SANJAY GULABCHAND GUPTA,NAGPUR V. ASSISTANT COMMISSIONER OF INCOME TAX,CIRCLE-4, NAGPUR

ITA 210/NAG/2023

AI Insights

The case involves Sanjay Gulabchand Gupta, the appellant, who claimed an exemption under section 54F of the Income Tax Act, 1961, for the assessment year 2017-18. The exemption was claimed on the capital gains from the sale of an immovable property, which was reinvested in constructing a residential house. The Assessing Officer (AO) disallowed the claim on grounds that the construction had commenced prior to the sale of the original asset and the property was in a commercial zone. The CIT(A) upheld the AO's decision, leading to the appeal before the Income Tax Appellate Tribunal, which also confirmed the disallowance.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24207 (ITAT-NAGPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Other Referred Cases: Mrs Meera Jacob vs ITO 313 ITR 411 (Kerala), ACIT vs TN Gopal (2009) 121 ITD 352 (Chennai ITAT), CIT VS H.K. Kapoor 234 ITR 753 (All) (1998), CIT VS J.R. Subramanya Bhat (1987) 165 ITR 571 (Karnataka), Paramjitkaur VS Income Tax Officer (ITAT) Chandigarh in Appeal No. ITA 717/Chd/2017 Dt. 28.09.17, ACIT VS Sudhakaran (1011) 16 Taxmann.com 175 (Mum) ITAT, Smt. Ranjeet Sandhu VS DCIT (2011) 16 Taxmann.com 210 (Chd ITAT), Dy Comm. Of Income Tax VS Pankaj Chimanlal Patel in ITA No. 3179/Ahd/2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ABHAY Y. MARATHE
• Assessee Lawyers: VEENA AGRAWAL
• Keywords: Capital asset; Capital Gains; Reason to believe
• Section: 142(1); 143(2); 143(1); 54; 153; 54F; 139

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI K.M. ROY, ACCOUNTANT, MEMBER ITA no.210/Nag./2023 (Assessment Year : 2017–18) Sanjay Gulabchand Gupta J–9, The Nagpur Ashok WHC Road, Laxmi Nagar Nagpur 440 022 PAN – ABMPG7867Q ……………. Appellant v/s Asstt. / Dy. Commissioner of Income Tax Circle–4, Nagpur ……………. Respondent Assessee by : Smt. Veena Agrawal Revenue by : Shri Abhay Y. Marathe Date of Hearing – 28/01/2025 Date of Order – 14/02/2025 O R D E R PER K.M. ROY, A.M. The appeal by the assessee is emanating from the impugned order dated 03/05/2023, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2017–18. 2. In its appeal, the assessee has raised following grounds:– “1. The Ld. CIT(A) erred in confirming the disallowance so made by the AO in respect of exemption under section 54F of the Income Tax Act, 1961 of Rs. 1,58,64,162/-. 2. The Appellant denies to the levy of excessive tax computed on above disallowance and interest thereupon. 3. The Appellant craves to add, delete, insert and omit any ground or part of the grounds of appeal at the time of hearing of the appeal.” 2 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 3. The assessee is an individual and has filed the return of income for AY 2017-18 on 30/10/2017 declaring total Income of ` Nil. The case was selected for scrutiny and notices under section 143(2) and 142(1) of the Income Tax Act, 1961 (\"the Act\") were issued. In response to various notices, assessee has duly complied the notices from time to time. 4. During the assessment year under consideration, the assessee had transferred an immovable property for sale consideration of ` 2,15,00,000, on 18/07/2016. The assessee had computed income from capital gains of ` 1,58,64,162, and claimed exemption under section 54F of the Act amounting to ` 1,58,64,162. The assessee had invested the net sale consideration in construction of residential house on 6th floor of his existing premises. 5. The Assessing Officer referred to the provisions of section 54F and observed that the deduction is allowable if the assessee constructs one residential house after the date on which transfer of the original assets take place. The Assessing Officer observed that the assessee had already started construction of new residential house prior to sale of original asset. As per ledger account of Sanjay Gupta House, it was observed that the assessee had opening balance as on 01/04/2016 amounting to ` 1,36,45,598. The Assessing Officer has disallowed the claim under section 54F of the Act on the following reasons:– “…….. It can be seen that: 3 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 1. The land use as per sanction development plan was for commercial purpose. Therefore the first and foremost question regarding the admissibility of the provisions of Section 54F in ay 2017-18 and of Section 54 in AY 2014-15 and AY 2015-16 as well is that whether the said benefits are available if the residential house as claimed by the assessee is actually permissible in the building approved purely for commercial purpose. 4.12 Therefore the assessee's claim of benefits of Section 54F of IT Act is sought to be denied on the basis of combination of following factors: 1. Assessee constructed the residential house on the sixth floor of his business premise and the sanction of the said building was for commercial purpose as per the sanctioned plan approved. 