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TMI Blog2022 (8) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... house. Even assuming the loan was sanctioned in February 2012, that by itself is not conclusive. According to him, the conclusive circumstance is the completion of construction of a residential house three years from the sale of the original asset. As we notice a serious flaw in the application and appreciation of Section 54F to the circumstances stated by the assessee, we prefer to remit the matter to the CIT(Appeals) for a decision afresh. Hence for statistical purposes, the questions are answered in favour of the assessee and against the Revenue. - ITA NO. 232 OF 2019 - - - Dated:- 1-8-2022 - THE HONOURABLE MR.JUSTICE S.V.BHATTI AND THE HONOURABLE MR.JUSTICE BASANT BALAJI APPELLANT: ADVS. A.KUMAR SRI.P.J.ANILKUMAR SMTG.MINI, SRI.P.S.SREE PRASAD AND SRI.AJAY V.ANAND JUDGMENT S.V.Bhatti, J. We have heard Mr A Kumar and Mr Christopher Abraham for the parties. 2. The assessee/Bindu Premananth is the appellant. The Commissioner of Income Tax, Kochi/Revenue is the respondent. The appeal is at the instance of the assessee under Section 260A of the Income Tax Act, 1961 (for short, the Act ) being aggrieved by the order dated 30.11.2018 in I.T.A No.40/Coch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in accordance with the following provisions of this section, that is to say,- (a) If the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) If the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45; In the case of the assessee, as the assessee has not purchased a residential house within a period of one year before or two years after the date on which the transfer took place, the first option is not applicable for the assessee. Coming to the other option of construction of a residential house, Section 54F is very clear which says that the assessee has wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of property in March 2013 owned by the assessee. Accordingly, the claim of the assessee that amounts purported to be spent/paid for purchase of 27.80 cents of land and construction of a residential house thereon in the name of the assessee and her husband is to be considered for deduction u/s. 54F is not accepted. The decision relied on by the assessee in the case of CIT vs Bharti Mishra was examined. The facts of that case entirely different than the facts of the assessee's case. (Emphasis added) 3.1 The tax demanded is Rs.26,51,660/-. The assessee filed an appeal against the order in Annexure-A before the Commissioner of Income-tax (Appeals)-II (for short, the CIT (Appeals) . The Appellate Authority through Annexure-B order dated 22.11.2016 partly allowed the appeal. The Revenue filed a second appeal in I.T.A No.40/Coch/2017 before the Tribunal and the Tribunal through the order under appeal allowed the appeal. Hence the appeal with the following substantial questions of law. i) Whether in the facts and in the circumstances of the case the Tribunal has erred or not in denying the deduction under section 54F of the Income Tax Act on the investment made prior to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of the following three conditions were satisfied; (i) the assessee had within a period of one year before the sale, purchased a residential house; (ii) within two years after the date of transfer of the original capital asset, purchased a residential house and (iii) within a period of three years after the date of sale of the original asset, constructed a residential house. 13. For the satisfaction of the third condition, it is not stipulated or indicated in the Section that the construction must begin after the date of sale of the original/old asset. There is no condition or reason for ambiguity and confusion which requires moderation or reading the words of the said sub-section in a different manner. The apprehension of the Revenue that the entire money collected or received on transfer of the original/capital asset would not be utilised in the construction of the new capital asset, i.e., residential house, is ill-founded and misconceived. The requirement of sub-section (4) is that if consideration was not appropriated towards the purchase of the new asset one year before date of transfer of the original asset or it was not utilised for purchase or construction of the new a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. [See CTT v. DSM Group of Industries[(2005) 1 SCC 657] (SCC para 26); TISCO Ltd. v. State of Jharkhand [(2005) 4 SCC 272] (SCC paras 42-45); State Level Committee v. Morgardshammar India Ltd. [(1996) 1 SCC 108]; Novopan India Ltd. v. CCE Customs [1994 Supp (3) SCC 606]; A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala[(2007) 2 SCC 725] and ReizElectrocontrols (P) Ltd. v. CCE. [(2006) 6 SCC 213] C.Aryama Sundaram Case At the cost of repetition, it is reiterated that exemption of capital gain from being charged to income tax as income of the previous year is attracted when another residential house has been purchased within a period of one year before or two years after the date of transfer or has been constructed within a period of three years after the date of transfer of the residential house. It is not in dispute that the new residential house has been constructed within the time stipulated in Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected accordingly. These grounds of appeal of the appellant are treated as allowed. The Tribunal reversed the said conclusion of the CIT (Appeals) and the operative portion reads thus: 7.4 Now the assessee claims deduction u/s. 54F in respect of investment in construction of residential house made by the assessee before the date of sale, i.e., before 22nd March, 2013. This provision provides that construction of the residential house should be done after the date of transfer but within three years from such date. If the date of sale is considered as the date of transfer of capital asset, the case of the assessee would not fall within the parameters of the said provision. These investments are made before one year of sale of the residential house which cannot be allowed as deduction u/s. 54F of the Act. Now the ratio relied on by the assessee lays down that, (i) the spending for construction need not be from the very sale consideration received from the sale of the original asset. (ii) the requirement is ie. within one year before or two years after the date on which the transfer took place purchased, or has within three years after that date constructed a resident ..... X X X X Extracts X X X X X X X X Extracts X X X X
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