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TMI Blog2017 (1) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished. During the year assessee sold a house property situated at Jyoti employee's Co-op. Housing Society at Fatehgunj, Baroda, and received Rs. 54,00,000/- as sale consideration. Assessee claimed index cost of acquisition at Rs. 9,37,800/-, deduction u/s 54EC of the Act for investment in bonds at Rs. 15,00,000/- and the remaining amount of long term capital gain was claimed as deduction u/s 54 of the Act for constructing residential house in which assessee has invested Rs. 53,96,287/- which included cost of land. Ld. Assessing Officer observed that construction of residential house against which assessee has claimed deduction u/s 54 of the Act commenced before 18.7.2008 i.e. the date of transfer of property on which assessee has earned long term capital gain. Ld. Assessing Officer further observe that deduction for construction of residential house is allowable u/s 54 of the Act only if the assessee constructs the house within a period of three years after the date of transfer of original asset, whereas assessee commenced and almost completed the construction of new residential house much before the date of transfer of capital asset and therefore, the plea of the assessee that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, though the construction commenced before the sale and the construction completed within two years from the sale of capital assets, is entitled for deduction under section 54F. [Para 9] * A bare look to the provisions of section 54F shows that the above provisions are incentive provisions intended to augment the investment in residential houses. It is the settled legal position that incentive provisions should be construed liberally in such a manner that object of the statute is fulfilled rather than the manner which may frustrate the object. [Para 11] * The Circular No. 471, dated 15-10-1986, clearly shows that object of sections 54 and 54F was to augment the investment in residential accommodation. Considering the said object, the Board took the view that payment to Delhi Development Authority, under self-financing scheme, amounted to investment in construction of residential house even though the assessee himself had not constructed the house. In view of the same, the Commissioner (Appeals) was not justified in applying strict rule of interpretation. [Para 13] * In view of the above discussion, it is opined that investment in residential house which would have taken p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a period of two years after the date of the transfer of the property on the sale of which the capital gain arose. Merely because the payment of a substantial portion of the agreed charges of the contracts was made and possession of the newly constructed property was obtained on the same day on which the conveyance was executed, it could not necessarily follow in all cases that the new building was not constructed up to that time. This was not one of those cases where for one reason or the other, not within the control of the assessee, the new house property which the assessee intended to put up had not been completely constructed so as to be fit for occupation. There was nothing on the record to show that the property constructed on the smaller plot was not fully constructed and that it was not fit for occupation. The finding, in fact, was that the instruction was completed on 31 -3-1968 but for some reason possession was not taken till 20-3-1970. Accordingly, it could not be held that the house property had not been "constructed" within the neaning of section 54 on the day on which it was found to have been actually constructed. Therefore, it could not be said that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of Hon'ble Gujarat High Court in the case of Smt. Shantaben P. Gandhi (Supra) and the decision of Mumbai Tribunal in the case of Ms. M.N. Palia (Supra) are clearly applicable in this case. Without prejudice to this, as per the decision in the case of Smt. Nimma Gaddu Sridevi (Supra), only the expenditure made after the date of sale of original property would be eligible for deduction u/s 54. Such amounts comes to Rs. 65,251/- in this case. Hence the action of the AO of disallowing deduction u/s 54 is upheld and the appeal is dismissed. 4. Aggrieved, assessee is now in appeal before the Tribunal. 5. Ld. AR submitted that the assessee claimed deduction of Rs. 29,62,200/- u/s 54 of the Act towards constructing new residential house for which assessee paid Rs. 53,96,287/-. Ld. AR duly accepted the fact that the construction of the new residential house on which deduction u/s 54 of the Act is claimed was started in the year 2006 and a considerable portion was constructed before the date of transfer of capital asset on 18.7.2008. However, construction of residential house eligible for investment u/s 54 of the Act was completed on 16.4.2009 i.e. the date on which completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which mainly arose during the year 2006 & 2007 and only a minor amount was spent after 18.07.2008. Ld. Assessing Officer observed that assessee has not purchased any residential house within one year or after two years of the date of transfer of capital asset i.e. 18.07.2008 but has claimed deduction u/s 54 for constructing a house completed on 16.4.2009. Ld. Assessing Officer denied the deduction u/s 54 of the Act by taking a view that the construction of impugned residential house was completed much before the date fo transfer of capital asset on 18.07.2008 and was occupied by the assessee for residential purpose and only a minor expenditure was incurred after 18.07.2008 which in the view of ld. Assessing Officer was not sufficient compliance of the provisions of section 54 of the Act as the amount of sale consideration was not invested in the new residential house. 10. We further observe that ld. CIT(A) confirmed the view of ld. Assessing Officer by referring and relying on the judicial pronouncements as referred above in the preceding paragraphs. Ld. CIT(A) in his appellate order referred and relied on the decision of the Co-ordinate Bench, Hyderabad in the case of Smt. Nimma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paying regularly the municipal taxes, electricity charges, telephone expenses which are basic for the purpose of occupying any house for residential purposes. It would not be out of place to stress here that there is a substantial compliance of law as regards usage cf the funds on sale of the one residential house and construction and occupying of the new residential house within the time frame allowed under the Act. Thus, there is a substantial compliance of the provisions of law. The procedural part which has not so much significance as against the usage of the funds and occupying the new residential premises, my claim of exemption u/s 54 may please be allowed. It would be an important matter for your Hon. to note that the legal hitch as regards the old land lord in the city survey record was a factor beyond my control. For your record details of the construction expenses right from the starting of construction activity along with copies of bills are as per Annexure - 7. Majority of the payments for the construction are paid by cheque only from my bank account with Bank of India, University Branch, Vadodara. I have =d construction activity prior to the date of sale of the old ..... X X X X Extracts X X X X X X X X Extracts X X X X
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