TMI Blog2014 (1) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... nd has not been able to locate any judgment in favour of the Revenue. 2. The respondent-assessee, an individual, had sold shares and thereafter the sale proceeds of Rs.54,86,965/- were invested in construction of house property. Exemption was claimed under Section 54F of the Income Tax Act, 1961 (Act, for short) in the return of income filed for Assessment Year 2009-10. Amount of Rs.37,99,000/- was utilised in the construction before date of filing of return and Rs.16,87,965/- was deposited in a capital gains account in the prescribed bank on 24th July, 2009 i.e., before the due date of filing of the return. 3. The Assessing Officer rejected the claim for benefit under Section 54F of the Act on two grounds. Firstly, he held that the construction of the house had commenced before the date of sale of shares and secondly, the construction was not completed within three years after the date of said sale. 4. On the second aspect, Commissioner of Income Tax (Appeals) has recorded a contrary factual finding that the construction of the house was completed within a period of three years from the date of sale of shares. The shares were sold on 17th September, 2008 and the construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h June, 1986 and was followed by Allahabad High Court in H.K. Kapoor (Decd.) (supra) and it has been held as under:- "The question for consideration is whether exemption on capital gains could be refused to the assessee simply on the ground that the construction of the Surya Nagar, Agra house, had begun before the sale of the Link house. Similar question came up for consideration before the Karnataka High Court in the case of CIT v. J. R. Subramanya Bhat [1987] 165 ITR 571. In the case before the Karnataka High Court, the date of the sale of the old building was February 9, 1977. The completion of the construction of the new building was in March, 1977, although the commencement of construction started in 1976. On these facts, the Karnataka High Court held that it was immaterial that the construction of the new building was started before the sale of the old building. We fully agree with the view taken by the Karnataka High Court. The Appellate Tribunal was right in holding that capital gains arising from the sale of the Golf Link house to the extent it got invested in the construction of the Surya Nagar house, will be exempted under section 54 of the Act." 8. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and others v. A.P Jaiswal and others, a three-judge bench has observed thus: "Consistency is the cornerstone of the administration of justice. It is consistency which creates confidence in the system and this consistency can never be achieved without respect to the rule of finality. It is with a view to achieve consistency in judicial pronouncements, the Courts have evolved the rule of precedents, principle of stare decisis, etc. These rules and principle are based on public policy " 3. We have commenced our opinion with the aforesaid exposition of law as arguments have been canvassed by Mr. Ranjit Kumar, learned senior counsel for the appellants, with innovative intellectual animation of how a three- Judge Bench in Chloro Controls India Private Limited v. Seven Trent Water Purification Inc. and others [2013] 1 SCC 641 has inappositely and incorrectly understood the principles stated in the major part of the decision rendered by a larger bench in SBP Company v. Patel Engineering Ltd and another [2005] 8 SCC 618 and, in resistance, Mr. Harish Salve amd Dr. A.M. Singhvi, learned senior counsel for the respondent, while defending the view expressed later by the three- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head Income from house property?.] Explanation. - For the purposes of this section, (i) [Omitted] (ii) "net consideration", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds, (b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under Section 45 as 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 the unutilised amount in accordance with the scheme aforesaid." 12. Section 54F(1) if read carefully states that the assessee being an individual or Hindu Undivided Family, who had earned capital gains from transfer of any long-term capital not being a residential house could claim benefit under the said Section provided, any one 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking, liberal and strict construction of an exemption provision is to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in the nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. (See Union of India v. Wood Papers Ltd. [(1990) 4 SCC 256 : 1990 SCC (Tax) 422] and Mangalore Chemicals and Fertilisers Ltd. v. CCT [1992 Supp (1) SCC 21] to which reference has been made earlier.)" 22. In G.P. Ceramics (P) Ltd. v. CTT [(2009) 2 SCC 90] , this Court has held: (SCC pp. 101-02, para 29) "29. 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. ..... 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