IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR BEFORE SHRI RAMESH C SHARMA, ACCOUNTANT MEMBER ITA No. 351/JP/2018 Assessment Year 2011-12 Geeta Devi, cuke I.T.O., W/o- Shri Tara Chand, H. No. A- Vs. Ward 1(3), 1, Ganpati Nagar, Near Sidhi Ajmer. Ganesh Samaroh Sthal, Foy Sagar Road, Ajmer. PAN/GIR No. AJUPD3588P Appellant Respondent Assessee by Shri Mahendra Gargieya (Adv) Revenue by Shri Rajendra Jha (Addl.CIT) Date of Hearing 09/08/2019 Date of Pronouncement 21/08/2019 ORDER PER R.C. SHARMA, A.M. This is appeal filed by assessee against order of ld.CIT(A), Ajmer dated 20/07/2017 for A.Y. 2011-12 in matter of order passed U/s 147/148 r.w.s. 143(3) of Income Tax Act, 1961 (in short, Act). 2. There is delay in filing appeal. In support of delay, assessee has filed application for condonation of delay. assessee has also filed affidavit supporting reasons mentioned in 2 ITA 351/JP/2018 Geeta Devi Vs ITO condonation application. After going through reasons, I am satisfied that there was reasonable ground for delay in filing appeal. Accordingly, delay is condoned and appeal is being heard on merit. 3. In this appeal, assessee is aggrieved for decline of claim of exemption U/s 54F of Act. At outset, ld AR of assessee placed on record order of Coordinate Bench in case of co-owner Shri Mohandas Kurani in ITA No. 655/JP/2016 order dated 08/03/2019 wherein Tribunal directed for allowing deduction U/s 54F of Act. Accordingly, it was pleaded that issue is squarely covered by order of Coordinate Bench of Tribunal. 4. On other hand, ld DR has relied on orders of authorities below and contended that property sold was commercial in nature, therefore, deduction U/s 54 is not allowable. Moreover, investment in new house was not made within stipulated period nor deposited in capital gain account, therefore, A.O. has correctly denied exemption U/s 54 of Act. ld DR has further contended that assessee has not claimed deduction U/s 54F of Act before A.O., therefore, there is no reason to allow same even though claim before ld. CIT(A). 3 ITA 351/JP/2018 Geeta Devi Vs ITO 5. I have considered rival contentions and carefully gone through orders of authorities below. I have also carefully gone through order of Coordinate Bench in case of co-owner of property wherein issued has been decided in favour of assessee with respect to 2/3rd share of property. precise observation of Coordinate Bench was as under: 5. We have considered rival submissions as well as relevant material on record. Though assessee in grounds of appeal has claimed deduction under section 54F, however, we find that assessee has invested Rs. 24,00,000/- in purchase of new house property as against sale consideration which is 1/3rd of Rs. 53,04,800/-. Therefore, there will be no change in quantum of deduction whether it is allowed under section 54 or 54F of Act. Since AO has already accepted claim of deduction under section 54F while passing order under section 154 of IT Act dated 6th January, 2017, therefore, without going into controversy of allowability of claim under section 54, we consider deduction under section 54F on entire investment made by assessee. There is no dispute that assessee has purchased new residential house and invested Rs. 24,00,000/- within time period prescribed under section 54F. However, AO has restricted deduction only on ground that assessee has not deposited entire sale consideration in Capital Gain Account Scheme. We find that once substantial and primary condition as prescribed in section 54F for investment of sale consideration for purchase of new residential house is satisfied, then claim of deduction cannot be denied merely 4 ITA 351/JP/2018 Geeta Devi Vs ITO on ground that prior to investment assessee has not deposited amount in Capital Gain Account Scheme. Coordinate Bench of this Tribunal in case of ACIT vs. Zahida Banoo (supra) has considered identical issue in para 6 as under :- 6. We further note that when assessee has claimed deduction u/s 54F of Income Tax Act for assessment year 2006-07 which was allowed by ld. CIT(A) then said claim is also allowable for assessment year under consideration particularly in view of fact that investment in new house has been made by assessee within time prescribed under provisions of Section 54F of Act. It was brought to our notice that assessee purchased new property on 26.12.2005 and therefore investment in new property was made within prescribed time under provisions of section 54F of Act. Though Revenue can raise objection about allowability of deducting u/s 54F of Act as assessee has not deposited net consideration in capital gain account however, when assessee