INCOME TAX ACT, 1961

Section 54F(1)

Capital gains - Deduction under section 54F - No deposit made by assessee in capital gain account - But assessee purchased plot for construction of house

Assessee in order to claim benefit of section 54F firstly planned to purchase house property at Bhopal at Rs. 1,06,95,941 and gave advance of Rs. 2,00,00,000 to a builder namely, Alark Builder & Developer and Mr. Shyam Manohar Agrawal. Few months later due to some legal litigation the project of Mr. Shyam Manohar Agrawal came to halt. The amount so advanced by assessee was subsequently realized during financial year 2013-14 to financial year 2015-16. The moment assessee came to know about dispute in the project of Bhopal, he, in addition to Bhopal property, planned to purchase a duplex flat at Thane from T Bhimjyani Realty Private Limited. He gave advance of Rs. 10 lakhs for the same on 4-4-2013. Up to the date of filing of return of income for assessment year 2013-14 on 30-9-2013, assessee had paid Rs. 39,27,746 as advance towards residential property at Thane. The remaining amount of purchase consideration at Rs. 85,28,960, stamp duty at Rs. 11,83,200 and registration fees at Rs. 32,100 were paid on 9-10-2014 at the time of the signing the purchase deed. Thus, up to 10-10-2014 assessee had paid Rs. 1,36,73,006 as purchase consideration for the residential property at Thane as against Rs. 1,35,00,000 of his share of sale consideration from sale of property which gave rise to Long-Term Capital Gain of Rs. 1,06,95,941. AO held that since assessee had violated provisions of section 54F(4) and had not deposited amount in capital gains account, assessee should be denied the benefit of exemption/capital gain under section 54F amounting to Rs. 75,83,299. Held: After giving advance of Rs. 39,28,746, remaining amount of the sale consideration, i.e., Rs. 95,71,254 was not deposited in the capital gains account but finally within two years assessee purchased new residential house at Thane and against sale consideration of Rs. 1.35 crores received from sale of original property, amount of Rs. 1,36,73,006 has been invested. Assessee's case was on a much strong footing for the reason that at the time when he received the advance from sale of original property on 21-6-2012 at Rs. 45 lakhs and on 28-8-2012 at Rs. 90 lakhs which form part of sale consideration of Rs. 1,35,00,000 shown in sale deed registered in March, 2013, assessee with an intention to purchase the residential flats at Bhopal had given advance of Rs. 1.50 crores to builder, namely, Shyam Manohar Agrawal and Rs. 50 lakhs to Alrak Builders & Developers (Rs. 50 lakhs each on 30-8-2012, 13-10-2012 and 9-11-2012 to Shyam Manohar Agrawal and Rs. 50 lakhs on 30-8-2012 to Alarak Builders & Developers). This advance of Rs. 2.00 crores was given by assessee with the intention to purchase a residential house at Bhopal so as to claim exemption under section 54F of the Act by utilizing the sale consideration from sale of original capital asset (other than residential house). This fact was duly shown by assessee in computation of income and exemption under section 54F was claimed on the basis of advance given to buy residential property at Bhopal and also the advance given to purchase the property at Thane. This fact was not rebutted by AO since assessee had fulfilled substantive condition of section 54F(1) by way of utilizing sale consideration from sale of capital asset (other than residential house) at Rs. 1.35 crores for purchase of residential plot at Thane costing Rs. 1.36 crores (approx.) within two years of sale of original capital asset, assessee was eligible for deduction under section 54F(1).

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