is required is compliance with condition of investment within specified time for purpose of exemption under section 54F - Held, yes 8.2. This proposition of law was followed by another Bench of the Tribunal in the case of J.V. Krishna Rao vs. DCIT; [2012] 24 taxmann.com 104 (Hyd.). 8.3. The Hon ble Kerala High Court in the case of ITO vs. K.C. Gopalan [1999] 107 TAXMAN 591 (Ker.), has taken a similar view that it is not necessary that the very same consideration that is received on sale of property, as such, should be utilised for construction of new building. 8.4. The Hon ble Punjab Haryana High Court in the case of CIT vs. Kapil Kumar Agarwal [2016] 66 taxmann.com 191 (Punjab Haryana), held that Section 54F nowhere envisages that sale consideration obtained by assessee from sale of original capital asset is mandatorily required to be utilized for purposes of meeting cost of new asset. It held that investment made by the assessee may be sourced other than entirely from the capital gains. The propositions laid down in these case-law, when applied to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce documents, would have only prospective effect. (emphasis supplied) 10.1. From the above, it is clear that the judgment of the Hon ble Supreme Court is prospective and does not affect transactions that have already taken place. As this transaction was executed in the year 2003 and possession was handed over, the judgment in the case of Suraj Lamp Industries Pvt. Ltd. (supra) will not apply as the judgment has come in the year 2012. 10.2. Even otherwise, Section 2(47) of the Act, lays down that transfer would include a transaction allowing possession of an immovable property in part performance of a contract of a nature referred to in Section 53A of the transfer of property Act. In the case on hand, part performance of a contract has taken place and possession has been handed over. Under these circumstances, the claim of the assessee that her 1/4th share in the house property in Gurgaon has been transferred, has to be accepted. Hence we hold that the assessee has only one house property as on the date of sale of the plots of land giving rise to long term capital gain. Hence this issue is decided in favour of the assessee. 11. In view of the above discussion, we are o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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