ACIT Vs Girish L. Ragha (ITAT Panaji)
The Revenue appealed against the CIT(A)’s order dated 19.12.2013 for A.Y. 2010-11, challenging deletion of an addition of Rs. 1,64,22,535/- representing Long Term Capital Gains and the grant of deduction under Section 54 of the Income Tax Act, 1961. The assessee, a civil engineer engaged in construction and real estate development, had sold two residential properties during F.Y. 2009-10 and earned Long Term Capital Gains of Rs. 1,64,22,535/-. He invested Rs. 1,64,75,600/- with M/s. Ashraya Real Estate Developers under an agreement for construction and purchase of a residential flat. The firm was a partnership of the assessee and his wife. The agreement provided for delivery within 24 months.
The Assessing Officer denied the Section 54 claim because the residential house was not completed and possession or occupancy certificate was not obtained within two years. A site inspection on 07.12.2012 found that construction was incomplete. The AO also questioned the investment in the assessee’s own firm and noted that the assessee had not offered the relevant property income. The AO relied on several judicial decisions and added Rs. 1,64,22,535/- to taxable income.
The CIT(A) allowed the assessee’s appeal. It noted that the assessee had sold two residential houses to construct a larger house, had paid the entire amount towards construction within the stipulated period, and that construction was delayed because of litigation concerning the title of the land. The CIT(A) noted that construction was ultimately completed and the completion certificate was received on 16.12.2013. Relying on CIT Vs Sardarmal Kothari & Anr., the CIT(A) held that the assessee need not complete and occupy the construction within the stipulated period where the investment had been made within time. It therefore directed the AO to allow deduction of Rs. 1,64,22,535/- under Section 54.
