9911796707
TMI Blog2019 (5) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... eld by the AO. Since, the case pertains to construction, benefit of section 54 of the Act are available to assessee. The booking of bare shell of a flat is a construction of house property and not purchase, therefore, the date of completion of construction is to be looked into which is as per provision of section 54 therefore, the CIT(A), has rightly directed the AO to allow benefit to the assessee as claimed u/s.54 which does not require any interference on our part, hence, we uphold the action of the CIT(A) on the issue in dispute and reject the ground raised by the Revenue. Disallowance of deduction u/s.54EC - scope of provisions of latest amendments made to section 54EC by the Finance Act 2014 - AO had restricted the deduction claimed u/s.54EC in part - HELD THAT:- This is to be understood that the restriction of 50,00,000/- in a financial year was placed for evenly distributing the invest into the capital gains bonds on continued basis throughout the year. Therefore, the alternative was put into operation were in the capital gain bonds are available on tap throughout the year without stopping but the limit of investment has been capped to 50,00,000/- per assessee per financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing the said house on 10.02.2006 only. 2. The Ld. CIT(A) has erred in deleting the addition of ₹ 50,00,000/- on account of exemption u/s. 54EC of the Act without considering the date of purchase of REC bonds. 3. The Ld. CIT(A) has erred in deleting the addition of ₹ 14,07,474/- without considering the facts that as per para 8(v) in lease deed of M/s DT Cinema, the assessee has received maintenance charges as income in disguise. 4. The appellant craves leave to add, alter or amend any / all the grounds of appeal before or during the course of hearing of the appeal. 2. The brief facts of the case are that the assessee company filed its return on 01.08.2012 declaring an income of ₹ 72,38,440/-. The case was selected for scrutiny under CASS. Notice u/s. 143(2) of the Income Tax Act, 1961 (in short "Act") was duly served upon the assessee. Subsequently, notice u/s. 142(1) of the Act alongwith questionnaire was issued on 28.8.2014. In compliance to notices, the AR of the assessee attended the hearing from time to time and furnished the written submissions and required details as called for. The Assessee is individual lady. The assessee declared income from hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt dated 10.2.2006 and therefore the date of agreement be treated as the date of acquisition and which falls beyond the period of one year prior to the date of transfer prescribed under section 54 of the Income Tax Act, following the judgment of Hon'ble Delhi High Court in the case of Gulshan Malik vs. CIT in ITA No. 55 of 2014 and CIT vs. RL Sood (2008) 109 taxman 227/245 ITR 727 (Delhi), which does not need any interference. She further stated that AO made the disallowance of ₹ 50,00,000/- u/s. 54 of the Act as against the deduction claimed by the assessee amounting to ₹ 1,00,00,000/- following the decision of the ITAT, Jaipur Bench in ACIT Circle-2 vs. Sh. Raj Kumar Jain Sons HUF, January 31, 2012 as per the details in the impugned assessment order dated 4.2.2015, hence, requested to cancel the order of the Ld. CIT(A) on the issue in dispute. She further stated that AO has rightly observed that addition of ₹ 14,07,474/- in the rental income of above said amount on the grounds that the assessee has received ₹ 646412/- from the tenant M/s DT Cinema Ltd.; add maintenance charges as per 8v of the Lease Deed; allowing deduction therefrom of 30% on account of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty was a long-term capital asset, the Assessee claimed benefit of indexation whereby the indexed cost of acquisition was arrived at ₹ 79,12,653/- resulting in capital gains of ₹ 5,20,87,347/-. Against the same, the Assessee claimed exemption u/s 54 of the Act of ₹ 3,00,26,154/- towards the amounts paid to M/s DLF towards construction of house at DLF Magnolias Golf Links, and a further sum of ₹ 1,10,19,424/- towards bank charges and cost of improvement on the same. It may also be stated at this juncture that the above amounts were paid to M/s DLF in pursuance of an agreement dated 10.02.2006. 2.4. Further, the Assessee, on 31.01.2012 also purchased eligible bonds u/s 54EC of the Act worth ₹ 50,00,000/-, and further, on 31.05.2012, also purchased additional eligible bonds u/s 54EC of the Act worth ₹ 50,00,000/-. 2.5. It may also be stated here that during the relevant year, the Assessee had received a sum of ₹ 64,64,112/- from M/s D.T. Cinemas, in terms of lease deed dated 29.10.2004, which amounts were duly offered to tax. However, the AO observed that the terms of the lease deed require payment of ₹ 12/- per sq. ft. as mainte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted and furnished with all the necessary amenities, which was offered only as on 31.10.2013, possession of which was duly taken and is not disputed, and this period is within three years of sale of the original asset. 3.3. However, the AO has contended that the present is a case of purchase of new asset, which purchase, as per the AO, was carried out on 10.02.2006, which is the date of entering into the agreement with M/s DLF, and therefore, the period mandated for purchase u/s 54 of the Act (one year before or within two years of sale) was alleged to have been violated, thereby disentitling the Assessee to claim the subject exemption. 3.4. In this regard, the Assessee, at the outset wishes to contend that the present is a case of construction and not purchase. In support of this proposition, the Assessee places reliance on the Circular No. 672 dated 16.12.1993 whereby it has been clarified that schemes of allotment and construction of flats / houses similar to that mentioned in Circular No. 471, dated 15.10.1986 will be treated as cases of construction of new asset and not purchase. 