2011 (1) TMI 1460 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of exemption claim u/s 54F of the Act.
2. Charging of interest u/s 234B and 234C of the Act.

Summary:

1. Disallowance of exemption claim u/s 54F of the Act:
The core issue in the appeal was whether the CIT (A) was justified in disallowing the exemption claim of Rs. 2.16 crores u/s 54F of the Act. The assessee had sold shares and invested part of the proceeds in a house property, claiming exemption u/s 54F. The AO denied the exemption, arguing that the construction was incomplete even after three years, thus not meeting the conditions of purchasing within two years or constructing within three years post-transfer. The CIT (A) upheld this view, citing the jurisdictional High Court's ruling in DCIT v. Yellamma Dasappa Hospital, which emphasized the necessity of actual use for claiming benefits.

The Tribunal, however, referred to the Hon'ble Madras High Court's ruling in CIT v. Sardarmal Kothari and the Tribunal's own decision in Mrs. Seetha Subramanian v. ACIT, which held that substantial completion and investment within the stipulated period sufficed for exemption u/s 54F. The Tribunal concluded that the assessee had invested the entire net consideration within the stipulated period and had substantially completed the construction, thus complying with s.54F conditions. Consequently, the Tribunal directed the AO to allow the exemption claim of Rs. 2,16,61,670/-.

2. Charging of interest u/s 234B and 234C of the Act:
Ground No. 5 regarding the charging of interest u/s 234B and 234C was dismissed as it is mandatory and consequential in nature.

Conclusion:
The Tribunal allowed the appeal partly, directing the AO to grant the exemption u/s 54F while dismissing the ground related to interest u/s 234B and 234C.