JCIT (OSD), CHENNAI V. Shri B.Shivkumar, CHENNAI

ITA 589/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64452 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 20-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Capital asset; Competent authority
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH C HENN AI BEFORE SHRI ABARAHAM P.GEORGE ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY , JUDICIAL MEMBER .. ITA NO. 589 /MDS./ 20 12 ASSESSMENT YEAR: 200 6 - 07 JOINT COMMISSIONER OF INCOME - TAX(OSD), COMPANY CI RCLE - I(1), CHENNAI 600 034. VS. SHRI B.SHIVKUMAR, NO.27,IV SEAWARD ROAD, VALMIKI NAGAR, TIRUVANMIYUR, CHENNAI 600 041. PAN AANPS 3708 A (APPELLANT) (RESPONDENT) C.O NO. 66 /MDS./20 12 ASSESSMENT YEAR:200 6 - 07 SHRI B.SHIVKUMAR, NO.27,IV SEAWARD ROAD, VALMIKI NAGAR, TIRUVANMIYUR, CHENNAI 600 041. VS. JOINT COMMISSIONER OF INCOME - TAX(OSD), COMPANY CIRCLE - I(1), CHENNAI 600 034. PAN AANPS 3708 A (CROSS OBJECTOR ) (APPELLANT IN APPEAL ) DEPARTMENT BY : SHRI K E B RENGARAJAN JR. STANDING COUNSEL ASSESSEE BY : SHRI V.S.JAYAKUMAR, ADVOCATE DATE OF HEARING : 27 .0 9 .12 DATE OF PRONOUNCEMENT : 11 . 1 0 . 12 ITA . 589 /MDS/ 12 CO NO.66/MDS/12 2 O R D E R PER ABRAHAM P. GEORGE , ACCOUNTANT MEMBER : THESE ARE APPEA L AND CROSS OBJECTION OF THE REVENUE AND ASSESSEE RESPECTIVELY DIRECTED AGAINST AN ORDER DATED 20.12.2011 OF COMMISSIONER OF INCOME TAX (APPEALS) - III, CHENNAI FOR THE IMPUGNED ASSESSMENT YEAR. 2. G RIEVANCE RAISED BY THE REVENUE IS THAT CIT(A) ALLOWED THE EXEMPTION TO ASSESSEE UNDER SECTION 54F OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ) , WHICH WAS DENIED BY THE ASSESSING OFFICER. AS PER REVENUE, INVESTMENTS MADE IN THE CAPI TAL GAINS ACCOUNTS SCHEME WERE IMMEDIATELY WITHDRAWN BY THE ASSESSEE AND NO WITHDRAWALS WERE EFFECTED FOR CONSTRUCTION OF ANY RESIDENTIAL BUILDING. FURTHER, AS PER REVENUE, ONLY INVESTMENT MADE BY THE ASSESSEE WAS IN LAND DURING THE RELEVANT PREVIOUS YEA R AND ON SUCH LAND, IT WAS NOT POSSIBLE TO CONSTRUCT A RESIDENTIAL HOUSE WITHOUT GETTING IT CONVERTED TO RESIDENTIAL AREA . AGAIN AS PER REVENUE, FAILURE TO COMPLY WITH THE CONDITIONS SPECIFIED IN SEC.54F HAD HAPPENED IN THE PREVIOUS YEAR RELEVANT TO THE I MPUGNED ASSESSMENT YEAR ITSELF AND THEREFORE, ASSESSEE ITA . 589 /MDS/ 12 CO NO.66/MDS/12 3 COULD NOT HAVE DEFERRED THE LONG TERM CAPITAL GAINS TAX TO ASSESSMENT YEAR 2009 - 10. 3. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD FILED RETURN FOR IMPUGNED ASSESSMENT YEAR DECLARING AN INCOME OF ` 6, 32,71,995/ - . DURING THE RELEVANT PREVIOUS YEAR, ASSESSEE HAD SOLD SHARES HELD IN ONE M/S.ALPUMP LIMITED, WHICH GAVE RISE TO CAPITAL GAIN S OF ` 11.13 CRORES. AGAINST SUCH CAPITAL GAINS, DEDUCTION OF ` 1.80 CRORES WAS CLAIMED FOR INVESTMENTS MADE UNDE R SECT ION 54EC OF THE ACT AND DEDUCTION FOR ` 3.47 CRORES WAS CLAIMED FOR INVESTMENT UNDER SECTION 54F OF THE ACT. THERE IS NO DISPUTE