Income Tax Officer, Ward- 1(2)(2), Bangalore v. Shri Mujeeb Urrahman, Bangalore

ITA 1523/BANG/2019 | 2014-2015
Pronouncement Date: 31-08-2021 | Result: Partly Allowed

Appeal Details

RSA Number 152321114 RSA 2019
Assessee PAN AADPU9149H
Bench Bangalore
Appeal Number ITA 1523/BANG/2019
Duration Of Justice 2 year(s) 2 month(s) 9 day(s)
Appellant Income Tax Officer, Ward- 1(2)(2), Bangalore
Respondent Shri Mujeeb Urrahman, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 31-08-2021
Appeal Filed By Department
Tags 54
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 31-08-2021
Date Of Final Hearing 25-08-2021
Next Hearing Date 25-08-2021
Last Hearing Date 08-07-2020
First Hearing Date 13-10-2020
Assessment Year 2014-2015
Appeal Filed On 21-06-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. BEENA PILLAI JUDICIAL MEMBER IT A NO. 152 3 /BANG/2019 ASSESSMENT YEAR : 2014 - 15 THE INCOME TAX OFFICER WARD 1(2)(2) BANGALORE. VS. SHRI MUJEEB URRAHMAN NO.395 THIMMAIAH ROAD SHIVAJINAGAR BANGALORE 560 051. PAN: AADPU 9149H APPELLANT RESPONDENT APPELLANT BY : S HRI V. SRINIVASAN ADVO CATE RESPONDENT BY : S MT. H. KABILA ADDL. CI T (DR)(ITAT) B ENGALURU. DATE OF H EARING : 25 . 0 8 .202 1 DATE OF PRONOUNCEMENT : 31 .0 8 .202 1 O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 12.03.2019 OF THE CIT(APPEALS)-1 BENGALURU FOR THE ASSESSMENT YEAR 2014-15 ON THE FOLLOWING GROUNDS :- 1. THE ORDER OF THE LEARNED CIT (APPEALS) IN SO F AR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE A SSESSEE IS ENTITLED TO DEDUCTION U/S 54 OF THE INCOME TAX ACT 1961 EVEN WHEN THE CONDITIONS FOR CLAIM OF DEDUCTION HAVE NOT BEEN FULFILLED BY THE ASSESSEE. ITA NO.1523/BANG/2019 PAGE 2 OF 11 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING IT IS HUMBLY PRAYED THAT THE ORDER OF THE LD. CIT (A) BE REVERSED AND THAT OF THE ASSESSING OFFICER B E RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. 2. THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSID ERATION SOLD A PROPERTY NO.3BM/519 OMBR LAYOUT EXTENSION OLD MAD RAS BANASWADI ROAD BANGALORE VIDE SALE DEED DATED 19.10.2013 FOR A CONSIDERATION OF RS.3 15 00 000. THE ASSESSEE INTENDED TO REINVEST THE ENTIRE CONSIDERATION OF RS.3.15 CRORES BY PURCHASING A BDA SITE AND CONSTRUCTION OF RESIDENTIAL BUILDING ON THE SAID PIECE OF LAND. SUBSEQUENTLY THE ASSESSEE BEING SUCCESSFUL BIDDER IN E-AUCTION PURCH ASED A SITE NO.2BC/805 IN SY.NO.36/1 BENNIGANAHALLI VILLAGE EA ST OF NGF LAYOUT K R PURAM HOBLI BANGALORE MEASURING 2400 SQ.FT. THE A SSESSEE DEPOSITED THE ENTIRE SALE CONSIDERATION OF RS.1 59 62 400 AND THE BDA REGISTERED THE SITE IN FAVOUR OF ASSESSEE VIDE SALE DEED DATED 9.6 .2014 AND POSSESSION DELIVERED ON THE SAME DAY. THE ASSESSEE ALSO INCUR RED RS.10 53 879 AS STAMP DUTY AND REGISTRATION FEES. THE ASSESSEE IN CLINED TO CONSTRUCT