Smt. Usha, CHENNAI V. ACIT, CHENNAI

ITA 2033/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4761 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 04-07-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: N V BALAJI
• Keywords: Capital asset; Cost of acquisition; Valuation report
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER . / ITA NO. 2033/MDS/2016 / ASSESSMENT YEAR : 2007-08 SMT. USHA , 27, MYLAI RANGANATHAN STREET, T. NAGAR, CHENNAI 600 017. PAN AAAPU1734B ( /APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, NON-CORPORATE CIRCLE-2, CHENNAI. RESPONDENT) / APPELLANT BY : SHRI N.V.BALAJI, / RESPONDENT BY : SHRI SHIVA SRINIVAS, JCIT ! / DATE OF HEARING : 23.02.2017 '# ! / DATE OF PRONOUNCEMENT: 26.04.2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 4. 3.2016. 2. THE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT - - ITA 2033/MDS/16 2 THE CIT(APPEALS) ERRED IN CONFIRMING THE ORDER OF T HE ASSESSING OFFICER DISALLOWING THE ASSESSEES CLAIM FOR DEDUCT ION U/S.54 AND 54F OF THE ACT IN COMPUTING HER INCOME. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSING OF FICER HAD MADE CERTAIN ADDITIONS TO THE INCOME OF THE ASSESSE E BY REVERSING CERTAIN DEDUCTIONS WHICH WERE PERMITTED U /S.54 AND 54F OF THE ACT, IN THE ASSESSMENT MADE U/S.143(3) R EAD WITH SEC.147 OF THE ACT. THE AO ASSESSED THE INCOME OF THE ASSESSEE AT 2,29,90,220/- AND CONSEQUENTLY RAISED A DEMAND OF 89,12,704/- INCLUDING INTERESTS. 3.1 THE SEQUENCE OF EVENTS RELEVANT TO THE ASSESSEE S TRANSACTIONS ARE AS FOLLOWS : 1. PROPERTY AT 26, MOUNT ROAD, SAIDAPET, CHENNAI (NOT A RESIDENTIAL HOUSE) SOLD FOR 76,00,000/- 19.6.2006 2. PROPERTY AT 36, PINJALA SUBRAMANIAM STREET, T. NAGAR (RESIDENTIAL HOUSE) SOLD FOR 2,05,98,940/- 6.10.2006 3. SALE PROCEEDS INVESTED IN CONSTRUCTION OF HOUSE AT 30, MYLAI RANGANATHAN STREET, T. NAGAR, CHENNAI (AMOUNT INVESTED 2,46,83,910/-) - - ITA 2033/MDS/16 3 - PLOT WAS PURCHASED IN 2003. - HOUSE CONSTRUCTION WAS COMPLETED IN 2006 3.2 BEFORE THE AO, THE ASSESSEE SUBMITTED A VALUATI ON REPORT FROM A PRIVATE VALUER STATING THAT THE CONST RUCTION OF THE HOUSE AT MYLAI RANGANATHAN STREET, T. NAGAR STARTED IN 2004 AND COMPLETED IN AUG. 2007. HOWEVER, AS PER THE CO MPLETION CERTIFICATE FROM A PRIVATE BUILDER SUBMITTED BY THE ASSESSEE, THE CONSTRUCTION OF THE HOUSE WAS COMPLETED IN DEC.2006 . IN VIEW OF THE ABOVE, THE AO OBSERVED THAT THERE IS A CONTR ADICTION BETWEEN THE COMPLETION DATE AS PER VALUATION REPORT AND COMPLETION CERTIFICATE FROM THE PRIVATE BUILDER. THEREFORE, THE