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TMI Blog2015 (9) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... and some electrical work were required to be made. In fact, the report of the inquiry conducted by the Department also discloses the flooring work, electrical work, fitting of door and window shutters were still pending. The assessee has produced before the authorities the registered sale deed dated 7.11.2009 showing the transfer of the property in his favour. The said document discloses marble tiles flooring has been done, electricity, water and sanitary connections have been given, wood used is teak in respect of doors and windows. The assessee has been put in possession of the property and he is in occupation. Therefore, the assessee has invested the sale consideration in acquiring a residential premises and has taken possession of the residential building and is living in the said premises. The object of enacting section 54 of the Act i.e., to encourage investment in a residential building is completely fulfilled. Thus justified in extending the benefit of section 54F of the Act to the assessee and the said order does not suffer from any infirmity which calls for interference - Decided in favour of assessee. Addition of the unexplained investment - CIT (A) held that the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long term capital gain as a deduction u/s 54F of the I.T. Act. AO asked the assessee to clarify as to whether the house purchased by the assessee for claiming deduction u/s 54F is complete and fit for occupation within a period of three years from the date of transfer of capital asset or not. In response to the same, assessee filed a letter dated 8.11.2011 stating that the assessee has purchased land and the construction of the house was completed in March, 2011 and that the contractor has handed over the house. It was submitted that the total net sale consideration was invested in acquiring the house and due to various issues, the developer has not completed roads, drainage and water connection and hence assessee could not complete the finishing works. From these details furnished by the assessee, AO came to the conclusion that the house is not yet completely constructed and not fit for habitation due to lack of road, electricity and drainage system to the house. He observed that for claiming deduction u/s 54F of the Act, assessee should have completed the construction of the residential house within a period of 3 years after the transfer of the original asset. Since the residenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the CIT (A), Revenue is in appeal before us. 4. Learned DR relied upon the order of the AO, while the learned Counsel for the assessee supported the order of the CIT (A). Assessee has also filed a paperbook consisting of the written submissions, bank statement of Mr. I.V. Satish, confirmation letter of Mr.Satish, balance sheet of the assessee and the relevant case law on which the assessee is placing reliance upon. 5. Having regard to the rival contentions and the material on record, we find that the undisputed fact is that assessee has sold a capital asset and has derived long term capital gain thereon. It is also not disputed that the entire net sale consideration has been invested in the construction of a residential house. The only dispute is whether the assessee is eligible for deduction u/s 54F of the I.T. Act, since the house constructed by the assessee is not in a liveable condition by the end of three years from the date of sale of original asset due to lack of road facility, electricity connection and drainage system to the house. We find that this Tribunal in catena of decisions has held that the thrust of the section 54F is on the investment of the net consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head Income from house property. Explanation : For the purposes of this section, net consideration , in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. 10. A reading of the aforesaid provision makes it very clear that if a capital gain arises from the transfer of any long term capital asset, not being a residential house and the assessee has within the period of one year before or two years after the date on which transfer took place purchased or has within a period of three years after that date constructed a residential house, if the cost of the new asset is not less than the net cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision is whether the assessee who received capital gains has invested in a residential house. Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respects and as required under the law, that would not disentitle the assessee from the said benefit. 12. In fact, Madras High Court had an occasion to consider this aspect in the case of CIT v. Sardarmal Kothari [2008] 302 ITR 286 where it has been held as under: 4. The requirement of the provision is that the assessee, within a period of three years after the date of transfer, has to construct a residential house in order to become eligible for exemption. In the cases on hand, it is not in dispute that the assessees have purchased the lands by investing the capital gain and they have also constructed residential houses. In order to establish the same, the assessees submitted before the CIT(A) several material evidences, viz., invitation card printed for the house warming ceremony to be held on 12th July, 2003. The assessees have also produced the compl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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