2020 (10) TMI 925 - AT - Income Tax

Exemption u/s 54F - Denial of exemption possession of the property was not taken by assessee and registered sale deed was not executed in favour of assessee - CIT(A) allowed exemption claimed by assessee to the extent as deposited into capital gains account scheme maintained with Indian overseas bank and state bank of India and disallowed exemption claimed in respect of investment made in residential property by holding that, investment in residential property was made prior to date of sale of original asset, and construction of residential property was not completed within stipulated time - HELD THAT - There is no strict requirement regarding completion of construction under section 54F(1) to be entitled for availing exemption. The passport to derive benefit under sec.54F(1) is investment in construction of property within the period required u/s 54(1)F or to invest in residential property within the stipulated time for enabling deduction under section 54F. Once it is demonstrated that the consideration received on transfer of capital asset has been invested in or construction of residential house, even though the construction is not complete in all respect as required under law, assessee cannot be denied benefit under section 54F. Further on a plain reading of case of CIT Vs. Sambandam 2012 (3) TMI 80 - KARNATAKA HIGH COURT reveals that, there is no particular stage of completion of construction, that is contemplated. AR submitted that, the construction was later on completed and the sale deed was registered in favour of assessee on 05/07/2019 in respect of transfer of ownership of residential property. There is nothing placed by revenue on record to demonstrate any other violation in support of their arguments. In present facts we are of the view that assessee has substantially fulfilled all necessary conditions to be entitled for liberal interpretation of sec.54F. We hold that assessee is eligible for exemption u/s 54F. - Decided in favour of assessee.

Summary

Issues Involved:
1. Opposition to the assessment order and total income assessed.
2. Denial of exemption claimed under Section 54F of the Income Tax Act.
3. Levy of interest under Sections 234B and 234D of the Income Tax Act.
4. Right to add, alter, delete, or substitute grounds of appeal.
5. General prayer for allowing the appeal in the interest of justice and equity.

Issue 1: Opposition to the Assessment Order and Total Income Assessed

The appellant contended that the assessment order was opposed to law, weight of evidence, natural justice, probabilities, facts, and circumstances of the case. The appellant denied liability to be assessed on a total income of ?49,29,292/- as against ?5,19,220/- returned by the appellant.

Issue 2: Denial of Exemption Claimed Under Section 54F

The appellant claimed an exemption under Section 54F of the Income Tax Act for ?65,00,000/- invested in a residential property. The assessing officer disallowed this exemption on the grounds that the investment was made prior to the sale of the original asset and the construction was not completed within the stipulated time. The CIT(A) upheld this disallowance but allowed an exemption for ?64,00,000/- deposited in the capital gains account scheme.

The Tribunal noted that the appellant had invested the entire amount of ?1,28,00,000/- partly in the capital gains account scheme and partly in the construction of a residential property within the prescribed time period. The authorities did not dispute the amount deposited in the capital gains account scheme. The Tribunal referred to the decision of the Hon’ble Madras High Court in the case of Ms. Moturi Luxmi vs. ITO, which considered similar situations and allowed the exemption.

The Tribunal observed that the delay in the construction was beyond the control of the appellant since it was carried out by the builder. It referred to the decision of the Hon’ble Karnataka High Court in CIT vs. Sambandam Udaykumar, which held that the essence of Section 54F is whether the consideration received on the transfer of a capital asset has been invested in or towards the construction of a residential house. The Tribunal concluded that the appellant had substantially fulfilled all necessary conditions to be entitled to a liberal interpretation of Section 54F and allowed the exemption of ?65,00,000/-.

Issue 3: Levy of Interest Under Sections 234B and 234D

The appellant denied liability for interest under Sections 234B and 234D and contended that the computation of interest was not provided regarding the rate, period, and method of calculation. The appellant urged that the period of levy of interest was not in accordance with the sections and requested a waiver of the interest.

Issue 4: Right to Add, Alter, Delete, or Substitute Grounds of Appeal

The appellant reserved the right to add, alter, delete, or substitute any of the grounds urged above.

Issue 5: General Prayer for Allowing the Appeal

The appellant prayed that the appeal be allowed in the interest of justice and equity.

Conclusion:
The Tribunal allowed the appeal in part, granting the exemption under Section 54F for ?65,00,000/- invested in the residential property. The Tribunal applied the liberal interpretation principle as per the decisions of the Hon’ble Karnataka High Court and the Hon’ble Madras High Court. The Tribunal emphasized that the appellant had substantially fulfilled the conditions required under Section 54F and that the delay in construction was beyond the appellant's control. The Tribunal did not provide a detailed analysis regarding the levy of interest under Sections 234B and 234D, and the appellant's right to alter grounds of appeal was noted.