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2015 (2) TMI 451 - AT - Income TaxBenefit under section 54F - whether the amount of consideration received on transfer invested by the assessee in a flat constructed within three years would amount to construction of a residential house within the time limit of three years? - Held that - A flat which is newly constructed by a builder on behalf of the assessee is in no way different from a house constructed. Section 54F being a beneficial provision has to be interpreted so as to give the benefit of residential unit viz., flat instead of house in the present state of affairs. Further, as already pointed out even if only advance is given the benefit still will be available for exemption u/s. 54F. Considering chart of statement of payment made to M/s. Emaar MGF Land Ltd. the assessee will get the benefit u/s. 54F for payment made till 12.9.2011. Hence the AO may verify the exact amount invested by the assessee up to 12.9.2011 and allow the claim under sec. 54F, accordingly. - Decided in favour of assessee for statistical purposes.
Issues Involved:
1. Eligibility for exemption under Section 54F of the Income-tax Act, 1961. 2. Interpretation of the time limit for construction under Section 54F. 3. Consideration of delays beyond the control of the assessee. 4. Applicability of judicial precedents and beneficial provisions of Section 54F. Issue-wise Detailed Analysis: 1. Eligibility for Exemption under Section 54F: The primary issue was whether the assessee was eligible for exemption under Section 54F of the Income-tax Act, 1961, after selling a property and investing in a new residential flat. The assessee claimed an exemption of Rs. 2,29,82,700 under Section 54F, which was later revised to Rs. 89,99,724 due to non-deposit of the unutilized amount in a specific bank account under the Capital Gains Deposit Scheme, 1988. 2. Interpretation of the Time Limit for Construction under Section 54F: The assessee argued that Section 54F allows a period of three years for the construction of a new residential house. The CIT(A) and AO initially considered a two-year period for purchase and a three-year period for construction but denied the exemption due to the incomplete status of the flat within the prescribed period. The Tribunal had to determine if the investment in the flat, which was under construction, satisfied the conditions of Section 54F. 3. Consideration of Delays Beyond the Control of the Assessee: The assessee contended that the delay in the completion of the flat was beyond his control and should be condoned. The CIT(A) acknowledged that Section 54F is a beneficial provision but emphasized that the project had significant delays and uncertainties, making it unreasonable to extend the prescribed time limit indefinitely. The Tribunal had to assess whether such delays could be condoned under the beneficial provisions of Section 54F. 4. Applicability of Judicial Precedents and Beneficial Provisions of Section 54F: The assessee relied on various judicial precedents, including: - Smt. Rajneet Sandhu vs. DCIT: Held that the completion of the house within the prescribed period is not mandatory if substantial investment is made. - Smt. Shashi Varma vs. CIT: Emphasized that substantial steps towards construction within the time limit suffice for exemption. - Satish Chandra Gupta vs. Assessing Officer: Allowed relief for delays beyond the assessee's control. The Tribunal considered these precedents and the beneficial nature of Section 54F, which aims to encourage investment in residential properties. It was argued that the provision should be construed liberally to grant exemptions even if the construction was not completed within the stipulated period, provided substantial investments were made. Tribunal's Decision: The Tribunal concluded that a flat constructed by a builder on behalf of the assessee is equivalent to a house constructed by the assessee. It was noted that the assessee had made substantial payments towards the flat's construction, and the delays were beyond his control. The Tribunal emphasized that Section 54F is a benevolent provision and should be interpreted to provide the intended benefits. The Tribunal directed the AO to verify the exact amount invested by the assessee up to 12.09.2011 and allow the claim under Section 54F accordingly. The assessee's appeal was allowed for statistical purposes. Conclusion: The Tribunal recognized the beneficial nature of Section 54F and the need for a liberal interpretation to grant exemptions for substantial investments in residential properties, even if construction was delayed due to uncontrollable factors. The decision highlighted the importance of judicial precedents in interpreting tax provisions and the necessity of considering the assessee's bona fide intentions and efforts.
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