2016 (5) TMI 101 - AT - Income Tax

Exemption u/s 54 - CIT(A) allowed the claim - Held that - We find that in the case of the assessee the assessee has utilised the entire capital gains within the period of one year but due to certain circumstances beyond the control of the assessee the construction of the house could not be completed within the specified period. As it is not disputed by the authorities below that the assessee has invested the amount of capital gain for construction of a residential house within the specified period we do not see any reason to interfere with the order of the learned Commissioner of Income-tax (Appeals) which is inconsonance with the precedents on the issue. - Decided against revenue

Summary

Issues:
- Appeal by Revenue against CIT(A) order for assessment year 2009-10
- Disallowance of exemption under section 54 of Income-tax Act
- Cross-objection by assessee in support of CIT(A) order
- Interpretation of beneficial provision under section 54F
- Comparison with precedents and judicial decisions
- Application of Supreme Court judgment in Fibre Boards (P.) Ltd. v. CIT

Analysis:
1. The appeal was filed by the Revenue against the order of the CIT(A) for the assessment year 2009-10. The assessee, an individual, claimed long-term capital gain as exempt under section 54 of the Income-tax Act for constructing a residential house. The Assessing Officer disallowed the exemption as the construction was not completed within the stipulated period. The CIT(A) allowed the appeal, following relevant judgments, and the Revenue appealed against this decision.

2. During the hearing, the Departmental representative relied on the Assessing Officer's order, while the assessee's counsel supported the CIT(A) order. The counsel presented various decisions covering the issue and cited the judgment of the Supreme Court in Fibre Boards (P.) Ltd. v. CIT [2015] 376 ITR 596 (SC).

3. The Tribunal found that the assessee had utilized the capital gains within the specified period but faced delays in completing the construction due to circumstances beyond control. Citing a previous Tribunal decision, it noted that section 54F should be construed liberally, emphasizing that the investment in construction should not be disqualified if the house was not ready for occupation within the stipulated period.

4. Referring to the Supreme Court judgment in Fibre Boards (P.) Ltd. v. CIT, the Tribunal highlighted the importance of interpreting the provision in a manner that does not render any part of it ineffective. It emphasized that utilizing the capital gains for the intended purpose within the assessment year should be sufficient, even if the actual purchase or acquisition takes place later.

5. Given the facts on record and the undisputed investment by the assessee within the specified period, the Tribunal upheld the CIT(A) order, stating that there was no reason to interfere. Consequently, both the appeal of the Revenue and the cross-objection of the assessee were dismissed, aligning with established precedents and legal interpretations.

6. The judgment was pronounced on January 20, 2016, by the Appellate Tribunal ITAT Hyderabad, with detailed analysis and references to relevant legal provisions and judicial decisions to support the decision to uphold the CIT(A) order in favor of the assessee.