2. The assessee had already expended the amount of Rs13645598/-even before the financial year in which the benefit was sought actually began. Thus the expenditure incurred before the financial began was more than 50% of the expenses incurred till the end of the FY 2016-17. This means that before the transfer of the capital asset, the proceeds of which were used for claiming the benefit of Section 54F of IT Act, the majority of expenses were already incurred and the house being constructed was either in the final stages or was already constructed and the expenses, claimed subsequently. In fact there is every reason to believe from the circumstances and multiple benefits claimed by the assessee that the transfer of original property in AY 2017-18 was itself an afterthought and effected solely to claim the benefits of Section 54. 3. Most importantly the assessee under scrutiny has taken recourse of the same construction of a residential house at the sixth floor of the business premises for claiming benefit not once, not twice but staggeringly thrice as follows: AY 2014-15 benefit of Rs. 25,56,571/-u/s Section 54 AY 2015-16 benefit of Rs. 19,62,411/- u/s Section 54 AY 2017-18 benefit of Rs. 1,58,64,162/- u/s Section 54F 4.13 In this regard it is seen that the assessee has claimed benefit spanning across four years, whereas originally the construction of the house as envisaged by the provisions of Section 54 must be completed within three years after the transfer of the original asset. pornjructed was a expenses claimed 4.14 Moreover, the very object of the provisions is defeated if the assessee indulges in claiming the benefits multiple times. The object of Section 54F is to encourage an assessee to convert any of his long term assets into a residential house subject to the condition that assessee does not own more than one residential house other than the new residential house on the date of transfer of long term asset. The Section, thus, in essence, offers some incentives to a tax payer to change its unproductive assets into a residential house. However in the instant case, this intention of the legislature is already met. The productive asset was already in existence way before the unproductive asset was transferred. In fact the benefit was already availed by the assessee for the purpose of construction of the productive asset (residential house). Therefore there is no question of allowing any further benefit for residential house again. This is akin to extension and renovation of the existing house on which benefit of Section 54 is already claimed in earlier years. Various judicial 4 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 pronouncements have held that the expenses incurred on renovation or extention of the house already in existence, then it does not qualify for the benefits of Section 54F. The decision in the case of Mrs Meera Jacob vs ITO 313 ITR 411 (Kerala) is applicable in thi regard as is the decision in the case of ACIT vs TN Gopal (2009) 121 ITD 352 (Chennai ITAT). 4.15 Hence in this case assessee cannot claim in FY 2016-17, the benefit intended by the legislature on the construction which started way back in FY 2013-14. 4.16 The assessee e cannot make claim of double deduction towards investment of sale proceeds arising out in two different assets in two different assessment years under two different provisions against the construction of same residential property. Since the construction as contemplated in Section 54F of the Act could happen only once and that has already happened in the preceding assessment years in fact in fourth year preceding the year under assessment, the benefit towards construction of new asset cannot be extended to capital gains on sale of another asset in another assessment year. In fact the Act actually envisages that the construction of the house be completed WITHIN three years after the transfer of the asset in question whether in Section 54 or in Section 54F. In this case, the construction has started astonishingly four years before the end of the AY 2017-18. Moreover even some of the judicial pronouncements claimed by the assessee which allowed that the beneficial intent of the provisions of the act to be accorded in case the construction started within one year before the transfer of other asset. In such cases the courts have used the analogy and liberal interpretation to treat the construction in similar vein as that of purchase and award the same treatment to the word \"construction\" as that accorded to the word purchase. Hence even in those cases the construction was supposed to have started one year before the transfer date of the asset transferred. But in the instant case, the benefit of Section 54 was claimed way back in FY 2014-15 which unmistakably and unambiguously mean that the construction started in FY 2014-15, without which the assessee could not have claimed the benefit of Section 54 in FY 2014-15. 