TMI Blog2022 (7) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance on the judgment in CIT Vs. Shakuntala Devi [ 2016 (10) TMI 60 - KARNATAKA HIGH COURT] , which has held that the investment in property if made within the time specified, the registration of the property though entered into beyond the period of three years. the assessee would be eligible for the claim of deduction u/s 54. As utilisation of the capital gains within the time specified would entitle the assessee to the claim of deduction under section 54 of the Act, notwithstanding the fact that the new asset was registered beyond the period specified under the I.T.Act, which according to the assessee was beyond her control and was to be liberally construed. It is held by various Hon ble Courts that application of beneficial provisions must be liberal to accommodate the rules laid down broadly to verify compliance and must not be interpreted literally, unlike charging sections which are to be construed strictly. In support of this proposition, we place reliance on the judgments of Bajaj Tempo Ltd. [ 1992 (4) TMI 4 - SUPREME COURT] and CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. [ 1992 (4) TMI 3 - SUPREME COURT] As observed by us that the bonafides of the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of scrutiny assessment, it was noticed that the assessee had claimed a sum of Rs.1,26,00,000 as exempt u/s 54 of the I.T.Act. The details of the same were called for and it was noticed that the assessee has not invested in a residential house but paid a sum of Rs.1,26,00,000 to one Sri.B.Suresh for purchase agricultural land of 2 acres at Kolar Taluk. It was evidenced by unregistered agreement for purchase of an agricultural land. No registered document was produced by the assessee. Therefore, the A.O. held that the assessee has not made any investment in residential property for claiming exemption u/s 54 of the I.T.Act. The relevant finding of the A.O. in this regard reads as follows:- Transfer of residential house property for a sum of Rs.1,26,00,000/- dated 18.04.2015: On perusal of the evidences and documents produced during the scrutiny assessment proceedings, it is noticed that a sum of Rs.1,26,00,000/- has been claimed exemption u/s 54 of the Income Tax Act, 1961. However, the assessee has not invested in a residential house property, but the assessee has paid a sum of Rs.1,26,00,000/- to one Shri B.Suresh for the purchase of an agricultural land of 2 acr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal 4 of the appellant is dismissed. 5.6 As regards additional evidence filed by the appellant, this is observed that the same is not relevant to any of the grounds of appeal of the appellant. Through this additional evidence the appellant has sought adjudication of issue as to 'whether she was eligible for exemption under Section 54 of the Act on the basis of purchase of house property on 22.03.2018 i.e. after the assessment had been passed by the AO and also after a period of three years from the date of sale of the original asset (the original asset being sold on 23.04.2014 08.09.2014, 30.10.2014, 14.11.2014 and 24.11.2014)'. So vide the additional evidence the appellant has sought adjudication on a ground of appeal which neither. formed part of the grounds of appeal taken up in Form no. 35 nor the same had been filed by her as additional grounds of appeal. The ground of appeal is very specific and relates to investment of Rs 1,26,00,000/- in purchase of agricultural land. So this cannot be extended to include all claims related to Section 54 of the Act. Since the ground of appeal sought to be adjudicated itself does not exist, so the admission of additional evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee ought to have purchased the residential house within 2 years or constructed a residential house within 3 years from the date of sale of the original asset (the original asset was sold on 26.03.2015 for a total consideration of Rs.1,26,00,000 and the assessee ought to have either purchased the new asset on or before 25.03.2017 or construct within 3 years i.e. on or before 25.03.2018). Admittedly, the assessee has neither purchased nor constructed the residential house within the due date specified. It is also an admitted position that the proceeds from the sale of original asset was deposited by the assessee in a capital gains account scheme with the State Bank of India on 26.03.2015 itself. The copy of statement of capital gains account scheme is placed at page 31 of the paper book filed by the assessee. 