Phool Singh, J.M. - (1.) THIS appeal of the assessee arises out of the order dated 14.12.1994 recorded by CIT(A)-III. Lucknow.
(2.) Facts giving rise to this appeal are that Smt. Rita Gaur, the assessee filed return for assessment year 1991-92 at an income of Rs. 1.83.390/- and the A.O. noted that the assessee was enjoying income from interest. dividend. salary and also capital gains on sale of equity shares. From the computation of the income, the A.O. noted that the assessee had sold 3,23,750 shares of jaiprakash Industries Limited (for short JIL) on 18.4.1990 @ Rs. 11.50 per share and also sold 10.000 shares of JIL on 4.8.1990 @ Rs. 24.75 ps. The long term capital gains worked out by the assessee was Rs. 39,70,625/-. The assessee asserted that she has purchased a residential plot at R.K. Puram on 24.6.1991 for Rs. 70.20 lakhs and claimed exemption u/s 54-F of Income-tax Act, 1961 (hereinafter referred to as the 'Act'). The assessee filed photocopy of registered deed for purchase of the plot. The A.O. called upon the assessee to show as to how the exemption u/s 54-F was admissible to her as the provision of Section 54-F of the Act requires investment into a residential house and in the case of the assessee, she had purchased a residential plot only. The assessee submitted that Section 54-F of the Act requires that the assessee must have constructed the residential house within a period of 3 years after the date on which transfer took place. The purchase of the house was to be regarded as an act in the process of construction of residential plot. It was also contention of the assessee that entire sale proceeds of shares was invested in purchase of plot and requirement of Section 54-F stands satisfied. The assessee also placed reliance on the case of CIT Punjab vs. Alps Theatre. 58 ITR 192 and also C.B.D.T. Circular No. 667 dated 18.10.1993 issued by C.B.D.T. in which it was clarified that if the amount of capital gains for the purpose of Section 54 and net consideration for the purpose of Section 54-F is appropriated towards purchase of plot and also towards construction of a residential house there-upon. the aggregate cost should be considered for determining the quantum of deduction u/s 54-F of the Act provided that the acquisition of plot and also the construction thereon are completed within a period specified in the said sections. The A.O. noted from the facts of the case that the assessee had not constructed any house on the said plot till the date and reasons thereof given by the assessee was that a civil suit was pending at Agra and the assessee was restrained from raising construction on the said plot. The A.O. however, noted that more than 3 years have elapsed since the sales of shares and no construction of house could be made on the said plot and provision of Section 54-F were not complied with. Accordingly, the A.O. did not allow the claim of the assessee for exemption u/s 54-F and sale proceeds of the shares was assessed for tax purposes as per the provisions of the Act. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) and reiterated the same submissions, which were taken before the A.O. The contention was that the assessee had already purchased a plot in the residential colony for Rs. 70.20 lakhs and could not raise the construction within three years due to ad interim injuction passed by the Civil Court. Agra. Reliance was also placed on the C.B.D.T. Circular 667 dated 18.10.1993 in which cost of plot was also to be included in the cost of residential house. The other plea of the assessee was that the assessee had installed a tube well and constructed one room and boundary wall on the above plot and that was sufficient to prove the intention of the assessee to raise the construction of the residential plot and benefit u/s 54-F should not have been refused. The alternative plea was also raised by the assessee that in case the assessee was not able to raise construction by the end of previous year of assessment year 1991-92, the year under consideration, the capital gains could have been subjected to tax in assessment year 1994-95 after the expiry of period of three years from the end of financial year in which shares were transferred.
(3.) THE ld. CIT (A) considered the submissions and noted that admittedly the assessee had not been able to construct a house on the said plot purchased by her within a period of three years from the date of transfer of shares. THE house. it was pleaded by the ld. counsel for the assessee was not completed on account of injunction issued by Civil Court, Agra, but ld. CIT(A) was of the view that the benefit u/s 54-F of the Act can be extended only when the assessee is able to prove about construction of residential house on the plot. THE installation of tube well. boundary wall or construction of one room will not be taken as complete compliance of the Section 54-F of the Act. THE ld. CIT(A) also noted that circular no. 667 of the C.B. D.T. is also applicable in the cases where the assessee had constructed residential house, then only cost of the plot shall be included in the same, but here the assessee had not constructed any house and reliance on the said circular was not justified. About the alternative plea. the ld. CIT(A) noted that capital gains can be assessed in assessment year 1994-95 only when the assessee is able to prove on record that the assessee had complied with the requirement of Section 54-F(4) of the Act. THE assessee had not deposited the amount of proceeds of transfer of assets as per provision of Section 54-F(4) and, thus the A.O. was justified to assess the capital gains in assessment year 1991-92. Accordingly, the appeal of the assessee was dismissed on this ground.;