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TMI Blog2016 (3) TMI 1436X X X X Extracts X X X X X X X X Extracts X X X X ..... firming the action of the A.O. and denying the claim of the appellant u/ s 54F by holding that such exemption u/ s 54F is available for only one residential house purchased or constructed. 2. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in denying the claim of the appellant u/s 54F amounting to Rs. 62,60,601/- in respect of residential house constructed at Parsik Hill Property on the contention that the said property was not in a habitable condition. 3. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in assessing the agricultural income earned by the appellant amounting to Rs. 1,82,390/-, as income under the head "Income from Other Sources"." 3. The brief facts of the case are that the assessee is an individual and derives income from business and long term capital gains on sale of plots. During the course of the assessment proceedings before the AO u/s 143(3) read with Section 143(2) of the Act, it was observed by the A.O. that assessee has sold two landed properties viz. 1) Nevali land and 2) Palidevad la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reiterated the submissions before the CIT(A) as were made before the A.O. and submitted that the assessee had invested a sum of Rs. 62,60,601/- on construction of new residential house at Parsik Hill, Belapur and also made an investment of Rs. 25,79,278/- in another residential flat at N.R.l Complex, Nerul and, thus, he utilized the net consideration for investment in two residential properties. The assessee submitted that the A.O. wrongly interpreted that benefit u/s 54F of the Act is available for one residential house whereby the AO erroneously allowed deduction for only one residential house, whereas Section 54F of the Act uses a term "a residential house" which could be equivalent to word 'any': In his support the assessee relied upon the following judicial decisions:- (i) CIT v. Smt. K.G. Rukuminiamma, (2011)196 Taxman 87 (Kar) (ii) CIT v. Gita Duggal (2013)30 taxmann.com 230 (Delhi HC) (iii) K.G. Vyas, 16 ITD 195(Bom-Trib) (iv) Shiv Narayan Choudhari, (1981)108 ITR 104 (All) (v) B.B. Sarkar, 132 ITR 150 (Cal) (vi) Col. H.H. Sir Harinder Singh, 83 ITR 416 (vii) Fulwanti C. Rathod v. ITO, Mumbai Tribunal. The CIT(A) observed that the assessee is claimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and common ration card, thus, the reasoning behind Tribunal's decision was common use of several flats. In the course of appellate proceedings before the CIT(A), the assessee was asked to furnish the appropriate evidences that residential house property at Parsik Hill, Belapur constructed by him was in livable condition. The assessee submitted that merely because the construction was not complete in all respect and it was not in a fit condition to be occupied within the period stipulated would not disentitle him for claiming the benefit u/s. 54F of the Act. It is also submitted that once the assessee demonstrates that the consideration received on transfer has been invested even though the transactions are not complete in all respect and as required by law that would not disentitle the assessee from availing benefits u/s 54F of the Act. In support of assessee's contention, he relied on the decision of the Hyderabad Tribunal in the case of Narasimha Raju Rudra Raju v. ACIT (2013) 35 taxmann.com 90(Hyd. Trib.) and also decisions of Hon'ble Karnatka High Court in the case of CIT v. Sri Sambandam Udaykumar (2012) 19 taxmann.com 17(Kar.HC), decision of Hon'ble Delhi High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that before the sale of two properties, the assessee did not own any residential house. The assessee's contention that construction of Parsik Hills, Belapur were completed within three years as required u/s 54F of the Act and in November, 2007, the second residential property at NRI Complex, Nerul was purchased. The assessee stated before us that the he did not own any other residential property prior to acquisition of the afore-stated two new residential properties. The assessee also reiterated the submissions as was made before the authorities below and the same are not repeated for the sake of brevity. The ld. Counsel for the assessee relied upon the following decisions: (i) Rajesh Keshav Pillai v. ITO( Mumbai-Tribunal in ITA No.6661/M/2009. (ii) CIT v. Dr R Balaji (Hon'ble High Court of Karnatka in ITA No 109/2013) (iii) CIT v. Late Khoobchand M Makhija (Hon'ble High Court of Karnatka in ITA No. 496 of 2007) 8. The ld. D.R., on the other hand, relied upon the orders of authorities below. 9. We have considered the rival submissions and perused the material on record including case laws relied upon by both the parties. We have observed that the assessee sold two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and observed that there are marked differences in both the sections 54 and 54F of the Act, whereby Section 54F of the Act stipulates additional conditions to be met for availing the exemption, which inter-alia, provides as under and these conditions are not existing in Section 54 of the Act: (a) Investing net consideration on transfer of capital asset in acquiring or constructing new asset instead of investing capital gains. (b) the tax-payer should not own more than one residential house, other than new asset, on the date of transfer of the original asset or (c) the tax-payer should not purchase any residential house, other than new asset, within a period of one year after the date of transfer of the original asset or (d) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original assets Section 54F of the Act is re-produced hereunder: "[Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.6 54F. (1) 7[Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such new asset is transferred.] 