2015 (8) TMI 274 - HC - Income Tax

Exemption from capital gains u/s 54F - assessee had not completed the construction of the house within three years - ITAT allowed claim - Held that - The words used in Section 54F are purchased or constructed and held that the condition precedent for claiming benefit under such provision is the capital gain realized from sale of a Long Term capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. It has also been held that if the assessee has invested money in constructing the residential house, merely because the construction was not complete in all respects or such building is yet to be completed fully or the building not being in a fit condition for being occupied, would by itself not be a ground for the assessee to be denied the benefit under Section 54F of the Act. Assessee had produced material evidence before the First Appellate Authority to demonstrate that the construction was on the verge of completion by producing photographs and this aspect, though not noticed in detail, same came to be noticed by the Tribunal to reject the appeal of Revenue. It was also noticed by the Tribunal that construction of the building having been completed and same having been occupied by the assessee, is also a factor to dismiss the appeal of the revenue. See Commissioner of Income-tax Versus Sambandam Udaykumar 2012 (3) TMI 80 - KARNATAKA HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Appeal against dismissal of revenue's claim under Section 54F of the Income Tax Act for not completing construction within three years.

Analysis:
The case involved the revenue appealing against the dismissal of their claim by the Income Tax Appellate Tribunal regarding the assessee's entitlement to deduction under Section 54F of the Income Tax Act. The assessee had sold a property and reinvested the capital gain in a residential site but did not complete construction within three years as required by the Act. The assessing officer disallowed the claim based on this non-completion. The Appellate Commissioner, however, allowed the appeal, considering the liberal interpretation of Section 54F to achieve its purpose of promoting residential construction. The Court noted that the provision does not require the construction to be fully completed or habitable within three years, but only that the investment be made within the stipulated period. The Court emphasized that the intention was to encourage investments in residential properties. The Appellate Commissioner's decision was supported by previous judgments and the Court agreed with the interpretation, stating that the construction being on the verge of completion and the building being occupied by the assessee were relevant factors. Therefore, no substantial question of law was found to be formulated and adjudicated, leading to the dismissal of the appeal and affirmation of the Tribunal's order.

This comprehensive analysis of the judgment highlights the key legal issues, arguments presented, and the Court's reasoning, providing a detailed understanding of the case and its implications under Section 54F of the Income Tax Act.