A 3 FLOOR RESIDENTIAL BUILDING FOR HIS RESIDENTIAL PURP OSES. HOWEVER THERE WAS A LITIGATION PENDING BETWEEN A PRIVATE PARTY SMT. PAD MAJA AND BDA IN A SUIT FILED ON 30.8.2012 AGAINST THE BDA FOR WHICH RELIEF OF PERMANENT INJUNCTION FROM INTERFERING WITH POSSESSION OF SAID PROPERTY W HICH WAS SOLD TO ASSESSEE. BEING SO THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE WHICH WAS BEYOND HIS CONTROL TO CONSTRUCT RESIDENTI AL BUILDING. THE SUIT INSTITUTED ON 30.8.2012 WAS MUCH BEFORE THE E-AUCTI ON AND SALE DEED EXECUTED BY BDA IN FAVOUR OF ASSESSEE. THE PROCEED INGS IN THE SUIT CULMINATED ON 25.10.2016 WHEREIN THE SUIT FILED BY SMT. PADMAJA WAS DISMISSED. AN INTERIM APPLICATION WITH A PRAYER FO R GRANT OF TEMPORARY INJUNCTION RESTRAINING THE BDA FROM INTERFERING WIT H POSSESSION OF THE SAID ITA NO.1523/BANG/2019 PAGE 3 OF 11 PROPERTY WAS FILED BY SMT. PADMAJA WHICH WAS REJECT ED BY THE CITY CIVIL COURT. AGGRIEVED SMT. PADMAJA FILED A WRIT PETIT ION BEFORE THE HONBLE HIGH COURT OF KARNATAKA IN WP NO.22737/2016 ON 3.10 .2016 WHEREIN THE ASSESSEE IS MADE AS RESPONDENT NO.3 AND THE MATTER WAS PENDING FOR DISPOSAL BEFORE THE HIGH COURT. AFTER THE COURT JU DGMENT DTD: 05-11-2016 ASSESSEE MADE ATTEMPTS TO OBTAIN THE SANCTION PLAN AND THE SAME WAS SANCTIONED BY THE BBMP ON 26-05-2017 AFTER CONSIDER ATION OF THE NECESSARY FORMALITIES. 3. THE ASSESSEE HAD CLAIMED EXEMPTION U/S. 54 OF TH E ACT FOR HAVING INVESTED THE CAPITAL GAINS IN THE NEW RESIDENTIAL H OUSE WHICH WAS DENIED BY THE AO ON THE GROUND THAT CAPITAL GAINS ARISING OUT OF SALE OF ORIGINAL ASSET WAS NOT DEPOSITED IN THE CAPITAL GAIN DEPOSIT ACCOU NT. 4. ON APPEAL THE CIT(APPEALS) OBSERVED THAT ASSESS EE MADE ATTEMPTS TO OBTAIN A LICENSE AND A SANCTIONED PLAN FROM THE COMPETENT AUTHORITIES FOR CONSTRUCTION OF THE RESIDENTIAL HOU SE ON THE NEW ASSET BEING THE SITE PURCHASED FROM THE BDA. HOWEVER THE APPELL ANT WAS UNABLE TO OBTAIN THE LICENSE AND THE PLAN IN VIEW OF A PENDI NG LITIGATION BETWEEN A PRIVATE PARTY SMT. PADMAJA AND BDA. AFTER THE COUR T JUDGMENT DTD: 05-11- 2016 SANCTIONED PLAN WAS OBTAINED FROM THE BBMP ON 26-05-2017. LATER THE ASSESSEE CONSTRUCTED A RESIDENTIAL BUILDING IN THE YEAR 2017-18 AND IN SUPPORT OF THE CONSTRUCTION FILED A VALUATION REPOR T DTD. 15-12-2018. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. K. RAMACHANDRA (2015) 277 CTR 522 (KAR) WHEREIN IT WAS HELD THAT THE DEDUCTION CANNOT BE DE NIED IF THE ASSESSEE HAD INTENTION TO RETAIN THE CASH TO INVEST IN CONST RUCTION EVEN IF NOT DEPOSITED IN THE CAPITAL GAIN DEPOSIT ACCOUNT. THE CIT(APPEALS) WAS OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR THE DEDU CTION ADMISSIBLE U/S. 54 OF THE ACT SINCE A MAJOR PORTION OF RS. 1 70 16 279/- WAS INVESTED IN ITA NO.1523/BANG/2019 PAGE 4 OF 11 PURCHASING A SITE FROM THE BDA WHICH WAS LOCKED-UP IN A LITIGATION AND ONLY AFTER FINALIZATION OF SUCH LITIGATION THE ASSESSEE WAS ABLE TO CONSTRUCT A BUILDING BY INVESTING THE BALANCE CAPITAL GAIN OF R S. 56 75 680/-. ACCORDING TO THE CIT(A) THE ASSESSEE IN VIEW OF THE LITIGATI ON WAS PREVENTED FROM CONSTRUCTION OF THE BUILDING WITHIN THE TIME LIMIT WHICH SHOULD NOT BE A GROUND FOR DISALLOWANCE OF DEDUCTION ADMISSIBLE U/S . 