Decided on August 26,2008



D. Karunakara Rao, A.M. - (1.) THIS is an appeal by the assessee against the order of the CIT(A), Central-I, Mumbai, dt. 16th Nov., 2005. The essence of the grounds in the appeal is that the CIT(A) has erred in confirming the addition of Rs. 5,71,200 on account of long-term capital gains by withdrawing the claim of exemption under Section 54F by holding that the assessee owns two houses before due date.
(2.) Briefly stated, the facts of the case are that the assessee purchased 2200 shares of Ajmera Development Corporation (P) Ltd. (hereinafter referred to as ADCPL) on 12th Dec, 1990 for a sum of Rs. 2.22 lakhs. Assessee sold the same to the M/s Prudential Leasing Ltd. on 25th Feb., 1992 for a sum of Rs. 16.65 lakhs. The long-term capital gains arising out of these transactions invested for construction of residential property by making the payment of Rs. 16.65 lakhs on 30th Dec, 1992 to Ajmera Housing Construction. AO denied the benefit. This is a second round of appeal before the Tribunal. Earlier, the Tribunal cancelled the order of the lower authorities and issued direction to the AO to decide the issue afresh. During the assessment proceeding under Section 143(3) r/w Section 254, the AO denied claim of exemption under Section 54 for the reason that the construction of the new asset was not complete as per the provisions of Section 54F(1) and assessee acquired another house vide agreement dt. 2nd Jan., 1993. Thus AO held that the assessee is the owner of two houses before due date for investment of capital gains in the construction of new asset. He further mentioned that the assessee is also a beneficiary in AOP Ajmera Construction, which owns a flat in Manish Nagar, Andheri, which further disentitles the assessee to claim the exemption. Therefore, the AO decided the exemption under Section 54F. Aggrieved with the above, the assessee filed an appeal before the CIT(A). Assessee submitted before the CIT(A) that the purchasing of another house vide agreement dt. 2nd Jan., 1993 would not disentitle the assessee from the claim of exemption under Section 54F in asst. yr. 1992-93. Assessee has 3 years time to complete the construction, which is evidenced by existence of an occupancy certificate, which is filed before the AO dt. 18th April, 2000 itself. He further mentioned that AOP owning a flat in which he is a beneficial holder does not amount to owning a house for the purpose of the proviso to Section 54F. AOP is a separate entity and he is a actual owner of the flat and assessee is member of this AOP for beneficial reasons. He further relied on the decision of the Madras Tribunal Bench in the case of Mrs. Seetha Subramanian v. Asstt. CIT, (1996) 56 TTJ (Mad) 427 :, (1996) 59 ITD 94 (Mad) for the proposition that where the sale proceeds of the capital assets when invested in the construction of the residential house within the stipulated period the assessee is entitled to relief under Section 54F and completion of construction or occupation is not essential in view of the CBDT Circular Nos. 471 and 672. In this connection, assessee invested entire sale proceed in December, 1992 itself, which itself entitles the assessee to the benefits of the Section 54F. CIT(A) rejected the same and confirmed the action of the AO.
(3.) AGGRIEVED with the same, the assessee is before us. The case of the Revenue is that the assessee is not entitled to the benefits of Section 54F when the occupancy certificate is not in order and when the assessee entered into purchase agreement for acquisition of another flat during the stipulated period and also when the assessee is entitled to beneficial interest of the AOP, which owns a flat too. On the other hand, the assessee's case is that the date of investment of capital gains for construction of the new asset decides the allowability of the claim under the beneficial provisions of Section 54F. Assessee relied on the judgment in the case of Mrs. Seetha Subramanian (supra) in this regard.;

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