14[(4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a period of one year after the date of transfer of the original asset or construct any residential house other than the new asset within a period of three years after the date of transfer of the original asset and any such conditions does not exist in section 54 of the Act for availing the benefit. Thus, it is clear that assessee shall be entitled for benefit u/s 54F of the Act with respect to only one residential house property and if the assessee purchase or construct another residential house apart from new asset, income of which is chargeable to tax under the head 'income from house property', then on acquisition/purchase of the another residential house within time stipulated under the provisions of Section 54F of the Act, the benefit earlier so granted shall stand withdrawn as per provisions of Section 54F(2) of the Act and the capital gain arising from transfer of the original asset not charged to capital gains u/s 45 of the Act on the basis of cost of such new asset as provided under clause (a) or (b) of Section 54F(1) of the Act shall be deemed to be the income chargeable under the head 'Capital Gains' relating to long-term capital asset of previous year in which such n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been invested in a residential house. The condition precedent for claiming benefit under the said provision is the capital gain realized from sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house.Thus, benefit u/s 54F of the Act cannot be denied to the assessee during the year ending March, 2008 merely because the assessee has not yet completed the entire residential house at Parsik Hills, Belapur while the assessee can complete the house with a stipulated period of three years from the date of transfer of original asset, the deduction cannot be denied merely on the ground that construction is not completed . Our decision is fortified by the decision of Hyderabad- Tribunal in the case of Narsimha Raju Rudra Raju v. ACIT (2013) 35 taxmann.com 90(Hyd. Trib.), decisions of Hon'ble Karnatka High Court in the case of CIT v. Sri Sambandam Udaykumar (2012) 19 taxmann.com 17(Kar.HC) and decision of Hon'ble Karnataka High Court in the case of CIT v. B S Shantakumari (2015) 60 taxmann.com 74(Kar.). The relevant extract from the decision of Hon'ble Karnatka High Court in the case of Mr Samban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 10. A reading of the aforesaid provision makes it very clear that if a capital gain arises from the transfer of any long term capital asset, not being a residential house and the assessee has within the period of one year before or two years after the date on which transfer took place purchased or has within a period of three years after that date constructed a residential house, if the cost of the new asset is not less than the net consideration in respect of the original asset the whole such capital gain shall not be charged under section 45 of the Act. However, if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to be whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration shall not be charged under section 45 of the Act. 11. Section 45 of the Act makes it very clear that any profits or gains arising from the transfer of a capital asset effected in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been held as under: "4. The requirement of the provision is that the assessee, within a period of three years after the date of transfer, has to construct a residential house in order to become eligible for exemption. In the cases on hand, it is not in dispute that the assessees have purchased the lands by investing the capital gain and they have also constructed residential houses. In order to establish the same, the assessees submitted before the CIT(A) several material evidences, viz., invitation card printed for the house warming ceremony to be held on 12th July, 2003. The assessees have also produced the completion certificates from the municipal authority on 30th Jan., 2004. On the basis of the above documents, the CIT(A) concluded that the requirement of the statutory provision has been complied with by the assessees and that was reconfirmed by the Tribunal in the orders impugned." 13. The said Judgment of the Madras High Court has been affirmed by the Apex Court and the appeal was dismissed at the stage of preliminary hearing in CC Nos.3953-3954/2009 decided on 6.4.2009. 14. In the instant case, the material on record discloses that the assessee had invested Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- during the year. Moreover, the assessee could not produce any proof regarding the basic activities such as ploughing, weeding, harvesting etc carried out to claim agricultural income, hence, the A.O. treated the said income of Rs. 1,89,548/- as income from other sources instead of treating the same as agricultural income, vide assessment order dated 27.12.2010 passed by the AO u/s 143(3) of the Act. 11. Aggrieved by the orders dated 27.12.2010 passed by the A.O. u/s 143(3) of the Act, the assessee preferred first appeal before the CIT(A). 12. The CIT(A) by following the decision of his predecessor for the assessment year 2007-08 in assessee's own case confirmed the addition made by the A.O. vide orders dated 29-11-2013. The CIT(A) while adjudicating appeal for assessment year 2007-08 had held as under:- "I have carefully considered the facts of the case, the submissions of the appellant and assessment order. It is not in dispute that assessee is the owner of agricultural land. The contention that the A.O. has raised that the appellant has not produced any evidence to show that the income earned is out of agriculture activity. At the time of appellate proceedings, the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land, the assessee is carrying out agricultural operations directly or through care-taker. No certificate from the revenue authorities to corroborate that the assessee is earning agricultural income from its agricultural land has been filed. 15. We have considered the rival contention and also perused the material available on record. Considering the peculiar facts and circumstances of the issue, we are of the considered opinion that the assessee has failed to bring on record any evidence even in this second round of litigation with respect to the agricultural operations being actually carried out at the agricultural land owned by the assessee. No details regarding procurement of seeds or labour or water for carrying out the agricultural operations has been produced by the assessee even in the second round of litigation. No details were produced with respect to the crop cultivated or produced from the agricultural land even by the caretaker. The Tribunal in ITA No. 6614/Mum/2009 has setaside and restored the matter to the file of the A.O. for de-novo determination of the matter and it is stated before us by the ld counsel of the assessee that the A.O. in compliance to the direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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