AO CALLED FOR THE FOLLOWING DETAILS FROM THE ASSESS EE : A. PROPERTY TAX DETAILS B. CAUTION DEPOSIT FOR ELECTRICITY CONNECTION PAYME NT DETAILS C. PURCHASE BILLS D. CONSTRUCTION LEDGER E. REPORT FROM CMDA F. RETURN OF INCOME (ROI) A/W ANNEXURES FOR AY 2006 -07 TO 2011-12 THE ASSESSEE SUBMITTED RECEIPT DATED 19.12.2006 FRO M TAMILNADU ELECTRICITY BOARD (TNEB), WHEREIN IT IS R EFLECTED THAT 27,000/- HAS BEEN PAID AS CCD ALONG WITH OTHER PAYM ENTS. APART FROM THIS, THE ASSESSEE HAS PRODUCED THE CONS TRUCTION - - ITA 2033/MDS/16 4 BILLS AND THE RETURNS OF INCOME CALLED FOR. 3.3 BASED ON THE DETAILS PRODUCED BY THE ASSESSEE, THE AO HAS OBSERVED THAT THE ASSESSEE HAS PURCHASED THE PL OT AT MYLAI RANGANATHAN STREET, (ON WHICH THE HOUSE HAS BEEN CONSTRUCTED) FOR 1,20,38,439/- IN THE YEARS 2003 ITSELF. THE AO FURTHER OBSERVED THAT IN AY 2006-07, THE ASSESSE E HAS SHOWN THE HOUSE PROPERTY AT MYLAI RANGANATHAN STREE T AS SELF- OCCUPIED PROPERTY AND CLAIMED DEDUCTION U/S.24B FOR INTEREST PAID TOWARDS HOUSING LOAN, WHICH IS REFLECTED IN TH E ASSESSEES RETURN OF INCOME AND ACCOMPANYING STATEMENT OF COMP UTATION. ACCORDING TO THE AO, THE ASSESSEE HAS TAKEN HOUSING LOAN OF 1.75 CRORES FROM IDBI IN 2004 AND THE ENTIRE CONSTR UCTION WAS DONE USING THE HOUSING LOAN AMOUNT AND NO PART OF T HE SALE CONSIDERATION RECEIVED BY WAY OF SALE OF PROPERTY H AS BEEN USED FOR THE CONSTRUCTION OF THE NEW ASSET. THE AO OBS ERVED THAT THE BILLS SUBMITTED BY THE ASSESSEE SHOW THAT MOST OF THE BILLS BELONG TO THE PERIOD BEFORE JUNE, 2006 AND THE COMP LETION DATES GIVEN BY THE VALUER (AUG.2007) AND BY THE BUI LDER (DEC.2006) ARE CONFLICTING. ACCORDING TO THE AO, THE RENTAL INCOME SHOWN BY THE ASSESSEE FROM THE NEW HOUSE IS FROM - - ITA 2033/MDS/16 5 DEC.2006 ONWARDS AND THEREFORE, HE CONCLUDED THAT T HE COMPLETION OF THE HOUSE IS BEFORE DEC.2006. FURTHE R, THE AO OBSERVED THAT ALTHOUGH THE ASSESSEE HAS SHOWN RENTA L INCOME FROM ABUSHA INVESTMENTS AND MANAGEMENT SERVICES P. LTD. FROM THE MONTH OF DEC.2006, SHE HAS PAID PROPERTY T AX OF 27,174/- IN THE FINANCIAL YEAR 2005-06 ITSELF AND THE ASSESSEE HAS NOT FURNISHED LEDGER OR CONSTRUCTION AGREEMENT TO DECIDE HOW MUCH WAS SPENT, ON THE DATE BEFORE THE SALE OF PROPERTY. 