2018 (12) TMI 1329 - AT - Income Tax

Tribunal denies Section 54F benefit for land purchase pre-sale. Appeal dismissed on 21st Dec 2018.

The Tribunal dismissed the appeal, holding that the assessee is not entitled to the benefit of Section 54F for the investment made in purchasing the land ... Entitlement to the benefit of 54F - land purchased is prior to the disposal of Asset resulting in Capital Gain - Held that:- section 54F is an exemption provision and though there is no ambiguity in reading of 54F assuming there is some ambiguity in that eventuality section 54F is required to be read in favour of the Revenue as held by the Hon’ble Supreme Court in the matter of Dileep Kumar & Co. (2018 (7) TMI 1826 - SUPREME COURT OF INDIA ). We dismiss the appeal of the assessee and hold that the assessee is not entitled to the benefit of Section 54F in respect of the investment made by the assessee in purchasing the capital asset (land) prior to the period of one year from the sale of capital asset , as the said purchase of the land was not within a period of one year prior to the sale of the capital asset or falling in any of the categories in which the assessee was entitled to claim exemption u/s.54F under various categories. - Decided against assessee Issues Involved:1. Disallowance of exemption claimed under Section 54F for the cost of land.2. Consideration of judicial precedents and circulars related to Section 54F.Detailed Analysis:Issue 1: Disallowance of exemption claimed under Section 54F for the cost of landThe assessee purchased land on 17.04.2010 and claimed an exemption under Section 54F of the Income Tax Act for an amount of Rs. 3,83,76,769 out of the capital gains of Rs. 8,62,15,500, arguing that the construction of the new residential house, which included the purchase of land, entitled him to the benefit under Section 54F. However, the Assessing Officer (AO) denied the benefit for the cost of land amounting to Rs. 1,93,44,970, as the land was acquired before one year from the sale of the capital asset, which occurred on 01.04.2012.The first appellate authority upheld the AO's decision, relying on the bare provision of Section 54F, leading the assessee to appeal before the ITAT.Issue 2: Consideration of judicial precedents and circulars related to Section 54FThe assessee argued that the exemption should be allowed based on several judicial precedents and Circular No. 667 dated 18.10.1993, which clarified that the cost of the new residential house includes the cost of land. The assessee cited various cases, including CIT v. J R Subramanya Bhat, Sandeep Khosla v. DCIT, and others, to support the claim.The Revenue countered by relying on the strict interpretation of Section 54F, as emphasized by the Supreme Court in the case of Commissioner of Customs (Import) v. Dilip Kumar and Co., asserting that any ambiguity in exemption clauses should be interpreted in favor of the Revenue.Tribunal's Findings:1. Section 54F Requirements:- For claiming the benefit under Section 54F, the assessee must satisfy one of the following conditions:- The capital asset should be purchased within one year before the sale of the long-term capital asset.- The capital asset should be acquired within two years after the date of transfer.- The residential house should be constructed within three years after the date of transfer.2. Assessee's Situation:- The land was purchased on 17.04.2010, which is beyond one year before the sale of the capital asset on 01.04.2012. Thus, the first condition is not met.- The land was not purchased within two years after the transfer, so the second condition does not apply.- The residential house was not constructed within three years after the date of transfer, as the land was purchased before the sale, making the third condition inapplicable.3. Judicial Precedents:- The cited cases by the assessee were found not applicable as they did not align with the facts of the present case.- The Tribunal noted that Section 54F is an exemption provision and, as per the Supreme Court's ruling in Dilip Kumar & Co., any ambiguity in exemption provisions should be interpreted in favor of the Revenue.Conclusion:The Tribunal dismissed the appeal, holding that the assessee is not entitled to the benefit of Section 54F for the investment made in purchasing the land prior to one year from the sale of the capital asset. The purchase of the land did not fall within any of the categories under Section 54F that would allow the exemption.Order:The appeal of the assessee is dismissed. The order was pronounced in the open court on 21st December 2018.