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TMI Blog2016 (10) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration received by her under sale dated 04.02.2003 has been paid by the assessee for purchasing another property and reinvestment has been made within two years as contemplated under Section 54 of the Act. These facts are not in dispute. Thus, long- term capital gains computed by virtue of sale deed stood adjusted by virtue of payment made by assessee for purchasing another property under Memorandum of Understanding dated 08.09.2003. As such, Tribunal has rightly held that date of purchase was to be taken as the basis for reckoning the period of two years prescribed under Section 54 of the Act for extending the benefit flowing therefrom. In the instant case consideration paid by assessee under Memorandum of Understanding dated 08.09.2003 would fully cover the consideration of capital gains portion for being eligible to claim exemption under Section 54 of the Act. Coordinate Bench of this Court in the case of PRINCIPAL COMMISSIONER OF INCOME-TAX vs. C. GOPALASWAMY reported in [2016 (6) TMI 643 - KARNATAKA HIGH COURT] has held that utilization of capital gains in construction of residential house would suffice to claim the benefit of Section 54 of the Act. - Decided in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authority held that there has been non-compliance of provision i.e., Section 54 of the Act and as such, assessee would not be entitled to claim deduction. Consequently, appeal filed by the assessee came to be rejected by affirming the order of Assessing Officer by order dated 30.06.2008 - Annexure-B. 5. Assessee pursued her grievance before ITAT in ITA No.1170(BNG)/2008. Tribunal after considering the rival contentions held that assessee was entitled to deduction since for the purposes of Section 54 of the Act the date of purchase was to be taken as the basis namely, entering into a agreement for purchasing the new property. It also came to be held that payment made by assessee to purchase new property fully covered the consideration of capital gains portion and as such, it came to be held that assessee was eligible for claiming exemption under Section 54 of the Act. It has been further held by the Tribunal taking of physical possession or for that matter registration of the sale deed would be immaterial. Hence, appeal filed by the assessee came to be allowed by order dated 30.01.2009 vide Annexure-A. Hence, revenue is in appeal. 6. This Court by order dated 22.06.2011 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Term Capital Gains was arrived at ₹ 1,44,68,032/-. In the return of income assessee claimed exemption under Section 54 of the Act, contending interalia that said amount had been reinvested by her for purchase of another residential property namely, a flat at Mumbai itself for a total consideration of ₹ 3,25,00,000/- as per Memorandum of Understanding entered on 08.09.2003. It is also not in dispute that assessee had been paid a sum of ₹ 2,40,00,000/- as advance between 12.04.2003 to 24.09.2003 as against the total consideration of ₹ 3,25,00,000/-. The Assessing Officer, as already noticed hereinabove, denied the exemption and brought the entire capital gain to tax. Section 54 of the Act which provides for claiming exemption reads as under: 54. (1) Subject to the provision of sub- section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property (hereafter in this section referred to as the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset: Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,-- (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. 11. A reading of the above Section would make it explicitly clear that proceeds of sale of the property is to be reinvested within a period of two years, which would not be chargeable to tax. The intention of Legislature was to encourage the investment in the acquisition of residential house or construction thereof. The condition precedent for claiming benefit under said provision is that the capital gains realized from sale of a capital asset should be reinvested either in purchasing a residential house or utilised for constructing a residential building. If it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchasing another property and reinvestment has been made within two years as contemplated under Section 54 of the Act. These facts are not in dispute. Thus, long- term capital gains computed by virtue of sale deed stood adjusted by virtue of payment made by assessee for purchasing another property under Memorandum of Understanding dated 08.09.2003. As such, Tribunal has rightly held that date of purchase was to be taken as the basis for reckoning the period of two years prescribed under Section 54 of the Act for extending the benefit flowing therefrom. In the instant case consideration paid by assessee under Memorandum of Understanding dated 08.09.2003 would fully cover the consideration of capital gains portion for being eligible to claim exemption under Section 54 of the Act. 14. Coordinate Bench of this Court in the case of PRINCIPAL COMMISSIONER OF INCOME-TAX vs. C. GOPALASWAMY reported in [2016] 384 ITR 307 (KAR) has held that utilization of capital gains in construction of residential house would suffice to claim the benefit of Section 54 of the Act. 15. Following the same and for the reasons aforestated, we are of the considered view that substantial question of law is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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