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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 ..... eme 1988 framed by the Central Government following which the appellant had deposited capital gains before expiry of time to file the return of income . 4. That the Ld. CIT(A) has further erred in not appreciating that having made a deposit under Capital Gains Scheme, 1988 before expiry of time to file the return of income the appellant was entitled to either purchase or construct a residential house within the period stipulated having been so mandated. 5. That while sustaining the addition of Rs. 24,74,000/- the Ld. CIT(A) did not appreciate that provisions relating to Section 54 of the Income Tax Act, 1961 had to be construed liberally as being meant to encourage construction of residential houses . 2. I have heard ld. Representatives of both the parties, perused the findings of authorities below and considered material available on record. 3. Briefly the facts of the case are that the assessee sold the property in question on 16.02.2006 for Rs. 42,97,500/- on which assessee got capital gains of Rs. 24,74,000/-. The Assessing Officer held that assessee had, instead of constructing residential house, had purchased the same as was evident from the Registration Deed dated 14.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; or 'constructed'. Therefore, claim of the assessee should not be rejected. 4(i) The ld. CIT(Appeals), however, did not allow claim of the assessee and held that purchase of a house cannot be treated as purchase of plot and that the contention of the assessee that semi constructed house was purchased which was demolished and re-constructed is not acceptable in the absence of any evidence. The ld. CIT(Appeals) also noted that finding of the Assessing Officer is that amount of investment Rs. 7,84,506/- is insignificant, therefore, appeal of the assessee was dismissed denying exemption under section 54 of the Income Tax Act. 5. After considering rival submissions and going through the material on record, I am of the view that authorities below were unjustified in denying benefit to the assessee under section 54 of the Act. 6. Hon'ble Madras High Court in the case of CIT Vs P.V. Narasimhan 181 ITR 101 held as under : "In order to claim exemption under section 54 of the Income-tax Act,1961, two conditions are required to be satisfied, namely, (1) the house property must have been used by the assessee or a parent of his mainly for the purposes of his own or the parent& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of one year 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 consideration in respect of the original asset the whole of such capital gain shall not he charged under section 45 of the Act, However, if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to he whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration shall not be charged under section 45 of the Act. Section 54F of the Act is a beneficial provision of 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 the acquisition of a residential house and completion of construction or occupation of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are "purchased" or "constructed". For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings like window shutters and some electrical work were required to be made. The assessee had produced before the authorities the registered sale deed dated November 7, 2009, showing the transfer of the property in his favour. The assessee had been put in possession of the property and he was in occupation. The assessee had invested the sale consideration in acquiring residential premises and had taken possession of the residential building and was living in the premises. The Tribunal was justified in extending the benefit of Section 54F of the Act to the assessee. 7. Hon'ble Gauhati High Court in the case of CIT V Rajesh Kumar Jalan 286 ITR 274 dismissed departmental appeal in which the Tribunal allowed the appeal filed by the assessee holding that Section 54 of the Act being the beneficial provisions, it should be construed liberally to advance the object of giving benefit to the assessee by exempting the capital gain on the sale of property used for residence from being charged to income tax and also that sub-section (2) of Section 54 of the Act, simply mentions that the unutilized portion of the capital gain on the sale of property used for residence could be deposited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same building account, assessee has further shown payment of Rs. 65,000/- to Smt. Sakshi Nagpal, joint owner of the property under sale against sale of building material lying in the property on 14.01.2009. Smt. Sakshi Nagpal also issued a receipt to that effect and also issued a receipt that since property in sale was partially constructed and incomplete and she has lifted all debris from this property and she has received the payment from the assessee. 9. The ld. counsel for the assessee also filed various bills to show that further building material was purchased in raising construction in the property under consideration. The authorities below have not given any adverse finding against the residential building account and receipts filed before them. The residential building account is supported by the receipts referred to by ld. counsel for the assessee referred to above. These facts would, therefore, support the contention of the assessee that the property in reference purchased by assessee was merely semi constructed plot on which sale consideration was paid to the owners prior to the execution of the sale deed in favour of the assessee. The owners of the property also conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n human probabilities by considering surrounding circumstances. 10. I may refer to Board's circular No. 667 dated 18.10.1993 as under : 431. Whether, in cases where the residential house is constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also 1. Sections 54 and 54F provide for a deduction in cases where an assessee has, within a period of one year before or two years after the date on which the transfer of a capital asset takes place, purchased, or has within a period of three years after that date constructed, a residential house. The quantum of deduction is itself dependent upon the cost of such new asset. It has been represented to the Board that the cost of construction of the residential house should be taken to include the cost of the plot as, in a situation of purchase of any house property, the consideration paid generally includes the consideration for the plot also. 2. The Board has examined the issue whether, in cases where the residential house is constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also. The Board are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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