has not received entire sale consideration during year under consideration then question of depositing same does no arise. condition of depositing amount in capital gain accounts scheme presupposes that assessee has already received entire sale consideration. In case in hand when assessee did not receive sale consideration during year under consideration then, said condition cannot be thrust upon assessee. Further, assessee has invested amount within time period provided u/s 54F of Act and we find that Hon ble Karnataka High Court in case of Principal CIT vs. C. Gopalaswamy 384 ITR 307 has held that condition precedent for claiming benefit u/s 54/54F of Act is that capital gain realized from capital asset should have been invested either in purchase of residential house or in constructing residential house. If it is established that consideration was received on alienation property has been invested for purchase of residential house, assessee would be entitled to benefit of section 54F of Act irrespective of fact that transfer was not 5 ITA 351/JP/2018 Geeta Devi Vs ITO completed in all respect. In case of CIT vs. Sambandam Udaykumar 345ITR 389 Hon ble High Court has in para 10 and 11 as under:- 10. reading of aforesaid provision makes it very clear that if capital gain arises from transfer of any long term capital asset, not being residential house and assessee has within period of one year before or two years after date on which transfer took place purchased or has within period of three years after that date constructed residential house, if cost of new asset is not less than net consideration in respect of original asset whole such capital gain shall not be charged under section 45 of Act. However, if cost of new asset is less than net consideration in respect of original asset, so much of capital gain as bears to be whole of capital gain same proportion as cost of new asset bears to net consideration shall not be charged under section 45 of Act. 11. Section 45 of Act makes it very clear that any profits or gains arising from transfer of capital asset effected in previous year shall, save or otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H is chargeable to income tax under head 'capital gains' and shall be deemed to be income of previous year in which transfer took place. aforesaid sections which form part of section 54 of Act are cases where capital gain on transfer of capital asset not to be charged in those cases. Section 54F of Act is beneficial provision of promoting construction of residential house. Therefore, said provision has to be construed liberally for achieving purpose for which it was incorporated in statute. intention of Legislature was to encourage investments in acquisition of residential house and completion of construction or occupation is not requirement of law. 6 ITA 351/JP/2018 Geeta Devi Vs ITO words used in section are 'purchased' or 'constructed'. For such purpose, capital gain realized should have been invested in residential house. condition precedent for claiming benefit under said prevision is capital gain realized from sale of capital asset should have been parted by assessee and invested either in purchasing residential house or in constructing residential house. If after making entire payment, merely because registered sale deed had not been executed and registered in favour of assessee before period stipulated, he cannot be denied benefit of section 54F of Act. Similarly, if he has invested money in construction of residential house, merely because construction was not complete in all respects and it was not in fit condition to be occupied within period stipulated, that would not disentitle assessee from claiming benefit under section 54F of Act. essence of said provision is whether assessee who received capital gains has invested in residential house. Once it is demonstrated that consideration received on transfer has been invested either in purchasing residential house or in construction of residential house even though transactions are not complete in all respects and as requited under law, that would not disentitle assessee from said benefit. Therefore, in view of facts and circumstances of case when investment was made within time period even counted from date of transfer to be considered on date of agreement dated 13.09.2004 then assessment of capital gain tax either for assessment year 2006-07 or for assessment year 2005-06 would be Revenue neutral as benefit of section 54F is available to assessee. In view of above discussion, we do not find any reason to interfere with impugned order of ld. CIT(A). 