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TMI Blog2017 (9) TMI 1701X X X X Extracts X X X X X X X X Extracts X X X X ..... hereto which reads as under:- "Please refer to your rely dt. 18.7.2011: you have submitted a copy of booklet of EMAAR MGF Land Limited and form regarding booking of a flat of total value Rs. 79,66,275/- which includes charges of Rs. 5,33,250/- for IDC & EDC Rs. 2,50,000/- for car parking slot and Rs. 75,000/- for club membership. The agreement as per stamp paper it was purchase on 10th Dec. 2009 from HP Singh Stamp Agent Patiala House, New Delhi. It means you have entered into agreement for purchase of flat after due date of furnishing of return of income. Please justify your claim?" 4. He also taken us to the order passed by the authority with regard to comparison to statement which is reproduced as under:- "Comparison of Investment u/s 54F in the New Flat at Emar MGF and Rights at Noida/Chandigarh. Investment u/s 54F at EMAAR MGF Booking Rights at Nodia/Chandigarh Source of funds The source of funds in this case was Capital Gain on the Sale Proceeds of the Land Acquired by the Government Investments as Advance Bookings were made by assessee out of his own capital/savings prior to Acquisition Proceeds. Intention The intention and actual use of the house was alw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 3. Date of transfer of original asset should be taken as 5.6.08 and not 3.10.08 it is not disputed that RICO acquired land of the appellant, for which the appellant received consideration from RICO, which is taxable under the head Long term capital gains. In the computation filed with return the appellant has taken the date of last installment paid by RICCO on 3.10.08 as the date of sale consideration for computing capital gain. The AO has also accepted 3.10.08 as the date but in my view the date on which land was acquired through order of RICCO (copy enclosed as Annexure-1 of this order) which is 5th June, 2008 should be taken as the date of transfer of land. This date was so accepted as the date of transfer by the appellant through reply dt. 23.1.2013 as well. 4. On the date of transfer of original asset that is land acquired by RICCO the appellant owns more than one residential house: Whether the date of transfer is taken 5.6.2008 or 3.10.2008, it is not disputed that as per Balance sheet ending on 31.3.2008 the appellant owns following flats: 1. S-225, Mahaveer nagar, Jaipur 2. Flat No. 101, block No.43, Heritage City, Gurgaon 3. ATS Paradiso, Greater Noida flat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant - because as ruled by Hon'ble Delhi High Court in the case of CIT vs R L Sood-245 ITR 727 (Del) and as clarified by substantial investment in residential flats without the possession being handed over has to be treated as flats acquired/purchased for the purpose of capital gains. 5. Noida and Chandigarh flats argued wrongly as not residential flats. The appellant has come forth with contradictory arguments. On one hand he is stating that the investment in Noida and Chandigarh flats had been made even before acquisition proceeds were received by the appellant, that flats were acquired/booked for investment purposes to earn capital gains, but till date the flats are retained that is in 2013 the flats are in possession of the appellant. The other argument is that Noida and Chandigarh flats are being used for business and cannot be branded as residential flats for denying exemption u/s 54F because maintenance charges of these flats are being paid by the firm in which appellant is a partner, also does not hold water, because the flats at Noida and Chandigarh appear in the personal Balance sheet of the appellant, it is not disputed by the appellant that the flats are acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 'old asset' and by referring to the new residential house to be purchased or constructed as the case may be, as 'new asset'. The collective reading of this section makes it clear that two conditions should be satisfied and both are co-exist at the relevant time of transfer of original asset (1) the assessee must owned the residential house on the date of transfer and (2) income from such residential house should be chargeable under the head 'income from other house property'. If the above two conditions co-exist, the assessee becomes disentitled to the exemption section 54F of the Act, particularly when, the assessee owns such a house other than the original asset and its income is chargeable as a income from house property as per the provisions of section 22 of the Act. The assessee needs to be owner rather legal owner of that house. Hon'ble Supreme court in the case of CIT vs. Podar Cement (P) Ltd. etc. reported in 226 ITR 625 (SC) has clearly explained this position by holding that 'owner' is a person who is entitled to receive income from the property in his own right. In the absence of completion and possession by way of registration and transfer of its title etc., of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of section 54/54F. This assessee made payment to the builder Emaar - MGF Gurgaon before 30.9.2009 for buying a II residential house. Builder has promised to give possession of the house before 5.6.2010 i.e. within 2 years of the sale of the original asset but could not give possession by that time. Section 54F is a beneficial provision for promoting the construction of residential houses and requires