3.4 ACCORDINGLY, THE AO CONCLUDED THAT SINCE THE PL OT IS PURCHASED 3 YEARS BEFORE THE SALE OF THE PROPERTY, THE ASSESSEE WILL NOT BE ENTITLED TO CLAIM DEDUCTION U/S.54 / 54 F WITH RESPECT TO THE COST OF ACQUISITION OF THE PLOT BY RELYING O N THE CBDT CIRCULAR NO.667 DATED 18.10.1993 AND ACQUISITION OF PLOT, BEING AN EVENT WHICH OCCURS AT A SINGLE POINT OF TIME, SI NCE THE DATE OF ACQUISITION WAS IN 2003, I.E. OUTSIDE THE SPECIFIC PERIOD FOR CONSTRUCTION, THE SAME WILL NOT BE ENTITLED TO ANY DEDUCTION/RELIEF. HENCE, THE AO MADE AN ADDITION OF 1,20,38,439/- AS DISALLOWANCE OF EXEMPTION ON PLOT AND IN VIEW OF THE ABOVE OBSERVATIONS, HE MADE AN ADDITION OF - - ITA 2033/MDS/16 6 1,01,16,377/- ON ACCOUNT OF DISALLOWANCE OF EXEMPTI ON WITH RESPECT TO CONSTRUCTION OF HOUSE. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 4. ON APPEAL, THE CIT(APPEALS), OBSERVED THAT IN TH E PAPER BOOK FILED BY THE ASSESSEE BEFORE HIM, THE DETAILS WERE FURNISHED FOR THE PERIOD ON OR AFTER 1.4.2007. THE CIT(APPEALS) FURTHER OBSERVED THAT AS THERE IS NO COPY OF RENTAL AGREEMENT / LEASE AGREEMENT WITH THE TENANT, ABUSHA INVESTMENTS AND MANAGEMENT SERVICES PRIVATE LTD., IT IS NOT CLEAR A S TO WHEN THE ASSESSEE HAS ACTUALLY LET OUT THE HOUSE. HOWEVER , AS PER THE OBSERVATION OF THE AO, IN THE RETURN OF INCOME FOR THE AY 2006- 07, THE ASSESSEE HAS SHOWN THE HOUSE PROPERTY AT MY LAI RANGANATHAN STREET AS SELF OCCUPIED PROPERTY AND CL AIMED DEDUCTION U/S.24B FOR INTEREST PAID TOWARDS HOUSING LOAN, THE CIT(APPEALS) WAS OF THE OPINION THAT THE ASSESSEE C OULD HAVE COMPLETED THE CONSTRUCTION OF THE PROPERTY ON OR BE FORE 31.3.2006 ITSELF. THE ASSESSEE HAS FURNISHED THE P ROPERTY TAX RECEIPT ISSUED BY CORPORATION OF CHENNAI DATED 10.1 0.2006 AND IT IS CLEAR THAT PROPERTY TAX HAS BEEN PAID BY THE ASSESSEE AT LEAST FROM 1.4.2006 ONWARDS. - - ITA 2033/MDS/16 7 5. THE CIT(APPEALS) ALSO OBSERVED THAT THERE WAS LA CK OF FULL CO-OPERATION FROM THE SIDE OF THE ASSESSEE, SU CH AS THE NON- FURNISHING OF CONSTRUCTION LEDGER, DISCREPANCIES RE GARDING THE DATE OF COMPLETION OF CONSTRUCTION, ETC. ACCORDING TO CIT(APPEALS), SINCE THE HOUSE PROPERTY WAS REFLECTE D IN THE RETURN FOR THE AY 2006-07 ITSELF AND THE PROPERTY T AX WAS PAID EVEN IN 2005 BY THE ASSESSEE, THE EXACT DATE OF COM PLETION OF CONSTRUCTION WAS KEPT IN DARK. THE CIT(APPEALS), OBSERVED THAT THE ASSESSEE GETS A TIME LIMIT OF 3 YEARS AFTE R THE DATE OF TRANSFER I.E. SALE OF THE PROPERTY, FOR CONSTRUCTIN G THE NEW PROPERTY AND THE DEDUCTION U/S.54 AND 54F OF THE AC T WILL NOT BE AVAILABLE TO THE ASSESSEE, IF THE CONSTRUCTION ITSE LF IS COMPLETED BEFORE THE DATE OF SALE. FURTHER, THE CIT(APPEALS) OBSERVED THAT IN THIS SCENARIO, THE AO SEEMS TO HAVE ADOPTED A LE NIENT VIEW, GIVING THE BENEFIT OF DOUBT TO THE ASSESSEE WITH RE SPECT TO THE DATE OF COMPLETION OF CONSTRUCTION