Case Law Details
ITAT AHMEDABAD BENCH ‘C’
Assistant Commissioner of Income-tax, Circle – 7
V/s.
Subhash Sevaram Bhavnani
IT APPEAL NO. 928 (AHD.) OF 2012
[ASSESSMENT YEAR 2008-09]
JUNE 29, 2012
ORDER
D.K. Tyagi, Judicial Member
This is Revenue’s appeal against the order of ld. CIT(A)-XI, Ahmedabad dated 08.02.2012 directing the A.O. to allow entire deduction u/s 54 of the Act, as claimed by the assessee.
2. Brief facts of the case are that during the assessment proceedings the A.O. noticed that the assessee has sold residential house property situated at 3/6, Golden Appartment, Usmanpura, Ahmedabad for a sum of Rs. 35 lakhs on 03.11.2007. The assessee had worked out indexed cost value of this property at Rs. 13,11,380/- and shown the long term capital gain of Rs. 21,88,628/-. The assessee claimed deduction u/s 54 of the Act on purchase/construction of new house property at Rs. 30,44,695/- and accordingly claimed tax payable on long term capital gain of Rs. 21,88,620/- at Rs. NIL. The assessee had invested a sum of Rs. 9,23,687/- for the purchase of residential plot and further invested a sum of Rs. 21,21,008/- in the construction of residential house. The residential plot was purchased by the assessee for a consideration of Rs. 9,23,687/- on 29.10.2005. This is 23 months before the date of transfer of capital assets. The assessee had also started construction of residential house before the transfer of the capital asset. It was noticed by the A.O. that the assessee had invested a sum of Rs. 16,96,008/- in the construction of house property before the transfer of the capital asset and Rs. 4,25,000/- in the construction of residential house after the transfer of capital assets. The A.O. was of the view that the deduction u/s 54 is available to the assessee against construction of house property, if the same is constructed after the transfer of capital asset and the same should be completed within three years from the date of transfer of the capital assets. In this regard the A.O. placed reliance on the case of Smt. Shantaben P. Gandhi v. CIT reported in 129 ITR 218 (Guj.). The A.O. has also distinguished the case relied upon by the assessee on the case of CIT v. Subramaniya Bhat reported in 165 ITR 517. The A.O. was of the opinion that in the case of Subramaniya Bhat (supra) the construction of the house property was started one year before the transfer of the capital assets and the same was completed within 3 years from the date of transfer of capital asset. In view of these facts, the A.O. was of the opinion that in the case of Subramaniya Bhat (supra) condition of Section 54 was fulfilled while in the instant case conditions as laid down u/s 54 were not fulfilled. Keeping these facts in view, the A.O. was of the opinion that investment made in the purchase of residential plot and construction of residential house before the date of transfer of capital assets i.e. 3.11.2009 do not qualify for deduction u/s 54 and accordingly he disallowed the deduction u/s 54 as claimed by the assessee of Rs. 26,19,695/- (Rs. 9,23,687 + 16,96,008/-) and allowed deduction u/s 54 in view of construction of residential property to the extent of Rs. 4,25,000/- only as these payments were made after the transfer of capital assets i.e. 03.11.2007.
3. Aggrieved by this order of the A.O. the assessee went in appeal before ld. CIT(A) and filed detailed written submission before him which have been reproduced by the Ld. CIT(A) in his order in para 2.2. After taking into consideration these submissions of the assessee, ld. CIT(A) allowed the appeal of the assessee directing the A.O. to allow the deduction claimed u/s 54 of the Act by observing as under:-
“2.3 I have carefully considered the rival submissions. I have also perused case laws relied upon by the appellant and the A.O. It is seen that the appellant had purchased a residential plot and constructed a house on this residential plot. The appellant has claimed deduction u/s 54 of the I.T. Act on these investments. As per the provisions of Section 54 of the I.T. Act, deduction under this section is allowed for construction of a residential house, if the following conditions are fulfilled:-
(i) There must be a transfer of long term capital asset being a residential house.
(ii) The appellant must have constructed a residential house within prescribed time.
(iii) The construction of residential house should be completed within three years from the date of original transfer.
I find that these conditions are fulfilled in the case of the appellant in the following manner:-
(i) The appellant had sold residential house situated at 3/6, Golden Apartment, Usmanpura, Ahmedabad for a sum of Rs. 35,00,000/- on 3/11/2007.
(ii) The appellant had constructed a residential house at farm house plot (Ashok Vatika) at Bodakdev, Ahmedabad for a sum of Rs. 30,44,695/-.
(iii) As per the evidences available on record the construction was completed in the month of March, 2008. This way the construction was completed within three years of transfer of capital asset.
As demonstrated above, all the conditions laid down in section 54 are fulfilled in the case of the appellant. Accordingly, I am inclined to agree with the contention of the appellant that deduction u/s 54 be allowed to it.
In this regard, the appellant has rightly placed reliance on the case of CIT v. Subramanyam Bhat (supra) wherein it is clearly held that for claiming deduction u/s 54 the construction of the house should be completed within the prescribed time limit of this section and date of commencement of construction is immaterial. The A.O. has tried to distinguish this case, however, in my considered view, this case has been distinguished on wrong assumptions. The A.O. had placed reliance on Smt. Shantaben P. Gandhi v. CIT reported at 129 ITR 218 (Guj.). However, the facts of this case is entirely different than the case in hand. In the case of Smt. Shantaben Gandhi, the construction of the residential house was completed before the transfer of capital asset and accordingly, the Hon’ble Gujarat High Court held that conditions as laid down u/s 54 is not fulfilled. In the instant case, construction of the residential house was completed after the transfer of capital asset i.e. 3/11/2007 and within three years of transfer of capital asset. In fact, the evidences placed on record indicate that the construction of residential house was completed in the month of March, 2008. The evidence available on record indicate that, the appellant has made payments towards construction of house property of Rs. 4,25,000/- in the F.Y. 2007-08 and the A.O. has allowed deduction u/s 54 against these payments.
2.4 In view of the above, I hold that the appellant is eligible to claim deduction u/s 54 of the I.T. Act. The A.O. is directed to allow the same accordingly.”
4. Aggrieved by the order of ld. CIT(A) now the Revenue is in appeal before us.
5. After hearing both the parties and perusing the record we find that there is no dispute about the fact that assessee sold his residential house on consideration of sum of Rs. 35,00,000/- on 03.11.2007 and has spent a sum of Rs. 30,44,695/- on purchase of plot and on construction of a residential house thereon. The construction of this residential house was completed in the month of March, 2008. Since the construction was completed within three years of transfer of capital asset, the ratio as laid down in the case of Subramaniya Bhat (supra) is applicable to the facts of this case as it has been clearly held in that case that for claiming deduction u/s 54, the construction of the house should be completed within the prescribed time limit and date of commencement of construction is not material for claiming deduction.
6. We further find that reliance placed by the A.O. on the decision of jurisdictional High Court in the case of Smt. Shantaben P. Gandhi (supra) was misplaced because the facts in that case are different from the facts of this case. In that case the construction of residential house was completed before the transfer of the capital asset and accordingly, the Hon’ble Gujarat High Court held that conditions, as laid down u/s 54 was not fulfilled while in the instant case construction of the residential house was completed after the transfer of capital asset. Therefore, the ratio as laid down in the case of Smt. Shantaben P. Gandhi (supra) is not applicable to the facts of this case.
7. In view of the above, we feel no need to interfere with the order passed by ld. CIT(A) and the same is hereby upheld.
8. In the result, Revenue’s appeal is dismissed.