an assessee to construct houses and for achieving that purpose to intention of the Legislature is to encourage investments in the acquisition of a residential hose and completion of construction or occupation is not the requirement of the law. In view of the above discussion the assessee cannot be treated owner of Noida/Chandigarh flats on 5.6.2010. At the same time, he to be allowed benefit of section 54F because he has invested the capital gain as per the requirement of the Act. 12. We have found that section 54F of the Act is a beneficial provision aimed at promoting construction or addition of new residential houses to meet out the needs of the society in respect of increasing demand of houses. Thus, the intention of the Legislator is to encourage and give an impetus towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, gave it a wider meaning and it was held that the payment made for execution of release deed by the brother thereby joint ownership became separate ownership for price paid would be covered by the word 'purchase.' It was observed that the word 'purchase' used in Section 54 of the Act should be interpreted pragmatically in a practical manner and legalism shall not be allowed to play and create confusion or linguistic distortion. The argument that 'purchase' primarily meant acquisition for money paid and not adjustment, was rejected observing that it need not be restricted to conveyance of land for a price consisting wholly or partly of moneys worth. The word 'purchase,' it was observed was of a plural semantic shades and would include buying for a price or equivalent of price by payment of kind or adjustment of old debt or other monetary considerations. It was observed that if you sell a house and make profit, pay Caesar (State) but if you buy a house or build another and thereby satisfy the conditions of Section 54, you were exempt. The purpose was plain; the symmetry was simple; the language was plain. 9. Recently Supreme Court in Civil Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses incurred in relation to the sale deed which was executed. 10. More direct are the two decisions of Madhya Pradesh High Court in Shashi Verma (Smt.) vs. CIT MANU/MP/0213/1996MANU/MP/0213/1996 : [1997] 224 ITR 106 and Calcutta High Court in CIT vs. Smt. Bharati C. Kothari MANU/WB/0265/2000MANU/WB/0265/2000 : (2000) 244 ITR 352. In Shashi Verma (supra), the assessee had invested the sale consideration for purchase of a flat from Delhi Development Authority and had paid part installments. Reversing the decision of the Tribunal and allowing the appeal of the assessee, the High Court observed that the Tribunal had adopted a pedantic approach without noticing the fact that the capital gain was Rs. 31,980/- whereas the installments paid were Rs. 71,256/-, i.e. much more than the amount of capital gain. Reference was made to Circular No. 471 : MANU/DTCR/0018/1986 dated 15th October, 1986 [1986] 162 ITR (Stat.) 41. It was observed that Section 54 of the Act says that assessee could have constructed the house and not that the construction should have necessarily been completed. Noticing that it was not easy to construct a house within the time limit of three years and under the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session of the flat to the assessed within the period of one year, the assessed cannot be denied the benefit of the said benevolent provision. This would not be in consonance with the spirit of Section 54 of the Act." 6.3 In Commissioner of Income Tax-XII vs. Sh. Kamal Wahal (2013) 351 ITR 4 (Delhi) wherein it has been held as under:- "5. The revenue preferred an appeal before the Tribunal questioning the decision of the CIT (Appeals). The Tribunal, however, by the impugned order, agreed with the decision of the CIT (Appeals) and in doing so followed the judgment of the Madras and Andhra Pradesh High Courts cited supra and also another judgment of the Karnataka High Court in Director of Income-tax, International Taxation, Bangalore : (2011) 203 Taxman 208. It also noted the judgment of the Bombay High Court in Prakash Vs. ITO : MANU/MH/0825/2008MANU/MH/0825/2008 : (2008) 173 Taxman 311 in which a contrary view was taken but preferred the view taken by the Madras and Karnataka High Courts adopting the rule laid down by the Supreme Court in CIT Vs. Vegetable Products Ltd : MANU/SC/0241/1973MANU/SC/0241/1973 : 88 ITR 192 which says that if a statutory provision is capable of more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a kothi, i.e., house on Khasra No. 76 (purchased by the Assessee's father), the land in Khasra Nos. 75 and 90 purchased by the Assessee was used only for agricultural purpose. The explanation by the Assessee that only the rental income from letting out the constructed portion property was being shared between him and the father in the ratio of 15%: 85% appears to be a plausible one. Unless there is document to show that the Assessee was a co-owner of the said building to the extent of even 15%, there cannot be an inference in that regard. As explained by Umacharan Shaw & Bros v. CIT MANU/SC/0080/1959MANU/SC/0080/1959 : (1959) 37 ITR 271 (SC) suspicion howsoever strong cannot partake the character of evidence. The evidence produced by the Assessee showed that the house was purchased by him on 10th April 2007 within the time allowed under Section 54F of the Act, after making payment and by obtaining the possession thereof. A substantial part of