4.17 Most importantly, the assessee has himself claimed in his reply dated 25.12.2019. In your Show Cause Notice, you had pointed out that I had started the Construction work of new residential house long before the capital gain arise. It is not the fact. I had constructed the house at 6 floor. The advance payments were made to various parties and actual construction started during AY 2016- 17. Upto AY 2017-18, the total amount invested in the House Property is of Rs. 2,68,73,530/-. The relevant ledger account of Sanjay Gupta House is enclosed herewith. So it is very clear that the amount invested in New House Property up to AY 2017-18 is of Rs2,68,73,530/-which is more than the Capital Gain arise of Rs. 1,58,64,162/-. So the benefit claimed u/s. 54F by me is genuine and correct. You had observed that investment in house property to claim benefit u/s. 54F should be made after the capital gain arise and within three years from the capital gain arise. But it is not the fact. In various case laws before various benches of Hon. ITAT and before the Hon. High Courts, it is already confirmed that even if the construction has started earlier than the capital gain arise, it is eligible for claiming deduction u/s. 54F. 5 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 4.18 It is here that the assessee's wilful and deliberate tax avoidance comes to the fore. In the aforesaid reply as can be seen from the highlighted portion that the assessee claims that actual construction started during FY 2016-17. But when the assessee has claimed the benefit of Section 54 in FY 2014-15 on the same house, the falsity in assessee's claim comes to the fore. It is therefore clear that the assessee had claimed the benefit for construction of residential house in ay 2014-15. Hence the residential house on which the claim of Section 54 benefit was claimed and allowed in AY 2014-15 was completed latest by 13.08.2016 as the assessee had transferred the property on 13.08.2013, transfer of which the assessee had claimed the benefit of Section 54 in AY 2014-15. Hence there arises absolutely no question of claiming by the assessee, leave alone allowing by department the claim of any more benefit on the same residential house. 4.19 Finally it will not be out of place to quote the legislative intent of the beneficial provisions of Section 54 and 54F here. 4.20 The legislative intent behind giving exemption u/s 54 & 54F is to increase availability of housing accommodation in the country which is woefully short compared to the demand by losing tax. In assessee's case, both the action and intention of the assessee is against the legislative intent as the assessee has used the beneficial provisions in multiple years in contravention of the legislative intent. This has deprived the public exchequer of its rightful revenue. It has also disturbed the principles of equity in taxation as the misuse of deduction and exemptions actually increase the burden of taxation on, the taxpayers who actually pay taxes honestly. Therefore this is fit case to deny the benefit of the provisions of Section 54F of IT Act. 4.21 In light of the discussion in preceding paras the assessee's claim of the benefit of provisions of Section 54F of IT Act is denied. Therefore a sum of Rs 1,58,64,162/-is disallowed as deduction and added back to the returned income of the assessee. Penalty u/s 270A(9) initiated separately for misreporting of income. 5. After perusal of uploaded documents, the total income of assessee is computed as under:– Particulars Amount in (`) Income as per section 143(1) Nil Addition as discussed in Para–3 (specified business loss set off disallowed) 92,47,915 Addition as discussed in para–4 (deduction u/s 54F disallowed) 1,58,64,162 Assessed Income 2,51,12,077 Rounded off u/s 288A 2,51,12,080 The assessee being aggrieved, went in appeal before the first appellate authority. 6 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 6. The learned CIT(A) has further strengthened the addition by meticulously observing as under:– “5. Ground No 1 is directed against the Assessing Officer (hereinafter referred to as \"the AO') denying the claim made under section 54F of the Act of Rs. 1,58,64,162. The brief facts of the case is that the appellant filed the return of income for AY 2017-18 on 30-10-2017 declaring total Income of Rs. Nil/-. The case was selected for scrutiny and during the course of assessment proceedings the AO found that the appellant had transferred an immovable property for sale consideration of Rs. 2,15,00,000/- on 18/07/2016. The appellant had computed income from capital gains of Rs. 1,58,64,162/- and claimed exemption u/s 54F of the Act amounting to Rs.1,58,64,162/-. The