Mustansir I Tehsildar vs. ITO (ITAT Mumbai)- 22 Dec 2017
1- The assessee treated the acquisition of new flat as a case of “Construction”. As per the provisions of sec.54, the new flat is required to be constructed within 3 years from the date of transfer of old flat. Since the old flat was transferred on 05-12-2012, the assessee submitted that the time limit was available upto December, 2015 and the new flat was acquired before that date,
2- The assessing officer, however, took the acquisition of flat as a case of purchase of flat. Accordingly he took the view that the flat should have been purchased one year before or two years after the date of transfer, as per the requirements of sec. 54.
3- The Ld A.R submitted that the assessee has completed the construction of new flat within three years from the date of transfer of old asset and accordingly he submitted that the assessee has complied with the conditions of sec.54. He further submitted that the payments made towards acquisition of new flat before the due date for filing return of income was more than the amount of capital gains. He further submitted that there is no requirement that the sale proceeds realised on sale of old asset alone should be used for acquiring new asset and for this proposition, he placed reliance on the decision rendered by Hon’ble Kerala High Court in the case of ITO Vs. K.C.Gopalan (2000)
4- Section 54 of the Act provides the condition that the construction of new residential house should be completed within 3 years from the date of transfer of old residential house. According to Ld A.R, section 54 is silent about commencement of construction and hence commencement of construction can precede the date of sale of old asset.
5- Since the amount invested in the new flat prior to the due date for furnishing return of income was more than the amount of capital gain, the requirements of depositing any money under capital gains account scheme does not arise in the instant case. Further, the Hon’ble High Court has held in the case of K.C.Gopalan that there is no requirement that the sale proceeds realised on sale of old residential house alone should be utilised
In view of the above, we are of the opinion that the assessee is entitled for deduction of full amount of capital gains u/s 54 of the Act, as he has complied with the conditions prescribed in that section. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to allow the deduction u/s 54 of the Act as claimed by the assessee
For reading full text of the case please refer link- http://itatonline.org/archives/mustansir-i-tehsildar-vs-ito-itat-mumbai-s-54-acquisition-of-new-flat-in-an-apartment-under-construction-should-be-considered-as-a-case-of-construction-and-not-purchase/mustansir-54-purchase-construction/
Some of the pointers of the case (for our easy reference) -
1- The assessee treated the acquisition of new flat as a case of “Construction”. As per the provisions of sec.54, the new flat is required to be constructed within 3 years from the date of transfer of old flat. Since the old flat was transferred on 05-12-2012, the assessee submitted that the time limit was available upto December, 2015 and the new flat was acquired before that date,
2- The assessing officer, however, took the acquisition of flat as a case of purchase of flat. Accordingly he took the view that the flat should have been purchased one year before or two years after the date of transfer, as per the requirements of sec. 54.
3- The Ld A.R submitted that the assessee has completed the construction of new flat within three years from the date of transfer of old asset and accordingly he submitted that the assessee has complied with the conditions of sec.54. He further submitted that the payments made towards acquisition of new flat before the due date for filing return of income was more than the amount of capital gains. He further submitted that there is no requirement that the sale proceeds realised on sale of old asset alone should be used for acquiring new asset and for this proposition, he placed reliance on the decision rendered by Hon’ble Kerala High Court in the case of ITO Vs. K.C.Gopalan (2000)
4- Section 54 of the Act provides the condition that the construction of new residential house should be completed within 3 years from the date of transfer of old residential house. According to Ld A.R, section 54 is silent about commencement of construction and hence commencement of construction can precede the date of sale of old asset.
5- Since the amount invested in the new flat prior to the due date for furnishing return of income was more than the amount of capital gain, the requirements of depositing any money under capital gains account scheme does not arise in the instant case. Further, the Hon’ble High Court has held in the case of K.C.Gopalan that there is no requirement that the sale proceeds realised on sale of old residential house alone should be utilised
In view of the above, we are of the opinion that the assessee is entitled for deduction of full amount of capital gains u/s 54 of the Act, as he has complied with the conditions prescribed in that section. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to allow the deduction u/s 54 of the Act as claimed by the assessee
For reading full text of the case please refer link- http://itatonline.org/archives/mustansir-i-tehsildar-vs-ito-itat-mumbai-s-54-acquisition-of-new-flat-in-an-apartment-under-construction-should-be-considered-as-a-case-of-construction-and-not-purchase/mustansir-54-purchase-construction/
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