54 OF THE ACT. THEREFORE THE ADDITION MADE BY THE AO AMOUNTING TO RS. 2 48 83 672/- WAS DELETED BY THE CIT(APPEALS). AGAINST THIS THE REV ENUE IS IN APPEAL BEFORE US. 5. THE LD. DR SUBMITTED THAT THE JUDGMENT OF THE HO NBLE HIGH COURT OF KARNATAKA IN CIT V. K. RAMACHANDRA RAO (SUPRA) HELD AS FOLLOWS:- 4.1 RE.QUESTION NO.2 : 'AS IS CLEAR FROM SUB-SECTION (4) IN THE EVENT OF T HE ASSESSEE NOT INVESTING THE CAPITAL GAINS EITHER IN PURCHASING TH E RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54F(1) IF THE ASSESSEE WANTS THE BENEFIT OF SECTION 54F THEN HE SHOULD DEPOSIT THE SAID CAPITA L GAINS IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVER NMENT. IN OTHER WORDS IF HE WANT OF CLAIM EXEMPTION FROM PAYM ENT OF INCOME TAX BY RETAINING THE CASH THEN THE SAID AMO UNT IS TO BE INVESTED IN THE SAID ACCOUNT. IF THE INTENTION IS N OT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE OF TH E PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPUL ATED THEREIN THEN SECTION 54F(4) IS NOT AT ALL ATTRACTED AND THE REFORE THE CONTENTION THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS STIPULATED AND THEREFORE HE IS NOT ENTITLED TO THE BENEFIT EVEN THOUGH HE HAS INVESTED THE MONEY IN CO NSTRUCTION IS ALSO NOT CORRECT.' 5. FOR THE AFORESAID REASONS BOTH THE SUBSTANTIAL Q UESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THEREFORE WE DO NOT SEE MERIT IN ANY OF THE APPEAL S. ACCORDINGLY ALL THE FOUR APPEALS ARE DISMISSED. ITA NO.1523/BANG/2019 PAGE 5 OF 11 6. ON THE OTHER HAND THE LD. AR RELIED ON THE ORDE R OF THE CIT(APPEALS) AND RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HI GH COURT IN CIT V. GIRISH L. RAGHA IN ITA NO.66 OF 2015 DATED 17.3.201 6 WHEREIN IT WAS HELD THAT THE SANCTION OF PLAN WAS DELAYED IN VIEW OF TH E PENDING LITIGATION FILED BY THE OTHER PARTIES AND THUS THE APPELLANT WAS PRE VENTED FROM FULFILLING THE CONDITION TO AVAIL THE BENEFIT OF DEDUCTION ADMISSI BLE UNDER THE ACT. FURTHER IN CIT V. K. RAMACHANDRA RAO (SUPRA) THE HONBLE HIGH COURT OF KARNATAKA HAS DECIDED THE ISSUE IN FAVOUR OF ASSESS EE AND AGAINST THE DEPARTMENT OBSERVING THAT IF THE INTENTION IS NOT T O RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE OF THE PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THEREIN THEN SEC TION 54F(4) IS NOT AT ALL ATTRACTED AND THEREFORE THE CONTENTION THAT THE ASS ESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS STIPULATED AND TH EREFORE HE IS NOT ENTITLED TO THE BENEFIT EVEN THOUGH HE HAS INVESTED THE MONEY IN CONSTRUCTION IS ALSO NOT CORRECT. 