9. It is the case of the assessee that there was an arrangement with the developer Sri.B.Suresh, who developed the joint property of the assessee along with other co-owners wherein the assessee and other co-owners received the flats. Since the said developer Sri.B.Suresh was very well known to the assessee, request was made to the developer Sri.B.Suresh to identify the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned AR has further argued that the registration of the property, similar to the completion of the construction of a house property would signify the completion of the procedure for investment, the latter part was not to be treated as absolute, considering the benevolent nature of section 54 of the I.T.Act. The assessee has submitted that the utilisation of the capital gains within the time specified would suffice to make the assessee eligible to the claim of deduction under section 54 of the I.T.Act, and the assessee should not be treated as not being eligible for the deduction claimed. The claim of the assessee is that she is entitled to the deduction under section 54 of the I.T.Act, since she has complied with the requirement of section 54 of the I.T.Act, in so far as investing the capital gains from the sale of the house property into a capital gains account scheme account before filing the return of income as required under section 54 of the I.T.Act. Alternatively, the assessee has contested that the capital gains were uti!ised within the period prescribed under section 54 of the I.T.Act, since the amount of capital gains have been utilised for the acquisition of the house p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the PURCHASER to Sri. B. SURESH, the Consenting Witness; and 12. The section 54 of the I.T.Act mandates that the assessee must invest in a new asset to be eligible for the claim of deduction under section 54 of the I.T.Act, i.e. within the periods specified in the Act, which in the instant case is not complied with. The assessee's argument that the acquisition of the new asset by way of registration was not necessarily the determining factor, in so far as the contention that the capital gains was utilised within the specified time and the registration was not germane to the claim, as long as the asset was acquired. 13. The Hon ble Apex Court in the case of Fibreboards (P) Ltd. v. CIT (2015) 376 ITR 596 (SC) had held that the utilization of the capital gains within the period would suffice for making the claim of deduction u/s 54G of the I.T.Act and there was no requirement to acquire the asset intended within the period specified, provided the same has been acquired in due course. The relevant observation of the Hon ble Apex Court reads as follows:- 36. A reading of Section 54G makes it clear that the assessee is given a window of three years after the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime stipulated in the Section, but it is not the case of the assessee that after such payment of advance amount, it has taken possession of land and building, plant and machinery. In our view, if the argument of the learned Senior Counsel for the assessee is accepted, it would defeat the very purpose and object of the Section itself. By merely paying some amount by way of advance towards the cost of acquisition of land for shifting its industrial unit from urban area to non-urban area, an assessee cannot claim exemption from payment of tax on capital gains. This cannot be the intention of the Legislature and an interpretation, which would defeat the very purpose, and the object of the Act requires to be avoided. (at para 31 of the impugned judgment) 38. We are of the view that the aforesaid construction of Section 54G would render nugatory a vital part of the said Section so far as the assessee is concerned. Under sub-section (1), the assessee is given a period of three years after the date on which the transfer takes place to purchase new machinery or plant and acquire building or land or construct building for the purpose of his business in the said area. If the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscloses the flooring work, electrical work, fitting of door and window shutters were still pending. The assessee has produced before the authorities the registered sole deed dated 7.11.2009 showing the transfer of the property in his favour. 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 I.T.Act, i.e., to encourage investment in a residential building is completely fulfilled. 15. It is also pretend to place reliance on the judgment of the Jurisdictional High Court in CIT Vs. Shakuntala Devi [2016] 389 ITR 366 (Kar), which has held that the investment in property if made within the time specified, the registration of the property though entered into beyond the period of three years. the assessee would be eligible for the claim of deduction under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Courts that application of beneficial provisions must be liberal to accommodate the rules laid down broadly to verify compliance and must not be interpreted literally, unlike charging sections which are to be construed strictly. In support of this proposition, we place reliance on the judgments of the Hon ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT (1992) 196 ITR 188 (SC) and CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 196 ITR 149 (SC). 17. As observed by us that the bonafides of the assessee cannot be doubted, since the assessee has made deposits into the capital gains scheme immediately and thereupon made payments to the developer to acquire the new house property. The assessee was also prevented by reasonable cause since the funds had already been utilized and was forced to acquire an asset due to the reason beyond her control. The section 54 of the I.T.Act being benevolent in nature, it should be liberal in interpreting the provisions of section 54 of the I.T.Act considering the fact that the new house was eventually acquired, out of the same capital gains utilized, which has been brought on record and not in dispute. 18. For the aforesaid rea ..... 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