REGARDING THE CLAIM OF DEDUCTION UNDER SECTION 54EC OF THE ACT , ON WHICH BOTH PARTIES ARE ONE. D ISPUTE BETWEEN THE ASSESSEE A ND THE REVENUE IS LIMITED TO THE DEDUCTION CLAIMED UNDER SECTION 54F OF THE ACT. ON THE LATTER CLAIM , ASSESSING OFFICER NOTED THAT ASSESSEE HAD ACQUIRED 8 ACRES 40 CENTS OF LAND FOR A SUM OF ` 2.41 CRORES. AS PER ASSESSING OFFICER, THIS LAND WAS AGRICUL TURAL IN NATURE AND ASSESSEE COULD NOT SHOW ANY EVIDENCE FOR FILING ANY A PPLICATION FOR CONVERSION OF SUCH LAND TO A RESIDENTIAL AREA. IN ADDITION TO ` 2.41 CRORES INVESTED FOR PURCHASING THE LAND, A SSESSEE HAD ALSO INVESTED ` 1.06 CRORES IN A CAPITAL GAI N ACCOUNT SCHEME. IT SEEMS THERE WERE CERTAIN ITA . 589 /MDS/ 12 CO NO.66/MDS/12 4 WITHDRAWAL MADE FROM THE DEPOSITS IN THE SAID CAPITAL GAIN ACCOUNT SCHEME. AS PER THE ASSESSING OFFICER FOR CLAIMING DEDUCTION UNDER SECTION 54F OF THE ACT, IT WAS NECESSARY FOR THE ASSESSEE TO INVEST THE CON SIDERATION RECEIVED ON TRANSFER OF LONG TERM CAPITAL ASSET WITHIN A PERIOD OF TWO YEARS FROM THE DATE OF TRANSFER , FOR THE PURPOSE OF ACQU IRING A RESIDENTIAL HOUSE OR OTHERWISE ASSESSEE HAD TO CONSTRUCT A RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS . A S PER THE ASSESSING OFFICER THE SUM OF ` 2.41 CRORES INVESTED IN PURCHASE OF AGRICULTURAL LAND COULD NOT BE CONSIDERED AS AN INVESTMENT, WHICH SATISFIED THE CO NDITIONS SET OUT IN SECTION 54F OF THE ACT. RE LYING ON A SWORN STATEMENT TAKEN FROM ASSESSEE , A SSESSING OFFICER CAME TO A CONCLUSION THAT ASSESSEE HAD NOT MADE THE INVESTMENT IN THE LAND IN ACCORDANCE WITH SEC.54F OF THE ACT. FURTHER AS PER ASSESSING OFFICER, THERE WERE WITHDRAWALS FROM THE DEPOSITS IN CAPITAL GAIN ACCOUNT SCHEME AS WELL. ASSESSI NG OFFICER FURTHER NOTED THAT ASSESSEE HAD MADE DEPOSITS IN CAPITAL GAIN ACCOUNT SCHEME ONLY WAS 30.10.2006 WHEREAS THE DUE DATE FOR FILING RETURN FOR THE IMPUGNED ASSESSMENT YEAR ON 31.07.2006. FOR THESE REASONS, HE DENIED THE CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT AND BROUGHT TO TAX A SUM OF ` 3,47,01,162/ - AS LONG TERM CAPITAL GAINS OF THE IMPUGNED ASSESSMENT YEAR. ITA . 589 /MDS/ 12 CO NO.66/MDS/12 5 4. IN ITS APPEAL BEFORE THE CIT(A), ARGUMENT OF THE ASSESSEE WAS THAT THE LAND ACQUIRED WAS NOT 8.01 ACRES BUT ONL Y ONE ACRE AN D IN SUPPORT OF THIS ARGUMENT, A COPY OF SALE DEED WAS PRODUCED. AS PER ASSESSEE, IT HAD PREPARED A PLAN OF CONSTRUCTION OF RESIDENTIAL HOUSE THROUGH AN ARCHITECT, AND ALSO MADE NECESSARY APPLICATION TO THE COMPETENT AUTHORITY FOR APPROVAL THEREOF. FUR THER AS PER THE ASSESSEE , HE HAD ALSO APPLIED AND GOT POWER CONNECTION IN THE SITE FOR CONSTRUCTION WORK AND HAD UTILIZED POWER FOR DOING CONSTRUCTION. AS PER THE ASSESSEE, HE HAD ATTEMPT ED TO DO CONSTRUCTION, BUT COULD NOT PROCEED, SINCE APPROVAL F OR T HE PLAN WAS NOT RECEIVED DUE TO COASTAL ZONE REGULATIONS. SINCE APPROVAL WAS NOT RECEIVED WITHIN A PERIOD THREE YEARS ON THE END OF THE THIRD YEAR, HE HAD OFFERED THE AMOUNT AS CAPIT AL GAINS AND PAID TAXES. AS FOR THE WITHDRAWAL MADE FROM CAPITAL GAIN AC COUNT SCHEME, ASSESSEE SUBMITTED THAT HE WAS NOT AWARE THAT SUCH WITHDRAWALS WERE REQUIRED TO BE MADE UNDER ANY PARTICULAR FORMS AND THAT THERE WAS ANY NON - COMPLIANCE WITH SUCH PROCEDURE. 