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TMI Blog2018 (11) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of non-completion of construction of the new asset within the period of 3 years, the deduction u/s.54 of the Act cannot be denied to the Assessee. - Decided in favour of assessee. - ITA No.1958/Bang/2017 - - - Dated:- 20-7-2018 - Shri N.V. Vasudevan, Judicial Member And Shri Jason P. Boaz, Accountant Member For the Appellant : Shri Balram R. Rao, Advocate For the Respondent : Shri B.R. Ramesh, Jt.CIT(DR)(ITAT), Bengaluru. ORDER PER N.V. VASUDEVAN, JUDICIAL MEMBER This appeal by the assessee is against the order dated 11.07.2017 of the CIT(Appeals)-5, Bengaluru relating to assessment year 2013-14. 2. The only issue that arises for consideration in this appeal is as to whether the revenue authorities were justified in disallowing the claim of assessee for deduction of ₹ 82,33,620 u/s. 54 of the Act. 3. The factual details are as follows. The assessee is an individual. He sold a residential property at No.76, Block C, Noida (hereinafter referred to as the Noida Property) for a sale consideration of ₹ 1,50,00,000/- under a sale deed dated 20.6.2012. The Assessee computed Long Term Capital Gain (LTCG) of ₹ 82,33,620 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouse, the income of which is chargeable under the head Income from house property (hereafter in this section referred to as the original asset), and the assessee has within a period of [one year before or two years after the date on which the transfer took place purchased], or has within a period of three years after that date constructed, a residential house, then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- (i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The admitted position is that builder could not complete the construction within the period of 3 years from the transfer of the asset which gave rise to LTCG because of cancellation of No Objection Certificate given by Hindustan Aeronautics Ltd. (HAL), and court proceedings in this regard by the builder against HAL. 8. The AO was of the view that the assessee s claim for deduction u/s. 54 of the Act for investment by way of construction of another residential house can be allowed only in respect of investments made after the date of sale of the old asset. Since the Assessee entered into agreement with builder for acquiring the new asset on 9.12.2010 much prior to the sale of the old asset, the Assessee was not entitled to deduction u/s.54 of the Act. 9. On appeal by the Assessee, the CIT(A) upheld the order of the AO on the ground that construction of the new asset was not completed within a period of 3 years from the date of transfer of the old asset. 10. Aggrieved by the order of the CIT(A), the Assessee has preferred the present appeal before the Tribunal. Before the Tribunal, the learned counsel for the assessee relied on the decision of the Hon ble High Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the evidence has firstly found that the building was used by the assessee mainly for his residential purpose. Taking into consideration the area of the building under the occupation of the assessee, it has stated that the ground floor occupied by the assessee including the garage was 1,330 sq. ft. The land appurtenant to the ground floor excluding the land occupied by the house was 4,795 sq. ft. that was also held to be under the occupation of the assessee. This building with the land has been sold. It was only the first floor that was let out. The Tribunal took into consideration the extent of the building used mainly for the residential purpose of the assessee and found that the major portion of the building was under the occupation of the assessee. The Tribunal, therefore, concluded that the first condition prescribed under section 54 was satisfied. This finding, it may be seen, has been arrived at by the Tribunal upon appreciation of the evidence and the factual aspects of the case. 6. So too was the next conclusion reached by the Tribunal. The date of the sale of the old building was February 9, 1977. The completion of the construction of the new b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Apart from the above, the Hon ble Karnataka High Court in the case of CIT Vs. Sambandam Udayakumar 251 CTR 317 (Karn.) had taken the view that the non-completion of construction within a period of 3 years cannot be a ground to deny deduction u/s.54F of the Act, which provisions are pari materia the same as Sec.54 of the Act on this aspect. In that case, the assessee sold shares for ₹ 4.18 crores and, within 12 months, invested ₹ 2.16 crores thereof to construct a house property and claimed exemption u/s 54F. However, as even after the expiry of 3 years of the date of transfer, the construction of the house was not complete and sale deed not executed, the AO CIT (A) denied relief u/s 54F though the Tribunal granted it. On appeal by the department to the High Court, held that Sec. 54F is a beneficial provision for promoting the construction of residential house requires to be construed liberally for achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law . The words used in the section are purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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