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2019 (7) TMI 1410 - AT - Income TaxDeduction u/s 54 against the LTCG received on sale of residential house - assessee failed to construct the new residential house within a period of three years from the date of sale due to delay in the handing over of the possession of the plot by the developer - HELD THAT:- Date of investment made in the purchase of residential plot is not relevant, because, what is relevant is that the investment made in the purchase of land forms an integral part of the cost of new residential house and the same is allowable as exemption along with the cost of construction and other related cost of construction of the new residential house within a period of three years. Besides in the instant case, investment for purchase of plot has been made out of the part sale consideration received as advance only, so as to construct the house thereon and there is no embargo to the purchase of plot or start construction prior to the sale of house property, as held by the Hon’ble Karnataka High Court in the case of CIT 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 benefit of section 54. Thus amount utilized by the assessee in the acquisition of land should be construed as amount invested in purchase/ construction of residential house. The intention of the statute as provided in section 54 has been fully satisfied by the assessee in the present case. Thus, on the facts of the present case, we hold that the assessee is entitled for exemption under section 54 of the Act and AO is directed to allow the exemption us/ 54. - Decided in favour of assessee.
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