AND HAS ALLOWED 20% OF THE COST OF CONSTRUCTION AS DEDUCTION U/S.54 & 54F OF T HE ACT. HOWEVER, THE CIT(APPEALS) CONCLUDED THAT BY DENYING EXEMPTION ON THE COST OF PURCHASE OF PLOT, AS THIS HAS TAKEN PLACE 3 YEARS PRIOR TO THE DATE OF TRANSFER OF OLD PROPERTY, AND BY - - ITA 2033/MDS/16 8 DISALLOWING 80% OF THE CONSTRUCTION COST, HAS ACTED JUDICIOUSLY, BASED ON THE EVIDENCE AVAILABLE ON RECORD AND THE DISALLOWANCES MADE BY THE AO ARE IN CONSONANCE WITH THE PROVISIONS OF SEC.54 & 54F OF THE ACT. ACCORDINGLY , THE CIT(APPEALS) CONFIRMED THE ACTION OF THE AO. AGAIN ST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AR SUBMITTED THAT BOTH THE AO AND THE CIT(APPEALS) FAILED TO TAKE NOTE THAT A BUILDING IS CONSIDERED HABITABLE AND A HOUSE BECOMES HABITABLE ONLY IF AN ELECTRICITY CONNECTION IS PROVIDED. IT HAS TO BE ASSUMED THAT EXPENDED HUGE SUMS FOR THE CONSTRUCTION OF THE BUILDING, IT CANNOT BE USED WITHOUT AN ELECTRICITY CONNECTION AND IT CANNOT BE CONSIDERED HABITABLE. IN THIS CASE, CAUTION DEPOSIT RECEIPT F ROM TAMIL NADU ELECTRICITY BOARD WAS ISSUED ONLY ON 19.12.2006 AND HENCE, IT CAN BE DEFINITELY CONCLUDED THAT THE DATE FOR COMPL ETION OF CONSTRUCTION CANNOT BE BEFORE 19.12.2006. THE CERT IFICATE ISSUED BY THE CONTRACTOR/BUILDER DATED 19.3.2007 CE RTIFIES THE FACT THAT THE CONSTRUCTION OF BUILDING WAS ONLY COM PLETED IN DECEMBER, 2006. THIS CERTIFICATE HAS NOT BEEN DISB ELIEVED BY THE AO AND NO FURTHER REPORT WAS CALLED FOR BY THE AO. - - ITA 2033/MDS/16 9 6.1 THE LD. AR, SUBMITTED THAT THE RETURNS OF INCOM E FILED FOR THE YEARS 2006-2007 (ASSESSMENT YEAR) AND THE PREVI OUS YEARS CLEARLY SHOW THAT THE ADDRESS OF THE ASSESS EE WAS NO.3, DORAISAMY ROAD, T. NAGAR, CHENNAI, IF THE HOUSE WAS NOT IN OCCUPATION PRIOR TO THAT THE INCOME-TAX RETURNS FOR 2006-2007 ALSO REFLECTS THIS ADDRESS. 6.2 ACCORDING TO THE LD. AR, THE INVOICES PRODUCED HAVE NOT BEEN DISBELIEVED AND DOCUMENTS SET OUT IN SERIAL NO .10 TO 136 NEARLY 126 PAGES AND TAX INVOICES AND DETAILS OF PA YMENTS MADE TO THE CONTRACTORS, SUPPLIERS, PLUMPING MATERI AL SUPPLIER, EQUIPMENTS, ELECTRICAL ITEMS, ETC. AND THIS WOULD C LEARLY SHOW THAT THE CONSTRUCTION WAS COMPLETED ONLY IN DEC., 2 006. THIS ASPECT HAS NOT BEEN DISBELIEVED. 6.3 THE LD. AR FURTHER SUBMITTED THAT THE ADDITIONA L DOCUMENTS FILED BY THE ASSESSEE I.E. RENTAL AGREEME NT ENTERED INTO BETWEEN THE ASSESSEE AND LESSEE DATED 15.12.20 06 WOULD ALSO FORTIFY THE FACT THAT THE BUILDING WAS COMPLET ED ONLY IN DEC., 2006. - - ITA 2033/MDS/16 10 6.4 THE ELECTRICITY BOARDS CAUTION DEPOSIT RECEIPT DATED 19.12.2006 WOULD REFLECT THE PAYMENT OF 48,770/- ONLY ON COMPLETION OF THE BUILDING. THE PAYMENT OF ELECTRI CITY BILL AT PAGE NO.5 OF THE ADDITIONAL DOCUMENTS WOULD REFLECT THAT THE SERVICE CONNECTION AS WELL AS METER CAUTION DEPOSIT WAS RECEIVED ONLY ON 21.12.2006. 