3.5. In this regard, the findings of CIT(A) are relevant, which read as under: "In the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid finding as well as the case laws and CBDT Circular discussed therein, we are of the view that booking of flat with the builder has to be treated as construction of flat by the assessee and hence period of three years would apply for construction of new house from the date of transfer of long term capital asset. Therefore, the Ld. CIT(A) has rightly allowed the exemption u/s 54 of the Act, because in the present case also the flat booked with the builder by the assessee has to be considered as a case of construction of flat... " 3.8. Therefore, the Assessee submits that it cannot be denied that the Assessee has constructed the new asset, within the meaning thereof under section 54, and therefore, the consequent timelines would necessarily follow. 3.9. The Assessee submits that once it is accepted that it is a case of construction of new asset, the only objection of the AO remaining is that the construction of the same was commenced before the sale of the original asset. In this regard, the Assessee wishes to draw the attention of this Hon'ble Tribunal to the clear language of section 54 of the Act, which makes it clear that in case of construction, no requirement exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as immaterial that the construction of the new building was started before the sale of the old building. We fully agree with the view taken by the Karnataka High Court. The Appellate Tribunal was right in holding that capital gains arising from the sale of the Golf Link house to the extent it got invested in the construction of the Surya Nagar house, will be exempted under section 54 of the Act. " 3.12. The finding of the Hon'ble Tribunal in the order under appeal in the above referred case has also been reproduced in the judgment, as under: "A 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 and that the sale proceeds of the old residential house must be used for the construction of the new residential house. We are, therefore, of the opinion that the assessee complied with the requirement of section 54 in respect of the construction of the house at 64, Surya Nagar, Agra, and that he is entitled to the exemption out of the capital gains from the sale of the house at Golf Link to the extent of the cost of construction of the house at 64, Surya Nagar, Agra. We, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 54 of the Act. 4. CLAIM U/S 54EC IS ALLOWABLE 4.1. The relevant facts regarding this claim are that against the capital gains arising out of sale of the residential house on 21.12.2011, as detailed above, the Assessee purchased eligible bonds of the Rural Electrification Corporation ('REC') worth ₹ 50 Lakhs on 31.01.2012 vide No. 0900848, and worth ₹ 50 Lakhs on 31.05.2012 vide No. 0912416. 4.2. Before addressing the merits of the instant claim, the Assessee first wishes to draw the attention of this Hon'ble Tribunal to the amendment brought into section 54EC of the Act by way of the Finance Act, 2014, whereby a second proviso was inserted in the said section, which reads as under: "Provided further that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer or one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. " 4.3. The Notes on Clauses appended to the Finance Act, 2014 explain the proviso, which, to the extent relevant, read as under: "Clause 23 of the Bill seeks to am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insert a proviso in sub-section (I) so as to provide that the investment made by an assessee in the long-term specified asset, out of capital gains arising from transfer of one or more original asset, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years. '' 4.5. The purport and meaning of the above amendment qua the claim of ₹ 1 Crore u/s 54EC was examined by the Hon'ble Madras High Court in the case of CIT v. C. Jaichander, reported as [2015] 370 ITR 579 (Madras), wherein, after referring to the provisions of the Finance Act, 2014 and above-referred notes on clauses and the memorandum issued by the Board, it was held as under: "10. The legislature has chosen to remove the ambiguity in the proviso to Section 54EC(1) of the Act by inserting a second proviso with effect from 1.4.2015. The memorandum explaining the provisions in the Finance (No.2) Bill, 2014 also states that the same will be applicable from 1.4.2015 in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessee submits that the instant addition is completely devoid of any factual basis and has been made by the AO based solely on conjectures and surmises. 5.2. The Assessee submits that the AO has placed reliance on the clause 8(v) of the lease deed, which has been reproduced in the assessment order, whereunder the lessee was required to pay monthly maintenance charges at the prescribed rate (₹ 12/- per sq. ft. per month) and has observed that the presence of this clause in the rent agreement was sufficient to make the addition of the amount arrived at in terms of the stated rate. However, the AO failed to consider in the proper perspective the complete terms of the lease deed whereby clause 1 (c) of the lease deed was not considered in the right context which recorded that the maintenance tasks were handed over by the lessor (Assessee) to M/s DLF Services Ltd. and therefore no question arose of the Assessee receiving such amounts. The AO also failed to consider in the right spirit the confirmation letter dated 29.01.2015 received from the lessee, i.e. M/s DLF Utilities Ltd., which stated as under: "This is confirmed that We, M/s DLF Utilities Limited, have made p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the sale of property at 146, 1st floor Jorbagh, New Delhi on 28.12.2011 on which he claimed