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TMI Blog2019 (1) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise, if the date of inheritance is taken into consideration, then the cost of acquisition of the asset on that date corresponding to the market value is to be taken into consideration - Otherwise, take the cost of acquisition on the day the previous owner acquired it and apply the "Indexed Cost of Acquisition" and then calculate the capital gains and the tax payable. - decided in favour of assessee. Entitlement for benefit u/s 54F - possession of the flats is not taken by the assessee within the period of three years and as such, the assessee is not entitled for the benefit under section 54F - Held that:- If one has invested the amount received on sale of capital asset either in purchasing a residential house or in construction of a residential house, even though the transactions are not complete in all respects, the assessee would be entitled to the benefit under section 54F of the Act. See Sambandam Udaykumar case[2012 (3) TMI 80 - KARNATAKA HIGH COURT] - decided in favour of assessee. - I. T. A. No. 456 of 2017. - - - Dated:- 30-10-2018 - Dinesh Maheshwari C. J. And S. G. Pandit J. For the Appellants : K. V. Aravind, Advocate For the Respondent : Aditya Sond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authority. 3. The appellate authority, on appreciation of material on record accepted the contentions of the assessee and observed that the respondent-assessee had the option of taking FMV as on April 1, 1981, and entitled for the benefit on reading of the provisions of sections 2(42A), 49(1) and 55(2)(b)(ii) of the Act. With regard to the benefit under section 54F, the appellate authority held that the sale deeds were executed in respect of 2 flats in favour of the assessee on September 10, 2008 and November 20, 2008, respectively, wherein the assessee had purchased undivided share in the land over which the apartment building is being constructed. Further, the appellate authority also observed that the entire consideration amount was paid and the said apartments were purchased on the date of sale deeds, therefore, the assessee is entitled for benefit under section 54F of the Act. 4. The Revenue, aggrieved by the order of the appellate authority and the findings therein, filed appeal before the Tribunal in ITA No. 1431(Bang)2012. The Tribunal confirmed the order passed by the appellate authority holding that the date April 1, 1981, opted by the assessee is in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 54F of the Act by following the decision of this hon'ble court in the case of CIT v. Sambandam Udaykumar even when the assessee has not satisfied all the conditions prescribed under the said section to avail of the benefit of section 54F and the Tribunal without appreciating that the decision of this hon'ble court was not challenged before the apex court as the tax effect was low ? 6. The appellants-Revenue urged that while arriving at FMV, the cost inflation index of the year 2006 would be applicable as the assessee acquired the property in the year 2006 ; and the Tribunal erred in holding that index cost of acquisition has to be computed with reference to the year in which, the previous owner acquired the property. To appreciate the said contention, it is necessary to refer to section 49(1) of the Act, which is extracted below : 49. Cost with reference to certain modes of acquisition.-(1) Where the capital asset became the property of the assessee- (i) on any distribution of assets on the total or partial partition of a Hindu undivided family ; (ii) under a gift or will ; (iii) (a) by succession, inheritance or devolution, or (b) on any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the said cost of acquisition of the previous owner has to be calculated on the basis of indexed cost of acquisition as provided in Explanation 3 to section 48. 9. Though in the definition of 'indexed cost of acquisition', the words used are, 'in which the asset was held by the assessee' a harmonious reading of sections 48 and 49 makes it clear that, for the purpose of 'indexed cost of acquisition', it has to be understood as the first year in which the previous owner held the said property. Other wise, if the date of inheritance is taken into consideration, then the cost of acquisition of the asset on that date corresponding to the market value is to be taken into consideration. Otherwise, take the cost of acquisition on the day the previous owner acquired it and apply the 'indexed cost of acquisition' and then calculate the capital gains and the tax payable. That is precisely what has been held by the Bombay High Court in the aforesaid judgment which in our view is the correct legal decision. 8. The next contention urged by the appellants-Revenue is that the Tribunal has erred in allowing the claim of the assessee under section 54F of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections which form part of section 54 of the Act are cases where capital gain on transfer of capital asset not to be charged in those cases. Section 54F of the Act is a beneficial provision of promoting the construction of residential house. Therefore, the said 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 is not the requirement of law. The words used in the sec tion are 'purchased' or 'constructed'. For such purpose, the capital gain realized should have been invested in a residential house. The condition precedent for claiming the benefit under the said provision is the capital gain realized from sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favour of the assessee before the period stipulated, he cannot be denied the benefit of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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