appellant sought benefit of sec 54F of the Act on the investment of the net sale consideration in construction of residential house on 6th floor of his existing premises. The AO observed that the deduction is allowable if the appellant constructs one residential house after the date on which transfer of the original assets take place. The AO observed that the appellant had already started construction of new residential house prior to sale of original asset and that, as per ledger account of Sanjay Gupta House, it was observed that the appellant had opening balance as on 01.04.2016 amounting to Rs. 1,36,45,598/-. The AO held that the appellant had constructed the residential house on the sixth floor of his existing business premise and the sanction of the said building was for commercial purpose. The AO also held that the appellant had expended the amount of Rs 13645598 even before the financial year in which the benefit was sought actually began and the expenditure incurred before the financial year began was more than 50% of the expenses incurred till the end of the F.Y 2016-17. The AO also held that the appellant cannot make claim of double deduction towards investment of sale proceeds arising out in two different assets in two different assessment years against the construction of same residential property. The AO disallowed a sum of Rs 1,58,64,162 claimed as deduction u/s 54F of the Act. Unsiderrufs 5.1 The appellant during the course of appellate proceedings has submitted as under: ussets take plans \"1. The dispute in Appeal is with regards to Disallowance of claim u/s 54F at Rs.1,58,64,162/- 2. Assessee filed the retum declaring Income at \"NIL\". Assessee has Business Income. After deduction u/s 35AD and carry forward Losses, the income declared was NIL. However while computing the income the sum of Rs. 92,47,915/- (Income from Firm) was not adjusted as it was the Loss carried forward from Specified business. Assessing Officer further disallowed the claim u/s 54F arising on Sale of Factory at Rs.2,15,00,000/- on which Assessee had Capital Gain at Rs. 1,58,64,162/-. This Capital Gain was claimed exempt u/s 54F. This Capital Gain was invested in the residential house being built on 6th Floor of the commercial venture \"The Nagpur Ashok\". The sanction map also shows that 6th floor is for residential use. 7 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 3. The Learned Income Tax Officer disallowed the claim of Appellant for the following reasons:- 1. The Assessee has to construct residential house AFTER the date on which transfer of the Original assets take place. (Para 4.2 to Para 4.6 of AO's Order). 2. Significant amount of construction expenses were already incurred on the construction. (1,36,45,598/-) (Para 4.12 of AO's Order) 3. On same property, exemption u/s 54F is being claimed in AY 2014- 15, 15-16 and lastly AY 2017-18. (Investment of Sale proceeds arising out of two different assets in two different Assessment years under two different provisions against same property) (Para 4.7 to 4.12 of AO's Order) 4. Assessee has claimed benefit spanning across four years whereas originally the construction of the house as envisaged by the provisions of Section 54 must be completed within three years after the transfer of original assets. (Para 4.13 AO's Order) & 4.16 of A.O’s order) 5. Land use was for Commercial purposes. 4. So basically there is no dispute as regards calculations of Capital gains. However the claim of exemption u/s 54F is disallowed for above reasons. Pertinent to note is that there is no dispute regarding cost of construction of residential House Property at Rs. 2,68,73,530/-. There is no dispute that construction of residential house commenced in Asst Year 2015-16 and was completed in Asst year 2017-18. 5. Appellant takes each issue hereunder :- 1. Assessee has to construct residential house After the date on which transfer of the original assets takes place. 1. In Para 4.2 the Assessing Officer states that benefit u/s 54F is allowable only if the Assessee constructs one residential house after the date on which the transfer of original asset takes place. Show Cause notice 29.12.2019 was issued. Assessee explained that upto AY 2016-17 only advance payments for goods were made to parties and infact construction started in Asst Year 2017-18 only. Assessee also stated that various highcourts and Tribunals have held that even if construction has started earlier even then the Capital Gain Assessee is eligible for exemption u/s 54F. 2. Appellant reiterates the stand consistently taken and state that exemption of Capital Gain u/s 54F is allowable notwithstanding the fact that the construction of new house had begun before the sale of old house. Matter is aptly clear and needs no further explanation. However it is respectfully submitted that the AO is fundamentally misplaced in