5. LD. CIT(A) AFTER CONSIDERING THE ABOVE SUBMISSIONS OF ASSESSEE, WAS OF THE OPINION BENEFIT OF SEC.54F WOULD BE ITA . 589 /MDS/ 12 CO NO.66/MDS/12 6 AVAILABLE TO HIM SINCE CBDT CIRCULAR NO.667 DATED 18 .10.1993 HAD CLARIFIED THAT COST OF PLOT ACQUIRED BY ASSESSEE WOULD BE ELIGIBLE FOR EXEMPTION ALONG WITH THE COST OF CONSTRUCTION. AS PER LD. CIT(A), WHEN ASSESSEE WAS UNABLE TO USE THE NET CONSIDERATION BEFORE THE DUE DATE OF FILING THE RETURN , H E WAS ENTITLED TO DEPOSIT SUCH SUM IN AN ACCOUNT OPENED UNDER CAPITAL GAINS SCHEME. THE AMOUNTS, WHICH ASSESSEE WAS UNABLE TO USE, WERE DEPOSITED IN AN ACCOUNT U NDER CAPITAL GAIN ACCOUNT SCHEME . I F THE AMOUNTS SO DEPOSITED WERE NOT USED FOR THE PURPOSE OF CONSTRUCTION OR PURCHASE OF A RESIDENTIAL HOUSE , IT WOULD BE CHARGED TO TAX AS CAPITAL GAINS AT THE END OF THE SPECIFIED PERIOD. AS PER LD. CIT(A) SUB - SECTION( 4), WHICH DEALT WITH WITHDR AWAL OF EXEMPTION UNDER SECTION 54F OF THE A CT CLEARLY BROUGHT OUT THAT AMOUNTS NOT UTILIZED COULD BE BROUGHT TO TAX ONLY AFTER THE END OF THE THREE YEARS PERIOD. LD. CIT(A) FURTHER NOTED THAT THE ASSESSEE HAD APPLIED FOR APPR OVAL OF CONSTRUCTION VIDE HIS LETTER DATED 07.01.2007 TO THE PRESIDENT, KANATHUR REDDYKUPPAN PANCHAYAT UNION AND ALSO FURNISHED SITE PLAN OF THE LAND, BUILDING PLAN SHOWING PL AN FOR EACH FLOOR ELEVATION, SPECIFICATION S FOR THE WORK . P OWER CONNECTION WAS ALSO RECEIVED. AS PER THE LD. CIT(A) , ASSESSEE COULD NOT START CONSTRUCTION DUE TO RESTRICTIONS IMPOSED BY COASTAL ZONE REGULATIONS AND ITA . 589 /MDS/ 12 CO NO.66/MDS/12 7 ACCORDINGLY, THE GAINS WERE OFFERED TO TAX BY THE ASSESSEE AFTER THREE YEARS PERIOD. CIT(A) ALSO NOTED THAT WITHDRAWAL OF MONEY FROM THE ACCOUNT FOR CAPITAL GAIN ACCOUNT SCHEME WOULD NOT DIS - ENTITLE THE ASSESSEE FROM CLAIMING EXEMPTION UNDER SECTION.54F OF THE ACT IN THE IMPUGNED ASSESSMENT YEAR. SINCE ASSESSEE WAS A PERSON SUBJECT TO TAX AUDIT, HIS DUE DATE FOR FILIN G RETURN FELL ON 31.10.06 AND NOT 31.07.06 AS NOTED BY THE ASSESSING OFFICER. IN THIS VIEW OF THE MATTER, HE DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT. 6. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE A SSAILING THE ORDER OF CIT(A) SUBMITTED THAT NATURE OF THE LAND PURCHASED BY THE ASSESSEE , AT THE TIME OF PURCHASE WAS AGRICULTURAL . ASSESSEE WAS AWARE THAT NO CONSTRUCTION WAS POSSIBLE IN AGRICULTURAL LAND UNLESS APPROVAL FOR CONVERSION WAS RECEIVED. TH U S, ASSESSEE HAD NO INTENTION FOR STARTING ANY CONSTRUCTION OF RESIDENTIAL BUILDING AT ALL . THEREFORE, ACCORDING TO HIM, ACTION OF THE ASSESSEE IN DEPOSITING BALANCE SUMS IN A DEPOSIT UNDER CAPITAL GAIN ACCOUNT SCHEME HAD NO RELEVANCE WHATSOEVER. EVEN T HE DEPOSITS IN CAPITAL GAIN ACCOUNT SCHEME WERE WITHDRAWN BY THE ASSESSEE LATER FOR PURPOSE S OTHER THAN ITA . 