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TMI Blog2006 (6) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties. In case of semi-finished house, the purchaser will have to invest on flooring, wooden work, sanitary work, etc., to make it habitable. Therefore, the investment in house would be complete only when such house becomes habitable - it is held in principle that expenditure incurred on making the house habitable should be considered as investment in purchase of the house subject to the condition that payment was made during the period specified in section 54F. There is distinction between expenditure incurred on making the house habitable and the expenditure on renovation. A situation can be visualised where assessee may buy a habitable house but the assessee may like to incur expenditure by way of renovation to make it more comfortable. He may not be happy with the quality of material used by the builder and, therefore, he may incur the expenditure on improvement of the house. Such expenditure cannot be equated with the expenditure on making the house habitable. Whether the house purchased by the assessee was in a habitable condition or not would depend on the state of condition of the house at the time of purchase. Hence, this aspect would have to be kept in mind whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2002, submitted- (i) The cost under section 54F would include all expenses necessary to put the asset required in good running condition; (ii) The expression actual cost must be understood in the sense in which a commercial man would understand; (iii) That as per normal rule of accountancy prevailing in commerce and industry, the cost of fixed asset has to include all expenses necessary to bring such asset into existence and put them in working condition; and (iv) The house purchased by the assessee was in inhabitable condition and, therefore, the assessee had incurred various expenditures such as electrification of house, civil work, design and planning, plumbing work, flooring, fitting of aluminium windows, etc. In view of the above submissions, it was prayed that the sum of Rs. 28,66,675/- should be considered as part of the investment in the residential house for the purpose of claiming deduction under section 54F. 3. However, the Assessing Officer rejected the claim of the assessee by observing as under: The submissions of the assessee-company have been considered and not found acceptable for the following reasons: a. Section 54F(1) spells o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the amount spent by the assessee, after the purchase of inhabitable house, to make the house habitable. The contention of revenue is that, the moment the house is purchased, the requirement of section 54F stands complied with and, therefore, any amount spent thereafter in respect of such house would not qualify for exemption under section 54F. The stand of the assessee is that, incentive provisions should be construed liberally. According to him, an incomplete house which is inhabitable cannot be considered as purchase of residential house and, therefore, any sum incurred to make such house habitable would form part of cost of purchase. So, the entire dispute centers round the interpretation of the provisions of section 54F of the Act. Therefore, it would be appropriate to reproduce the relevant portion of the provisions of section 54F as under: 54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Delhi Development Authority, the allotment letter is issued on payment of the first instalment of the cost of construction. The allotment is final unless it is cancelled or the allottee withdraws from the scheme. The allotment is cancelled only under exception circumstances. The allottee gets title to the property on the issuance of the allotment letter and the payment of instalments is only a follow-up action and taking the delivery of possession is only a formality. If there is a failure on the part of D.D.A. to deliver the possession of the flat after completing the construction, the remedy for the allottee is to file a suit for recovery of possession. 3. The Board have been advised that under the above circumstances, the inference that can be drawn is that the D.D.A. takes up the construction work on behalf of the allottee and that the transaction involved is not a sale. Under the scheme, the tentative cost of construction is already determined and the D.D.A. facilitates the payment of the cost of construction in instalments subject to the condition that the allottee has to bear the increase, if any, in the cost of construction. Therefore, for the purpose of capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it more comfortable. He may not be happy with the quality of material used by the builder and, therefore, he may incur the expenditure on improvement of the house. Such expenditure cannot be equated with the expenditure on making the house habitable. Whether the house purchased by the assessee was in a habitable condition or not would depend on the state of condition of the house at the time of purchase. Hence, this aspect would have to be kept in mind while adjudicating such issue. In the present case, the Assessing Officer as well as the learned CIT(A) had rejected the claim of the assessee on the ground that no expenditure could be considered for exemption under section 54F which was incurred after the date of purchase. The Assessing Officer had no occasion to examine the state of the condition of the house purchased by the assessee. Though, the list of expenditure has been provided by the assessee, yet it is to be examined whether such expenditure was incurred to make the house habitable or just to make the house more comfortable. This aspect of the matter requires examination by the Assessing Officer. In view of the above discussion, we hold that the assessee is entitled to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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