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Principle Commissioner of Income Tax & Assistant Commissioner of Income Tax, Circle 15 (1) , Versus Sri. C. Gopalaswamy

2016 (6) TMI 643 - KARNATAKA HIGH COURT

Entitlement for exemption under section 54F - assessee has re-invested entire capital gains by making payment in full to the builder and builder has not handed over the possession within the time limit prescribed under section 54F - Held that:- The issue is already covered by the decision of this Court in case of CIT vs. Sambandham Udayakumar [2012 (3) TMI 80 - KARNATAKA HIGH COURT ] wherein held that the essence of the said provision is whether the assessee who received capital gains has invest .....

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athi, Adv) JAYANT PATEL J., JUDGMENT The appellant revenue has preferred the appeal on the following substantial question of law: Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that assesee is entitled for exemption under section 54F just because the assessee has re-invested entire capital gains by making payment in full to the builder and builder has not handed over the possession within the time limit prescribed under section 54F notwith .....

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ong with his son had effected sale of certain equity shares which resulted in long term capital gain of ₹ 13,55,84,748/- and the son Sri Navin Kumar had the share of ₹ 4,20,283/-. 3. Out of this capital gains, ₹ 50,00,000/- each were deposited by the respective assessee in REC Bond and claimed exemption under Section 54-F of the Income Tax Act. As per the assessee, the balance amount was invested in the residential house. The assessing authority in the course of assessment orde .....

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bmissions of the revenue observed at para-8 as under: 8. We have perused the orders and heard the rival contentions. There is no dispute that on 28-07-2008, the builder gave an allotment letter to the assessee which clearly mentions that ₹ 7.70 Crores for villa no.75 stood paid by the assesses. The sale of shares giving rise to the capital gains was on 20-07- 2007. May be it is true that the agreement for construction entered by assessee with builder gave an outer date, which went beyond t .....

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e assessee from claiming the benefit u/s 54F of the Act. Their Lordship s in the case of Sri Sambandam Udaykumar (Supra) had held as under: A reading of Section 54F of the Act, 1961, makes it very clear that if a capital gain arises from the transfer of any long term capital asset, not being a residential; house and the assessee has within the period of one year before or two years after the date on which transfer took place purchased or has within a period of three years after that date constru .....

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beneficial provision of promoting the construction of residential house. Therefore, the provision has to be construed liberally for achieving the purpose for which it was incorporated in the statute. The intention of the legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are purchased or constructed . For such purpose, the capital gain realized should have be .....

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larly, if he has invested the money in construction of a residential house, merely because the construction was not complete in all respects and it was not in fit condition to be occupied within the period under section 54F of the Act. The essence of the 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 o .....

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the deduction claimed by them. 3. Consequently, the Tribunal allowed the appeal. Under the circumstances, the present appeal before this Court. 4. We have heard the learned counsel for the parties and perused the record. 5. If the reasons recorded by the Tribunal as considered as it is, the issue is already covered by the decision of this Court in case of CIT vs. Sambandham Udayakumar reported in 345 ITR 389. If the Tribunal has followed the said decision of this Court, no substantial question o .....

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is sina qua requirement and in absence thereof, the deduction cannot be claimed and therefore, the Tribunal has committed error. He also relied upon the decision of the Apex Court in case of Giridhar Yadalam vs. Commissioner of Wealth Tax reported (2016) 65 Taxman.com 148(SC) and contended that, similar word was interpreted by the Apex Court and was found that the construction ought to have been completed. 7. In his submission, since the construction was not completed in the present case, the Tr .....

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