589 /MDS/ 12 CO NO.66/MDS/12 8 CONSTRUCTION AND THIS WENT TO SHOW THAT ASSESSEE HAD NO INTENTION TO CONSTRUCT RESIDENTIAL BUILDING. THE SCHEME OF DEDUCTION UNDER SECTION 54F ON LO NG TERM CAPITAL GAINS ENVISAGED PURCHASE OF PROPERTY FOR THE PURPOSE OF CONSTRUCTION OF A RESIDENTIAL BUILDING AND EXEMPTION COULD NOT BE GIVEN WHEN AT THE OUTSET ITSELF , ASSESSEE HAD NO INTENTION TO DO SO. ACCORDING TO HIM, ASSESSEE COULD NOT BE GIVE N BENEFIT OF SEC 54F , JUST FOR A REASON THAT DEPOSITS WERE MADE IN A DEPOSIT ACCOUNT OPENED UNDER CAPITAL GA IN ACCOUNT SCHEME. ASSESSEE WAS UNABLE TO START ANY CONSTRUCTION ACTIVITY IN THE SAID LAND , AND HAD OFFERED THE ENTIRE AMOUNT AFTER THE END OF THE THREE YEAR PERIOD FOR TAX JUST AS A DELAYING TECHINQUE. JUST BECAUSE, ASSESSEE HAD RECEIVED ELECTRICITY CONNECTION OR HAD SENT PLAN FOR APPROVAL W OULD NOT BE A REASON TO CONSTRUE THAT ASSESSEE HAD ANY INTENTION TO CONSTRUCT A HOUSE , WHEN NO SUCH CONSTRU CTION WAS POSSIBLE IN AN AGRICULTURAL LAND. 7. PER CONTRA LD. AUTHORISED REPRESENTATIVE OF ASSESSEE SUPPORTING THE ORDER OF CIT(A) SUBMITTED THAT IN THE FIRST PLACE THERE WAS NO RESTRICTION F OR CONSTRUCTION OF AT LEAST A FAR M HOUSE IN AN AGRICULTURAL LAN D. ACCORDING TO HIM, THE LAND ACQUIRED WAS ONLY ONE ACRE AND NOT 8.04 ACRES AS MENTIONED BY ASSESSING ITA . 589 /MDS/ 12 CO NO.66/MDS/12 9 OFFICER. SINCE F OR CONSTRUCTION OF A FARM HOUSE ALSO APPROVAL FROM LOCAL AUTHORITY WAS NECESSARY, A SSESSEE HAD PREPARED A PLAN AND MOVED FOR THIS PURPO SE . ASSESSEE HAD RECEIVE D EL ECTRICITY CONNECTION IN THE PREMISE FOR PURSUING THE CONSTRUCTION ACTIVITY. UNFORTUNATELY DUE TO RESTRICTION S IMPOSED BY COASTAL ZONE REGULATIONS, PERMISSION FOR CONSTRUCTION WAS NOT FORTHCOMING AND WITHOUT SUCH APPROVAL, A SSESSEE COULD NOT LAWFULLY GO AHEAD WITH THE CONSTRUCTION WORK. ASSESSEE HAD WITH AN INTENTION TO CONSTRUCT BUILDING DULY DEPOSITED THE BALANCE SUM OF CONSIDERATION IN A DEPOSIT UNDER CAPITAL GAIN ACCOUNT SCHEME. WHEN IT WAS FOUND THAT CONSTRUCTION WAS NOT POSSIBLE , ASSESSEE HAD RETURNED THE CAPIT AL GAINS FOR ASSESSMENT YEAR 20 0 9 - 10 . IN SUPPORT OF HIS ARGUMENT THAT INTENTION OF ASSESSEE FOR CLAIMING DEDUCTION UNDER SECTION 54F OF THE ACT ALONE WAS MATERIAL, LD.A.R. RELIED ON THE DECISION OF A CO - ORDIN ATE BENCH OF THIS TRIBUNAL IN THE CASE OF SMT V.A.THARABAI VS. DCIT ( ITA NO.1894/2011 DATED 12.01.2012 ) 8. AD LIBITUM LD. D.R. SUB MITTED THAT DECISION OF CO - ORDI N A TE BENCH WAS GIVEN IN AN ENTIRELY DIFFERENT SITUATION WHERE DUE TO LITIGATION IN THE LAN D PURCHASED , ASSESSEE WAS UNABLE TO PURSUE A CONSTRUCTION . CO - ORDINATE BENCH HELD THAT JURISPRUDENCE OF LAW ITA . 