TMI Blog2008 (10) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... e within a specified period, the assessee is not entitled to claim exemption of whole capital gain u/s. 54F. Whatever amount was utilized in purchase of a residential house, the corresponding deduction u/s. 54F, is to be allowed and the Revenue authorities have already allowed the corresponding exemption to the assessee. We, therefore, find no infirmity in the order of the CIT(A) and we confirm the same. Accordingly, the appeal of the assessee is dismissed. In the result, appeal of the assessee is dismissed. - Member(s) : SUNIL KUMAR YADAV., RAJENDRA SINGH. ORDER-SUNIL KUMAR YADAV, J.M.: This appeal is preferred by the assessee against the order of the CIT(A) on various grounds, but, they all relate to the disallowance of exemption claimed under s. 54F on long-term gain on purchase of residential flat by the assessee. 2. We have heard the rival submissions and carefully perused the orders of the authorities below and documents placed on record. 3. The facts in brief borne out from the orders of the lower authorities are that during the course of relevant previous year, the assessee claimed exemption under s. 54F against long-term capital gain of Rs. 14,18,890 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s can be utilized in investment in various schemes for claiming deduction under s. 88. Therefore, similar view should be taken while allowing the exemption under s. 54F. He has also placed a reliance upon various judgments. The CIT(A) has re-examined the issue, but, was not convinced with the explanation of the assessee and relying upon the order of the Tribunal in the case of Smt. Pramila A. Parikh vs. ITO (ITA No. 2755/Mum/1997) the CIT(A) has confirmed the disallowance after having observed that sale proceeds of the shares have been utilized by the assessee for other purpose and the property was purchased from the loans borrowed from the bank. 5. Now the assessee has preferred an appeal before the Tribunal. The learned counsel for the assessee has submitted that requirement of s. 54F is only either to purchase a residential house within the period of one year before or 2 years after the date on which transfer took place or the assessee has within a period of 3 years after that date, construct a residential house. It is not necessary that sale proceeds should remain intact with the assessee for the purchase of the residential house within a specified period, as this proposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the property was constructed out of the borrowed funds and the sale proceeds of the capital asset was utilized for the repayment of the loan. In that case, the Tribunal has categorically held that since the sale proceeds were not utilized for purchase the residential house and it was utilized to repay loans, the exemption under s. 54F cannot be granted. 8. The learned Departmental Representative further commended upon the orders of the Tribunal and judgment of the Kerala High Court and has submitted that in those cases, it has been held that it is not necessary that the same sale proceeds of the capital assets shall be used to purchase the residential house. But, the equivalent funds should be available with the assessee to purchase the residential house. The learned Departmental Representative further submitted that in the instant case. the sale proceeds were admittedly appropriated by the assessee for different purposes and the assessee did not have any funds to purchase the property. The property was purchased out of the borrowed funds and not from the sale proceeds of the shares earlier sold. In these circumstances, it is not proper to say that the assessee is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (2) ............ (3) ............ (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under s. 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-s. (1) of s. 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-s. (1), the amount, if any, already utilised by the assessee for the purchase or construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of s. 54F, the assessee is required either to purchase a residential house out of the sale proceeds of long-term capital asset within a period of one year before or two years after the date on which transfer took place or within a period of 3 years after that date, construct a residential house. In that case, the capital gain shall be computed as per cls. (a) and (b) of sub-s. (1). 12. In case, the assessee is not able to appropriate the sale proceeds of long-term capital asset as stated above before the date of furnishing of return of income under s. 139, he is required to deposit the same before furnishing of such return in an account in any such bank or institution as may be specified in and utilized in accordance with any scheme, which the Central Government may by notification in the Official Gazette frame in this behalf and such return shall be accompanied by proof of such deposit. Similar is the position for claiming the exemption under s. 54 of the Act. 13. The object of introduction of these sections are that assessee should make more investments in residential house, on sale of its old residential house or a long-term capital asset. It is not necessary tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee itself should be utilized for the purchase of house property. The main part of s. 54 provides that assessee has to purchase a house property for the purpose of his own residence within a period of one year before or after the date on which transfer of his property took place or he could have constructed house property within a period of two years after the date of transfer. 15. This similar view was again expressed by the Tribunal in the case of Mrs. Prema P. Shah. It was held that there is no requirement of law that same amount of sale consideration should be utilized for acquisition of property for claiming exemption under s. 54 of the Act. The Tribunal placed a reliance upon the order of the Tribunal in the case of Bombay Housing Corporation. But, this case pertains to the exemption claimed under s. 54E of the Act and under s. 54E there is no provision like sub-s. (4) which puts a condition precedent that if the sale proceeds are not appropriated for purchase of the new residential house before the due date of the filing of the return, the same be deposited in an account in any such bank or institution as may be specified in and utilized in accordance with any scheme noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 54F as he has constructed the house by taking loans from other persons for the purpose of construction of the house and thereafter, he sells the capital asset and repays the loan out of the sale proceeds of the same. 19. We have carefully examined the aforesaid various orders of the Tribunal and we are of the view that the legal proposition developed from the aforesaid orders of the Tribunal is that residential property should either be acquired or constructed by the assessee out of his personal funds or the sale proceeds of the capital asset on which deduction under s. 54F is claimed. If the assessee constructs or purchases a residential house out of the borrowed funds, he is not eligible for deduction under s. 54F of the Act. If it is not construed in such a manner the object of introduction of the beneficial provisions would be frustrated. The fiscal provisions are to be construed in such a manner, so that its objects of introduction can be achieved. 20. Turning to the facts of the case, we find that sale proceeds of the capital assets received by the assessee was utilized or appropriated for different purpose and assessee had no personal funds to acquire a resident ..... X X X X Extracts X X X X X X X X Extracts X X X X
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