6.5 THE LD. AR SUBMITTED THAT THE LEDGER ACCOUNTS F OR THE PERIOD FROM 1.4.2006 TO 31.10.2007 WOULD SHOW DEBI T ENTRIES IN ALL AMOUNTING TO 2,53,14,485.13/- TOWARDS EXPENSES INCURRED FOR THE CONSTRUCTION. IN SPITE OF VOLUMINOUS RECOR DS TO ESTABLISH THAT THE CONSTRUCTION WAS SUBSEQUENT TO THE SALE OF THE ASSETS AND THAT THE REQUIREMENTS OF SEC.54 AND 54F OF THE ACT HAVE BEEN MET WITH ALL ITS VIGOUR AND HENCE, THE ORDERS OF THE LOWER AUTHORITIES ARE ERRONEOUS. THE VERY FACT THAT THE PLANNING APPROVAL WAS GRANTED ON 16.9.2004 WOULD NOT MEAN TH AT THE CONSTRUCTION WAS COMPLETED PRIOR TO THE SALE OF THE ASSETS, THE APPROVAL GRANTED BY THE CORPORATION OF CHENNAI HAD GRANTED 3 YEARS TIME FOR COMPLETION OF THE CONSTRUCTION AND H ENCE, ONLY BY SEPTEMBER, 2007 IS THE BUILDING REQUIRED TO BE CONS TRUCTED. - - ITA 2033/MDS/16 11 THEREFORE, THE CONSTRUCTION IS WELL WITHIN THE LIMI TS STIPULATED U/S.54 AND 54F OF THE ACT. 6.6 ACCORDING TO THE LD. AR, THE PORTION OF THE SEC TION, WHICH IS APPLICABLE TO THE ASSESSEE, IS THAT THE ASSESSEE HAS WITHIN THE PERIOD OF 3 YEARS AFTER THAT DATE CONSTRUCTED T HE RESIDENTIAL HOUSE AS MENTIONED IN THE PROVISIONS OF SEC.54 AND 54F OF THE ACT. ACCORDING TO THE LD. AR, IT HAS BEEN ESTABLIS HED BY A LARGE NUMBER OF DOCUMENTS FILED BY THE ASSESSEE THAT THE CONSTRUCTION WAS COMPLETED ONLY IN DEC., 2006. TH E ASSETS WERE SOLD ON 19.6.2006 AND 6.10.2006 AND THEREFORE, WELL WITHIN THE TIME STIPULATED U/S.54 & 54F OF THE ACT. THE P ROVISIONS OF SEC.54 AND 54F OF THE ACT DO NOT PROHIBIT DISALLOWA NCE ON ACCOUNT OF THE CONSTRUCTION HAVING COMMENCED EARLIE R AND ALL THAT THE SECTION REQUIRES IS THAT THE ASSESSEE HAS WITHIN THE PERIOD OF 3 YEARS CONSTRUCTED HER RESIDENTIAL HOUSE IN INDIA. THE AO AND THE CIT(APPEALS) ARE NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT OUT OF THE TOTAL EXEMPTION CLAIM ON ACCOUNT OF EXPENSES INCURRED ON CONSTRUCTION 80% IS DISALLOWED , AS THE CONSTRUCTION WAS MOSTLY PRIOR TO THE SALE OF THE AS SET. THERE IS NO SUCH POWER TO SEGREGATE THE AMOUNT EXPENDED AS B EING - - ITA 2033/MDS/16 12 EXPENDED PRIOR TO AND CONSEQUENT UPON THE SALE OF T HE ASSET AND THIS IS NOT PROVIDED FOR UNDER THE ACT AND SUCH EXERCISE OF POWER IS NOT WITHIN THE PURVIEW AND PURPORT