7 ITA 351/JP/2018 Geeta Devi Vs ITO Therefore, once investment was made for purchase of new residential house within time period as prescribed under section 54F, then non-deposit of entire amount in Capital Gain Account cannot be reason for disallowance of deduction. This Tribunal in said case has followed decision of Hon ble Karnataka High Court in case of Principal CIT vs. c. Gopalaswamy, 384 ITR 307 (Kar.). Therefore, following earlier decision of this Tribunal, we allow full claim of deduction under section 54F of Act. 6. In instant case, I found that assessee had sold residential property jointly with Shri Puran Mal &, Shri Moha.ndas Kurani (Brothers) for total consideration of Rs. 45,00,000/- vide registered sale deed dated 09.11.2010. assessee received consideration of Rs.15,04,256/-towards his 1/3rd share. property was valued at Rs.45,12,768/- by Sub-Registrar. however, subsequently was enhanced to Rs.1,03,51,323/-. assessee objected to such valuation and requested AO to refer matter to Departmental Valuation Officer (hereinafter referred as DVO') u/s 50C(2)(a) of Act. Accordingly, AO referred matter to DVO, who in response valued said property vide valuation report dated 27.01.2016 at Rs.53,04,800/- (assessee's share Rs.17,68,267/) as against Rs. 15,04,256/- as declared. I also observe that assessee made claim of 8 ITA 351/JP/2018 Geeta Devi Vs ITO exemption u/s 54 or 54F in as much as against declared sale consideration of Rs.15,04,256/- on dated 09.11.2010, assessee purchased plot (situated at Khasra No. 936, Gram Boraj, Foy Sagar Road Scheme, Ajmer) for Rs. 3,51,360/- and further constructed residential house costing Rs.6.80,750/- up to 15.10.2011 (PB 86-90) totaling to Rs. 10,32,100/-. Thus, part of sale consideration having been invested within one year only i.e. much prior to stipulated period of 3 years from date of sale (falling on dated 08.11.2013). However claim U/s 54 was denied by AO on reasoning that property so sold was commercial cum residential property whereas such benefit u/s 54 is meant only for capital asset being residential house and that assessee did not invest in new property within stipulated period nor deposited same in capital gains account. Thus, denying deduction claimed u/s 54, AO finally assessed LTCG at Rs.8,75,887/-, as he proposed. 7. From record, I found that assessee sold capital asset on 09.11.2010 for Rs. 15,04,256/-, and with view to save capital gain tax, claimed deduction u/s 54 of Act and hence constructed residential house by 15.10.2011, i.e. much before 9 ITA 351/JP/2018 Geeta Devi Vs ITO period of 3 years from date of sale as provided in Act, but also before end of time provided u/s 139(4) i.e. 31.3.2012 itself. assessee invested Rs. 10,32,100/- (Plot Rs. 3,51,350/- + Construction 6,80,750/-. Though same did not exceed total amount of sale consideration as per Section 50C of Rs. 17,68,267/- yet however, assessee was fully entitled to get proportionate deduction u/s 54F up to investment of Rs. 10,32,100/-. Though AO denied deduction u/s 54 saying that what was sold was not residential house but in first. appeal, assessee made claim u/s 54F also, as alternate claim. But ld. CIT(A) summarily denied. In similar fact situation, in case of joint owner Shri Mohandas Kurani, who also sold his 1/3 share of property, made claim u/s 54F. In that case, ld. CIT(A) duly admitted claim u/s 54F and directed AO to consider same. Later on. ITO himself accepted claim u/s 54F vide his order u/s 154 dated 06.01.2017. Moreover, this Hon'ble ITAT also in that case (i.e. Mohandas Kurani vs ITO) accepted claim u/s 54F in ITA No. 655/JP/2016 vide their order dated 08.03.2019 in Para 5 and onwards, without going into controversy of allowability or 10 ITA 351/JP/2018 Geeta Devi Vs ITO otherwise of deduction u/s 54 of Act. facts and circumstances are similar in instant case in so far as assessee is 1/3 rd owner of very same property. Respectfully following proposition laid down by Tribunal in case of joint owner, I direct A.O. to allow proportionate claim of deduction U/s 54F of Act up to investment of Rs. 10,32,100/- as against value adopted U/s 50C at Rs. 17,68,267/-. I direct accordingly. 8. other grounds raised by assessee are dismissed. 9. In result, appeal of assessee is allowed in part. Order pronounced in open court on 21st August, 2019 Sd/- (RAMESH C SHARMA) Accountant Member Jaipur Dated:- 21st August, 2019 *Ranjan Copy of order forwarded to 1. Appellant- Smt. Geeta Devi, Ajmer. 2. Respondent- ITO, Ward 1(3), Ajmer. 3. CIT 4. CIT(A) 11 ITA 351/JP/2018 Geeta Devi Vs ITO 5. DR, ITAT, Jaipur 6. Guard File (ITA No. 351/JP/2018) By order, Asst. Registrar Geeta Devi v. I.T.O., Ward 1(3), Ajmer