7. THE LD. AR ALSO RELIED ON THE ITAT CHENNAI BENCH DECISION IN SMT. V.A. THARABAI V. DCIT 14 ITR (TRIB) 15 [ITAT CHEN] WHEREIN IT WAS HELD AS UNDER:- THE ASSESSEE SOLD ONE OF HER CAPITAL ASSETS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08 RESULTING IN CAPITAL GAINS AND CLAIMED EXEMPTION IN HER RETURN OF INCOME ON TH E LONG-TERM CAPITAL GAINS UNDER SECTION 54F OF THE INCOME-TAX A CT 1961 AS THE ASSESSEE WAS PROPOSING TO CONSTRUCT A RESIDENTI AL HOUSE PROPERTY OUT OF THE SALE CONSIDERATION OF THE PROPE RTY. THE ASSESSEE IMMEDIATELY AFTER THE SALE PURCHASED LAND TO CONSTRUCT A HOUSE. THE PURCHASE PRICE PAID FOR THE LAND WAS MO RE THAN THE LONG-TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSE E ON SALE OF HER CAPITAL ASSET. BUT THE ASSESSEE COULD NOT CONSTRUC T THE PROPOSED RESIDENTIAL HOUSE IN THE LAND PURCHASED BY HER AS PROPOSED DUE TO AN INJUNCTION ORDER FROM THE CIVIL COURT. EVEN THO UGH THESE CIRCUMSTANCES WERE EXPLAINED BEFORE THE ASSESSING A UTHORITY THE CLAIM OF EXEMPTION MADE BY THE ASSESSEE UNDER SECTI ON 54F WAS ITA NO.1523/BANG/2019 PAGE 6 OF 11 REJECTED ON THE GROUND THAT THE ASSESSEE HAD NOT CO NSTRUCTED THE RESIDENTIAL HOUSE WITHIN THE PERIOD OF THREE YEARS WHICH WAS MANDATORY UNDER THE PROVISIONS OF THE ACT. THE COM MISSIONER (APPEALS) ALSO DID NOT GRANT EXEMPTION. ON APPEAL: HELD ALLOWING THE APPEAL THAT IT WAS AN ACCEPTED PRINCIPLE OF JURISPRUDENCE THAT LAW NEVER DICTATES A PERSON TO P ERFORM A DUTY THAT IS IMPOSSIBLE TO PERFORM. IT WAS IMPOSSIBLE F OR THE ASSESSEE TO CONSTRUCT THE RESIDENTIAL HOUSE WITHIN THE STIPU LATED PERIOD OF THREE YEARS. T HE ENTIRE CONSIDERATION RECEIVED BY THE ASSESSEE ON SALE OF HER OLD PROPERTY HAS BEEN UTILIZED FOR THE PURCHASE OF THE NEW PROPERTY. THE PURCHASE VALUE OF THE PROPERTY IS MORE THAN THE LONG-TERM CAPITAL GAINS TAXABLE IN THE HANDS OF THE ASSESSEE. THE CONDUCT OF THE ASSESSEE UNEQUIVOCALLY DEMONSTRA TED THAT THE ASSESSEE WAS IN FACT PROCEEDING TO CONSTRUCT A RESI DENTIAL HOUSE BASED ON WHICH THE ASSESSEE HAD CLAIMED EXEMPTION U NDER SECTION 54F. IT WAS TRUE THAT THE ASSESSEE COULD N OT CONSTRUCT THE HOUSE. BUT SHE HAS PURCHASED THE LAND UTILIZING THE ENTIRE CONSIDERATION RECEIVED ON THE SALE OF THE OLD PROPE RTY. IT MEANT THAT THE ASSESSEE HAS INVESTED THE ENTIRE CONSIDERA TION RECEIVED ON SALE OF THE OLD ASSET IN ACQUIRING/CONSTRUCTING A R ESIDENTIAL HOUSE PROPERTY. IN THE SPECIAL FACTS AND CIRCUMSTANCES OF THE PRESENT CASE THEREFORE IT WAS NECESSARY TO HOLD THAT THE AMOUNT UTILIZED BY THE ASSESSEE TO PURCHASE THE LAND WAS IN FACT UT ILIZED FOR ACQUIRING/CONSTRUCTING A RESIDENTIAL HOUSE. WITHOU T PURCHASING LAND HOUSE CANNOT BE CONSTRUCTED. THE FIRST STEP S HOULD BE THE PURCHASE OF LAND. THAT WAS