TMI Blog2012 (3) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 15-2-2012 - N. Kumar AND RAVI MALIMATH, JJ. JUDGMENT The revenue has preferred this appeal against the order passed by the Tribunal granting benefit to the assessee, upholding the order of the Commissioner under section 54F of the Income-tax Act, 1961, (For short, hereinafter referred to as, 'the Act'). 2. The assessee Sri. Sambandam Udaykumar filed his return of income for the year 2006-07 on 11.10.2006 declaring an income of Rs. 2,13,68,271/-. The case was selected for scrutiny, Notices under sections 143(2) and 142(1) were issued to the assessee. In response to the above notice, the authorised representative of the assessee appeared and submitted the details called for. The said details disclosed that during the year relevant to the assessment year 2006-07, the assessee sold the shares of M/s. Assess Technologies India Pvt. Ltd. for a consideration of Rs. 4,18,08,725/-. Part of the proceeds of the said sale consideration has been invested in purchase of house property to the extent of Rs. 2,16,61,570/- and accordingly claimed exemption under Section 54F of the Act. Necessary inquiries in this regard were conducted by the Revenue. The report was submitted on 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving rise to capital gain and only minor fittings like window shutters and some electrical work were required to be made. In other words, the villas were substantially ready and habitable with water connection and also temporary electrical connection. Therefore, the Tribunal was of the opinion that the authorities below were not justified in depriving the exemption legitimately claimed by the assessee under section 54F of the Act. Therefore, they allowed the appeal, directed that assessee's claim for exemption under section 54F of the Act to the tune of Rs. 2,16,61,670/- is to be allowed. 5. Aggrieved by the said order, the revenue has preferred this appeal. 6. The substantial question of law that arise for consideration in this appeal is as under: "Whether the Tribunal was correct in holding that the assessee is eligible to claim the deduction u/s. 54F of the Act in respect of building under construction despite the same having not being constructed within the stipulated period of three years for availing of the benefit?'' 7. Learned counsel for the revenue assailing the impugned order of the Tribunal contended that the undisputed material on record discloses that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be charged under section 45: Provided that nothing contained in this sub-section shall apply where ( a ) the assessee,- ( i ) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or ( ii ) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or ( iii ) constructs any residential house, other than 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, "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. 10. A reading of the aforesaid provision makes it very clear that if a capital gain arises from the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in construction of a residential house, merely because the construction was not complete in all respects and it was not in a fit condition to be occupied within the period stipulated, that would not disentitle the assessee from claiming the benefit under section 54F of the Act. The essence of the said provision is whether the assessee who received capital gains has invested in a residential house. Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respects and as requited under the law, that would not disentitle the assessee from the said benefit. 12. In fact, Madras High Court had an occasion to consider this aspect in the case of CIT v. Sardarmal Kothari reported in [2008] 302 ITR 286 where it has been held as under: "4. The requirement of the provision is that the assessee, within a period of three years after the date of transfer, has to construct a residential house in order to become eligible for exemption. In the cases on hand, it is not in dispute that the assessees have purchased the lands by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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