OF SEC. 54 AND 54F OF THE ACT AND SUCH SEGREGATION OF AMOUNT CANNOT BE MA DE AS THE LEGISLATURE HAS NOT EMPOWERED THE AO OR CIT(APPEALS ) TO PASS SUCH AN ORDER. THE LD. AR, SUBMITTED THAT ONCE TH E AO COMES TO A CONCLUSION THAT THE BUILDING HAS BEEN COMPLETE D ONLY IN DEC., 2006 AND PERMITTED 20% SET OFF, THERE IS NO P OWER VESTED FOR THE AO TO ASSUME THAT 80% COULD HAVE BEEN EXPEN DED PRIOR TO THE SALE OF THE ASSET. THIS ITSELF WOULD BE A F ACT IN FAVOUR OF THE ASSESSEE AND IT IS EVIDENT THAT THE BUILDING HA S NOT BEEN COMPLETED BEFORE DEC., 2006. THE LD. AR, DREW OUR ATTENTION TO THE ORDER OF THE CIT(APPEALS) AT PAGE NOS. 12 AND 1 3. 6.7 THE LD. AR, FURTHER SUBMITTED THAT THE CIT(APPE ALS) HAS AGREED WITH THE AO ON THE BASIS OF PROBABILITY BU T NOT PROOF AND THEREFORE, THE ORDER OF THE CIT(APPEALS) IS ERR ONEOUS. THE LD. AR, RELIED ON THE FOLLOWING JUDGMENTS TO SUPPOR T HIS VIEW THAT THE PROVISIONS OF SEC.54 AND 54F OF THE ACT IS APPL ICABLE TO THE ASSESSEE, WHICH WAS LOST SIGHT OFF BY THE CIT(APPEA LS) AND THE AO: - - ITA 2033/MDS/16 13 1. CIT VS. H.K.KAPOOR (234 ITR 753)(ALLAHABAD) 2. MUNNER KHAN VS. ITO (41 SOT 504)(HYD.) 3. CIT VS. KAPIL KUMAR AGARWAL (66 TAXMANN.COM 191)(ALLAHABAD) 4. CIT VS. SMT. BEENA K. JAIN (75 TAXMAN 145)(BOM) 5. CIT VS. SMT. V. VENKATA LAXMI (59 TAXMANN.COM 216)(ANDHRA PRADESH & TELANGANA) 6. ACIT VS. SUBHASH SEVARAM BHAVANI (23 TAXMANN.COM 94(AHMEDABAD-TRIB) 6.8 ACCORDING TO THE LD. AR, WHEN IT HAS BEEN ESTAB LISHED BY THE ASSESSEE, BEYOND DOUBT THAT THE ENTIRE BUILDING HAS BEEN COMPLETED IN DEC., 2006 AND THE MANDATE OF SEC.54 & 54F OF THE ACT HAS BEEN MET WITH AND THE ULTIMATE PURPOSE OF SUCH A PROVISION IS TO ENCOURAGE INVESTMENTS AND RESIDENTI AL PROPERTIES AFTER SALE OF ANY ASSET AND THIS BEING A BENEFICIAL PIECE OF INSERTION TO THE ACT, THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN DISALLOWING 80% OF THE BENEFIT CLAIMED U/S.54 AND 5 4F OF THE ACT AND ADDITION A SUM OF 1,01,16,377/- TO THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS ALSO FILED THE FOLLOWIN G DOCUMENTS TO SUPPORT HER CASE: - - ITA 2033/MDS/16 14 SL. NO. DATE DESCRIPTION 1 15.12.2006 RENTAL AGREEMENT ENTERED BETWEEN THE A SSESSEE AND M/S. ABUSHA INVESTMENTS AND MANAGEMENT SERVICES PVT. LTD. 2 19.12.2006 TAMIL NADU ELECTRICITY BOARD CAUTION D EPOSIT SLIP 3 21.12.2006 TAMIL NADU ELECTRICITY BOARD ONLINE AC COUNT SUMMARY 4 APRIL 2006 TO MARCH 2008 LEDGER ACCOUNT OF THE ASSESSEE DESCRIBING PAYMENTS MADE FOR CONSTRUCTION OF PROPERTY 5 BUILDING PLAN 6 CONSTRUCTION AGREEMENT BETWEEN THE ASSESSEE AND THE BUILDER (CONTRACTOR) 7 01.04.2006 TO 31.03.2007 BANK STATEMENT OF THE ASSESSEE 8 10.10.2006 PROPERTY TAX RECEIPT 9. INCOME RETURNS FORM-2D FILED PRIOR TO COMPLETIO N OF CONSTRUCTION OF THE RESIDENTIAL HOUSE WHICH REFLECTS THE ADDRESS OF THE ASSESSEE IS NOT THE SAME AS THE DISPUTED RESIDENTIAL HOUSE. 