TMI Blog2021 (10) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... udes, the cost of the materials used in the construction, the cost of labour and any other cost relatable to the acquisition and/or construction of the residential house. The object of Section 54F is to encourage investment in the residential building and enable the assessee to save tax on capital gains. The aforesaid three limbs of Section 54F(1) being different and distinct, each limb has to be read as a whole separately. The three parts/limbs cannot be intermingled to deny the benefit of 54F(1) to the assessee. The third part/ limb being applicable to the facts of the case and it is not in dispute that the assessee has constructed the residential building within three years from the date of transfer of long standing asset, the benefit flowing from the said Section cannot be denied on the premise that the land was purchased prior to one year. In our opinion, this interpretation of the revenue is wholly untenable and would defeat the object and purport of the provision. The Tribunal has failed to appreciate the judgment of C. Aryama Sundaram, supra in a right perspective. 14. It is trite that even if two plausible views are possible, the view beneficial to the assessee has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income-Tax vs. J.R. Subramanya Bhat reported in (1986) 028 taxman 0578 as well as the ruling of the Co-ordinate Bench of this Court in the case of Mr. M.. George Joseph vs. Deputy Commissioner of Income Tax Officer, Circle 12(2), Bangalore in ITA No.238/2015 (D.D. 12.07.2021) argued that as per Section 54F(1) of the Act, what was relevant for the authorities to examine was whether the claim of the assessee comes within either of three limbs mentioned therein. According to the assessee, his case would fall under the third limb namely, has within a period of three years after that date of transfer of any long term capital assets construction, one residential house in India (new asset). The said provision being beneficial in nature, the authorities ought to have interpreted the same liberally to achieve the object of which benevolent provision is enacted. 5. Learned counsel for the revenue argued that Section 54F(1) of the Act contemplates that when the assessee has within a period of one year before or two years after the date on which the transfer took place purchased or has within a period of three years after that date constructed, a residential house in India, the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial house and claimed entire long term capital gain as exempt from tax under Section 54 of the Act. The Assessing Officer allowed the benefit of Section 54F only to the part of the construction expenditure denying the land costs. Being unsuccessful before the First Appellate Tribunal and the Income Tax Appellate Tribunal, the assessee preferred an appeal before the High Court of Madras, which was admitted to consider the following questions of law:- i) When capital gain arises from sale of building and/ or land appurtenant thereto and a residential house is constructed within three years from the date of such sale, whether the cost of the new asset, which is eligible for set-off against capital gain, would include the cost of the land, if such land had been purchased three years prior to sale of the property from which capital gain arose? ii) Whether, in the computation of cost of new asset contemplated in Section 54(1) of the Income Tax Act, the cost of land can be segregated from the cost of the constructed house property? 9. The substantial questions of law raised herein is identical to the said substantial questions of law considered and answered by the Hon ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is a beneficial piece of legislation, whereby certain benefit in taxation is given to the assessee on fulfillment of certain conditions. Every such legislation is to be construed liberally in favour of the assessee, as it is for the benefit of the assessee. 12. In yet another coordinate bench decision in the case of Commissioner of Income Tax us. Sambandam Udaykumar reported in (2012) 345 ITR 389, it has been held that the essence of Section 54F is whether the assessee, who received capital gains has invested in a residential house. Even though the construction of a residential house is not complete in all respects, but if it is demonstrated that the same has been invested either in purchasing a residential house or in construction of a residential house, the assessee cannot be disentitled from seeking the benefit. The object of enacting Section 54 of the Act is to encourage investment in the residential building and _ the fulfillment of the same would make the assessee eligible for the benefits. 13. A reading of Section 54F of the Act in the light of these judgments would make it clear that the three limbs of Section 54F(1) namely, the capital gain arising from the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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