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TMI Blog2019 (4) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... , ergo, follows that so long as the construction of a new residential house is completed within a period of three years from the date of transfer of the original asset, the benefit of exemption u/s.54F has to be allowed with reference to whole of the cost of plot or the cost of construction thereon, even if such a process of purchasing the plot or constructing the house started within a reasonable time anterior to the date of transfer of the original asset. The date of purchase of the first part of the plot on 11.10.2010, which is within the reasonable period as discussed above, constitutes the date of initiation of process of construction, and the deadline for the completion of construction would be 10.6.2015. As the construction actually got concluded latest by 15.9.2014, we hold that the assessee is entitled to exemption u/s 54F with reference to the full amount of ₹ 1.12 crore spent on purchase of two parts of land and construction of new residential house thereon. The impugned order is overturned pro tanto. - ITA No.294/PUN/2017 - - - Dated:- 28-3-2019 - Shri R.S. Syal, Vice President And Shri Partha Sarathi Chaudhury, Judicial Member For the Appellant : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. The undisputed position is that the assessee transferred the original asset on 11-06-2012 and purchased a common plot of land for construction of a new residential house thereon, in the following different parts, which for convenience, can be divided into two parts, viz., the first part of the plot purchased on 11.10.2010 and the second part of the plot purchased in the year 2011/12 : 11-10-2010 Rs.34,83,440/- 04-11-2011 Rs.73,00/- 04-11-2011 Rs.2,82,500/- 04-11-2011 Rs.2,82,500/- 04-11-2011 Rs.7,300/- 11-11-2011 Rs.2,82,500/- 11-11-2011 Rs.7,300/- 25-01-2012 Rs.62,000/- Total Rs.44,14,840/- 5. In addition, the assessee incurred cost of construction amounting to ₹ 67,59,973/- on the above common plot for a new residential house, which component has been held by the AO as eligible for exemption. The dispute is only qua t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 new residential house, then no capital gain on transfer of the original asset shall be charged if the cost of new asset is more than the net consideration in respect of the original asset. The relevant part of sub-section (1) of section 54F providing exemption states that : `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 (hereafter in this section referred to as the new asset), the capital gain shall be dealt with . On a careful circumspection of the above part of subsection (1), it is clearly discernible that the legislature has given three disjunctive and mutual exclusive modes in which the exemption can be claimed. The use of word or at the relevant places in the above provision leaves nothing to doubt that there are three distinct non-overlapping modes providing for exemption, namely, i. where the assessee has, within a period of one year before the date on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it must terminate with the completion of purchase of a new residential house with in a period of two years from the date of transfer of the original asset. The third mode, in the like manner, also provides for exemption to the assessee constructing a new residential house within a period of three years from the date of transfer of the original asset. Reference to the period of three years for constructing a new residential house is only for completing the construction and not commencing the construction. The above view emerges on a harmonious reading of different limbs of section 54F including sub-section (4), whose proviso provides that if the amount deposited under this subITA section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in subsection (1), then, (i) the amount by which- (a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of subsection (1), exceeds (b) the amount that would not have been so charged had the amount actually utilised by the assessee for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the transfer of original asset when an assessee purchases or constructs a new residential house within the prescribed period. It is further pertinent to note that such an exemption is not available for any number of residential houses constructed/purchased by the assessee but there is a cap contained in sub-section (2). At the same time, there is another deterrent provision in sub-section (3) which restricts transfer of qualifying new residential house within the stipulated period. An overview of section 54F, in totality, indicates that the object or purpose of its enactment is to encourage building of new residential house for an assessee and then staying invested in it for certain duration. So long as such an object is achieved and there is no breach of any of the express conditions, the provision should be interpreted in such a manner as advances its purpose and not frustrates it. Recently, the Hon ble Supreme Court in Pr. CIT vs. Aarham Softrincs , vide its judgment dated 20.2.2019, has reiterated the rule of purposive interpretation by laying down that if a statutory provision is open to more than one meaning, the Court has to choose the interpretation which represents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a benchmark. A plot of land purchased prior to such a reasonable period cannot ordinarily be viewed as having been purchased for starting construction of a new residential house. It, ergo, follows that so long as the construction of a new residential house is completed within a period of three years from the date of transfer of the original asset, the benefit of exemption u/s.54F has to be allowed with reference to whole of the cost of plot or the cost of construction thereon, even if such a process of purchasing the plot or constructing the house started within a reasonable time anterior to the date of transfer of the original asset. Ex consequenti, Circular 667, providing for acquisition of plot and also completing construction within a period of three years from the date of transfer of the asset, being contrary to the intent and language of the provision, cannot be given effect to that extent. 12. The ld. DR tried to fortify his point of view of having the date of transfer of the original asset as the date of initiation of process of construction by arguing that the same is implicit in the provision in asmuchas the net consideration from the transfer of original asset is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. It is seen that whereas the AO canvassed a view that the period of three years for the purposes of construction of a new residential house, as given in the third mode, should be reckoned from the date of transfer of the original asset, the ld. CIT(A) went a step ahead and also superimposed the above noted first mode and held that the cost of land purchased within a period of one year before the date of transfer of the original asset should also be considered as eligible along with the cost of construction of new residential house within a period of three years from the date of transfer of the original asset. In our considered opinion, both the views taken by the authorities below are not in accordance with law. We have held hereinabove that the aforediscussed three modes are distinct from each other and the availability of exemption u/s.54F has to be tested on the touchstone of the mandate given in each of them separately. In our opinion, the ld. CIT(A) was not justified in combining the above noted first mode with the third mode for conferring partial relief to the assessee. Though technically, the AO was correct in his view in restricting himself to the above noted third ..... 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