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TMI Blog2021 (9) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... inal asset or deposit the same in the account notified by the Central Govt. u/s. 54 - If the assessee failed to do so, he is liable for capital gain on the transfer of capital asset. In the present case, the assessee purchased the residential site and used portion of net sale consideration for construction of new house and not appropriated the balance sale consideration either in investment in construction of residential house or deposit into account notified by the Central Govt. to avail exemption u/s. 54. Hence the assessee is entitled for deduction only to the extent of amount used for purchase of residential site only - Decided partly in favour of assessee. - ITA No.1523/Bang/2019 - - - Dated:- 31-8-2021 - Shri Chandra Poojari, Accountant Member And Smt. Beena Pillai, Judicial Member For the Appellant : Shri V. Srinivasan, Advocate For the Respondent : Smt. H. Kabila, Addl.CIT (DR)(ITAT), Bengaluru ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the revenue is directed against the order dated 12.03.2019 of the CIT(Appeals)-1, Bengaluru for the assessment year 2014-15 on the following grounds :- 1. The order of the Learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restraining the BDA from interfering with possession of the said property was filed by Smt. Padmaja which was rejected by the City Civil Court. Aggrieved, Smt. Padmaja filed a Writ Petition before the Hon ble High Court of Karnataka in WP No.22737/2016 on 3.10.2016 wherein the assessee is made as Respondent No.3 and the matter was pending for disposal before the High Court. After the Court judgment dtd: 05-11-2016 assessee made attempts to obtain the sanction plan and the same was sanctioned by the BBMP on 26-05-2017 after consideration of the necessary formalities. 3. The assessee had claimed exemption u/s. 54 of the Act for having invested the capital gains in the new residential house which was denied by the AO on the ground that capital gains arising out of sale of original asset was not deposited in the Capital Gain Deposit Account. 4. On appeal, the CIT(Appeals) observed that assessee made attempts to obtain a License and a Sanctioned Plan from the Competent Authorities for construction of the residential house on the new Asset being the site purchased from the BDA. However the Appellant was unable to obtain the License and the Plan, in view of a Pending Litigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posited the amount in the Bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct. 5. For the aforesaid reasons both the substantial questions of law are answered in favour of the, assessee and against the Revenue. Therefore, we do not see merit in any of the appeals. Accordingly, all the four appeals are dismissed. 6. On the other hand, the ld. AR relied on the order of the CIT(Appeals) and relied on the judgment of the Hon ble Bombay High Court in CIT v. Girish L. Ragha in ITA No.66 of 2015 dated 17.3.2016 wherein it was held that the sanction of plan was delayed in view of the pending litigation filed by the other parties and thus the Appellant was prevented from fulfilling the condition to avail the benefit of deduction admissible under the Act. Further, in CIT v. K. Ramachandra Rao (supra) , the Hon ble High Court of Karnataka has decided the issue in favour of assessee and against the department observing that if the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utilizing the entire consideration received on the sale of the old property. It meant that the assessee has invested the entire consideration received on sale of the old asset in acquiring/constructing a residential house property. In the special facts and circumstances of the present case, therefore, it was necessary to hold that the amount utilized by the assessee to purchase the land was in fact utilized for acquiring/constructing a residential house. Without purchasing land, house cannot be constructed. The first step should be the purchase of land. That was done. Therefore, the entire amount spent by the assessee in purchasing the land should be construed as amount invested in purchase/construction of residential house. The assessee was entitled for exemption under section 54F as the intention of the statute provided in section 54F had been fully satisfied by the assessee. The expression 'of the nature referred to in section 53A' in sub-clause (v) of section 2(47)( v ) of the 1961 Act, cannot be stretched to refer to an amendment that was made years later in 2001, so as to then say that though registration of a contract is required by the Amendment Act of 2001, yet th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 3[ constructed, one residential house in India ], 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 this 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 period of three years of its purchase or construction, as the case may be, the cost shall be nil ; or ( ii ) if the amount of the capital gain is equal to or less than the cost of the new asset, the capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question No.2 in the same case, in para 4.1, that if such investment is made in the bank account as stipulated in section 54(2) or invested in constructed of new residential house within the stipulated period, then assessee is entitled for deduction u/s. 54 of the Act. If the assessee failed to deposit into the bank account and also failed to construct the new residential house within the stipulated time, then assessee cannot take advantage of its own default so as to claim deduction u/s. 54 of the Act. In the present case, though assessee purchased the residential site and incurred the expenditure of ₹ 1,76,16,279, the assessee failed to deposit the balance amount in the account notified by the Central Govt within extended period due to litigation, hence the assessee is not entitled for deduction to the extent of balance amount which was not invested under an account notified by the Central Govt. In our opinion, deduction under this section is restricted to proportionate amount invested in purchase of new residential site for the purpose of construction of new residential house after sale of the original asset and also amount invested in construction of property. The intent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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