589 /MDS/ 12 CO NO.66/MDS/12 10 NEVER DICTATED A PERSON TO PERFORM A DUTY THAT WA S IMPOSSIBLE TO PERFORM. HERE, O N THE OTHER HAND, ACCORDING TO LD. DEPARTMENTAL REPRESENTATI VE CONSTRUCTION OF RESIDENTIAL HOUSE IN THE GIVEN LAND WAS IMPOSSIBLE FROM VERY BEGINNING . A SSESSEE WAS AWARE THAT SUCH CONSTRUCTION WAS NOT POSSIBLE BUT ST ILL WANTED TO CLAIM DEDUCTION UNDER SECTION 54F OF THE ACT. 9. WE HAVE HEARD THE RIVAL CONTENTIO NS AND ALSO CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. REVENUE HAS NOT DENIED THE OBSERVATION OF THE CIT(A) THAT LAND ACQUIRED WAS ON E ACRE AND NOT 8.40 ACRES. C OST OF THE LAND WA S ` 2.41 CRORES AND THE AMOUNT DEPOSITED BY THE ASSESSEE I N CAPITAL GAIN ACCOUNT SCHEME WAS ` 1.06 CR ORES. T OTAL DEDUCTION CLAIMED UNDER SECTION 54F WAS ` 3.47 CRORES. A RGUMENT OF REVENUE IS THAT ASSESSEE HAD NO INTENTION TO CONSTRUCT A HOUSE IN THE ONE ACRE PROPERTY. L AND WAS AGRICULTURAL IN NATURE AND ASSESS EE WOULD HAVE BEEN AWARE THAT A RESIDENTIAL CONSTRUCTION WAS NOT POSSIBLE IN AN AGRICULTURAL PROPERTY. IN OUR OPINION, TH IS CONTENTION ITSELF IS A PURE PRESUMPTION. A S STATED BY LD. AUTHORISED REPRESENTATIVE OF ASSESSEE , AT LEAST A FARM HOUSE COULD BE CO NSTRUCTED, IF NOT A FULL FLEDGED RESIDENCE IN AN AGRICULTURAL PROPERTY. THERE IS NO CASE F OR THE REVENUE THAT LAND WAS NOT DRY IN NATURE. ASSESSEE HAD ITA . 589 /MDS/ 12 CO NO.66/MDS/12 11 MOVED THE LOCAL AUTHORITY, NAMELY KANATHUR REDDYKUPPAN PANCHA YAT UNION FOR GETTING APPROVAL F OR CONSTRU CTION OF A HOUSE AND ALSO SUBMITTED PLAN OF THE BUILDING, WHICH GAVE FLOOR - WISE ELEVATION AND SPECIFICATION OF WORK, AND L AY - OUT OF THE HOUSE THROUGH A LETTER DATED 07.01.2007. THESE FACTS HAVE NOT BEEN DISPUTED BY THE REVENUE AT ALL. THERE IS ALSO NO D ISPUTE THAT HE HAD OBTAINED POWER CONNECTION. IN THE FACE OF THE S E FACT S TO SAY THAT ASSESSEE HAD NO INTENTION TO CONSTRUCT RESIDENTIAL HOUSE IS NOT CORRECT . IN OUR OPINION , IF THE ASSESSEE HAD NO INT ENTION TO CONSTRUCT A HOUSE, HE WOULD NOT HAVE GOT A PLAN PREPARED BY A N ARCHITECT AND SUBMITTED IT TO THE LOCAL AUTHORITY FOR APPROVAL ALONG WITH A SITE PLAN. MAY BE IT TRUE THAT DUE TO COASTAL ZONE REGULATIONS , NO CONSTRUCTION WAS POSSIBLE IN THE SAID LAND. BUT WE CANNOT SAY THAT ASSESSEE , WHEN PURCHA SING THE LAND, WAS AWARE THAT ON ACCOUNT OF THE CO A ST A L ZONE REGULATION, HE COULD NOT CONSTRUCT A RESIDENTIAL HOUSE THEREIN . EVEN COASTAL ZONE REGULATION S BY ITSELF DOES NOT DENY THE RIGHT OF CONSTRUCTION, BUT PLACES A NUMBER OF CONSTRAINTS FOR SUCH CO NSTRUCTION. HAVING NOT OBTAINED APPROVAL FOR THE PLAN WITHIN THREE YEARS, ASSESSEE HAD OFFERED THE SAME TO CAPITAL GAIN ACCOUNT SCHEME IN ASSESSMENT YEAR 2009 - 10. A LOOK AT SECTION 54F AT THIS J UNCTURE IS VERY MUCH NECESSARY. ITA . 