DONE. THEREFORE THE ENT IRE AMOUNT SPENT BY THE ASSESSEE IN PURCHASING THE LAND SHOULD BE CONSTRUED AS AMOUNT INVESTED IN PURCHASE/CONSTRUCTION OF RESI DENTIAL HOUSE. THE ASSESSEE WAS ENTITLED FOR EXEMPTION UNDER SECTI ON 54F AS THE INTENTION OF THE STATUTE PROVIDED IN SECTION 54F HA D BEEN FULLY SATISFIED BY THE ASSESSEE. THE EXPRESSION 'OF THE NATURE REFERRED TO IN SECTION 53A' IN SUB-CLAUSE (V) OF SECTION 2(47)( V ) OF THE 1961 ACT CANNOT BE STRETCHED TO REFER TO AN AMENDMENT T HAT WAS MADE YEARS LATER IN 2001 SO AS TO THEN SAY THAT THOUGH REGISTRATION OF A CONTRACT IS REQUIRED BY THE AMENDMENT ACT OF 2001 YET THE AFORESAID EXPRESSION 'OF THE NATURE REFERRED TO IN SECTION 53A' WOULD SOMEHOW REFER ONLY TO THE NATURE OF CONTRACT MENTIONED IN SECTION 53A WHICH WOULD THEN IN TURN NOT REQUIRE R EGISTRATION. ITA NO.1523/BANG/2019 PAGE 7 OF 11 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THIS CASE THE ASSESSEE SOLD A PROPERTY NO.3BM/5 19 OMBR LAYOUT EXTENSION OLD MADRAS BANASWADI ROAD BANGALORE VID E SALE DEED DATED 19.10.2013 FOR A CONSIDERATION OF RS.3 15 00 000. THIS WAS ORIGINALLY PURCHASED BY THE ASSESSEE JOINTLY WITH HIS BROTHER MR. HASEEB-UR-RAHMAN ON 10.1.2006. AFTER SELLING THE PROPERTY THE ASSE SSEE WAS TO CONSTRUCT A NEW RESIDENTIAL HOUSE. FOR THIS PURPOSE THE ASSES SEE PARTICIPATED IN THE E-AUCTION CONDUCTED BY THE BDA AND PURCHASED THE PR OPERTY THROUGH E- AUCTION ON 9.6.2016 FOR A CONSIDERATION OF RS.1 59 62 400 AND AFTER ADDING UP THE COST OF REGISTRATION IT WORKED OUT AT RS.1 70 16 279. LATER THE ASSESSEE WAS HELD UP WITH THE LITIGATION OF THIS PR OPERTY AND THERE WAS DELAY IN CONSTRUCTION OF NEW RESIDENTIAL HOUSE. LI TIGATION WAS OVER AFTER THE HIGH COURT JUDGMENT DATED 5.11.2016 AS NARRATED IN PARA 2 OF THIS ORDER. CONSEQUENTLY THE ASSESSEE OBTAINED THE BUILDING PLA N FROM BBMP ON 26.5.2017. 9. WHILE FRAMING THE ASSESSMENT EXEMPTION CLAIMED BY THE ASSESSEE WAS DENIED SINCE THE ASSESSEE HAS NOT COMPLIED WITH THE REQUIREMENT OF PROVISIONS OF SECTION 54 OF THE ACT. HOWEVER THE CIT(APPEALS) ALLOWED THE CLAIM OF ASSESSEE U/S. 54 OF THE ACT. ADMITTEDLY THE ASSESSEE HAS ACTUALLY INVESTED AN AMOUNT OF RS.1 70 16 279 IN PURCHASING THE RESIDENTIAL SITE FOR FOR CONSTRUCTING A NEW RESIDENTIAL HOUSE. TO THAT EXTENT PROPORTIONATE DEDUCTION TO BE GRANTED TO THE ASSESSEE. HOWEVER THE CIT(APPEALS) GRANTED DEDUCTION U/S. 54F OF RS.2 48 83 672 THOUG H ASSESSEE HAS NOT DEPOSITED THAT PORTION IN THE NET SALE CONSIDERATIO N INTO THE ACCOUNT SCHEME NOTIFIED BY THE CENTRAL GOVT. FOR THIS PURP OSE IT IS APPROPRIATE TO GO THROUGH THE PROVISIONS OF SECTION 54(2) OF THE A CT WHICH ARE AS FOLLOWS:- 54. