Shri Subhash Chand Kapoor, Agra v. ITO, Agra

ITA 663/AGR/2008 | 2004-2005
Pronouncement Date: 23-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 66320314 RSA 2008
Assessee PAN ACNPK8844M
Bench Agra
Appeal Number ITA 663/AGR/2008
Duration Of Justice 1 year(s) 8 month(s) 12 day(s)
Appellant Shri Subhash Chand Kapoor, Agra
Respondent ITO, Agra
Appeal Type Income Tax Appeal
Pronouncement Date 23-07-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 23-07-2010
Date Of Final Hearing 21-06-2010
Next Hearing Date 21-06-2010
Assessment Year 2004-2005
Appeal Filed On 10-11-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NO.663/AGR/2008 ASST. YEAR: 2004-05 SHRI SUBHASH CHAND KAPOOR VS. THE INCOME-TAX O FFICER-1(1) 402 PUSHPANJALI TOWER EXTENSION AGRA. AGRA. (PAN : ACNPK 8844 M). ITA NO.19/AGR/2009 ASST. YEAR: 2004-05 SHRI RAJENDRA KAPOOR VS. THE INCOME-TAX OFFICE R-1(3) PROP. M/S. MAHINDRA DIESELS AGRA. 2-3 RACHNA FAUZDAR MARKET FREEGANJ AGRA. (PAN : AKBPK 6492 P). (APPELLANTS) (RESPONDENTS) APPELLANTS BY : SHRI SAHIB P. SATSANGEE C.A. RESPONDENTS BY : SHRI R.C. SHARMA JR. D.R. ORDER PER P.K. BANSAL A.M.: THESE TWO APPEALS HAVE BEEN FILED BY TWO DIFFERENT ASSESSEES. AS THE FACTS INVOLVED IN BOTH THE APPEALS ARE COMMON THEREFORE BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. ITA NO.663/AGR/2008 HAS BEEN FILED BY THE A SSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 10.09.2008 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- (1) BECAUSE THE LEANED AUTHORITIES BELOW HAVE ERRE D ON FACTS AND IN LAW IN WORKING OUT THE COST OF ACQUISITION EXCLUDING THE F AIR MARKET VALUE OF THE 2 RESIDENTIAL BUILDING WHICH EXISTED ON THE DATE OF T RANSFER OF THE LONG TERM CAPITAL ASSET. (2) BECAUSE THE LEARNED AUTHORITIES BELOW HAVE ERRE D ON FACTS AND IN LAW IN DISALLOWING THE EXEMPTION CLAIMED UNDER SECTION 54 ON SALE OF RESIDENTIAL HOUSE ON THE BASIS THAT AS PER THE SALE DEED THE ASSESSEE HAD SOLD PLOT OF LAND. THEY HAVE IGNORED THE SUBMISSIONS AND THE AFFIDAVIT FILE D BY THE ASSESSEE THAT TO FACILITATE THE SALE PLOT OF LAND WAS MENTIONED BU T IN FACT WHAT WAS SOLD WAS RESIDENTIAL HOUSE WHICH IS FULLY PROVED AND ESTABLI SHED WITH REFERENCE TO - - REPORT OF APPROVED VALUER - RECEIPT FOR PAYMENT OF MUNICIPAL TAXES - LETTER OF DISCONTINUANCE OF ELECTRIC CONNECTION - AFFIDAVIT OF THE ASSESSEE 2. THE BRIEF FACTS OF THE CASE ARE THAT THE A.O. NO TED FROM THE RETURN FILED BY THE ASSESSEE AT NIL INCOME THAT THE ASSESSEE HAS CLAIMED TO HAVE SO LD RESIDENTIAL HOUSE IN WHICH THE ASSESSEE WAS HAVING 1/3 RD SHARE ON 15.10.2003 AND 26.12.2003 FOR RS.29 40 00 0/- AND RS.46 00 000/- RESPECTIVELY. ON 15.10.2003 THE ASSESSEE SOLD LAN D APPURTENANT TO THE HOUSE. THE 1/3 RD SHARE OF THE ASSESSEE IN THE SALE CONSIDERATION OF BOTH THE PROPERTIES WORKED OUT TO RS.25 13 333/-. COST OF ACQUISITION FOR BOTH THE SALE WAS CLAIMED BY THE ASSESSEE ON THE BASIS OF VALUATION REPORT OF APPROVED VALUER AT RS.6 42 000/- 1/3 RD SHARE THEREOF AMOUNTING TO RS.2 14 000/-. THE ASS ESSEE HAS WORKED OUT THE INDEXED COST AT RS.9 90 820/- RE LATING TO HIS SHARE FOR BOTH THE SALES AND THE CAPITAL GAIN WAS ARRIVED AT RS.15 22 513/- AFTER C LAIMING THE EXEMPTION UNDER SECTION 54 AND 54EC LONG TERM CAPITAL GAIN (LTCG) WAS WORKED OUT AT NIL. FROM THE PERUSAL OF THE COPY OF THE SALE DEED DATED 26.12.2003 THE A.O. AND THE CI T(A) CAME TO THE CONCLUSION THAT THE ASSESSEE HAS SOLD THE PLOT OF LAND AFTER DISMANTLING THE CON STRUCTION THEREON AND NOT THE HOUSE PROPERTY. THEREFORE THE EXEMPTION CLAIMED BY THE ASSESSEE UN DER SECTION 54 OF THE ACT WAS DISALLOWED BUT THE EXEMPTION UNDER SECTION 54F WAS ALLOWED ONLY ON THE PURCHASE COST AT RS.7 50 000/- EXCLUDING THE COST OF STAMP DUTY APPARENTLY BY MIST AKE BY THE A.O. THE A.O. HAS ALSO ON THE BASIS OF THE APPROVED VALUER TAKEN THE COST OF THE LAND ONLY AT RS.3 99 825/-. 1/3 RD SHARE THEREOF 3 AT RS.1 33 275/- SINCE THE PROPERTY WAS DEVOLVED ON THE ASSESSEE AND OTHERS FROM LATE SHRI HANS RAJ KAPOOR. DURING THE YEAR 1999-2000 THE A.O. HA S NOT ALLOWED THE INDEXED COST OF ACQUISITION FROM 01.04.1981 BUT ALLOWED INDEXATION FROM THE YEAR 1999-2000. THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXEMPTION UNDER SECTION 54EC FOR RS.7 00 000/- WAS DULY ACCEPTED BY THE AO. THE A.O. THUS WORKED OUT THE NET INCOME OF THE ASSESSEE AT RS.11 80 111/- INCLUDING RS.11 63 218/- FROM THE LTCG. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ACTION OF THE A.O. TAKING THE COST OF ACQUISITION AT RS.1 33 275/- AGAINST RS.2 14 000/- CLAIMED BY THE ASSESSEE. THE CIT(A) ALSO CONFIRMED THE FINDING OF THE A.O. THAT THE ASSESSEE HAS NOT SOLD THE HOUSE PROPERTY BUT SO LD THE PLOT OF LAND AFTER QUOTING THE RELEVANT PARAGRAPH FROM THE COPY OF THE SALE DEED. HE ALSO CONFIRMED THE ACTION OF THE A.O. NOT ALLOWING EXEMPTION UNDER SECTION 54 OF THE ACT. THE CIT(A) ALLOWED THE CONTENTION OF THE ASSESSEE THAT THE INDEXATION HAS TO BE DONE ON THE FAIR MARKET VA LUE AS ON 01.04.1981 WHEN THE PROPERTY WAS DEVOLVED TO THE ASSESSEE AFTER THE DEATH OF HIS FAT HER. THE CIT(A) ALSO DIRECTED THE A.O. TO ALLOW EXEMPTION TO THE ASSESSEE UNDER SECTION 54F OF THE ACT. 3. THE LD. A.R. BEFORE US VEHEMENTLY CONTENDED THAT THE ASSESSEE HAS SOLD THE TWO CAPITAL ASSETS LAND APPURTENANT TO THE RESIDENTIAL AND RESI DENTIAL HOUSE ON 15.10.2003 AND 26.12.2003 RESPECTIVELY. ON 15.10.2003 LAND APPURTENANT TO R ESIDENTIAL HOUSE WAS SOLD WHILE ON 26.12.2003 THE PROPERTY WAS SOLD. IN THE SALE DEE D DT. 26.12.03 IT HAS WRONGLY BEEN MENTIONED THAT THE ASSESSEE HAS SOLD THE LAND. HE CONTENDED THAT THE RESIDENTIAL PROPERTY WAS IN EXISTENCE ON THE IMPUGNED LAND WHEN THE LAND APPURTENANT TO P ROPERTY WAS SOLD. FOR THIS HE SUBMITTED VARIOUS EVIDENCES BEFORE THE AUTHORITIES BELOW INCL UDING THE APPELLATE ORDER PASSED BY THE ACIT-II AGRA FOR THE A.Y. 1972-73 IN THE CASE OF H IS FATHER LATE SHRI HANS RAJ KAPOOR COPY OF 4 CERTIFICATE ISSUED BY LAJPAT KUNJ ASSOCIATION IN TH E NAME OF THE ASSESSEES FATHER LATE SHRI HANSRAJ KAPOOR COPY OF THE CERTIFICATE ISSUED BY L AJPAT KUNJ ASSOCIATION ISSUED IN THE NAME OF THE ASSESSEE PHOTOCOPY OF THE GAS CONNECTION IN AS SESSEES NAME SHOWING THE ADDRESS AS 32 KHANDARI ROAD AGRA PHOTOCOPY OF THE RECEIPT DATED 09.02.2004 FOR THE PAYMENT OF MUNICIPAL TAX FOR THE SAME PROPERTY. THE PHOTOCOPIES OF ALL THESE DOCUMENTS WERE FILED BEFORE US ALSO. THIS ALL PROVES THAT THERE WAS RESIDENTIAL BUILDING . THE SAID PROPERTY WAS SOLD IN TWO PARTS. LAND APPURTENANT OF THE PROPERTY WAS SOLD VIDE SALE DEED DATED 15.10.2003 AND THE OTHER PART WAS SOLD VIDE SALE DEED DATED 22.06.2003. MERELY T HE ASSESSEE MENTIONED IN THE SALE DEED THAT THE ASSESSEE HAS SOLD THE VACANT PLOT OF LAND IT C ANNOT BE SAID THAT THERE WAS NO STRUCTURE ON THE OTHER PART OF THE BUILDING. SINCE THE ASSESSEE HAS SOLD THE RESIDENTIAL PROPERTY THEREFORE THE ASSESSEE WAS ENTITLED FOR EXEMPTION UNDER SECTION 5 4 OF THE ACT IN RESPECT OF CAPITAL GAINS ARISING OUT OF THE SALE THROUGH BOTH THE SALE DEEDS. IT WA S ALSO CONTENDED THAT THE A.O. WAS NOT CORRECT IN LAW IN TAKING COST OF ACQUISITION AT RS.1 33 275 /- I.E. ONLY COST RELATING TO LAND. EVEN IF THE TRIBUNAL AGREES WITH THE A.O. THAT THE ASSESSEE HAS SOLD THE LAND THE COST OF ACQUISITION SHOULD BE TAKEN FAIR MARKET VALUE OF THE PROPERTY AS ON 01 .04.1981. THE APPROVED VALUER HAS VALUED THE PROPERTY AS ON 01.04.1981 AT RS.6 42 000/-. THIS F ACT HAS NOT BEEN DENIED BY THE A.O. REFERRING TO SECTION 48 OF THE ACT IT WAS CONTENDED THAT THI S SECTION LAID DOWN THE MODE OF COMPUTATION OF CAPITAL GAIN. THE COST OF THE ACQUISITION OF THE A SSET AND COST OF ANY IMPROVEMENT THEREON HAS TO BE DEDUCTED. THE COST OF ANY IMPROVEMENT WILL INCL UDE ALL THE EXPENDITURE WHICH HAS BEEN INCURRED BY THE ASSESSEE FOR MAKING OR ALTERING THE CAPITAL ASSET TO THE PRESENT SITUATION. IN THIS REGARD REFERENCE WAS MADE TO SECTION 55(1) OF THE ACT. THIS IS A FACT ON RECORD THAT THE ASSESSEE AS WELL AS HIS FATHER FROM WHOM THE ASSESSEE DEVOLV ED THE PROPERTY WAS PUTTING UP IN THE SAME VERY PROPERTY. THE SECOND SALE DEED ONLY TALKS OF THAT THE OLD CONSTRUCTION HAS BEEN DISMANTLED 5 BY THE ASSESSEE AND CONVERTED THE PROPERTY INTO THE LAND. THE EXPENSES INCURRED BY THE ASSESSEE IN CONSTRUCTION AND RECONVERTING THE SAID PROPERTY INTO LAND TANTAMOUNT TO COST OF IMPROVEMENT OF CAPITAL ASSET. THE A.O. AND THE CIT(A) HAS NOT LOOKED INTO THIS ASPECT AND HAS TAKEN ONLY THE COST OF THE LAND AS ESTIMATED BY THE APPROVED VALUE R TO BE THE COST OF ACQUISITION OF THE ASSESSEE WHILE COMPUTING THE CAPITAL GAIN. THUS IT WAS CON TENDED THAT THE COST OF ACQUISITION AND THE COST OF IMPROVEMENT HAS TO BE CONSIDERED FOR COMPUTING C APITAL GAIN. IT SHOULD BE TAKEN TO BE RS.2 14 000/- AND THE ASSESSEE SHOULD BE ALLOWED IN DEXATION ON THE SAME VALUE. IT WAS ALSO CONTENDED AS AN ALTERNATE CONTENTION THAT IN CASE T HIS TRIBUNAL DID NOT AGREE TO ALLOW THE EXEMPTION UNDER SECTION 54 THE A.O. BE DIRECTED TO ALLOW EXEMPTION UNDER SECTION 54F AND THE SAME MAY BE COMPUTED IN ACCORDANCE WITH THE PROVISI ONS OF SECTION 54F. THE ASSESSEE HAS INVESTED A SUM OF RS.8 30 000/- IN THE NEW FLAT BEI NG NO.402 PUSHPANJALI TOWER EXTENSION AGRA AND NOT RS.7 50 000/-. FOR THIS OUR ATTENTIO N WAS DRAWN