observing that in case of construction of property the construction cannot precede the date of transfer of original asset giving rise to Capital gains. It is now judicially very well settled that there can be no denial of deduction I exemption u/s 54F for commencing construction of new house before the sale of 8 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 original asset. This issue is now no longer a res integra in view of several authoritative pronouncements from High Courts and Tribunals. Assessee relies on the following decisions besides others: CIT VS H.K. Kapoor 234 ITR 753 (All) (1998) CIT VS J.R. Subramanya Bhat (1987) 165 ITR 571 (Karnataka) Paramjitkaur VS Income Tax Officer (ITAT) Chandigarh in Appeal No. ITA 717/Chd/2017 Dt. 28.09.17 Asst CIT VS Subhash Sevaram Bhavnami (ITA No.928/Ahd/2012 Dt. 29.6.12) 23 Taxmann.com 94 Kapil Kumar Agrawl VS DCIT Gurgaon in ITA/2630/Del/201 Order Dt. 30.4.19 CIT VS Bhart Mishra (Delhi High Court) 265 CTR 374 In CIT VS Sardarmal Kothari (2008) 302 ITR 286 (Madras High Court) relying on the observation of Supreme Court held Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. Madras High Court has made this observations. Following decisions of Supreme Court in CCE VS Favourite Industries, (2012) 7 SCC 153 and GP Ceramics (P) Ltd. VS Dy. Commissioner, Trade Tax (2009) 2 SCC 90). ii) Significant amount of construction expenses were already incurred in the construction (13645593/-). The Assessee himself stated that in AY 2014-15 & 15-16, entire Capital amount was utilised mostly in giving advance for various goods and services for residential house and claim was made u/s 54F. Courts have consistently held that deduction u/s 54F cannot be enied where Assessee invested into purchase of flat before expiry of statutory period, benefit of deduction u/s 54F could not be denied on the ground that building was under construction stage. (ACIT VS Sudhakaran (1011) 16 Taxmann.com 175 (Mum) ITAT. (III) On same property Exemption u/s 54F is being claimed in AY 2014-15, 15- 16 & lastly 2017-18 (iv) Assessee has claimed benefit spanning across four years. Whereas originally the construction of house as envisaged by the provision of Section 54 must be completed within three years after the transfer of original asses. 1. With respect to above the contraversory is whether deduction u/s 54F is available in respect of Capital Gain arising from sale of more than one Long Term Capital asset, not being residential house against the construction of one residential house. Incidental issue would be whether capital gains of multiple years can be claimed against construction of same new residential house. 2. Assessee submits that there is no bar in Section 54F for claiming deduction second or third time for the same property if cost of the property is within 9 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 Capital gain arising to Assessee. Therefore in respect of residential property till cost of purchase of property is exhausted by the claim of Capital gain but remaining in the time frame stipulated in Section 54F, deduction u/s 54F cannot be denied. Further the thurst of section is on investment of net consideration received on sale of original asset and start construction of a new residential house. It is on record and admitted fact that construction started in Asst Year 2015-16 and culminated in Asst Year 2017-18. In course of this period the Assessee claimed exemption u/s 54F for gain on two different properties on same residential house. This is perfectly within the parameters of law and is an allowable expenditure. Assessee relies on following decisions on the EN TAX DEPA 1. Rajesh Keshav Pillai VS I.T.O. 7. [Taxmann.com 11 (Mumbai) 2010] 2. ACIT New Delhi VS Mohinder Kumar Jain [I.T.Appeal No. 554(Delhi) of 2014] 3. ACIT VS Sudhakarram (2011) 16 Taxmann.com 175 (Mum) ITAT 4. Smt. Ranjeet Sandhu VS DCIT (2011) 16 Taxmann.com 210 (Chd ITAT) 5. Dy Comm. Of Income Tax VS Pankaj Chimanlal Patel in ITA No. 3179/Ahd/2016 6.(V) Land was for Commercial Purpose: Sir, The Land is situated in the R2 Zone as specified in the sanction building plan. As per Development Control Regulations 2000 for Nagpur City and also as per Unified Development Control and Promotion Regulations for Maharashtra State, the land use of R-2 zone is classified and permissible for residential cum commercial mix use. Even in the commercial zone, Buildings or Premises are permissible for mix use same as in R2 zone. Copy of both Development control rules are attached for your ready reference. Accordingly, Local Sanctioning Authority who sanctions the map, has sanctioned it for residential cum commercial use. Accordingly the residential portion was sanctioned. Thus this cannot be a ground to reject the contention of Claim u/s 54F. Except to state that site is of commercial sanction, nothing is stated by Assessing Officer to reject the claim. Hence Appellant requests that this may please be rejected. PRAYER:- In view of above facts it is submitted that negativeing the claim of deduction u/s 54F at Rs. 158,64,162/- is unwarranted, uncalled for and claim of Assessee of deduction u/s 54F at Rs. 1,58,64,162/- is liable to be allowed.