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TMI Blog2025 (4) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction, before the due date of filing of the return of income u/s. 139(1) of the IT Act, therefore, before the due date of filing of the return of income u/s. 139(1) of the IT Act, therefore erred in confirming the order of the Assessing Officer wherein Rs. 70,00,000/- is disallowed with an assumption that the assessee had not deposited Rs. 70,00,000/- received on account of sale of house property in capital gains accounts scheme. 3. The Learned. Commissioner ought to have appreciated that the requirement of the section is that the assessee is required to purchase one year before or two years after the date of transfer or within a period of three years after that date constructed a residential house, therefore, the assessee satisfied the requirement of section by purchasing a house property within the time provided in section 54, therefore, erred in confirming the disallowance of Rs. 70,00,000/- made by the Assessing Officer. 4. The Learned Commissioner erred in confirming the order of the Assessing Officer where the amount of Rs. 70,00,000/- is disallowed with an incorrect assumption. 5. The appellant craves leave to add to, amend or modify the above grounds of appeal e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have within a period of 3 years after sale of house property, constructed a residential house to be eligible for exemption u/s. 54 or the capital gains arising from the sale of house property, where section 54(2) stipulates that if the amount of capital gains has not been utilized within a year, it has to be deposited in a notified capital gains account. In the instant case, it is clear from the sequence of events that the amount of capital gains which is not utilized by appellant for the purchase of construction of new asset before the date of furnishing the return of income u/s. 139 has not been deposited by him before furnishing the return u/s. 139(1) in a Capital Gains Scheme account. The appellant has not utilized the capital gains arising out of the sale proceeds from the sale of property on 31/10/2015 for investment in the new asset within the due date of furnishing the return. It is to be noted that the appellant has not deposited the sale consideration or the capital gains arising thereof in a notified account at any time before the completion of the construction of the new asset. Therefore, this is a case of non-deposit in Capital Gains Account Scheme and not a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the aforesaid property the assessee and his wife Smt. Indira Reddy, had vide an "agreement to sell", dated 22/06/2015 agreed to purchase a semi-finished Villa No. 53 situated at Village: Tellapur, Ramachandrapuram Mandal, District: Medak, Telangana for a consideration of Rs. 52,60,000/-, Page 36 of APB. Further, the seller/builder, viz. M/s Pranit Projects Pvt. Ltd had agreed to complete the balance construction of the semi-finished Villa No. 53 (supra) in accordance with the specifications annexed with the "agreement to sell" (supra) for an additional consideration of Rs. 1,62,40,000/-. Accordingly, the assessee had agreed for a payment aggregating to Rs. 2,15,00,000/- [Rs. 1,62,40,000/- (+) Rs. 52,60,000/-] to M/s Greenmark Developers Pvt. Ltd. (Formerly: M/s Pranit Projects Pvt. Ltd.) i.e the builder/seller of Villa No. 53 (supra). 9. As is discernible from the submissions filed by the assessee before us, Page 4 of APB read a/w the copy of the "registered sale deed", dated 29.06.2017, Page 47 to 68 of APB read a/w the payment receipts issued by the builder/seller of the Villa No. 53 (supra), viz. M/s Greenmark Developers Pvt. Ltd. (Formerly: M/s Pranit Projects Pvt. Ltd.), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On appeal, the CIT(A) upheld the declining of the assessee's claim for exemption under Section 54 of the Act by the AO, but interestingly he supplemented the latter's view by another reason. The CIT(A) was of the view that as the assessee had out of the amount of Rs. 1.40 Crore that was invested by him in the new residential property during the period 06/06/2015 to 18/11/2015 only made a payment of a sum of Rs. 10,24,645/- to the builder/seller, viz. M/s Greenmark Developers Pvt. Ltd. (Formerly: M/s Pranit Projects Pvt. Ltd.) on 18/11/2015, and there were no further payments till the end of the financial year, therefore, he had failed to satisfy either of the twin conditions for claiming exemption u/s 54 of the Act, viz. (i). constructed a new residential property within a period of 3 years after the sale of his old residential property; or (ii). deposited in a "Capital Gains Account Scheme" (CGAS) the amount of capital gain that was not utilized for the purchase or construction of the new residential house before the "due date" of furnishing of the return of income under Section 139(1) of the Act. Accordingly, the CIT(A) besides approving the AO's view had further based on his af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 capital gain shall not be charged under section 45; 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 reduced by the amount of the capital gain: (2) 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 utilised 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 [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i). towards the purchase consideration of Villa No. 53 (semi-finished); and (ii). towards payment to the builder/seller, viz. M/s Greenmark Developers Pvt. Ltd. (Formerly: M/s Pranit Projects Pvt. Ltd.) for completing the construction of the semi-finished Villa No. 53 (supra) in accordance with the specifications annexed with the "agreement to sell" (supra). Accordingly, as the assessee had within the specified time period made an investment in the aforesaid new residential property, viz. Villa No. 53 (supra) much in excess of the sale consideration of Rs. 72.54 lacs of his old residential house, viz. House No. 10-3-734/3 situated at Vijaynagar Colony, Malleapally, Hyderabad, therefore, we find no reason for declining of his claim of exemption under Section 54 of the Act by both the lower authorities. 17. Alternatively, even if the CIT(A)'s view that the assessee had made investment in construction of the new residential property i.e., Villa No. 53 (supra) is to be accepted, then also there could have been no justification in declining his claim for exemption under Section 54 of the Act. Ostensibly, the CIT(A) had declined to consider the investment that was made by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of another residential house at 64, Surya Nagar, Agra, on March 10, 1963, and that came to be completed within two years of the sale of the Golf Link house and that the capital gains to the extent of being invested in the construction of the Surya Nagar house was not taxable under Section 54 of the Act. The Income-tax Officer, however, took the view that the assessee had started construction of this house prior to the sale of the Golf Link house. He, therefore, rejected the alternative contention too of the assessee. 5. On appeal, the Appellate Assistant Commissioner had agreed with the Income-tax Officer. 6. On further appeal, the Appellate Tribunal reproducing Section 54 in its order found as follows: "A perusal of the above provision will show that it does not lay down that the construction of any house must be begun after the sale of the old residential house and that the sale proceeds of the old residential house must be used for the construction of the new residential house. We are, therefore, of the opinion that the assessee complied with the requirement of Section 54 in respect of the construction of the house at 64, Surya Nagar, Agra, and that he is entitled to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained by the assessee from the original capital asset is mandatorily required to be utilized for the purchase or construction of a house property. Also, a similar view had been taken by the Hon'ble High Court of Punjab & Haryana in CIT Vs. Kapil Kumar Agarwal (2016) 382 ITR 462 (P&H) and the Hon'ble High Court of Karnataka in CIT & Ors. Vs. Shri. K. Ramchandra Rao (2014) 277 CTR 522 (Kar). 19. We, thus, in terms of our aforesaid observations, are unable to concur with either of the grounds based on which the CIT(A) had approved the declining of the assessee's claim for exemption u/s 54 of he Act. Accordingly, not being able to persuade ourselves to concur with the view taken by the lower authorities, we set-aside the order of the CIT(A) and direct the A.O to allow the assessee's claim for exemption under Sec. 54 of the Act. 20. Before parting, we may herein observe, that the Ld. DR's claim that as the assessee as on the date of transfer of the old residential house was an owner of more than one residential property, therefore, on the said count itself he was disentitled from claiming exemption under Section 54 of the Act but, we are unable to consider the same. We, say so, for t ..... 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