TO THE COPY OF PURCHASE DEED OF THE SAID RESIDENTIAL PROPERTY AVAILABLE IN THE PAPE R BOOK. 4. LD. D.R. ON THE OTHER HAND VEHEMENTLY CONTENDE D THAT THE ASSESSEE HAS SOLD THE LAND THROUGH BOTH THE SALE DEED AND THIS FACT CANNOT BE DENIED. THE SECOND SALE DEED EXECUTED BY THE ASSESSEE CLEARLY STATES THAT THE ASSESSEE HAS SOLD THE VACANT PLOTS WITHOUT ANY STRUCTURE AFTER DISMANTLING THE STRUCTURE. THIS SALE DEED HAS BEEN EXECUTED BY THE ASSESSEE AND HAS DULY BEEN SIGNED BY HIM. ONCE THE ASSESSEE HAS DISMANTLED TH E STRUCTURE AND SOLD THE VACANT PLOTS ONE CANNOT SAY THAT THE ASSESSEE HAS SOLD THE RESIDENTI AL HOUSE. THIS FACT IS ALSO CLEAR FROM THE FACT THAT THE ASSESSEE HAS APPLIED FOR THE DISCONNECTION OF THE ELECTRICITY ON THE SAME VERY PLOT. IN CASE THE ASSESSEE WOULD HAVE SOLD THE HOUSE PROPERT Y THE ASSESSEE NEED NOT TO APPLY FOR ELECTRICITY DISCONNECTION. THERE MAY BE A RESIDENT IAL BUILDING ON THE PLOT PRIOR TO THE ENTRY OF THE 6 TRANSACTION BUT THERE WAS NO HOUSE PROPERTY WHEN TH E SECOND SALE TOOK PLACE BETWEEN THE BUYER AND THE ASSESSEE. THIS FACT HAS BEEN MENTIONED IN THE SALE DEED AT VARIOUS PLACES AND FOR THIS OUR ATTENTION WAS DRAWN TOWARDS THE ORDER OF THE CIT(A) ESPECIALLY PAGE 3 WHICH CONTAINED THE FINDING OF THE CIT(A). AS THERE WAS NO STRUCTURE O N THE LAND THE REVENUE WAS CORRECT IN LAW IN TAKING THE FAIR MARKET VALUE OF THE LAND AS ON 01.0 4.1981 FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD. WE NOTED THAT THERE IS A CLEAR CUT FINDING GIVEN BY THE CIT(A) AS REPRODUCED AT PAGE NO.3 OF HIS ORDER THAT IN BOTH THE SALE DEEDS DATED 15.10.2003 & 26.12.2003 BY WHICH THE PROPERTY WAS SOLD BY THE ASSESSEE AND HIS BROTHER FOR RS.29 40 000/- AND RS.46 00 000/- IT WAS CLEARLY MENTIONED THAT THE ASSESSEE HAS SOLD THE VACANT LAND. THE CI T(A) EVEN REPRODUCED THE RELEVANT PARAS OF THE SALE DEED. THIS FACT HAS NOT BEEN DENIED BY THE LD . A.R. BUT THE LD. A.R. VEHEMENTLY CONTENDED THAT THIS HAS WRONGLY BEEN MENTIONED IN THE SECOND SALE DEED. IN FACT THE ASSESSEE FIRST SOLD LAND APPURTENANT AND SUBSEQUENTLY SOLD THE HOUSE PROPERT Y. NO DOUBT THE ASSESSEE HAS SUBMITTED THE EVIDENCES SHOWING THAT THE ASSESSEE WAS HAVING THE GAS CONNECTION POWER CONNECTION AND PAYING THE MUNICIPAL TAX IN RESPECT OF THE SAID PRO PERTY WHICH WAS SOLD BY THE ASSESSEE. THIS EVEN THOUGH PROVES THAT THERE HAD BEEN PROPERTY ON THE PLOT BUT WE HAVE TO SEE THE SITUATION AS ON THE DATE OF TRANSACTION. THERE HAD BEEN TWO TRA NSACTIONS. FIRST FOR THE SALE OF LAND APPURTENANT AND SECOND AS IS APPARENT FROM THE SAL E DEED FOR THE SALE OF THE LAND AFTER DISMANTLING THE PROPERTY THEREON. THIS FACT HAS BE EN STATED ON 3 PAGES OF THE SALE DEED DATED 26.12.2003. THIS IS NOT THE CASE THAT THIS FACT HA S BEEN MENTIONED ONLY ONCE BY MISTAKE. THE SALE DEEDS ITSELF PROVES THAT THE ASSESSEE HAS SOLD THE PLOT NOT THE PROPERTY. WE DO AGREE WITH THE 7 PLEA OF THE LD. D.R. THAT IN CASE THE ASSESSEE WOUL D HAVE SOLD THE HOUSE PROPERTY THE ASSESSEE NEED NOT TO APPLY FOR THE DISCONNECTION OF ELECTRIC AL CONNECTION. THIS ALSO PROVES THAT THE PROPERTY WAS IN EXISTENCE ON THE LAND. 6. NOW THEREFORE FIRST WE WILL EXAMINE WHETHER TH E ASSESSEE IS ENTITLED FOR EXEMPTION U/S. 54 ON THE CAPITAL ASSET SOLD ON 15.10.2003 AND ALSO FOR EXEMPTION ON THE CAPITAL ASSET SOLD VIDE SALE DEED DATED 26.12.2003. 7. IN THIS REGARD THE RELEVANT PROVISIONS OF SECTI ON 54 LAYS DOWN AS UNDER :- SECTION 54 PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE. 54. [(1)] [SUBJECT TO THE PROVISIONS OF SUB-SECTION (2 ) WHERE IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY] T HE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET BEING BUILDINGS OR LA NDS APPURTENANT THERETO AND BEING A RESIDENTIAL HOUSE THE INCOME OF WHICH IS CHARGEABL E UNDER THE HEAD INCOME FROM HOUSE PROPERTY (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET) AND THE ASSESSEE HAS WITHIN A PERIOD OF [ONE YEAR BEFORE OR TWO YEARS A FTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIOD OF THREE YE ARS AFTER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE THEN] INSTEAD OF THE CAPITAL GA IN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLA CE IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION THAT IS TO SAY (I) IF THE AMOUNT OF THE CAPITAL GAIN [IS GREATER T HAN THE COST OF [THE RESIDENTIAL HOUSE] SO PURCHASED OR CONSTRUCTED (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET)] THE DIFFERENCE BETWEEN THE AMOUNT OF THE CAPITAL GAIN A ND 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 ASSET ANY CAPITAL G AIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTI