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TMI Blog2024 (6) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) / NFAC has given justifiable reasons while deleting the cost of improvement and the Ld. DR could not rebut the findings of the Ld CIT(A) / NFAC by producing any contrary material. In this view of the matter and in view of the detailed reasoning given, the order of CIT(A) / NFAC deleting the cost of improvement in the hands of the assessee is upheld and the grounds raised by the Revenue on this issue are dismissed. Denial of deduction u/s 54 - addition on the ground that the assessee failed to comply with the conditions stipulated in section 54 i.e. he has not completed the construction within three years from the date of transfer of original asset on or before 26.07.2019 - We find the CIT(A) / NFAC in the present case has given a finding that the assessee sold an old asset and realized the consideration and applied the same for acquiring the new asset which is in the nature of residential house, which is evident from the purchase deed filed by the assessee. He has given a finding that the assessee has satisfied all the conditions as stipulated u/s 54 of the Act. Further, we find in the case of spouse of the assessee the claim of deduction u/s 54 of the Act was denied by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be disallowed. The assessee filed the bank statement of Kotak Mahindra Bank held by him bearing Account No.509044010742 and another account No.509044010731 held by his wife Smt. Lata Prakash Pophale. It was explained that he and his wife had paid Rs. 15 lacs each to Shri Ramesh Kondhare on 26.08.2019. 5. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee on the ground that the above transaction does not justify the improvement cost reimbursed to Shri Ramesh Kondhare. According to him, no prudent person will wait for more than three years when there is no such reference in the sale deed. The above said payment, according to the Assessing Officer, was made only after issue of show cause notice which is nothing but an afterthought. He, therefore, held that the assessee has wrongly claimed improvement cost of Rs. 30,42,700/- in the computation of income as against the actual payment of Rs. 19 lacs. He, therefore, disallowed the improvement cost to this extent. 6. So far as the claim of deduction u/s 54 of the Act made by the assessee is concerned, the Assessing Officer noted from the details furnished by the assessee that the Assignment of Leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s. Vision Buildcon and balance amount of Rs. 20,00,000/- had been paid by Shri Ramesh Kondhare, purchaser of the property to M/s.Vision Buildcon. On being asked in this regard, the assessee furnished relevant bank accounts before the AO and submitted that he and his wife paid Rs. 15 lakhs each (total Rs. 30 lakhs) to Shri Ramesh Kondhare on 26/08/2019. However, the AO, being not satisfied with the assessee's reply, held that this claim was an afterthought and accordingly, disallowed Rs. 11,42,700/- being difference in improvement cost claimed by the assessee. In the written submissions uploaded on the ITBA, the appellant had submitted that he along with his wife purchased an old bungalow on 09/05/2011 which was constructed in 1977 and assesses had to get the same renovated, therefore, his wife engaged M/s VISION BUILDCON to get the property renovated. The appellant has contended that the AO failed to appreciate that assessee is the joint owner of the property and cost was borne by his wife also. To support his claim, the appellant has certain documents, which have been considered. The appellant has also pointed out that similar type of disallowance was also made in scrutin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paras of this order. 2. AO has wrongly held that Appellant claimed deduction u/s. 54F of Act. In fact the appellant has claimed deduction u/s. 54 of Act of Rs. 2,26,33,135/- as evident from the ITR and the computation of income filed for AY 2017-18 by appellant. Hence, the AO has wrongly disallowed the deduction u/s. 54F in the case of appellant whereas the deduction claimed was u/s. 54 of Act. 3. Property sold by appellant on 27.06.2016. Appellant purchased an old Bungalow which was constructed in 1977 on 09.05.2011 situated at Anand Nagar CHS, S. No.696/2, CTS No.2/6, Plot No. 475 / Part 6, TP Scheme No. 3, Gultekdi, Pune along with 2 Share Certificates bearing No.6 and 21 in Anand NagarCHS. The appellant got it renovated from M/s. Vision Buildon. Thereafter the renovated residential property (Plot area 3630 sq. ft. and Construction area 3557 sq. ft.) was sold by appellant on 27.06.2016. These facts show that appellant sold a residential house property and not a plot of land. e) Property purchased by Appellant on 29.07.2016 The new property purchased by Appellant was at Plot No.475, Anand Nagar, Sahakar Gruharachana Sanstha which was a residential house. When the said property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nagar CHS. The appellant got it renovated from M/s. Vision Buildon. Thereafter the renovated residential property (Plot area 3630 sq. ft. and Construction area 3557 sq. ft.) was sold by appellant on 27.06.2016. These facts show that appellant sold a residential house property and not a plot of land. Thus, the Appellant on 09.05.2011 purchased an old bunglow which was constructed in 1977. She got the same renovated to make it liveable. She engaged Vision Buildcon to renovate the said property and paid the cost of improvement to the said party. AO failed to appreciate the fact that said residential property was a very old construction and to make it livable the Appellant incurred the Cost of Improvement on said old bungalow. iii) AO failed to appreciate the fact that the husband of Appellant i.e. Sh. Prakash Pophale is joint owner of the said property, therefore, some of the bills were in his name. These facts show that AO wrongly rejected the claim of Appellant towards cost of improvement. In view of the above facts the claim of Appellant towards cost of improvement of Rs. 3,042,400/- is hereby allowed. Since the facts and circumstances, under which disallowance on account of cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,57,78,000/- each and deposited Rs. 68,56,000/- in the capital account. In this way, the assessee had shown LTCG of Rs. 2,26,33,135/- and claimed the same as exempt u/s 54 of the Act on account of investment of sale proceeds of original asset to new residential house property. However, the AO rejected the assessee's claim after reaching at the conclusion that the assessee failed to comply with the conditions prescribed in sec. 54 of the Act i.e. not completed construction within 3 years from the date of transfer of original asset i.e. before 26/07/2019. Upon considering the facts of the case, I am inclined to agree with the appellant's claim. Section 54 of the Act in respect of investment made in the new house cannot be denied. I find force in the contentions made by the appellant Section 54 of the Act is reproduced as under for the sake of clarity:- Profit on sale of property used for residence. 