2019 (8) TMI 331 - AT - Income Tax

Delay in Completion Certificate Not a Barrier for Exemption Claim u/sec. 54

Manthravadi Vidyavathi, Manthravadi Sivakama Sundar Versus DCIT (International Taxation), Visakhapatnam

The ITAT allowed the appeals, emphasizing that the delay in obtaining the completion certificate due to minor repairs should not disqualify the assessee ... Claim of exemption u/sec. 54 in respect of sale proceeds received - HELD THAT:- We are of the opinion that simply there is a delay on the part of the builder in non-completing the construction on account of minor repairs and obtained completion certificate subsequently, cannot a ground to deny the claim of exemption u/sec. 54. In this context, the Hon'ble Karnataka High Court in the case of Dilip Ranjrekar [2019 (1) TMI 158 - KARNATAKA HIGH COURT] has observed that the investment is made in a new property and the construction was completed within a period of three years as narrated in section 54 of the Act, the delay was not because of the assessee and is beyond his control and upheld the order of the Tribunal. In the case of Sardarmal Kothari [2008 (6) TMI 15 - MADRAS HIGH COURT] has observed that assessee having purchased land by investing the capital gains and constructed residential house and also produced completion certificate from the municipal authority, exemption u/sec. 54F could not be denied on the ground that the construction was not completed within the specified period. We are of the opinion that assessee’s claim u/sec. 54 cannot be denied. Hence, the order passed by the ld.CIT(A) is cancelled and directed the Assessing Officer to allow the exemption claimed by the assessee u/sec. 54 - this appeal filed by the assessee is allowed. Issues:1. Claim of exemption u/sec. 54 of the Income Tax Act for a non-resident assessee.2. Completion of construction within the stipulated period for claiming exemption.3. Interpretation of completion certificate date for exemption eligibility.Issue 1: Claim of exemption u/sec. 54:The case involved appeals by different assessees against the orders of the Commissioner of Income Tax for the Assessment Year 2009-10. The assessees, non-residents, had given property for development to a company and claimed exemption u/sec. 54 of the Act for the sale proceeds received. The Assessing Officer disallowed the exemption claim as the construction completion certificate date did not meet the stipulated period requirement.Issue 2: Completion of construction within stipulated period:The Assessing Officer noted that the completion certificate date was after the stipulated three-year period, thus denying the exemption claim. The assessee argued that the construction was completed within time, and minor repair works delayed the certificate issuance. Both the Assessing Officer and the CIT(A) did not accept this explanation, focusing solely on the completion certificate date.Issue 3: Interpretation of completion certificate date:The ITAT analyzed the facts, considering the delay in completion due to minor repairs. Relying on judgments from the Karnataka and Madras High Courts, the ITAT held that a delay caused by factors beyond the assessee's control should not be a ground for denying exemption u/sec. 54. The completion certificate date should not be the sole determining factor if the construction was substantially completed within the stipulated period.In conclusion, the ITAT allowed the appeals, emphasizing that the delay in obtaining the completion certificate due to minor repairs should not disqualify the assessee from claiming exemption u/sec. 54. The judgments of the Karnataka and Madras High Courts supported this view, highlighting that completion within the stipulated period, even if certificate issuance was delayed, should suffice for exemption eligibility.