\" 5.2 I have carefully considered the facts of the case, the submission of the appellant and evidences on record. Section 54 F of the Act reads as under:- \"54F. (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 arises 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 after that date constructed, one residential house in India (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 section, 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 consideration in respect of the original asset, so much of the capital gain as bears to the whole of the 10 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 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 nothing contained d in this sub-section shall apply where (a) the assessee, 1. owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or 2 (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset, or 3. constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head \"Income from house property\". Explanation-For the purposes of this section, - \"net consideration\", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the 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 two 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 income 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 its 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, clause (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 appropriated 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 with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, 11 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 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 cost 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,- (1) 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 that 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 income 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. 5.3 Section 54F(1) of the Act states that the assessee being an individual or Hindu Undivided Family, who had earned capital gains from transfer of any long-term capital not being a residential house could claim benefit under the said Section provided, any one of the following three conditions were satisfied: (i) the assessee had within a period of one year before the sale, purchased a residential house. (ii) within two years after the date of transfer of the original capital asset; purchased a residential house and. (iii) within a period of three years after the date of sale of the original asset, constructed a residential house. 5.4 The above exemption would not be available if any of the below mentioned conditions: (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asse I asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and 5.5 The AO on analysis of records found that in the A.Y 2015-16, the appellant has claimed benefit of provisions of section 54F. The AO on verification of also found from the case records for A.Y 2014-15 that the appellant has claimed the benefit of section 54 of the Act as well. The appellant submitted a copy of sanction map against which the benefit of sec 54 of the Act was claimed and 12 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 the said residential house was proposed to be build on the existing hotel. Therefore the AO found that the appellant has taken recourse of the same construction of a residential house at the sixth floor of the business premise for claiming the benefit not one but thrice as under:- A. Y 2014-15-Benefit of Rs 25,56,571 under sec 54 A.Y 2015-16-Benefit of Rs 19,62,411 under sec 54F A.Y 2017-18 - Benefit of Rs 1,58,64,162 under sec 54F 5.6 The appellant submitted that there is no bar in Section 54F for claiming deduction second or third time for the same property if cost of the property is within Capital gain arising to Assessee. Therefore, the appellant claimed that in respect of residential property till cost of purchase of property is exhausted by the claim of Capital gain but remaining in the time frame stipulated in Section 54F, deduction u/s 54F cannot be denied. The appellant also stated that it is on record and admitted fact that construction started in Asst Year 2015-16 and culminated in Asst Year 2017-18. In course of this period the Assessee claimed exemption u/s 54F for gain on two different properties on same residential house. 