ON 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 UNDER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING F ROM ITS TRANSFER WITHIN A PERIOD OF 8 THREE YEARS OF ITS PURCHASE OR CONSTRUCTION AS THE CASE MAY BE THE COST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. [(2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT A PPROPRIATED 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 U TILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FU RNISHING THE RETURN OF INCOME UNDER SECTION 139 SHALL BE DEPOSITED BY HIM BEFORE FURNI SHING SUCH RETURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLIC ABLE 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 AN D UTILISED IN ACCORDANCE WITH ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY BY NOTIFIC ATION 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 AL READY 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-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET W ITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1) THEN (I) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UND ER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FR OM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUC H AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. 8. FROM THE PERUSAL OF SECTION 54 IT IS APPARENT T HAT IN CASE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF LONG TERM CAPITAL ASSET BEING BUILDING OR LAND APPURTENANT THERETO AND BEING RESIDENTIAL HOUSE THE INCOME OF WHICH IS CHARGEABL E UNDER THE HEAD INCOME FROM HOUSE PROPERTY THE ASSESSEE IS ENTITLED FOR EXEMPTION U NDER SECTION 54 IN CASE HE COMPLIES WITH THE CONDITIONS STIPULATED UNDER SECTION 54 OF THE ACT. THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSEE HAS SOLD FIRST LAND APPURTENANT TO RESIDENTIAL HOUS E VIDE SALE DEED DATED 15.10.2003. THERE ARE EVIDENCES ON RECORD WHICH PROVE THAT THERE WAS RESI DENTIAL BUILDING ON THE LAND AND IS USED AS SUCH EVEN BY THE FATHER OF THE ASSESSEE IN THE A.Y . 1972-73 LATE SHRI HANS RAJ KAPOOR. THE 9 LAJPAT KUNJ ASSOCIATION HAS ISSUED THE CERTIFICATE AT THAT TIME ABOUT THE PROPERTY BEING OCCUPIED BY HANS RAJ KAPOOR. THERE WAS GAS CONNECTION AT TH E SAME ADDRESS. THE MUNICIPAL TAX HAS BEEN LEVIED AND IS BEING PAID. EVEN IN THE SUBSEQU ENT SALE DEED DATED 26.12.2003 ALSO CONFIRMS THAT ON THE LAND SOLD BY THE ASSESSEE THE RESIDENTI AL BUILDING WAS IN EXISTENCE AND THE SAME WAS DISMANTLED BY THE ASSESSEE WHEN THE LAND WAS SOLD V IDE SALE DEED DATED 26.12.2003. THE LAND APPURTENANT TO THE BUILDING IN OUR OPINION IF SOL D SEPARATELY THE ASSESSEE WILL BE ENTITLED FOR THE EXEMPTION UNDER SECTION 54 PROVIDED THE ASSESSEE HA D MADE THE INVESTMENT OF CAPITAL GAIN WITHIN THE STIPULATED TIME BY WAY OF PURCHASE OR CONSTRUCT ION IN THE NEW RESIDENTIAL PROPERTY. THE ASSESSEE HAS PURCHASED FLAT NO.402 PUSHPANJALI TOW ER EXTENSION AGRA ON 14.10.2003 I.E. WITHIN THE STIPULATED TIME FROM THE DATE OF SALE OF THE LAND APPURTENANT THERETO. THEREFORE THE CAPITAL GAIN ARISES ON THE SALE OF THE LAND APPURTE NANT WILL BE ENTITLED FOR EXEMPTION UNDER SECTION 54 OF THE ACT. THE FLAT HAS BEEN PURCHASED FOR RS .7 50 000/- AND THE ASSESSEE HAS INCURRED A SUM OF RS.80 000/- BY WAY OF STAMP DUTY AND REGISTR ATION WHICH IS APPARENT FROM THE COPY OF THE SALE DEED WHICH IS AVAILABLE AT PAGE 99 TO 105 OF T HE PAPER BOOK. SIMILAR VIEW HAS BEEN TAKEN BY THE ALLAHABAD HIGH COURT IN THE CASE OF P.K. LAH IRI VS. CIT 275 ITR 17 (ALLD) IN WHICH IT WAS HELD THAT A PERUSAL OF SECTION 54 OF THE I.T. A CT MAKES IT CLEAR THAT THE EXEMPTION UNDER THE PROVISION IS AVAILABLE ONLY WHERE A BUILDING OR LAN D APPURTENANT THERETO IS SOLD AND WITHIN TWO YEARS IMMEDIATELY PRECEDING THE DATE ON WHICH THE T RANSFER TOOK PLACE WAS BEING USED BY THE ASSESSEE OR A PARENT OF HIS MAINLY FOR THE PURPOSE OF HIS OWN OR THE PARENTS OR OWN RESIDENCE AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THAT DATE PURCHASED OR HAS WITHIN A PERIOD OF TWO YEARS AFTER THE DATE CONSTRUCTED A H OUSE PROPERTY FOR THE PURPOSE OF HIS OWN RESIDENCE. LAND APPURTENANT TO THE BUILDING IMPLIE S THAT THE OWNERSHIP OF THE BUILDING AND THE LAND APPURTENANT SHOULD BE OF THE SAME PERSON. IF THE BUILDING IS OWNED BY ONE PERSON AND THE 10 LAND IS OWNED BY ANOTHER PERSON THEN IT WILL BE THE CASE OF THE LAND ADJOINING THE BUILDING. IN THE CASE BEFORE US ALSO THE ASSESSEE WAS HAVING 1/3 RD SHARE IN THE WHOLE PROPERTY CONSISTING OF THE RESIDENTIAL HOUSE WHERE THE ASSESSEES FATHER USED TO LIVE AND THE LAND WAS APPURTENANT THERETO WHICH WAS SOLD BY THE ASSESSEE ON 15.10.2003. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO ALLOW EXEMPTION TO THE ASSESSEE U/S 54 ON THE CAPIT AL GAIN ARISING ON THE SALE OF LAND APPURTENANT SOLD VIDE SALE DEED DATED 15.10.2003. 9. NOW COMING TO THE QUESTION OF THE CAPITAL GAIN A RISING AS PER THE SALE DEED DATED 26.12.2003 WE NOTED THAT THE ASSESSEE HAS SOLD THE LAND WHERE THE BUILDING WAS IN EXISTENCE AFTER DISMANTLING THE BUILDING. THIS FACT IS APPAR ENT FROM THE COPY OF THE SALE DEED FILED BEFORE US. ONCE THE ASSESSEE HAS DISMANTLED THE BUILDING THE BUILDING HAD BEEN CONVERTED INTO THE LAND AND THE SALES MADE WILL BE REGARDED TO BE THE SALE OF LAND NOT OF A RESIDENTIAL PROPERTY NOR OF LAND APPURTENANT TO A RESIDENTIAL PROPERTY. THE AS SESSEE THEREFORE IN OUR OPINION WILL NOT BE ENTITLED FOR THE EXEMPTION UNDER SECTION 54 OF THE ACT ON THE CAPITAL GAIN ARISING ON THE SALE OF THE LAND WHICH HAS BEEN SOLD AFTER DISMANTLING THE BUILDING VIDE SALE DEED DATED 26.12.2003. THE ASSESSEE CAN GET THE EXEMPTION ON THE CAPITAL G AIN ARISING THEREON EITHER UNDER SECTION 54F PROVIDED HE COMPLIES WITH THE CONDITIONS STATED THE REIN OR UNDER SECTION 54EC. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS INVESTED A SUM OF RS.7 00 000/- IN THE ELIGIBLE INVESTMENT ENTITLED FOR DEDUCTION UNDER SECTION 54EC AND ACCOR DINGLY THE ASSESSEE WAS ALLOWED DEDUCTION UNDER SECTION 54EC BY THE A.O. 10. THE OTHER DISPUTE BEFORE US RELATES TO THE COM PUTATION OF THE CAPITAL GAIN. SECTION 48 OF THE ACT STATES THAT THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAIN SHALL BE COMPUTED WHILE 11 DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TRANSACTION OF THE CAPITAL ASSETS THE FOLLOWING AMOUNTS NAMELY :- I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN C ONNECTION WITH THE TRANSACTION. II) THE COST OF ACQUISITION OF THE ASSET AND COST O F ANY IMPROVEMENT THERETO. 11. THE COST OF ACQUISITION HAS BEEN DEFINED UNDER SECTION 55(2) OF THE ACT. SECTION 55(2)(B)(II) STATES WHERE THE CAPITAL ASSETS BECAME THE PROPERTY OF THE ASSESSEE BY ANY OF THE MODE SPECIFIED UNDER SUB-SECTION-1 OF SECTION 49 AN D THE CAPITAL ASSET BECAME THE PROPERTY OF THE PREVIOUS OWNER BEFORE 01.04.1981 THE COST OF ACQUI SITION WILL MEAN THE COST OF CAPITAL ASSETS TO THE PREVIOUS OWNER OR THE FAIR MARKET VALUE OF THE ASSET ON FIRST DAY OF APRIL 1981 AT THE OPTION OF THE ASSESSEE. THE CAPITAL ASSETS TRANSFERRED BY THE ASSESSEE HAS BEEN DEVOLVED ON THE ASSESSEE FROM HIS FATHER I.E. ONE OF THE MODE SPECIFIED UNDE R SECTION 49(1)(III). FATHER WAS THE PREVIOUS OWNER. PRIOR TO HIS DEATH HE WAS OWNING THE PROPE RTY PRIOR TO 01.04.1981. THE CIT(A) HAS ALREADY HELD THAT THE ASSESSEE WILL BE ENTITLED FOR THE INDEXED COST ON THE FAIR MARKET VALUE AS ON 01.04.1981. THE REVENUE HAS NOT COME IN APPEAL AGA INST THIS FINDING OF THE CIT(A). THEREFORE THE FAIR MARKET VALUE OF THE PROPERTY AS ON 01.04.1 981 HAS TO BE SEEN. AS ON 01.04.1981 IT IS NOT DISPUTED THAT THE CAPITAL ASSET SOLD THROUGH BOTH T HE SALE DEEDS WAS A CONSTRUCTED PROPERTY ALONG WITH THE LAND APPURTENANT THERETO. NO DOUBT THE AS SESSEE HAS SOLD THE LAND AFTER DISMANTLING THE CONSTRUCTION AS PER SECOND SALE DEED BUT THE ASSESS EE HAS TO INCUR THE COST FOR THE CONSTRUCTION AS WELL AS DISMANTLING THE SAME. THE COST OF IMPROVEM ENT HAS BEEN DEFINED UNDER SECTION 55(1)(B) IN RELATION TO OTHER CAPITAL ASSETS TO MEAN ALL THE EXPENDITURE OF CAPITAL NATURE INCURRED IN MAKING ANY ADDITION OR ALTERNATION TO THE CAPITAL ASSETS O N OR AFTER THE SAID DATE BY THE PREVIOUS OWNER OR 12 BY THE ASSESSEE. IT DOES NOT INCLUDE ANY EXPENDITU RE DEDUCTIBLE IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERT Y PROFIT AND GAIN OF THE BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURCES. THE PROPE RTY WAS CHARGED TO MUNICIPAL TAX AND THIS FACT IS CLEARLY MENTIONED IN THE SALE DEED THAT THE ASSESSEE HAS DISMANTLED THE CONSTRUCTION. THEREFORE IN OUR OPINION WHATEVER EXPENSES HAVE B EEN INCURRED BY THE ASSESSEE OR BY THE PREVIOUS OWNER IN CONSTRUCTING THE PROPERTY OR IN D ISMANTLING THE PROPERTY THAT WILL BE PART OF THE COST OF IMPROVEMENT OVER THE LAND. THE ASSESSEE HA S NOT CLAIMED THE EXPENSES INCURRED IN DISMANTLING THE CONSTRUCTION. AS ON 01.04.1981 THE BUILDING WAS IN EXISTENCE OVER THE PLOT. THEREFORE IN OUR OPINION FAIR MARKET VALUE OF THE CAPITAL ASSETS FOR THE PURPOSE OF COMPUTATION OF THE CAPITAL GAIN SHOULD BE TAKEN TO BE THE FAIR MA RKET VALUE OF THE LAND AS WELL AS THE CONSTRUCTION THEREON. THE A.O. WAS NOT CORRECT IN TAKING THE FA IR MARKET VALUE ONLY OF THE LAND. THE FAIR MARKET VALUE OF THE CONSTRUCTED PROPERTY INCLUDING LAND APPURTENANT AS