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) WHERE IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED F AMILY THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASS ET BEING BUILDINGS OR LANDS APPURTENANT THERETO AND BEING A RESIDENTIAL HOUSE THE INCOME OF WHICH IS ITA NO.1523/BANG/2019 PAGE 8 OF 11 CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPER TY' (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 W HICH THE TRANSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIOD OF THREE YE ARS AFTER THAT DATE 3 [ CONSTRUCTED ONE RESIDENTIAL HOUSE IN INDIA ] THEN INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE IT SHALL BE DEALT WI TH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION THAT IS TO SA Y ( I ) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER THAN THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED (HERE AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET) THE DIFFEREN CE BETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVI OUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSE T ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION AS THE CASE MAY BE THE COST SHALL BE NIL ; OR ( II ) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET THE CAPITAL GAIN SHALL NOT BE CHARGED UN DER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF T HREE YEARS OF ITS PURCHASE OR CONSTRUCTION AS THE CASE MAY BE THE C OST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. (2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT APP ROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN O NE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PL ACE 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 M ADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASS ESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 1 39] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN AN D UTILISED IN ACCORDANCE WITH ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY BY NOTIFICATION IN THE OFFICIAL GAZETTE FRAME IN THIS BEHALF AND SUCH RET URN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND FOR THE PURPOSES OF SUB-SECTION (1) THE AMOUNT IF ANY ALREADY UTILISED BY THE ASSESSEE FO R THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET TOGETHER WITH THE AMO UNT SO DEPOSITED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION O F THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1) THEN ITA NO.1523/BANG/2019 PAGE 9 OF 11 ( I ) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPI RES; AND ( II ) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUCH A MOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. 