5.7 Exemption under Section 54F would not be allowed if investment is made in 2 houses. The option to invest in 2 houses is available once in lifetime in Section 54 but is not available in Section 54F. From the provisions of sections 54 and 54F it is clear that the purpose of both these sections is to give a fillip to the Housing Sector, evidently, different sources for investment in a residential house have been envisaged there under. It is clear that both these sections are not only independent, but mutely exclusive too. In fact, the conditions regarding ownership of another residential house at the time of investment in new asset clearly show that the two are meant to operate in a exclusive manner and cannot be clubbed together for getting a bigger advantage of exemption on account of bigger investments. Under the circumstances, AO was correct that that the appellant could not have claimed deduction both u/s 54 and 54F against the same new asset. 5.8 It may be noted that exemption is available only when the investment is in the consideration of a house and not for investment in modification or renovation. The appellant has admitted the fact that construction started in Asst Year 2015-16 and culminated in Asst Year 2017-18 and in course of this period claimed exemption u/s 54F for gain on two different properties on same residential house. Section 54F does not provide for exemption on investment in renovation or modification of an existing house. Construction of a house only qualifies for exemption on the investment like addition of a floon of a self contained type to the existing house would have qualified for exemption. However, the appellant has not been able to prove that a whole new floor has been constructed for which exemption is claimed u/s 54F and such new construction is different from the one where exemption u/s 54/54F was claimed in earlier years. In fact is its admitted fact that exemption under section 54F for gain on two different properties are claimed on same residential house. 5.9 It is seen that the appellant transferred a property on 13.08.2013 on the basis of which the appellant had claimed benefit of section 54 in A.Y 2014-15. 13 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 Therefore, such property had to be completed by 13.08.2016 as per the provisions of section 54. The appellant has submitted during the course of appellate proceedings that that the construction started in F.Y 2014-15 and culminated in F.Y 2016-17. Whereas in his reply dated 25.12.2019 to the AO, the appellant submitted that the actual construction started during A.Y 2016- 17. Therefore, there is discrepancy in the statement of the appellant even on the date on which the construction started. 5.10 In view of the above discussions, the disallowance of the appellants claim of benefit of Rs 1,58,64,162 as per provisions of section 54F of the Act made by the AO is confirmed. The appeal on this ground is treated as dismissed.” 7. We have given a thoughtful consideration to the arguments made by the rival parties and perused the material available on record. We find that the sixth floor projected to be a residential house is built on an existing hotel. There is a stark difference between residential and commercial property which is fully operational. Use of commercial property for residential purpose will not satisfy the requirement of the concerned section. It is beyond human intelligence that the addition of a floor in a hotel run on commercial lines can be deemed to be an independent residential house and proposed building use in Govt./semi public/private business land use as per sanctioned develop– ment plan is “commercial”. No other evidences have been brought on record. The building is styled as “The Nagpur Ashok”, is a reputed hotel in the city of Nagpur. The ld. Authorised Representative relied on the following documents: Sr. .no Particulars Page No. 1. Return of computation of income for A.Y. 2017–18 1 – 2 2. Return of computation of income for A.Y. 2014–15 3 – 5 3. Return of computation of income for A.Y. 2015–16 6 – 7 4. Ledger of residential house constructed 8 – 21 5. Sale deed of the property sold during the year under consideration 22 – 35 6. Sanctioned Map for construction 36 14 Sanjay Gulabchand Gupta ITA no.210/Nag./2023 8. In our considered opinion, the above documents do not advance the case of the assessee since the learned Authorised Representative could hardly refute the contentions raised above and consequently, all the grounds raised by the assessee are liable to be dismissed in view of our foregoing discussions. The watertight impugned order passed by the learned CIT(A) confirming the additions needs no interference at our end. Accordingly, the impugned order passed by the learned CIT(A) is hereby upheld by dismissing the grounds raised by the assessee. 9. In the result, appeal by the assessee stands dismissed. Order pronounced in the open Court on 14/02/2025 Sd/- V. DURGA RAO JUDICIAL MEMBER Sd/- K.M. ROY ACCOUNTANT MEMBER NAGPUR, DATED: 14/02/2025 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Sr. Private Secretary ITAT, Nagpur "