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TMI Blog2019 (7) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. J.R. Subramanya Bhat [ 1986 (6) TMI 7 - KARNATAKA HIGH COURT] which was followed by CIT vs. H.K. Kapoor (Decd.) [ 1997 (8) TMI 44 - ALLAHABAD HIGH COURT] . The first step was to purchase the land, which was done. Thereafter the developer was to handover the plot, so that assessee could have constructed the house within time allowed of 2 years. However, no step could be put forward thereafter because possession of land was not given by the Developer, for reasons beyond the control of the assessee. If an assessee sells his house property and utilises the money for acquiring a plot for the construction of the house and if facts and circumstances point out that assessee intended to construct the house, which has been found so, then it is clear that he wants to avail exemption as provided under the law. Now if the developer after receiving the money could not fulfill the obligation within time, then can assessee be held responsible for not complying the law. The Hon ble Supreme Court in the case of Sanjeev Lal Vs. CIT [ 2014 (7) TMI 99 - SUPREME COURT] has laid down the purposive interpretation of section 54 to give a liberal approach to the assessee who clearly intended to claim b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngterm capital gain, assessee had claimed exemption under section 54 of ₹ 1,58,00,000/- on acquisition of allotment of a residential plot No. Q-168, Kensington Park, Sector 133, Noida, DIS Gautam Budh Nagar, UP at Jaypee Green, Noida on 01.06.2013 and for ₹ 25,10,000/- deposited in Capital Gain Account No. 0115001000443162 with PNB, Civil Lines, Delhi to be utilized in the construction of new residential house thereon. 2.1 The case was selected for scrutiny through CASS and in the assessment order, Ld. Assessing Officer allowed the exemption for ₹ 25,10,000/- deposited in Capital Gain Account No. 0115001000443162 with PNB, however, he denied the exemption of ₹ 1,58,00,000/- for the investment made in Plot No. Q-168 at Jaypee Green, Noida for the reasons given in paragraph 6 of his order, which can be summarised as under:- (a) In the given case assessee neither purchased a house nor constructed a house within the stipulated time u/s 54 which expired on 28-11-2017. (b) Assessee has not filed any substantial document in regard to financial crisis of Jaypee Greens and he has not even provided the proof of payments made to the contractor or any kind of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le interpreting the provisions of section 54 court applied the purposive interpretation. 4.1 He further submitted that till the time of agreement to sell on 07.04.2014, assessee had received ₹ 2,05,00,000/- in his bank account with HDFC and invited our attention to page 14, 15, 16 & 17 of the Paper Book and pointed out that sums so received as advance, assessee invested ₹ 1,58,00,000/- in the acquisition of allotment of a residential plot No. Q-168 at Jaypee Green, Noida (a township developed by JP Group) as evidenced by communication dated 01.06.2013 of Jaiprakash Associates Limited (Pg. 6 of the PB). However, due to delay in the handing over of the possession of the plot by the developer for the reasons which were beyond the control of the assessee, he could not construct residential house within a period of three years. In support, he invited our attention to the submissions made before the lower authorities, as supported by various news paper reports and information downloaded from the website (pg. 21-25 of the PB) to show that as Jaypee (Developer) failed to clear land dues to the tune of ₹ 10,205 crores towards Noida Authority, consequently Developer was u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .11.2014, which was agreed to be sold vide unregistered agreement to sell dated 07.04.2014, although assessee failed to construct the new residential house within a period of three years from the date of sale i.e. up till 27.11.2017. 7. Before dealing with the issue involved in the present appeal, it will be apposite to refer the relevant provisions of section 54 of the Act which reads as under: "Profit on sale of property used for residence. 54. (1) Subject to the provisions 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 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, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt 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." 7.1 On perusal of aforesaid provision, the condition precedent for exemption of capital gain from being charged to income-tax are as under: - (i) The assessee should have purchased a residential house in India either one year before or two years after the date of transfer of the residential house which resulted in capital gain or alternatively constructed a new residential house in India within a period of three years from the date of the transfer of residential property which resulted in the capital gain. (ii) If the amount of capital gain is greater than the cost of the residential house so purchased, or constructed, the difference between the amount of the capital gain and the cost of the new asset is to be charged under section 45 as the income of the previous year. (iii) If the amount of the capital gain is equal to or less than the cost of the new residential house, the capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vocally demonstrate that assessee really intended to construct the new residential house thereon. It was based on this bonafide intention assessee had claimed exemption under section 54 of the Act. Without the purchase of land, house could not have been constructed. The first step was to purchase the land, which was done. Thereafter the developer was to handover the plot, so that assessee could have constructed the house within time allowed of 2 years. However, no step could be put forward thereafter because possession of land was not given by the Developer, for reasons beyond the control of the assessee. If an assessee sells his house property and utilises the money for acquiring a plot for the construction of the house and if facts and circumstances point out that assessee intended to construct the house, which has been found so, then it is clear that he wants to avail exemption as provided under the law. Now if the developer after receiving the money could not fulfill the obligation within time, then can assessee be held responsible for not complying the law. 10. The Hon'ble Supreme Court in the case of Sanjeev Lal Vs. CIT [2014] 365 ITR 389 (SC) has laid down the purposive in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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