10 PASS BOOK OF THE ASSESSEE 11 TAX DEDUCTED AT SOURCE FORM 16A FILED BY TH E ASSESSEE 7. THE LD. DR, RELIED ON THE ORDERS OF THE LOWER AU THORITIES. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE AO REJECTED THE CLAIM OF DEDUCTION U /S.54 & 54F OF THE ACT FOR THE REASON THAT THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE WAS COMMENCED BEFORE THE DATE OF TRANSFER OF ASSET AND ALSO COMPLETED ON OR BEFORE 31.03.2006, I .E. BEFORE THE SALE OF PROPERTY, AS THE MOUNT ROAD, SAIDAPET, CHENNAI PROPERTY WAS SOLD ON 19.06.2006 AND PINJALA SUBRAMA NIAN - - ITA 2033/MDS/16 15 STREET PROPERTY SOLD ON 06.10.2006. ACCORDING TO A O, THE AMOUNT INVESTED IN THE CONSTRUCTION OF NEW HOUSE WA S BORROWED FUND, THEREFORE, NOT ELIGIBLE FOR EXEMPTION U/S.54 OR U/S.54F OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT DAT E OF CONSTRUCTION OF HOUSE IS IMMATERIAL, BUT IT IS ONLY THE DATE OF COMPLETION OF CONSTRUCTION. THERE CANNOT BE PART A LLOWABILITY OF DEDUCTION U/S.54 OR U/S.54F OF THE ACT AS DONE BY T HE LD.CIT(A), WHEN THE HOUSE WAS ACTUALLY COMPLETED ON 15.12.2006 , IT WAS EVIDENCED BY THE CERTIFICATE ISSUED BY BUILDER VIDE LETTER DATED 19.03.2007. THE LD.A.R HAS TAKEN A SUPPORT OF VARIO US BANK WITHDRAWALS MADE BY THE ASSESSEE BETWEEN 01.04.2006 TO 31.03.2007, PROPERTY TAX RECEIPT DATED 10.10.2006 A ND HE FILED THE DETAILS OF INVOICE REGARDING THE CONSTRUCTION C OST MET BY THE ASSESSEE WHICH IS AFTER THE SALE OF PROPERTY PLACED ON RECORD AT PAGE -10 TO 136 OF PAPER BOOK. THE LD.A.R HAS ALSO TAKEN A SUPPORT OF ADVICE SLIP ISSUED BY THE TAMILNADU ELEC TRICITY BOARD ON 19.12.2006 AT PAGE-1 OF PAPER BOOK, ELECTRICITY CONSUMPTION CHARGES CARD ISSUED IN THE NAME OF ASSESSEE BEARING NO.222/056/22 TO SAY THAT THE CONSTRUCTION WAS COMP LETED AFTER THE SALE OF PROPERTY. - - ITA 2033/MDS/16 16 8.1 WE FIND A FORCE IN THE ARGUMENT OF THE ASSESSE E FOR THE REASON THAT THE ACT DOES NOT DESCRIBE ANY CONDITION AS TO THE DATE OF COMMENCEMENT OF CONSTRUCTION OF A NEW HOUSE PROPERTY. THE ONLY CONDITION IS THAT CONSTRUCTION OF HOUSE PR OPERTY SHOULD BE COMPLETED WITHIN THREE YEARS FROM THE DATE OF TR ANSFER. THE DATE OF COMMENCEMENT OF CONSTRUCTION IS IRRELEVANT AND THE