ON 01.04.1981 WAS RS.6 42 000/- 1/3 RD SHARE OF WHICH THEREOF WAS RS.2 14 000/- THE INDE XED COST HAS TO BE APPLIED TO RS.2 14 000/-. WE ACCORDINGLY SET ASIDE THE O RDER OF THE CIT(A) AND DIRECT THE A.O. TO RECOMPUTE THE CAPITAL GAIN AFTER TAKING THE INDEXED COST ON RS.2 14 000/-. THE INDEXED COST SO ARRIVED BE ALLOCATED BETWEEN THE TWO TRANSACTION ON THE BASIS OF THE AREA OF THE LAND. THE ASSESSEE SHOULD BE ALLOWED EXEMPTION UNDER SECTION 54 OUT OF THE CAPITAL GAIN SO COMPUTED ON THE SALE OF THE LAND APPURTENANT VIDE SALE DEED DATED 15.10.200 3 AND EXEMPTION UNDER SECTION 54EC SHOULD BE ALLOWED OUT OF THE CAPITAL GAIN SO COMPUTED ON T HE SALE OF THE LAND VIDE SALE DEED DATED 26.12.2003. 12. IN THE RESULT ITA NO.663/AGR/2008 FILED BY THE ASSESSEE IS PARTLY ALLOWED. 13 ITA NO.19/AGR/2009 13. THIS APPEAL ARISE OUT OF THE ORDER OF THE CIT(A ) DATED 27.11.2008. 14. THE GROUNDS NO.4 & 7 SINCE NOT PRESSED STAND DISMISSED AS NOT PRESSED. GROUND NO.8 IS GENERAL IN NATURE. THE EFFECTIVE GROUNDS WHICH REM AIN FOR DISPOSAL READ AS UNDER :- (1) BECAUSE THE AUTHORITIES BELOW HAVE NOT CORRECT LY CALCULATED THE AMOUNT OF CAPITAL GAIN AND THERE IS NO JUSTIFICATION TO DISCA RD THE CALCULATION OF CAPITAL GAIN AT RS.15 22 213/- OF ENTIRE HOUSE PROPERTY ON WHICH EXEMPTION FROM CAPITAL GAIN WAS CLAIMED BY THE APPELLANT. (2) BECAUSE THE APPELLANT SOLD ONE RESIDENTIAL HOUS E PROPERTY IN TWO INSTALLMENTS ON WHICH RELIEF U/S 54 OUGHT TO HAVE B EEN ALLOWED IN THE CIRCUMSTANCES OF THE CASE AND LAW ON THE SUBJECT. THE REASONS GIVEN FOR DISALLOWANCE OF EXEMPTION U/S 54 ARE NOT CORRECT P ROPER AND JUSTIFIED. (3) BECAUSE IN THE CIRCUMSTANCES OF THE CASE AND EV IDENCE ON RECORD THE AUTHORITIES BELOW HAVE ERRED TO HOLD THAT THE PROPE RTY SOLD WAS VACANT PLOTS OF LAND AND NOT A RESIDENTIAL HOUSE. (5) BECAUSE IN ANY VIEW LAND APPURTENANT TO RESIDEN TIAL HOUSE WAS A RESIDENTIAL HOUSE AND EXEMPTION U/S 54 OUGHT TO HA VE BEEN ALLOWED. (6) BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN NOT ALLOWING THE EXEMPTION U/S 54F IN THE CIRCUMSTANCES OF THE CASE AND LAW ON THE SUBJECT. 15. AT THE TIME OF HEARING IT WAS POINTED OUT THAT IN THIS CASE ALSO THE ASSESSEE HAS SOLD 1/3 RD SHARE IN THE RESIDENTIAL HOUSE ALONG WITH HIS BROTH ER SHRI SUBHASH CHAND KAPOOR VIDE SALE DEED DATED 15.10.2003 AND 26.12.2003. THE ASSESSEE HAS SOLD THE LAND APPURTENANT THERETO VIDE SALE DEED DATED 15.10.20003 AND SUBSEQUENTLY THE OTHER P ART OF PROPERTY VIDE SALE DEED DATED 26.12.2003 IN RESPECT OF THE CAPITAL GAIN ARISING O N THE SALE OF THE LAND APPURTENANT THERETO. THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54 OF THE ACT WHICH WAS NOT ALLOWED. AGAINST WHICH THE ASSESSEE HAS COME IN APPEAL BY TAKING THE GROUN DS NO.1 TO 3 & 5. IT WAS POINTED OUT THAT THE 14 ASSESSEE HAS ALSO BOUGHT FLAT NO.504 PUSHPANJALI T OWER EXTENSION AGRA ON 15.10.2003 BY INVESTING A SUM OF RS.8 30 000/- FOR WHICH THE ASSE SSEE CLAIMED EXEMPTION UNDER SECTION 54. THE ASSESSEE HAS ALSO CLAIMED EXEMPTION UNDER SECTI ON 54F AGAINST THE CAPITAL GAIN ARISING ON SALE OF THE ASSET VIDE SALE DEED DATED 26.12.2003 I N RESPECT OF INVESTMENT MADE IN FLAT NO.104 FRIENDS PARADISE AGRA ON 31.03.2004. SO FAR THE I SSUE ABOUT THE CLAIM OF EXEMPTION UNDER SECTION 54 IS CONCERNED BOTH THE LD. A.R. AND LD. D.R. HAS AGREED THAT WHATEVER VIEW THIS TRIBUNAL MAY TAKE IN THE CASE OF ASSESSEES BROTHER SHRI SUBHASH CHAND KAPOOR THE SAME VIEW MAY BE TAKEN IN THE CASE OF THE ASSESSEE. WE HAVE ALREADY DEALT WITH THIS ISSUE IN THE CASE OF ASSESSEES BROTHER SHRI SUBHASH CHAND KAPOOR IN ITA NO.663/AGR/2008. IN THAT CASE WE HAVE HELD IN THE PRECEDING PARAGRAPHS THAT THE ASSESSEE IS ENTITLED FOR THE DEDUCTION UNDER SECTION 54 OF THE ACT ON THE SALE OF LAND APPURTENANT IN RESPE CT OF THE INVESTMENT MADE IN THE PURCHASE OF THE RESIDENTIAL FLAT IN PUSHPANJALI TOWER. WE HAVE ALSO IN THAT CASE DIRECTED THE A.O. TO TAKE THE FAIR MARKET VALUE OF THE CONSTRUCTED PROPERTY INCLU DING THE LAND APPURTENANT THERETO AS ON 01.04.1981 AT RS.2 14 000/- FOR APPLYING THE INDEXE D COST THEREIN. WE HAVE ALSO DIRECTED THAT THE INDEXED COST SO ARISES SHOULD BE DIVIDED WHILE COMP UTING THE CAPITAL GAIN IN RESPECT OF THE LAND SOLD VIDE SALE DEED DATED 15.10.2003 AND 26.12.2003 IN PROPORTION TO THE AREA OF THE LAND INVOLVED IN BOTH THE TRANSACTIONS. WE ACCORDINGLY DIRECT THE A.O. TO RECOMPUTE THE CAPITAL GAIN ON THE SALE OF LAND APPURTENANT VIDE SALE DEED DATE D 15.10.2003 AND ALLOW THE EXEMPTION TO THE ASSESSEE UNDER SECTION 54 IN THE SAME MANNER. THUS GROUNDS NO.1 2 3 & 5 STAND ALLOWED. 