54. [(1)] [Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 7[***], being buildings or [and appurtenant thereto, and being a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset: Provided that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,- (the amount not so utilised shall be charged under section 45 as i the income of the previous year in which the period of three years) from the date of the transfer of the original asset expires; and (the assessee shall be entitled to withdraw such amount in ii accordance with the scheme aforesaid ) 7.3 The only conditions to be satisfied for claiming exemption u/s. 54 are:- 1. the assessee should be an individual or a Hindu undivided family, 2. the capital gain arises from the transfer of a long-term capital asset (original asset) being buildings or lands-appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property 3. and the assessee has within a period of one y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant purchased a new residential property and not a plot of land and claimed deduction u/s 54 (not u/s 54F of Act). AO has wrongly observed that Appellant claimed deduction u/s 54F of Act and disallowed the same. The conditions to be satisfied to claim exemption under section 54 are as under: i) the asset transferred is a residential house; ii) the asset transferred is a long-term capital asset and hence there is a long term capital gain; iii) the asset has been transferred by an individual or a Hindu Undivided Family; iv) the assessee has purchased one residential house in India within one year before or 2 years after the date on which the transfer took place, or constructed one residential house in India within a period of 3 years after the date on which the transfer took place. As discussed above the Appellant furnished the documentary evidences pertaining to this transaction and claimed deduction u/s 54 of Act. Appellant has satisfied all these conditions u/s. 54 of Act. After examination of these documents and the facts of the case, it is clear that Appellant has satisfied all the above conditions and claimed exemption u/s 54 of Act............................. 7.5 Once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is capable of more than one view, then the view which favours the taxpayer should be preferred. Therefore, section 54, being a beneficial provision enacted for encouraging investment in residential houses, should be liberally interpreted. The Hon'ble Supreme Court held that a provision for exemption or relief in a fiscal statute should be construed liberally and in favour of the assessee - Maharajadhiraj Sir Kameshwar Singh v. CIT [1957] 32 ITR 687 (SC). Considering the facts of the case and legal position as discussed above, it is held that the appellant fully satisfied the conditions for availing exemption u/s. 54 of the Act in respect of the long term capital gains on sale of residential property. The AO is directed to allow deduction of Rs. 2,26,33,135/- claimed u/s. 54 of the Act. The ground no. 4 raised by the appellant regarding this issue is allowed. 9. Aggrieved with such order of CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds: 1. On the fads and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee by merely relying on the appellate order passed by the NFAC in the case of Smt. La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Tribunal vide ITA No.566/PUN/2023, order dated 27.06.2023 for assessment year 2017-18 has dismissed the appeal filed by Revenue against the order of CIT(A) allowing the cost of improvement as well as deduction claimed u/s 54 of the Act. Therefore, this being a covered matter in favour of the assessee by the decision of the Tribunal in the case of other co-owner i.e. Smt. Lata Prakash Pophale, order of the CIT(A) / NFAC be upheld and the grounds raised by the Revenue be dismissed. 12. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed by both the sides. We have also considered the various decisions cited before us. So far as the first issue i.e. deletion of addition of Rs. 11,42,700/- is concerned, we find the Assessing Officer disallowed the claim of cost of improvement to the extent of Rs. 11,42,700/- out of total amount of Rs. 30,42,700/- on the ground that the assessee has made payment of Rs. 19 lacs to M/s. Vision Buildcon whereas the amount of Rs. 20 lacs was paid by Shri Ramesh Kondhare, the purchaser of the property to M/s. Vision Buildcon. According to the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given a finding that the assessee sold an old asset and realized the consideration and applied the same for acquiring the new asset which is in the nature of residential house, which is evident from the purchase deed filed by the assessee. He has given a finding that the assessee has satisfied all the conditions as stipulated u/s 54 of the Act. Further, we find in the case of spouse of the assessee the claim of deduction u/s 54 of the Act was denied by the Assessing Officer and in appeal the CIT(A) / NFAC allowed the claim of the assessee. We find on appeal by the Revenue, the Tribunal vide ITA No.566/PUN/2023, order dated 27.06.2023 for assessment year 2017-18 has dismissed the appeal filed by the Revenue by observing as under: 3 The AO noted that assessee failed to file explanation to justify cost of improvement and deduction claimed u/s. 54F of Act. The bills for cost of improvement uploaded by the assessee relates to construction of bungalow and not for cost of improvement. Some of the bills are in the name of her husband. Therefore, the AO disallowed the cost of improvement of Rs. 30,42,000/- and also disallowed the claim u/s. 54F of Act as the assessee had two other residenti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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