CONSTRUCTION MAY BE COMMENCED EVEN BEFORE THE TRANS FER OF ASSET AS HELD BY DELHI HIGH COURT IN THE CASE OF CI T VS. BHARTI MISHRA REPORTED IN [2014] 41 TAXMANN.COM.50(DELHI). FURTHER, HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS.J.R.S UBRAMANYA BHAT IN [1986] 28 TAXMAN 578 (KAR.) HAS TAKEN A SI MILAR VIEW, WHICH WAS IN TURN FOLLOWED BY ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. H.K.KAPOOR IN [1998] 234 ITR 753 (ALLAHA BAD). FURTHER, THE ANDHRA PRADESH HIGH COURT AND TELANGAN A IN THE CASE OF LEARNED COMMISSIONER OF INCOME TAX VS. SMT. V.VENKATA LAXMI IN [2015] 59 TAXMANN.COM 216 HELD T HAT WHERE INVESTMENT IN CONSTRUCTION OF A NEW BUILDING IS MADE WITHIN 3 YEARS OF SALE OF THE PROPERTY, THE BENEFIT OF SEC.54 IS TO BE GIVEN. THUS, AS SEEN FROM THE FACTS BROUGHT ON RECORD, THE - - ITA 2033/MDS/16 17 ASSESSEE COMPLETED THE CONSTRUCTION IN DECEMBER, 20 06 AS EVIDENCED BY THE LETTER DATED 19.03.2017 ISSUED BY M/S.ARUN EXCELLO BUILDER. FURTHER, IN THE PRESENT CASE, THE LD. LEARNED COMMISSIONER OF INCOME TAX(A) ACCEPTED THAT THE CON STRUCTION WAS COMPLETED WITHIN 3 YEARS FROM THE DATE OF SALE OF CAPITAL ASSET. HOWEVER, HE RESTRICTED THE EXEMPTION 20% OF COST OF CONSTRUCTION, WHICH IS NOT APPROPRIATE. THERE IS N O QUESTION OF GIVING PARTIAL RELIEF TO THE ASSESSEE, EVEN AFTER A PPRECIATING THE FACT THAT THE ASSESSEE HAS COMPLETED THE CONSTRUCTI ON WITHIN THREE YEARS ON SALE OF THE CAPITAL ASSET. FURTHER, AS RIGHTLY ARGUED BY THE LD. A.R, THE LAW DOES NOT CONTEMPLATE THE IDENTITY OF THE FUNDS FOR INVESTMENTS IN CONSTRUCTION OF NEW HOUSE OF RESIDENTIAL PROPERTY. IF THE ASSESSEE STARTED THE CONSTRUCTION BEFORE THE TRANSFER OF PROPERTY BY BORROWING THE FU NDS, THE ASSESSEE CANNOT BE PRECLUDED FROM CLAIMING DEDUCTIO N U/S.54 OR U/S.54F OF THE ACT. THIS VIEW WAS FORTIFIED BY THE DECISION OF CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF MUNEE R KHAN VS. ITO IN [2010] 41 SOT 504 (ITAT[HYD]). BEING SO, WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.54 OR U/S.54F OF THE ACT FOR THE ENTIRE COST OF THE CONST RUCTION INCURRED - - ITA 2033/MDS/16 18 BY THE ASSESSEE AND NOT ANY PART. FURTHER, SIMILAR CONSISTENT VIEW WAS ALSO TAKEN BY CHENNAI TRIBUNAL IN THE CASE OF MR.C.ARYA SUNDARAM FOR ASSESSMENT YEAR :2010-11 IN I.T.A.NO.1208/MDS./2015 VIDE ORDER DATED 27.12.201 6. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 26 TH APRIL, 2017 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 26 TH APRIL, 2017. K S SUNDARAM 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.