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TMI Blog2024 (10) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal: - 1. Whether the CIT(A) was right in fact and in law by deleting the disallowance made u/s. 54 when the construction of residential house was not complete in all respect as required under law. 2. Whether the CIT(A) was right in law in allowing the deduction u/s. 54 if the Act, when assessee was not entitled for the benefit of sec. 54, and when the construction of the property was not complete ad there was no residential house. 3. The assessee, an individual, filed his return of income for AY 2016-17 on 30.03.2017 declaring a total income of Rs. 98,43,820/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The Assessing Officer (AO) during the course of assessment noticed that the assessee had sold a property for a consideration of Rs. 18,70,00,000/- and after claiming deduction towards selling expenses and indexation on cost of acquisition has arrived at a long term capital gain of Rs. 12,81,11,799/-. The AO further noticed that the assessee has claimed exemption u/s. 54 of the Income Tax Act, 1961 (the Act) to the tune of Rs. 12,06,51,057/- and offered the long term capital gain of Rs. 74,60,742/- to tax. The AO als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a residential house. The essence of the said provision is whether the assessee who received the capital gains has invested in a residential house. Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house, even though the transaction is not complete in all aspects and as required under the law, that would not disentitle the assessee from the said benefit. The discussion regarding construction vis-a-vis constructed by the Supreme Court in the case of Giridhar G Yadalam [2016] 65 taxman.com 148 was related to wealth tax and not regarding section 54. Regarding the utilisation of capital gains, it is clear that the appellant has fulfilled the conditions as prescribed for making a claim under section 54 of the Act and hence the disallowance of Rs. 3,86,23,200/- as estimated unutilised portion of capital gains as held by the Assessing Officer cannot be sustained. As a result, the appeal is allowed. Aggrieved, Revenue is in appeal before the Tribunal. 5. The learned D.R. submitted that the Hon'ble Supreme Court in the case of Giridhar G. Yadalam (supra) has considered the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e situations when the land is not to be treated urban land. The Legislature in its wisdom conferred the benefit of exemption in respect of urban vacant land only when the building is fully constructed and not when the construction activity has merely started. On the contrary, if the argument of the assessee is accepted, that would lead to absurd results in certain cases. For example, what would be the position if the construction of the building starts but the said construction is abandoned mid way? If we accept the argument of the assessee, in such a case, assessee would be given the exemption from payment of wealth tax in the initial years and the same benefit would be denied in Page 15 15 the year when it is found that construction was abandoned and, therefore, not complete. It would result in granting of benefit in the previous year(s), though that was not admissible. Such a situation cannot be countenanced. Presumably, because of this reason, the Legislature wanted to treat only that land to be excluded from the definition of 'urban land' at the stage when the building has been fully constructed on the said land. The learned D.R. accordingly argued that the property, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction for the completed portion of the construction at Rs. 3,500/- per sq.ft. to restrict the amount of exemption u/s. 54 to Rs. 2,80,56,000/-. Accordingly, the AO made disallowance of Rs. 3,86,23,200/- being the difference between the value adopted by the assessee and the amount estimated by the AO. The AO did not allow the claim of exemption 54 of the Act also for the reason that the assessee did not submit any bills and contract agreements for the construction. Before the CIT(A) the assessee furnished the construction agreements and other documentary evidences in support of the claim that the money has actual been invested in the construction of the property. The assessee also furnished certificate from BBMP in support of the claim that the house construction is completed. The CIT(A) allowed the claim of exemption u/s. 54 of the Act as made by the assessee and deleted the addition made by the AO by placing reliance on the decision of the Hon'ble Jurisdictional High Court in the case of Sambandam Uday Kumar (supra). 8. The limited issue for our consideration in this appeal is whether the exemption u/s. 54 of the Act can be allowed based on the amount utilised out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arose for making distinction between the land and building for the purpose of wealth tax and for the purpose of exemption. Further, the language in the section is Construction is done with the approval of the authority . Further, in clause (b) language was Such a building has been constructed . As per clause (a), the requirement was the land is occupied by any building. It is on account of said languages, meaning of the word constructed came up for consideration before the Apex Court. Whereas, in the present case, the relevant aspect is that, utilization of the capital gain in construction of a residential house. Such being the basic difference, we do not find that the said decision in case of Giridhar G.Yadalam referred supra would be of any help to the learned counsel for the Revenue. 12. The resultant situation would be that, issue stands covered by the decision of a coordinate Bench of this Court in case of Sambandham Udayakumar (supra). When the issue is already covered by the decision of this Court, we do not find that any substantial question of Jaw would arise for consideration as sought to be canvassed in the present appeal. 13. Under the circumstances, the present appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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