the consideration of Rs. 2 crores was paid on the date of the agreement to sell itself. The balance payment of Rs. 22 lakhs was made on 17th April 2007 when the possession was handed over. The conclusion that the house was in fact purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the old capital asset is replaced by a new capital asset in form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. The Supreme Court in CCE versus Favourite Industries, MANU/SC/0270/2012MANU/SC/0270/2012 : (2012) 7 SCC 153 has succinctly observed:- 21. Furthermore, this Court in Associated Cement Companies Ltd. v. State of Bihar [MANU/SC/0840/2004MANU/SC/0840/2004 : (2004) 7 SCC 642], while explaining the nature of the exemption notification and also the manner in which it should be interpreted has held: (SCC p. 648, para 12) 12. Literally 'exemption' is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially, in a growing economy. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden of progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty on 01.12.2009 and the assessee has made the payment on 16.03.2010. The assessee was required to get the house and occupancy certificate on or before 01.12.2011. But however, the assessee got the occupancy certificate of the property on 17.01.2014. The learned Tribunal further noted that the assessee submitted the documentary evidence to show that after purchasing the property there was a civil suit filed by the other parties and the assessee could not complete the construction and the licence for constructing the house was accordingly delayed. The learned Tribunal further noted that CIT(A) in his order relied upon the decision of the Madras High Court in the case of CIT v. Sardarmal Kothari MANU/TN/0835/2008MANU/TN/0835/2008 : [2008] 302 ITR 286 wherein, it is held that in order to get the benefit under Section 54 of the Income-tax Act, the assessee need not complete the construction of the house and occupy the same. It is further noted that the assessee has invested the money and the occupancy certificate is delayed which is beyond the control of the assessee then the assessee is entitled for deduction under Section 54 of the Act. The learned Tribunal as such found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the original asset is chargeable under the head "Income from house property". 13. As far as the present case is concerned, contrary to the contention of the assessee, the assessee as well as her husband had offered 50 per cent share each in the clinic in the income-tax assessment and had claimed depreciation thereon. So too 50 per cent share in the property in the wealth-tax proceedings is offered by the assessee and her husband. The note submitted to the Asstt. CIT, City Circle 5(1), Madras, by the assessee discloses that the assessee owned 50 per cent of the property in 828, Poonamallee High Road, Chennai, for use as residential property and 50 per cent as clinic, so too for the property at Door No. 828A. Poonamallee High Road, Chennai. The facts thus reveal that as joint owners of the property, the assessee and her husband had shown 50 per cent share with reference to the clinic and the residential portion in their respective returns. Thus, it is clear that as on the date of the transfer, the assessee did not own a residential house in her name only, the income from which was chargeable under the head "Income from house property", to bring into operation, the proviso to s. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the previous year in which the transfer took place. The aforesaid sections which form part of section 54 of the Act are cases where capital gain on transfer of capital asset not to be charged in those cases. Section 54F of the Act is a beneficial provision of promoting the construction of residential house. Therefore, the said 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 been invested in a residential house. The condition precedent for claiming benefit under the said prevision is the capital gain realized from sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favor of the assessee befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n particulars of the stage of construction. According to him, only minor fittings like window shutters and some electrical work were required to be made. In fact, the report of the inquiry conducted by the Department also discloses the flooring work, electrical work, fitting of door and window shutters were still pending. The assessee has produced before the authorities the registered sale deed dated 7.11.2009 showing the transfer of the property in his favor. The said document discloses marble tiles flooring has been done, electricity, water and sanitary connections have been given, wood used is teak in respect of doors and windows. The assessee has been put in possession of the property and he is in occupation. Therefore, the assessee has invested the sale consideration in acquiring a residential premises and has taken possession of the residential building and is living in the said premises. The object of enacting section 54 of the Act i.e., to encourage investment in a residential building is completely fulfilled." 7. It is contended that the two other properties were never in possession. The title of the property transferred only on execution of an agreement. 7.1 In our cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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