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1. Entitlement to exemption under section 54 of the Income-tax Act, 1961. 2. Completion of construction of a residential building within the stipulated period for exemption under section 54. The judgment by the Appellate Tribunal ITAT COCHIN involved an appeal by the revenue against the order of the CIT(Appeals) regarding the entitlement of the assessee to exemption under section 54 of the Income-tax Act, 1961, for the assessment year 1981-82. The assessee, an individual, sold a property and claimed exemption under section 54 based on the construction of a residential building within two years of the property transfer. The Income-tax Officer allowed only partial exemption and disallowed the claim based on the completion timeline of the building. The CIT(Appeals) reversed this decision, leading to the revenue's appeal. The revenue contended that the construction was not completed within the stipulated period, relying on evidence such as permissions and utility connections granted after the deadline. However, the Tribunal upheld the CIT(Appeals) decision, emphasizing that amenities like water and electricity were not prerequisites for completion. The Tribunal noted the investments made by the assessee and registration dates as evidence of timely completion, confirming the entitlement to exemption under section 54. The appeal by the revenue was dismissed, affirming the assessee's entitlement to the exemption. In this case, the primary issue revolved around the interpretation and application of section 54 of the Income-tax Act, 1961, concerning the entitlement to exemption for capital gains on the sale of property. The crucial aspect was whether the assessee had completed the construction of a residential building within two years of the property transfer, as required by the provision to claim the exemption. The Income-tax Officer initially denied the exemption, citing the delay in construction based on permissions and utility connections granted post-deadline. However, the CIT(Appeals) allowed the exemption, emphasizing the completion of construction within the stipulated period. The Tribunal analyzed the evidence, including financial investments and registration dates, to determine the completion timeline. The Tribunal's decision hinged on the understanding that amenities like water and electricity were not essential for considering the construction as complete, leading to the confirmation of the exemption under section 54. The Tribunal's analysis focused on the specific requirements outlined in section 54 of the Income-tax Act, 1961, regarding the completion timeline for construction to claim exemption on capital gains. The Income-tax Officer's argument against the exemption was based on the delay in obtaining utility connections and permissions, indicating incomplete construction within the stipulated two-year period. However, the Tribunal rejected this argument, highlighting the financial investments made by the assessee and the registration dates as evidence of timely completion. The Tribunal emphasized that amenities like water and electricity were not decisive factors in determining the completion status of the construction. By considering the investments and registration dates, the Tribunal concluded that the construction was completed within the required timeframe, affirming the assessee's entitlement to the exemption under section 54. In conclusion, the Tribunal's judgment in this case upheld the assessee's entitlement to exemption under section 54 of the Income-tax Act, 1961, for the capital gains on the property sale. The decision emphasized the completion of construction within the stipulated two-year period, disregarding delays in obtaining utility connections and permissions as decisive factors. By analyzing the financial investments and registration dates, the Tribunal concluded that the construction was completed on time, validating the assessee's claim for exemption. The revenue's appeal was dismissed, affirming the CIT(Appeals) decision and establishing the assessee's right to the exemption under section 54.
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