589 /MDS/ 12 CO NO.66/MDS/12 12 SECTION 54F. CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. (1) SUBJECT TO THE PROVISIONS OF SUB - SECTION (4), WHERE IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, THE CAPITAL GAIN ARISE S FROM THE TRANSFER OF ANY LONG - TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECT ION, THAT IS TO SAY, - (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET C ONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45 : PROVIDED THAT NO THING CONTAINED IN THIS SUB - SECTION SHALL APPLY WHERE THE ASSESSEE OWNS ON THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET, OR PURCHASES, WITHIN THE PERIOD OF ONE YEAR AFTER SUCH DATE, OR CONSTRUCTS, WITHIN THE PERIOD OF THREE YEARS AFTER SUCH DATE, ANY RES IDENTIAL HOUSE, THE INCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', OTHER THAN THE NEW ASSET. EXPLANATION : FOR THE PURPOSES OF THIS SECTION, - 'NET CONSIDERATION', IN RELATION TO THE TRANSFER OF A CAPITAL ASSET, MEANS THE F ULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE ITA . 589 /MDS/ 12 CO NO.66/MDS/12 13 CAPITAL ASSET AS REDUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER. (2) WHERE THE ASSESSEE PURCHASES, WITHIN THE PERIOD OF TW O YEARS AFTER THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET, OR CONSTRUCTS, WITHIN THE PERIOD OF THREE YEARS AFTER SUCH DATE, ANY RESIDENTIAL HOUSE, THE INCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', OTHER THAN THE NEW ASSET, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF SUCH NEW ASSET AS PROVIDED IN CLAUSE (A), OR, AS THE CASE MAY BE, CLAUSE (B), OF SUB - SECTION (1), SHALL BE DEEMED TO BE INC OME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' RELATING TO LONG - TERM CAPITAL ASSETS OF THE PREVIOUS YEAR IN WHICH SUCH RESIDENTIAL HOUSE IS PURCHASED OR CONSTRUCTED. (3) WHERE THE NEW ASSET IS TRANSFERRED WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF I TS PURCHASE OR, AS THE CASE MAY BE, ITS CONSTRUCTION, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF SUCH NEW ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAUS E (B), OF SUB - SECTION (1), SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' RELATING TO LONG - TERM CAPITAL ASSETS OF THE PREVIOUS YEAR IN WHICH SUCH NEW ASSET IS TRANSFERRED. (4) THE AMOUNT OF THE NET CONSIDERATION WHICH IS NOT APPRO PRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139, SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB - SECTION (1) OF SECTION 139] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE ITA . 589 /MDS/ 12 CO NO.66/MDS/12 14 WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN S HALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSES OF SUB - SECTION (1), THE AMOUNT, IF ANY, ALREADY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHALL BE DEEMED TO BE THE C OST OF THE NEW ASSET : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB - SECTION IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB - SECTION (1), THEN, - (I) THE AMOUNT BY WHICH (A ) THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF THE NEW ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAUSE (B) OF SUB - SECTION (1), EXCEEDS, (B) THE AMOUNT T HAT WOULD NOT HAVE BEEN SO CHARGED HAD THE AMOUNT ACTUALLY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB - SECTION (1) BEEN THE COST OF THE NEW ASSET, SHALL BE CHARGED UNDER SECTION 45 AS INCO ME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW THE UNUTILISED AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. L AST PR OVISO CLE ARLY MENTIONS THAT WHEN AMOUNT S DEPOSITED UNDER CAPITAL GAINS ACCOUNT SCHEME WERE NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION WITHIN THE PERIOD SPECIFIED , THEN ITA . 589 /MDS/ 12 CO NO.66/MDS/12 15 SUCH AMOUNT WOULD BE CHARGED AS INCOME OF THE PREVIOUS YEAR IN WHICH THE PER IOD OF THREE YEARS , STARTING FROM THE DATE OF THE TRANSFER OF THE ASSET EXP IRED. THE TERM USED IS SHALL . SECTION 54F DOES NOT SAY THAT THE AMOUNT SHALL BE TAXED IN THE YEAR OF WITHDRAWAL, IF SUCH WITHDRAWAL ARE NOT UTILIZED FOR THE PURPOSE OF CONSTRU CTION. EVEN IF THE AMOUNT DEPOSITED IN A CAPITAL GAIN ACCOUNT , IS UTILIZED FOR ANY OTHER PURPOSE, IN OUR OPINION THE RESULT WOULD BE VERY SAME. HE WILL HAVE TO PAY TAX FOR SUCH AMOUNT IN THE PREVIOUS YEAR AFTER EXPIRY OF THE THREE YEAR S TIME PERIOD. HE RE, ASSESSEE HAD SUO MOT U OFFERED THE SUM IN ASSESSMENT YEAR 2009 - 10 AS CAPITAL GAINS. AS ALREADY MENTIONED, THE CIRCUMSTANCES DO NOT WARRANT A CONCLUSION CAN BE DRAWN THAT ASSESSEE HAD NO INTENTION TO CONSTRUCT A RESIDENTIAL HOUSE FROM THE VERY BEGINNING . IN THE CASE OF SMT V .A.THARABAI VS. DCIT(SUPRA), CO - ORDINATE BENCH HELD THAT WITHOUT PURCHASING LAND, HO USE CANNOT BE CONSTRUCTED . F IRST STEP WAS PURCHASE OF LAND. IF THE NEXT STEP COULD NOT BE PUT FORWARD , THEREAFTER , ON A CCOUNT OF A REASON , WHICH WAS BEYOND CONTROL OF ASSESSEE , T HE N THE AMOUNT SPENT BY THE ASSESSEE IN PURCHASING THE LAND HAD TO BE CONSIDERED AS AMOUNT INVESTED FOR PURCHASE /CONSTRUCTION OF RESIDENTIAL HOUSE. ASSESSEE HERE, HAVING OFFERED CAPITAL GAINS FOR TAX IN ASSESSMENT YEAR 2009 - 10 ITA . 589 /MDS/ 12 CO NO.66/MDS/12 16 AS STIPUL ATED IN PROVISO - 1 OF SECTION 54F OF THE ACT , COULD NOT BE SADDLED WITH THE SAME LIABILITY FOR THE IMPUGNED ASSESSMENT YEAR AS WELL. LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRANT THE ASSESSEE DEDUCTION UNDER SEC TION 54F OF THE ACT FOR IMPUGNED ASSESSMENT YEAR. NO INTERFERENCE IS REQUIRED IN THE ORDER OF CIT(A). 10. WHEN CROSS OBJE CTION WERE TAKEN UP, LD. COUNSEL FOR ASSESSEE SUBMITTED THAT HE WAS NOT PRESSING IT . 11 . IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AND CROSS OBJECTION OF ASSESSEE ARE DISMISSED. ORDER P RONOUNCED ON THURSDAY , THE 11 TH OCTOBER , 2012 AT CHENNAI . SD/ - SD/ - ( VIKAS AWASTHY) ( ABRAHAM P. GEORGE ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 11 TH OCTOBER , 2012 . K S SUNDARAM COPY TO: ASSESSEE / AO / CIT (A) / CIT / D.R. / GUARD FILE ITA . 589 /MDS/ 12 CO NO.66/MDS/12 17