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TMI Blog2017 (11) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... ase are that the case of the assessee was reopened after recording reasons and issuing notice under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act) and assessment was completed under section 143(3) read with section 147 of the Act, 1961. Originally the assessment was completed on 14.11.2011 under section 143(3) of the Act on the returned income of Rs. 9,00,540/-. In the return filed under section 139(1) of the Act, the assessee claimed deduction of Rs. 54,12,140/- under section 54F of the Act against long term capital gain of Rs. 54,12,140/- on sale of plot of land for Rs. 58,60,000/- on the ground that sale consideration was invested in construction of house property situated at plot no. 3, New Colony, M.I. Road, Jaipur. Later on, finding that the claim of deduction u/s 54F was not admissible to the assessee, after recording reasons, notice under section 148 of the Act was served on the assessee. In response thereto, the assessee submitted that the return filed under section 139(1) on 30.07.2009 may be treated as return filed in response to notice under section 148. The Assessing Officer finalized the assessment under section 143(3)/147 of the Act by d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called as a residential house. Since a house is called residential house with reference to the purpose of its user, it may not be necessary that somebody should live in it continuously. It is enough if it was a house for residence. The description of the construction, which is not in dispute, shows that it was a complete unit having a big hall, kitchen, toilet and verandah notwithstanding the size of the swimming pool, which was also there. As rightly pointed out on behalf of the assessee, there was no prohibition regarding the construction of a residential house on agricultural land. Therefore, the assessee is entitled to the deduction claimed under s. 54F, there being no other aspect or objection from the side of the Department about the claiming of such deduction. The AO is accordingly directed to deal with the matter of assessability of the capital gains taking into consideration the exemption allowable to the assessee under s. 54F ii. ACIT Vs. Om PrakashGoyal [ 53 SOT 158 (JAIPUR ITAT)] Benefit of s. 54F cannot be denied on ground that land on which construction was done was agricultural in nature-All the conditions for claiming exemption u/s. 54F have been found satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the JMC was only for commercial complex and so the residential house raised on such land was not eligible for deduction u/s 54F is not sustainable, and the deduction is rightly claimed, as there is no dispute to the fact that a residential house has been raised, and the cost of construction is substantiated with the valuer's report filed during the original assessment proceedings. Also further that the assessee was using the said premises for residential purposes, and had the address of the said premises on her ration card etc. [see pg. 43 of paper book] Thus the objection raised by the Assessing Officer regarding non admission of the claim u/s 54F on the above ground is not sustainable. 2. The assessee has submitted the Declaration in the form of affidavit, by the Coowners of the land, saying that the assessee was the absolute owner of the construction on the 1st and 2nd floor which consisted of the residential unit of the assessee [ PAPER BOOK Page no. 40.] Thus the ownership of the said residential house vests completely with the assessee.. 3. Also the Assessing Officer himself at para 2 (a) of the show cause notice issued pursuant to the notice u/s 148, and reproduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the construction of the new building was started before the sale of the old building. We fully agree with the view taken by the Karnataka High Court. The Tribunal was right in holding that capital gains arising from the sale of the Golf Link house to the extent it got invested in the construction of the Surya Nagar house, will be exempted under s. 54 of the Act" Thus, the objection that construction was started before the sale of asset is also not sustainable. Based on above contentions the assessee humbly submits that, the claim for deduction u/s 54F has been correctly made by the assessee, and hence ought to be allowed as per the original assessment order." 3.3. We have heard rival submissions, perused the material on record and gone through the orders of the authorities below. We find that the ld. CIT (A) had dealt with the issues at length at para 3.2.2 at pages 14 to 22 of his order and taking into consideration various pronouncements of Hon'ble Supreme Court, High Courts and the Tribunal allowed the deduction. The observations of the ld. CIT (A) are reproduced as sunder :- " 3.2.2 Determination (i) I have duly considered the submissions of the appellant, asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plete unit having a big hall, kithen, toilet and verandah notwithstanding the size of the swimming pool, which was also there. As rightly pointed out on behalf of the assessee, there was no prohibition regarding the construction of a residential house on agricultural land. Therefore, the assessee is entitled to the deduction claimed under s. 54F, there being no other aspect or objection from the side of the Department about the claiming of such deduction." (v) Further, Hon'ble ITAT, Jaipur in the case of ACIT vs. Om Prakash Goyal [53 SOT 158 (JAIPUR ITAT) held that: "Benefit of s. 54F cannot be denied on ground that land on which construction was done was agricultural in nature-All the conditions for claiming exemption u/s 54F have been found satisfied-It is established that assessee purchased a plot of land and then constructed a residential house on it- House constructed on agricultural land or on other land does not matter, but the fact that a house should be constructed-Therefore, order of CIT(A) confirmed-Revenue's appeal dismissed" (vi) It may be mentioned that the provisions of section 54F mandates the construction of a residential house within the specified period. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed relief to the extent of Rs. 20,96,008 as his contribution towards the cost of construction of the building and this amount would fall within the cost of the building" (ix) Therefore, in view of the above decision of Hon'ble Karnataka High Court this ground of AO for rejection of claim of appellant u/s 54F does not hold good. AO(3)- The construction of the said floors started on 9.4.2008. However in the balance sheets as on 31.03.2008 and 2009, no asset in the form of plot of land was shown by the assessee. This proves that the assessee was not the owner of land on the date of construction, and hence not eligible for deduction us 54 in absence of right of ownership. (x) The AO also observed that the construction of the said floors started on 9.4.2008 but in the balance sheets as on 31.03.2008 and 2009 of the appellant, no asset in the form of plot of land was shown and thus the appellant was not the owner of land on the date of construction, and hence not eligible for deduction u/s 54 in absence of right of ownership. (xi) During appellate proceedings, a copy of the purchase deed dated 02.06.1990 of 1/8th share of the plot No. 3, New Colony, Jaipur has been filed w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e new building was started before the sale of the old building. We fully agree with the view taken by the Karnataka High Court. The Tribunal was right in holding that capital gains arising from the sale of the Golf Link house to the extent it got invested in the construction of the Surya Nagar house, will be exempted under s. 54 of the Act." (xiii) It may be mentioned that in the case of CIT vs. Bharti Mishra [2014] 41 taxmann.com 50 (Del), it has been held by the Hon'ble High Court of Delhi that: 13. For the satisfaction of the third condition, it is not stipulated or indicted in the Section that the construction must begin after the date of sale of the original old asset. There is no conditions or reason for ambiguity and confusion which requires moderation or reading the words of the said sub-section in a different manner. The apprehension of the Revenue that the entire money collected or received on transfer of the original capital asset would not be utilized in the construction of the new capital asset, i.e, residential house, is ill-founded and misconceived. The requirement of sub-section (4) is that if consideration was not appropriated towards the purchase of the new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .)" 22. In G.P. Ceramics (P) Ltd. v. Dy. Commissioner, Trade Tax (2009) 2 SCC 90], this Court has held: (SCC pp. 101-02, para 29) 29. It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. [See CIT v. DSM Group of Industries [(2005) 1 SCC 657] (SCC para 26); TISCO Ltd. v. State of Jharkhand [(2005) 1 SCC 272] (SCC paras 42-45); State Level Committee v. Morgardshammar India Ltd. [(1996) 1 SCC 108]; Novopan India Ltd. v. CCE & Customs [1994 Supp (3) SCC 606]; A.P. Steel Re- Rolling Mill Ltd. v. State of Kerala [(2007) 2 SCC 725] and Reiz Electrocontrols (P.) Ltd. v. CCE. [(2006) 6 SCC 213] Therefore, in view of the above discussion, the objection of the AO that construction was started before the sale of asset is also not sustainable. (xiv) In view of the above, discussion it is evident that none of the four objections of the AO for denying exemption u/s 54F is sustainable and thus it is held that the AO was not justified in denying exemption u/s 54F of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer of the original asset. Therefore, in our considered view merely because the construction was started prior to transfer of original asset, if same is completed within three years of transfer of original asset, would not come into way of entitlement of exemption. Another objection of the AO is that the assessee is having 1/8th share in the commercial land on which the new asset has been constructed. The explanation of the assessee is that by way of settlement the assessee was given absolute rights on the new asset. We are of the view that this claim of the assessee requires verification at the end of the AO. Therefore, we modify the finding of ld. CIT (A) to the extent that AO would verify from other co-owners about the factum of relinquishment of their rights into new asset. If the AO finds correctness into the claim of the assessee, he would allow the entire claim lest he would restrict the same to the extent of 1/8th of the cost of construction of new asset. Ground No. 1 of the revenue's appeal is partly allowed for statistical purpose in the terms indicated hereinbefore. 4. Apropos to Ground No. 2, ld. D/R could not point out the violation of Rule 46A by ld. CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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