deduction u/s 54 amounting to ₹ 4,00,97,217/-. However, the AO disallowed the claim on the grounds that the assessee had entered into an agreement dated 10.02.2006 and therefore the date of agreement be treated as the date of acquisition, which falls beyond the period of one year prior to the date of transfer prescribed under section 54 of the Income-tax Act, owing the judgment of Honorable Delhi High Court in the case of Gulshan Malik Vs. in ITA no. 55 of 2014 and CIT vs R.L.Sood [2008] 109 taxman 227/245 ITR 727 Delhi), he disallowed the claim of the assessee. According to Assessing officer, the assessee could have purchased a house property between 28.12.2010 to 28.10.2011 in order to claim deduction under section 54. Since the assessee invested in the residential House property namely DLF Magnolia way back in F.Y. 2005-06 which is clearly outside the time period mentioned in section 54 of the Income-tax Act, it does not fit in case of exemption under section 54 of the Act. The Assessing officer placed reliance on the judgement of Honorable High Court at Delhi in the case of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the Competent Authorities and the six months period for completing the interiors, in terms of agreement shall commence from 01.01.2012 and is to be completed before 30.06.2012. Builder Company's letter dated 20.03.2012 and 20.01.2012 offered to finalise the details of interiors and extended the time for completion of interior to 30.09.2012 and finally possession was granted on 30.10.2013. It has therefore to be considered as a case of construction of new residential house and not purchase of a flat. Since the flat has been allotted to the assessee by the builder who would fall in the category of other institutions mentioned in the circulars, it has to be taken as a case of construction of the residential flat and not as a purchase of a residential flat. Therefore, he had time window of three years period available to him commencing from 21.12.2011 till 21.12.2014 to construct a house property. Having come to this conclusion that it is case of construction it is now to be seen if the assessee fulfils the conditions laid down under s. 54(1) of the Act. In the instant case, the assessee has occupied the house property during 2013 vide letter dated 30.10.2013 offering occu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement with the Builder Company, within Six months from the date of certificate of occupation from the competent Authorities, this is to be treated as the case of construction. Further, the construction has been completed within three years of the sale of original asset, which is accepted by the Assessing Officer, the relief under section 54 is genuinely claimed by him and therefore, disallowance made under section 54 amounting to ₹ 4,00,97,217/- needs to be deleted. It is it is clear that the facts of the present case that it was a case of construction of flat and not purchase of flat as held by the AO. Since, the case pertains to construction, benefit of section 54 of the Act are available to assessee. In view of above, the booking of bare shell of a flat is a construction of house property and not purchase, therefore, the date of completion of construction is to be looked into which is as per provision of section 54 of the I.T. Act., therefore, the Ld. CIT(A), has rightly directed the AO to allow benefit to the assessee as claimed u/s.54 of the I.T. Act, which does not require any interference on our part, hence, we uphold the action of the ld. CIT(A) on the issue in disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder:- "The legislature has chosen to remove the ambiguity in the proviso to Section 54EC(1) of Act by inserting a second proviso with effect from 1.4.2015. The memorandum explaining the provisions in the Finance (No.2) Bill, 2014 also states that the same will applicable from 1.4.2015 in relation to assessment year 2015-16 and the subsequent years. The intention of the legislature probably appears to be that this amendment should be for the assessment year 2015- 2016 to avoid unwanted litigations of the previous years. Even otherwise, we do not wish to read anything more into the first proviso to Section 54EC (1) of the Act, as it stood in relation to the assessees. The Honorable High court has further observed and underlined as under; "In any event, from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the appellant cannot be denied. It would have made a difference, if the restriction on the investment in bonds to ₹ 50,00,000/- is incorporated in Section 54EC(1) of the Act itself. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re totally different footings and facts, which are not relevant to the instant appeal. The cases pertain to the allowablity of certain deductions on income from House property. Whereas, in the instant case, the Assessing Officer as presumed that the assessee is in receipt of certain amount towards the provisioning of certain services which have not been disclosed which is patently false and based on his own conjecture and surmises, and without fully appreciating records and explanations placed before him. Further, the Assessing Officer has not made any inquiry or undertaken any exercise to prove the evidences / confirmations placed before him to be incorrect or false. He had in his written submissions dated 29.01.2015 stated that he had only received the monthly rental of the premises as per details attached with the bank statement and had further supported, by means of a confirmation from the tenants namely DLF Utilities Limited which reads as under; "This is confirmed that We, M/S DLF utilities Limited, have made payment of rent under the lease agreement to the owners (i.e. Akshay Sobti, Pradeep Sobti and Seema Sobti) as per TDS certificates already issued to them and no o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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