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TMI Blog2021 (10) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the purpose of section 54F, is whether, the assessee who received the capital gain has invested in a house. Once it is demonstrated that the consideration received on transfer of capital asset has been invested in or construction of residential house, even though the construction is not complete in all respect as required under law, assessee cannot be denied benefit u/s 54F. Respectfully applying ration of Hon'ble Karnataka High Court in case of CIT Vs. Sambandam [ 2012 (3) TMI 80 - KARNATAKA HIGH COURT] we hold that assessee is eligible during the year under consideration. However, the amount said to have been spent on interior decoration can't be granted since it is not for the purpose of making the house into habitats condition. see ALEEM FAZELBHOY. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-6 (1), MUMBAI. [ 2006 (6) TMI 139 - ITAT BOMBAY-G] - AO is directed to compute the proportionate deduction - Decided in favour of assessee partly. - ITA No. 164/Bang/2020 - - - Dated:- 30-9-2021 - Chandra Poojari, Member (A) And Beena Pillai, Member (J) For the Appellant : Chytanya K.K., Advocate For the Respondents : Kannan Narayan, JCIT (DR) ORDE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riors to make the house plush and luxurious which not included in the total cost of the house paid to the builder... , when no such condition prescribed under section 54F of IT Act. 8. The Learned Commissioner (Appeals) has erred in stating thus, it is found from above details that the house on completion was in livable condition when it was purchased by the Appellant without appreciating that amount invested for interior works is essential in order furnish and make the home habitable in the manner considered appropriate by the Appellant. 9. The Learned Commissioner (Appeals) has failed to appreciate that when Appellant has satisfied all the conditions stipulated under section 54F towards the construction of new residential house, the Appellant is duly entitled to claim exemption of ₹ 59,73,467/- under section 54F of IT Act. 10. Without prejudice to the above, the Learned Commissioner (Appeals) having denied the exemption under section 54F on the basis that investment in new residential house is made subsequent to the date of registration, ought to have allowed the exemption on investments made on or before the registration of new residential house. 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount for claiming exemption u/s 54F in A.Y 2016-17 60,00,000 2.2. The assessee submitted that he had invested in purchase of new residential house within one year before the date of sale of original asset and satisfies all the criteria of section 54F. The Ld. AO rejected the claim of assessee for following reasons: that assessee has not paid for purchase of new residential house but it is for registration charges stamp duty charges and interior works; that assessee has already claimed an amount of ₹ 93,18,118/- and ₹ 43,43,289/- as exemption under section 54 of the Act during assessment year 2013-14 and 2014-15 respectively, for purchase of the same new property. 2.3. The Ld. AO was of the opinion that assessee has misused provisions under section 54 and 54F of the act and has avoided tax by claim exemption under different sections for different assessment years on different capital gains arisen on sale of different capital assets. He thus denied the exemption of ₹ 59,73,467/- claimed by assessee under section 54F of the Act, for year under consideration. 2.4. Aggrieved by the disallowance made, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is not eligible for claiming the payment to interior decorators as investment in the construction of the house for the purpose of deduction under section 54F. 2.7. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us now. 2.8. At the outset the Ld. AR submitted that authorities below are not justified in denying exemption on incorrect premises. He submitted that registration charges stamp duty charges and interior works do constitute the cost of new residential house that are entitled for deduction under section 54F. 2.9. Referring to the provisions of section 54F the Ld. AR submitted that, capital gain arose in the hands of assessee from transfer of long-term capital asset not being a residential house. It was submitted that assessee has within a period of one year before or 2 years after the date on which the transfer took place purchased the new asset. He also submitted that assessee does not own more than one residential house other than the new asset as on the date of transfer of original asset and that assessee has not constructed any other residential house other than the new asset within the period of 3 years after the date of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits or gains arising from the transfer of a capital asset effected in the previous year shall, save or otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H is chargeable to income tax under the head 'capital gains' and shall be deemed to be income of the previous year in which the transfer took place. The aforesaid 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 section are 'purchased' or 'constructed'. For such purpose, the capital gain realized should have been invested in a residential house. The condition precedent for claiming benefit under the said provision is the capital gain realized from sale of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in case of CIT Vs. Bharti Mishra reported in (2014) 41 taxmann.com 50, decisions of Hon'ble Karnataka High Court in case of CIT Vs J.R Subramnya Bhat reported in (1986) 28 Taxman 578 and CIT Vs. K Ramachandra Rao reported in (2015) 56 taxmann.com 163, all principally allowed exemption u/s. 54/54F, only on substantial satisfaction of required conditions therein. Hon'ble Karnataka High Court and Hon'ble Madras High Court has widely interpreted the provision, consequent to strict satisfaction of conditions therein. 4.8. It is pertinent to note that, there is no strict requirement regarding completion of construction under section 54F(1) to be entitled for availing exemption. The passport to derive benefit under sec. 54F(1) is investment in construction of property within the period required u/s. 54(1)F or to invest in residential property within the stipulated time for enabling deduction under section 54F of the Act. Hon'ble Karnataka High Court in decision of CIT vs. Sambandam Udaykumar (supra) took the view that, under provisions of section 54F of the Act, the condition preceded is that, capital gains realised from sale of capital asset should have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports Case (supra) deduced as follows: Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally . 47. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand Case(supra). 4.11. Hon'ble Court summarised their observation as under:- 52. To sum up, we answer the reference holding as under: (1) Exemption notification should be interpreted strictly; the burden of Proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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