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Rakesh Kumar Kalra A 600, Sector - 46 Noida, Gautam Budh Nagar Uttar Pradesh Vs. The Income tax Officer Ward - 47(3) New Delhi
January, 06th 2020
                                  1


   IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI `A' BENCH,
                         NEW DELHI

       BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER, AND
              SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

                      ITA No. 4647/DEL/2019
                    [Assessment Year: 2013-14]

Rakesh Kumar Kalra                    Vs.     The Income tax Officer
A ­ 600, Sector - 46                          Ward - 47(3)
Noida, Gautam Budh Nagar                      New Delhi
Uttar Pradesh

PAN: AADPK 3694 F

 [Appellant]                                        [Respondent]

                Date of Hearing             : 02.01.2020
                 Date of Pronouncement      : 06.01.2020


                Assessee by :    Shri Bhupinderjeet, Adv

                Revenue by    : Shri Surender Meena, Sr. DR


                                ORDER


PER N.K. BILLAIYA, ACCOUNTANT MEMBER,



     This appeal by the assessee is preferred against the order of the

Commissioner of Income Tax [Appeals] - 16, New Delhi dated

19.03.2019 pertaining to Assessment Year 2013-14.
                                  2


2.   The sum and substance of the grievance of the assessee

is that the CIT(A) erred in confirming the assessment thereby

denying benefit of section 54 of the Income tax Act, 1961

[hereinafter referred to as 'The Act' for short].



3.   Representative of both the sides were heard at length.

Case records carefully perused.



4.   Facts emanating from the assessment order show that

the assessee filed his return of income on 28.09.2013 declaring total

income of Rs. 8.90 lakhs. Return was selected for scrutiny assessment

through CASS and, accordingly, statutory notices were issued and

served upon the assessee. During the course of scrutiny assessment

proceedings, the Assessing Officer noticed that the assessee has

computed his income declaring capital gain as under:


Full value of consideration                             Rs. 1,10,00,000/-


Less : Expenditure on transfer        Rs. 1,05,000/-
Less : Indexed cost acquisition       Rs. 18,50,000/-
Less : Indexed cost of improvement Rs. 40,00,000/-


Capital gain                                              Rs. 50,45,000/-
                                   3


5.   The assessee was asked to furnish the details of claim of

deduction while calculating the capital gain from sale of property.




6.   In his reply, the assessee stated that he, alongwith his

brother who was the co-owner of the property, sold the

property    for   a     consideration   of    Rs.    2.20        crores,   and

accordingly,      the     assessee's    share       out     of     the     sale

consideration was Rs. 1.10 crores.           It was explained that 1%

was paid as commission to the commission agent as transfer

expenses.      It was further explained that the said property

was purchased in the year 2001 for an amount of Rs. 18.50

lakhs and the assessee's share came to Rs. 9.25 lakhs which

was indexed as per the provisions of law and indexed cost

was taken at 18.50 lakhs.        It was further explained that the

said property was completed in F.Y. 2003 and total cost of

construction was Rs. 43.50 lakhs. Taking his 50% share, cost

of construction was taken at Rs. 21.73 lakhs and after

indexation, it was at Rs. 40 lakhs.


7.   The Assessing Officer asked the assessee to furnish details of

expenses incurred towards completion of sold property amounting to

Rs. 21.73 lakhs which was indexed at Rs. 43.50 lakhs.
                                    4


8.   The assessee furnished a documentary evidence in the form of a

document from the Stamp Duty Valuation Authority showing the

minimum cost of construction effective from 01.04.2002 which was Rs.

8000/- per sq. metre. Not satisfied with this evidence, the Assessing

Officer again asked the assessee to substantiate the claim for cost of

construction /improvement with supporting evidences.



9.   On receiving no plausible reply, the Assessing Officer computed

the capital gain from transfer of the property as under:







     "In    such    circumstances       cost    of   construction/

     improvement claimed by the assessee in his computation

     of capital gain is not fully allowable. However, it is

     'observed from the sale deeds of properties that the
     property, when it was purchased           has covered area of

     60.14 sq, motor only and when it was sold it has covered

     area of 439.06 sq, motor, Therefore, this fact cannot be

     denied that the assessee has made construction after

     acquiring the above property. However, In absence of any

     supporting documentary evidences, cost of construction/

     Improvement Is taken as minimum cost of construction as

     per the Government rate, Covered area of sold property

     Is 439.56 sq, meter and minimum cost of construction
                                     5


      prevailing at the time of construction is Rs.8,000/- per

      sq, meter, Therefore, the cost of construction Is

      calculated as Rs.35,16,480/-, for whole of the property,

      Since assessee's share In the property was 50%,

      therefore,    Rs.17,58,240/-       is   taken   as     cost   of

      construction on part of the assessee In the year 2003,

      Thus indexed cost of construction / Improvement for the

      year under consideration comes out to be Rs.32,35,465/-

      which is allowed while calculating capital gain.


      2:6 Therefore, in view of the above discussion, capital

      gain from transfer of the property during the year under

      consideration by the assessee is calculated as under:


      Full value of consideration                          Rs. 1,10,00,000/-

      Less: Expenditure on transfer                        Rs,   1,05,000/-

      Less: Indexed cost acquisition                       Rs. 18,50,000/--

      Less: Indexed const, of improvement                   Rs. 32,35.465/-

                   Capital Gain                          Rs, 58,09,535/-




10.   Proceeding further, the Assessing Officer sought explanation from

the assessee for claim of exemption u/s 54 of the Act.
                                    6


11.   In his reply, the assessee submitted that he has purchased a

property for Rs. 53 lakhs. Copy of purchase deed was furnished. The

Assessing Officer, not convinced, further asked the assessee to justify

its claim of exemption u/s 54 of the Act. The assessee replied that

construction is going on, on the said plot. Accordingly, an Inspector

was deputed by the Assessing Officer for physical verification and in his

report, the Inspector submitted that construction is still going on and is

not yet completed.