16. THE ONLY ISSUE REMAINS ABOUT THE CLAIM OF EXEMP TION ON THE ASSESSEE UNDER SECTION 54 F OF THE ACT. 15 17. IN THIS CASE ALSO THE ASSESSEE CLAIMS THAT HE SOLD THE CONSTRUCTED PROPERTY VIDE SALE DEED DATED 26.12.2003 ALONG WITH HIS BROTHER SHRI SUBAHS H CHAND KAPOOR IN WHICH THE ASSESSEE WAS HAVING 1/3 RD SHARE. IN THE CASE OF SAHRI SUBHASH CHAND KAPOOR WE HAVE ALREADY HELD ON APPRECIATION OF THE FACTS THAT THE ASSESSEE HAS SOL D THE LAND AFTER DISMANTLING THE BUILDING. THEREFORE THE QUESTION BEFORE US REMAINS WHETHER T HE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 54F IN RESPECT OF THE INVESTMENT MADE IN FL AT NO.104 FRIENDS PARADISE AGRA ON 31.03.2004. 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. SECTION 54F LAYS DOWN AS UNDER :- SECTION 54F CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. 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 TH E CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET NOT BEING A RESIDENTIA L HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET) AND THE ASSESSEE HAS WI THIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLA CE PURCHASED OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED A RESIDENT IAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET) THE CAPITAL GAIN SHALL BE DEA LT 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 T HE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET THE WHOLE OF SUCH CAPITAL GAIN SHAL L NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE N ET CONSIDERATION 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 TH E NET CONSIDERATION SHALL NOT BE CHARGED UNDER SECTION 45 : 16 PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY WHERE (A) THE ASSESSEE (I)OWNS MORE THAN ONE RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET ON THE DATE OF TRANSFER OF THE ORIGINAL 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 ASS ET; OR (III)CONSTRUCTS ANY RESIDENTIAL HOUSE OTHER THAN T HE NEW ASSET WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL AS SET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE OTHER T HAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET IS CHAR GEABLE 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 INCURRE D WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER. (2) WHERE THE ASSESSEE PURCHASES WITHIN THE PERI OD OF [TWO YEARS] AFTER THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET OR CONSTRUCTS WITH IN THE PERIOD OF THREE YEARS AFTER SUCH DATE ANY RESIDENTIAL HOUSE THE INCOME FROM WHICH IS CHA RGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY OTHER THAN THE NEW ASSET THE AMOU NT 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 CLA USE (B) OF SUB-SECTION (1) SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAI NS RELATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOUS YEAR IN WHICH SUCH RESIDENTIAL HOUS E IS PURCHASED OR CONSTRUCTED. 3) WHERE THE NEW ASSET IS TRANSFERRED WITHIN A PER IOD 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 CAPI TAL 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 UTIL ISED 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 ASS ESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS M AY BE 17 SPECIFIED IN AND UTILISED IN ACCORDANCE WITH ANY SCHEME 37 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 ALREADY UTILISED BY THE ASSESSEE FOR THE PURCH ASE 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-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET W ITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1) THEN (I) THE AMOUNT BY WHICH (A) THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TR ANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF THE NEW ASSET AS PROVI DED 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 TH E NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1) BEEN THE COST OF THE N EW 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 OR IGINAL ASSET EXPIRES ; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW TH E UNUTILISED AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. 19. WE NOTED THAT ON THE BASIS OF THE INTERPRETATI ON OF SECTION 54F(2) THE CIT(A) TOOK THE VIEW THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTIO N UNDER SECTION 54F. ACCORDING TO HIM THE ASSESSEE PURCHASED THE RESIDENTIAL PROPERTY AT PUSH PANJALI TOWER EXTENSION AGRA ON 15.10.2003 FOR RS.7 50 000/- WITHIN THE SAME F.Y. ON 31.03.200 4. THE ASSESSEE PURCHASED THE OTHER RESIDENTIAL PROPERTY BEING FLAT NO.104 FRIENDS PAR ADISE FOR RS.1120 000/-. AS BOTH THE PROPERTIES ARE RESIDENTIAL PROPERTIES FOR WHICH THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54/54F BOTH OF WHICH ARE ALLOWABLE ONLY IF THE TRAN SFEREE INVESTED THE SALE PROCEEDS OF THE ORIGINAL ASSET IN A RESIDENTIAL PROPERTY. 