Case Law Details

Case Name : Shri M.S Lakshmana Rao Vs DCIT (ITAT Hyderabad)
Appeal Number : ITA No 579/Hyd/2012
Date of Judgement/Order : 05/06/2015
Related Assessment Year :
Courts : All ITAT (4887) ITAT Hyderabad (282)

Brief of the case:

ITAT Hyderabad held in Shri M.S Lakshmana Rao Vs DCIT that if the assesse had not deposited the capital gain amount under the capital gain account scheme in bank then the assesse should not be barred of the exemption of sec 54 provided the assesse proved that the capital gain amount had actually been utilized for the construction of house. The assesse had to prove by showing the bills paid to the contractor, or other material bills, bank statement showing withdrawal from bank was not sufficient. Moreover even if the property on which amount had to be spent was not in the name of assesse, then there should be proper agreement between the assesse and the actual owner of the property which depicts that the actual owner was extinguishing its construction rights from the property and the same rights would be given to the assesse.

Facts of the case:

The assessee filed his return of income on 31/07/2008 declaring total income of Rs. 8,01,325 besides agricultural income of Rs. 1,50,000. During the assessment proceeding, AO on verifying the

materials on record noticed that though assessee during the year had sold immovable property and derived capital gain but at the same time, he had claimed deduction u/s 54F of the Act for an amount of

Rs. 50,37,209. When AO called upon assessee to produce documentary evidence to justify the claim of deduction u/s 54, assessee furnished details relating to long term capital gain as well as deduction claimed u/s 54. AO noticed that during the relevant PY, assessee sold immovable property for consideration of Rs. 76 lakh and deposited the entire sale consideration into his S.B. Account instead of depositing under capital gain account scheme.

Assessee further submitted that he has entered into agreement with his father, construction of house. Assessee submitted, as the amount of Rs. 50,37,209 was utilized by assessee towards construction of house, he is eligible for deduction u/s 54. Assessee had not produced any bills related to construction of house.

Contention of the assesse:

Assessee was of the view that as he was unaware of the legal position and also he had entered into agreement with his father for the construction of house. As he had entered into agreement with his father for the construction of house so exemption u/s 54 should be allowed to the assesse. Moreover Assessee had produced before the AO, the bank statement depicting the withdrawal of capital gain amount from the saving bank account.

Further the assesse was of the view that as ultimate the amount was utilized for the construction of house so assesse was eligible for exemption u/s 54.

Contention of the revenue:

Revenue was of the view that as the assesse had not deposited the capital gain amount under the capital gain account scheme in the bank which was the requirement of sec 54 for claiming exemption

So assessee was not eligible for exemption for sec 54. Moreover the assesse was not the owner of the plot on which capital gain amount was utilized for construction purpose so exemption u/s 54 could not be allowed to the assesse. Agreement did not confer the legal right which conferred assesse to be the owner of the assesse. Assesse was not having any legal right over the property in which assesse claimed to have constructed house. Moreover the bank statement showing the withdrawals was not supported by any evidence.

So assesse was not eligible for any exemption u/s 54.

Held by ITAT:

ITAT held that even though the assesse had not deposited the capital gain amount in the capital gain account scheme then also he would not be debarred from exemption u/s 54 provided he prove that the amount had actually been utilized for the construction of house of whom assesse was the owner.

In the above case though the assesse had not deposited the amount under capital gain account scheme but he failed to produce the bills of construction and other related construction bills, producing bank statement reflecting withdrawal of amount was not sufficient. So assesse was not eligible for exemption u/s 54. Moreover assesse was not the owner of the plot on which assesse had constructed the house and the agreement entered between the assesse and his father did not confer the legal right which conferred assesse to be the owner of the assesse. So assessee was not eligible for exemption u/s 54

Appeal of the assesse was dismissed.

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More Under Income Tax

Posted Under

Category : Income Tax (27006)
Type : Judiciary (11177)
Tags : ITAT Judgments (5068) Rishabh Mehra (100) Section 54F (161)

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