12.   The Assessing Officer was of the firm belief that since the

property was sold on 07.05.2012, the assessee should have completed

the construction by 07.05.2015, and since no construction was

completed within three years, the Assessing Officer denied exemption

u/s 54 of the Act and made addition on long term capital gain at Rs.

58,09,535/-.



13.   The assessee carried the matter before the ld. CIT(A) but without

any success.



14.   The first appellate authority dismissed the claim of the assessee

for want of documentary evidence towards cost of improvement/

construction.
                                    7


15.   Before us, the ld. counsel for the assessee vehemently submitted

that the assessee has already invested Rs. 64.74 lakhs towards cost of

construction, which is much higher than the capital gain computed by

the Assessing Officer at Rs. 58.09 lakhs. It is the say of the ld. counsel

for the assessee that even if the computation of the Assessing Officer

is accepted, then also, since the assessee has incurred more than the

capital gains, he is eligible for exemption u/s 54 of the Act.




16.   Per contra, the ld. DR strongly supported the findings of the

Assessing Officer.   It is the say of the ld. DR that the assessee is

supposed to complete the construction of the house within three years

from the date of sale of property on which capital gain arose and since

the assessee has failed to complete the construction he is not eligible

for claim of exemption.



17.   We have given thoughtful consideration to the orders of the

authorities below. The undisputed fact is that the assessee did invest

Rs. 53 lakhs in purchase of land within the specified period.         The

Assessing Officer did not allow exemption to the assessee on the

ground that residential house was not constructed within three years
                                    8


of sale of house property and even at the end of the stipulated period

of three years, the house was incomplete.




18.   In our understanding of the law, when question of allowance of

benefit of section 54 is required to be considered, it is envisaged in the

statutory provision that the house to be constructed at that stage

might be under construction and capital gain at that time not only

appropriated or utilised. It is, therefore, not correct to insist that the

assessee should establish that residential house is complete and then

ask for benefit u/s 54 of the Act. What is required under the section is

that the assessee should take steps to make investment in a residential

house. Thus, emphasis is on the utilisation or investment of capital

gain in construction of residential house.




19.   Considering the facts of the present case, claim of the assessee is

that he had invested full sale consideration, and over and above that,

some more money and total investment is at Rs. 64.74 lakhs.




20.   The Hon'ble High Court of Madhya Pradesh in the case of Smt.

Shashi Varma 224 ITR 106 has held that while allowing exemption u/s

54 of the Act, investment for acquisition of flat under the Scheme of
                                    9


DDA, where first instalment was paid, was much more than the capital

gains, deduction is to be allowed as section 54 does not require that

the construction of new house should necessarily be completed within

two years where substantial investment is made in construction of

house.








21.   Requirement of section 54 of the Act is for the assessee to have

either purchased a residential house, being a new asset, within the

stipulated period or construct a residential house within a period of

three years from the date of transfer. The section does not prescribe

the completion of construction of residential house and the thrust is on

the investment of net consideration received on sale of original asset

and start of construction of a new residential house.




22.   In our understanding of the facts and law, it is clear that for the

Assessment Year in question, all that is required for the assessee to

avail exemption contained in the section is to utilise the amount of

capital gain for purchase and acquisition of new asset.




23.   Since the assessee has claimed that he has invested Rs.

64,74,946/-, which is higher than the amount of capital gain computed
                                   10


by the Assessing Officer, the assessee is very much eligible for claim of

exemption u/s 54 of the Act.




24.   However, since no documentary evidences have been furnished

and only a claim has been made, we deem it fit to restore the issue to

the file of the Assessing Officer. The assessee is directed to

demonstrate that he has already invested Rs. 64,74,946/- towards

construction of house and the Assessing Officer is directed to examine

the documentary evidences and if found correct, allow benefit of

section 54 of the Act.    With the above directions, the grounds of

appeal raised by the assessee are allowed for statistical purposes.



25.    In the result, the appeal filed by the assessee in ITA No.

4647/DEL/2019 is treated as allowed for statistical purposes.


      The order is pronounced in the open court on 06.01.2020.



      Sd/-                                                 Sd/-

  (BHAVNESH SAINI)                                 (N. K. BILLAIYA)
  JUDICIAL MEMBER                               ACCOUNTANT MEMBER


Dated: 06th January, 2020.

VL/
                                       11


Copy forwarded to:

1.   Appellant
2.   Respondent
3.   CIT                                                     Asst. Registrar
4.   CIT(A)                                                  ITAT, New Delhi
5.   DR
Date of dictation
Date on which the typed draft is placed before the
dictating Member
Date on which the typed draft is placed before the Other
Member

Date on which the approved draft comes to the Sr.PS/PS


Date on which the fair order is placed before the
Dictating Member for pronouncement
Date on which the fair order comes back to the Sr.PS/PS

Date on which the final order is uploaded on the website
of ITAT
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk

The date on which the file goes to the Assistant Registrar
for signature on the order
Date of dispatch of the Order

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