18 20. FROM THE PERUSAL OF THE SECTION 54F IT IS APPAR ENT THAT THE ASSESSEE BEING AN INDIVIDUAL OR HUF IS ENTITLED FOR THE EXEMPTION IF CAPITAL GAIN A RISES TO HIM FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSET NOT BEING A RESIDENTIAL HOUSE AN D THE ASSESSEE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF TRANSFER PURC HASES OR HAD WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER CONSTRUCTED A RESIDENTIAL HOUS E THE WHOLE OF THE NET CONSIDERATION IS INVESTED IN THE RESIDENTIAL HOUSE (REFERRED SUBSEQUENTLY AS NEW ASSET) THE WHOLE OF THE CAPITAL GAIN SHALL BE EXEMPT. IN CASE COST OF THE NEW ASSET IS LESS T HAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN SAME PROPORTION AS THE CASE OF THE NEW ASSET BEARS TO TH E NET CONSIDERATION BE EXEMPT. THE PROVISO TO SECTION 54F DENIES THE EXEMPTION TO THE ASSESSEE IN CASE THE ASSESSEE OWNS MORE THAN ONE RESIDENTIAL HOUSE OTHER THAN THE ORIGINAL ASSET ON THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET OR 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 CONSTRUCT ED ANY RESIDENTIAL HOUSE OTHER THAN THE NEW RESIDENCE WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET. THE ASSESSEE IS CLAIMING EXEMPTION IN RESPECT OF THE LA ND SOLD VIDE SALE DEED DATED 26.12.2003 WHICH IS AN INDEPENDENT ASSET THAT WILL BE REGARDED TO BE ORIGINAL ASSET WITHIN THE PROVISIONS OF SECTION 54F. THE ASSESSEE HAS CLAIMED EXEMPTION IN RESPECT OF THE INVESTMENT MADE IN FLAT NO.104 FRIENDS PARADISE AGRA WHICH WAS PURCHASED ON 31.03 .2004. THIS ASSET IN RESPECT OF WHICH EXEMPTION IS CLAIMED IS REGARDED TO BE NEW ASSET. IN OUR OPINION THE PROVISO TO SECTION 54F(1) IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE DID NOT OWN MORE THAN ONE RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET ON THE DATE OF TRANS FER OF THE ORIGINAL ASSET. ON THE DATE OF THE TRANSFER OF ORIGINAL ASSET THE ASSESSEE WAS OWNING ONLY FLAT NO.405 PUSHPANJALI TOWER EXTENSION 19 AS THE PROPERTY SOLD VIDE SALE DEED DT. 26.10.03 (O RIGINAL ASSET) GOT CONVERTED INTO A PLOT AS HELD BY US AND BY THE DEPARTMENT. 21. THE LD. A.R. VEHEMENTLY POINTED OUT THAT THE AS SESSEE HAS NOT PURCHASED ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF O NE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET. IN OUR OPINION PURCHASE OF FLAT N O.405 PUSHPANJALI TOWER EXTENSION ON 15.10.2003 WILL NOT DISENTITLE THE ASSESSEE FOR EXE MPTION AS PER PROVISO TO SECTION 54F(1) AS THIS HOUSE HAS BEEN PURCHASED PRIOR TO THE TRANSFER OF T HE ORIGINAL ASSET. THE ASSESSEE HAS ALSO NOT CONSTRUCTED ANY RESIDENTIAL HOUSE OTHER THAN THE NE W ASSET WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET. THERE IS D IFFERENCE IN THE CONSTRUCTION AND PURCHASE OF RESIDENTIAL HOUSE. THE PURCHASE OF FLAT NO.405 PU SHPANJALI TOWER EXTENSION CANNOT BE REGARDED TO BE CONSTRUCTION OF THE RESIDENTIAL HOUSE BY THE ASSESSEE. WE HAVE ALSO GONE THROUGH SECTION 54F(2). THIS SECTION ALSO IN OUR OPINION WILL NO T DEBAR THE ASSESSEE FROM CLAIMING THE EXEMPTION UNDER SECTION 54F. THE ASSESSEE HAS NOT PURCHASED WITHIN THE PERIOD OF TWO YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET OR CONSTRUCTED WITHIN THE PERIOD OF THREE YEARS AFTE R SUCH DATE ANY RESIDENTIAL HOUSE THE INCOME FROM WH ICH CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY OTHER THAN THE NEW ASSET. THE ASSET IN RESPECT OF WHICH THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54F HAS BEEN SOLD ON 26.12. 2003. THE ASSESSEE HAS PURCHASED FLAT NO.405 PUSHPANJALI TOWER EXTENSION AGRA ON 15.10. 2003 I.E. PRIOR TO 26.12.2003. HAD THE ASSESSEE PURCHASED THIS FLAT WITHIN TWO YEARS FROM 26.12.2003 THE PROVISIONS OF SECTION 54F(2) WOULD HAVE DEBARRED THE ASSESSEE FROM CLAIMING EXEM PTION UNDER SECTION 54F(1). WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE A. O. TO ALLOW DEDUCTION TO THE ASSESSEE UNDER SECTION 54F IN RESPECT OF INVESTMENT MADE IN FLAT N O.104 FRIENDS PARADISE AGRA IN ACCORDANCE 20 ITA NO.663/AGR/2008 & ITA NO.19/AGR/2009 ASST. YEAR: 2004-05 WITH THE PROVISIONS OF SECTION 54F(1)(B) IN RESPECT OF THE CAPITAL GAIN ARISES ON THE SALE OF THE CAPITAL ASSET VIDE SALE DEED DATED 26.12.2003. THU S THIS APPEAL IS ALSO PARTLY ALLOWED. 22. IN THE RESULT BOTH THE APPEALS FILED BY THE AS SESSEE ARE PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 23.07.2010). SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 23 RD JULY 2010. 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