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TMI Blog2012 (1) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee of an exemption but only to avoid rectification. The ultimate object of the section having been satisfied namely to encourage construction of houses, we are convinced that the utilization of the funds in constructing a residential house should be treated as sufficient compliance of section 54 and therefore hold that the appellant is entitled to the exemption u/s 54 even in respect of the amount invested by way of construction of the residential house - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ut he has claimed the entire amount of ₹ 21.53 lakhs u/s 54(2) of the Act. But the Assessing Officer has found that only ₹ 9 lakhs has to be treated as exempt under this section and by treating the balance amount to be not chargeable to exemption, he has added back this amount to the assessee's total income. Aggrieved, the assessee went in appeal before the ld.CIT(A), who has also confirmed this addition. Now the assessee is in second appeal before us by raising following grounds: "1. The learned Commissioner of Income-tax (Appeals) in his Appellate order ITA 451-C / 2009-10 dated 24.02.2011 has upheld the addition made by the Assessing Officer while computing the income under the head Capital Gains at ₹ 12,02,482/-. He also confirmed the action of the Assessing officer in treating the above sum as taxable capital gains. The order of the learned C I T (Appeals) is clearly opposed to the facts and circumstances of the case and principles of law established. The order is also against the intention of the beneficial provisions of Section 54. Hence, the Appellate order is also opposed to the principles of justice. 2. The learned C I T (Appeals) ought to have appreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 54 (2), cannot make the Appellant disentitled to the beneficial provisions of Section 54. The CIT(Appeals) ought to have considered the legislative intention and scope of Section 54. In as much as the Appellant met the requirement of Section 54 the learned CIT(Appeals) is not justified in taking the prejudicial stand against the Appellant denying the benefit of Section 54 to the Appellant merely for the failure to deposit the unutilized amount in the specific account. He should have appreciated the fact that the Appellant had deposited the amount in a bank account and has been making payments to the Builder at various stages of construction as and when required. 6. The learned CIT (Appeals) has failed to consider the following favourable judicial decisions which are rendered on the issue giving a favourable interpretation. The learned CIT(Appeals) ought to have followed the judgment of these judicial forums. i) Nipun Mehrotra Vs Assistant Commissioner of Income-tax, Circle 14 (2), Bangalore- reported in (2008) 110 ITO 520 (BANG) ii) Commissioner of Income-tax Vs Rajesh Kumar Jalan - reported in (2006) 157 Taxmann 398 (Gauhati) iii) Jagannath Singh Lodha Vs ITO (148 Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he house and the advance was received back by the since the transaction did not materialize. The assessee in this case had sold the property on 4th January 1995 and advanced a sum of ₹ 2 lakhs on 16th April 1995 for purchase of the house. The advance was received back on 17th December 1995 and the assesse again entered into a fresh agreement on 6tll January 1996 for purchase of a flat and took possession thereof on 30th March, 1996 after paying the consideration of ₹ 4,01,000/-. In this case, though the Assessing Officer denied the exemption u/s.54F on the ground that the assessee failed to purchase another house before filing the return u/s. 139( 1) and also failed to deposit the amount in the capital gains account, the Tribunal held that the exemption was allowable since the intention of the assessee from the very beginning was to purchase a residential house and he has done so within two years from the sale of the plot. The Tribunal observed that the intention of the Act as well as the intention of the asessee have to be considered in a right perspective. In the case reported in 48 ITD 191, the assesse realized profits from transfer of a land, which was deposited in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a residential house which is apparent from the fact that he has purchased a land and also constructed a house thereon. It is also seen that section 54E (since deleted) and sections 54EC and 54ED which require investment of the proceeds in specified assets, specifically provides that the exemption would be forfeited if the specified asset is given as a security for taking loan. In section 54, we do not find any such provision and therefore in our considered view the purpose of section 54(2) is not to deprive the assesse of an exemption but only to avoid rectification. The ultimate object of the section having been satisfied namely to encourage construction of houses, we are convinced that the utilization of the funds in constructing a residential house should be treated as sufficient compliance of section 54 and therefore hold that the appellant is entitled to the exemption u/s 54 even in respect of the amount invested by way of construction of the residential house amounting to ₹ 16,40,311/-. Before we depart, we may mention that the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. Vs State of Uttar Pradesh (1979) 118 ITR 326 has observed as follows: "that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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