10. THE CONTENTION OF THE LD. AR IS THAT IN VIEW OF THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. K. RAMACHANDRA (SUPRA) THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 54 TO THE FULL EXTENT AS GRANTED BY THE CIT(APPEALS) AS THE INTENTION OF THE ASSESSEE WAS NOT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OF NEW R ESIDENTIAL HOUSE PROPERTY. THE DELAY IN INVESTMENT WAS BEYOND THE CONTROL OF T HE ASSESSEE. HOWEVER WE OBSERVE FROM THE ANSWER TO QUESTION NO. 2 IN THE SAME CASE IN PARA 4.1 THAT IF SUCH INVESTMENT IS MADE IN THE BANK ACCOUNT AS STIPULATED IN SECTION 54(2) OR INVESTED IN CONSTRUC TED OF NEW RESIDENTIAL HOUSE WITHIN THE STIPULATED PERIOD THEN ASSESSEE I S ENTITLED FOR DEDUCTION U/S. 54 OF THE ACT. IF THE ASSESSEE FAILED TO DEPO SIT INTO THE BANK ACCOUNT AND ALSO FAILED TO CONSTRUCT THE NEW RESIDENTIAL HO USE WITHIN THE STIPULATED TIME THEN ASSESSEE CANNOT TAKE ADVANTAGE OF ITS OW N DEFAULT SO AS TO CLAIM DEDUCTION U/S. 54 OF THE ACT. IN THE PRESENT CASE THOUGH ASSESSEE PURCHASED THE RESIDENTIAL SITE AND INCURRED THE EXP ENDITURE OF RS.1 76 16 279 THE ASSESSEE FAILED TO DEPOSIT THE BALANCE AMOUNT IN THE ACCOUNT NOTIFIED BY THE CENTRAL GOVT WITHIN EXTENDE D PERIOD DUE TO LITIGATION HENCE THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION TO THE EXTENT OF BALANCE AMOUNT WHICH WAS NOT INVESTED UNDER AN ACCO UNT NOTIFIED BY THE CENTRAL GOVT. IN OUR OPINION DEDUCTION UNDER THIS SECTION IS RESTRICTED TO PROPORTIONATE AMOUNT INVESTED IN PURCHASE OF NEW RE SIDENTIAL SITE FOR THE PURPOSE OF CONSTRUCTION OF NEW RESIDENTIAL HOUSE AF TER SALE OF THE ORIGINAL ASSET AND ALSO AMOUNT INVESTED IN CONSTRUCTION OF P ROPERTY. THE INTENTION OF LEGISLATURE WAS THAT EITHER THE ASSESSEE HAS TO PURCHASE OR CONSTRUCT NEW RESIDENTIAL HOUSE OUT OF NET SALE CONSIDERATION RECEIVED BY SALE OF ITA NO.1523/BANG/2019 PAGE 10 OF 11 ORIGINAL ASSET OR DEPOSIT THE SAME IN THE ACCOUNT N OTIFIED BY THE CENTRAL GOVT. U/S. 54 OF THE ACT. IF THE ASSESSEE FAILED T O DO SO HE IS LIABLE FOR CAPITAL GAIN ON THE TRANSFER OF CAPITAL ASSET. IN THE PRESENT CASE THE ASSESSEE PURCHASED THE RESIDENTIAL SITE AND USED PO RTION OF NET SALE CONSIDERATION FOR CONSTRUCTION OF NEW HOUSE AND NOT APPROPRIATED THE BALANCE SALE CONSIDERATION EITHER IN INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE OR DEPOSIT INTO ACCOUNT NOTIFIED BY THE CENTRAL GOVT. TO AVAIL EXEMPTION U/S. 54. HENCE THE ASSESSEE IS ENT ITLED FOR DEDUCTION ONLY TO THE EXTENT OF AMOUNT USED FOR PURCHASE OF RESIDE NTIAL SITE ONLY AS FOLLOWS:- A NET SALE CONSIDERATION = 3 15 00 000 B CAPITAL GAIN = 2 26 91 897 C INVESTMENT IN PROPERTY = 1 70 16 279 D ELIGIBILITY U/S. 54 EXEMPTION = LONG TERM CAPITAL GAIN X AMOUNT OF IN VESTMENT NET SALE CONSIDERATION D = B X C A I.E. 22691897 X 16016279 = RS.1 22 58 148 31500000 11. THUS ASSESSEE IS ENTITLED FOR DEDUCTION U/.S 54 AT RS.1 22 58 148. 12. IN THE RESULT THE APPEAL BY THE REVENUE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF AUGUST 2021. SD/- SD/- ( BEENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 31 ST AUGUST 2021. / DESAI S MURTHY / ITA NO.1523/BANG/2019 PAGE 11 OF 11 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.