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TMI Blog2024 (8) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... dential house, but it only refers to a construction of a residential house, which in our view is the date of completion of the constructed residential house habitable for the purpose of residence. Whether the assessee is entitled for claiming exemption u/s. 54 where the return is filed belatedly u/s. 139(4)? - As relying on C. Aryama Sundaram [ 2018 (8) TMI 864 - MADRAS HIGH COURT] and Manilal Dasbhai Makwana [ 2018 (8) TMI 1244 - ITAT AHMEDABAD] we are of the considered view, the assessee is eligible for deduction u/s. 54 and we hereby direct the AO to grant deduction and delete the addition made by him. Thus the Ground of Appeal raised by the Assessee are allowed. - Shri T.R. Senthil Kumar, Judicial Member And Shri Narendra Prasad Sinha, Accountant Member For the Assessee : Shri Tushar Hemani, Sr. Adv. Shri Parimalsinh B. Parmar, A.R. For the Revenue : Shri Hishikes Hement Patki, Sr.D.R. ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against appellate order dated 31.05.2018 passed by the Commissioner of Income Tax (Appeals)-4, Vadodara arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-). The Assessing Officer denied the benefit of Section 54 as the assessee failed to deposit unutilized amount of capital gain in separate account and also not filed the Return of Income as prescribed u/s. 139(1) of the Act. 4. Aggrieved against the same, the assessee filed an appeal before Ld. CIT(A) who partly allowed the appeal and directing the Assessing Officer to recompute the deduction u/s. 54 by observing as follows: From the documentary evidence, it transpires that investment in residential house which would have taken place after the sale of existing capital asset is to be considered for deduction under section 54F as the investment in residential house would not only include the cost of purchase of the house but also the cost incurred in making the house habitable because an inhabitable premises, cannot be equated with a residential house. If a person cannot live in the premises, then such premises cannot be considered as a residential house. In case of semifinished house, the appellant will have to invest huge money on finishing the house to make it habitable. Therefore, the investment in a house would be complete only when such house becomes habitable. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income belatedly, not appreciating that before filing return of income, money was utilized for appropriate purpose. 2.02 Your appellant therefore prays Your Honor to hold so now and direct the ld. AO to allow exemption. 6. Ld. Senior Counsel Shri Tushar Hemani appearing for the assessee submitted that construction of the new flat have been completed within three years (25.02.2014) from the date of transfer of original asset (09.01.2013). Thus assessee is eligible for exemption u/s. 54 even in respect of investment made prior to the date of transfer of original asset. Thus the date of commencement of construction his irrelevant for the purpose of claim of exemption u/s. 54 of the Act, so long as construction is completed within three years from the date of transfer of original asset . Further the assessee is eligible for exemption u/s. 54 of the Act even in respect of amount of investment in construction made prior to the date of transfer of original asset and placed reliance on the following decisions: Bhailalbhai N. Patel vs. DCITITA 37/Ahd/2014; ACIT vs. Subhash S. Bhavnani - (2012) 23 taxmann.com 94 (Ahd); Kapil Kumar Agarwal vs. DCIT-(2019) 178 ITD 255 (Del); CIT vs. J. R. Sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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; Also, section 54 provides a recourse to the assessee for not purchasing a residential house within the above time frame which says that The amount of the capital gain 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 the original asset took place, or which is not utilized by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139 shall be deposited by him before furnishing such return in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf . 8.2. We found that both the lower authorities have taken a common view that the sale consideration of the old residential house should f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in new asset) under section 139(4) of the Act. It is thus the claim of the assessee before the lower authorities that the assessee complies with the condition placed under section 54B(2) of the Act for the purposes of eligibility of deduction under section 54B(1) of the Act. It is apparently the case of the assessee that the embargo placed under s 54B(2) is that the un- utilized capital gain is required to be invested for acquisition of new asset within the time limit prescribed under s.139 of the Act and therefore the time limit cannot be restricted to what is referred to under section 139(1) of the Act but also extends to encompass extra time limit available under s.139(4) of the Act. 11. We find ourselves in agreement with the case made out by the assessee before the lower authorities as noted above. Section 54B(2) of the Act enjoins that the capital gain is required to be utilized by the assessee towards purchase of new asset before furnishing of return of income under s.139 of the Act. Alternatively, in the event of non-utilization of capital gains towards purchase of new asset, the assessee is required to deposit specified bank account before the due date of filing of retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 74 wherein on an identical facts held as follows: 20. What has to be adjusted and/or set off against the capital gain is, the cost of the residential house that is purchased or constructed. Section 54(1) of the said Act is specific and clear. It is the cost of the new residential house and not just the cost of construction of the new residential house, which is to be adjusted The cost of the new residential house would necessarily include the cost of the land, the cost of materials used in the construction, the cost of labour and any other cost relatable to the acquisition and/or construction of the residential house. 21. A reading of Section 54(1) makes it amply clear that capital gain is to be adjusted against the cost of new residential house. The condition precedent for such adjustment is that the new residential house should have been purchased within one year before or two years after the transfer of the residential house, which resulted in the capital gain or alternatively, a new residential house has been constructed in India, within three years from the date of the transfer, which resulted in the capital gain. The said section does not exclude the cost of land fro ..... 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