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
|