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TMI Blog2016 (9) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... d construction thereon for residential purposes. The assessee, therefore, would be entitled for deduction under section 54 of the Act. - Decided in favour of assessee. - ITA No. 831/CHD/2015 - - - Dated:- 30-8-2016 - Shri Bhavnesh Saini, Judicial Member Appellant by : Shri Tej Mohan Singh Respondent by : Shri S.K.Mittal,DR ORDER This appeal by assessee has been directed against the order of ld. CIT(Appeals)-I Ludhiana dated 28.09.2015 for assessment year 2009-10 on the following grounds : 1. That the Ld. CIT(A) has erred in upholding invocation of proviso to Section 54(2) of the Income tax Act, 1961 while sustaining addition of Rs. ₹ 24,74,000/- representing long term capital gain. 2. That while upholding addition of ₹ 24,74,000/- the Ld. CIT (A) did not appreciate that no capital gains were assessable to tax as the appellant had complied with the conditions prerequisite as provided under section 54(1) within the period stipulated having constructed residential house within the period as stipulated. 3. That the Ld. CIT(A) while sustaining addition of ₹ 24,74,000/- on account of capital gains failed to appreciate the true import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gain required to be invested i.e. ₹ 24,74,000/- and thus, fulfilled the condition of Section 54 of the Act because net capital gain was invested in a new asset. The assessee, right from the day one, after demolishing a part of the new asset, took up construction as is more than the manifest from the copy of account of residential building. The assessee filed details of the amount spent more than ₹ 4 lacs thereon with additional amount at ₹ 3 lacs totaling to ₹ 7 lacs. The assessee referred to circular No. 667 dated 18.10.1993 in which it is explained that if the amount of capital gain is appropriate towards purchase of plot and also towards construction of residential house thereon, the aggregate cost should be considered for determining the quantum of deduction under section 54/54F of the Act . The assessee relied upon several decisions in support of contention that these provisions are beneficial in nature, therefore, should be liberally construed for achieving the purpose for which it was incorporated in the Statute. The intention of the legislature was to encourage investment in acquisition of a residential house and completion or occupation is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned a capital gain of ₹ 32,500. The assessee put up the first floor in the other house at Madras after demolishing the first floor of the old structure and claimed exemption under section 54 of the Act. This claim was disallowed on the ground that the assessee had constructed only additional rooms to the existing house. The Appellate Assistant Commissioner accepted the case of the assessee that the construction of the first floor could be taken as construction of a unit of house property for granting exemption under section 54. The Tribunal agreed with the view of the Appellate Assistant Commissioner. On a reference : Held, that the admitted position was that the assessee, after demolishing completely the first floor of the existing house, had put up a new construction within the period allowed by Section 54 and the assessee was in enjoyment of the entire property. He was, therefore, entitled to the exemption under section 54 of the Act. 6(i) Hon'ble Karnataka High Court in the case of CIT V Sambandam Udaykumar 345 ITR 389 held as under : A reading of section 54F of the Income-tax Act, 1961, makes it very clear that if a capital gain arises from the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential house or in construction of a residential house even though the transactions are not complete in all respects as required under the law, that would not disentitle the assessee from the benefit. During the previous year relevant to the assessment year 2006-07 the assessee sold shares in a company for a consideration of ₹ 4,18,08,725. Part of the proceeds of the sale to the extent of ₹ 2,16,61,570 were invested in purchase of house property. The assessee accordingly claimed exemption under section 54F. The Assessing Officer found that the flooring work, electrical work, fitting of door shutters and window shutters were still pending. Therefore, the assessing authority came to the conclusion that the construction was not complete even after a lapse of three years of time from the date of transfer of the shares and hence section 54F was not applicable. The Tribunal, however held that the assessee was entitled to the benefit under section 54F. On appeal to the High Court : Held, dismissing the appeal, that the assessee had invested ₹ 2,16,61,670 as on October 31, 2006, within twelve months from the date of realization of sale proceeds of the shares. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction. The assessee filed copy of the Sale Deed in the Paper Book which shows that assessee made payment of sale consideration of purchase of property from November,2008 to January,2009 i.e. prior to registration of the Sale Deed on 14.01.2009. The assessee has been claiming since beginning that since the property so purchased was semi constructed plot, therefore, part of the structure thereon was demolished. The ld. counsel for the assessee filed copy of the residential building account on record which was also filed before authorities below and submitted that details of construction are mentioned in the books of account. The assessee in the residential building account has shown that on 03.01.2009, assessee has paid ₹ 85,000/- to one of the owner of the property under sale Shri Arun Nagpal against the sale of building material which was lying in the property under sale. Receipt to that effect was also executed by Shri Arun Nagal and is placed on record. This amount is added in the residential building account. Further, Shri Arun Nagpal has also executed another receipt confirming that the building material was sold to the assessee and the property in question was parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part construction in the property by spending the amount of ₹ 7.85 lacs in property in question within the period prescribed in law. May be construction was not fully completed, but Section 54 is a beneficial provision promoting the construction of residential house. Therefore, the provision has to be construed liberally for achieving the purpose for which it was incorporated in the Statute. The intention of the legislature was to encourage investments in acquisition of residential house and completion of construction or occupation is not the requirement of the law. When Section 54 talks of house property, it does not mean an independent and complete house in the sense in which the term used to be understood 'once upon a time'. The decisions referred to above, therefore, squarely apply to the facts of the case. Therefore, merely because construction was not complete in all respect and it was not in a fit condition to be occupied within the stipulated period, would not disentitle the assessee from claiming the benefit under section 54 of the Act. The above facts, therefore, clearly prove that assessee had intention to purchase only plot because old structure and debri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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