TaxTMI 
TaxTMI 
2014 (1) TMI 446
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....truction was not completed within three years after the date of said sale. 4. On the second aspect, Commissioner of Income Tax (Appeals) has recorded a contrary factual finding that the construction of the house was completed within a period of three years from the date of sale of shares. The shares were sold on 17th September, 2008 and the construction was completed in June, 2011. The aforesaid factual findings were not challenged and questioned by the Revenue before the Tribunal and also in the present appeal. 5. Thus, the only issue, which is raised and has to be examined, is whether the respondent-assessee can be denied benefit of Section 54F because construction of the house had commenced before the sale of the shares i.e., on 17th September, 2008. 6. Commissioner (Appeals) and the tribunal have relied upon decisions of Allahabad High Court and Karnataka High Court in Comissioner of Income Tax v. H.K. Kapoor (Decd.), [1998] 234 ITR 753 (All.) and Commissioner of Income Tax v. J.R. Subramanya Bhat, [1987] 165 ITR 571 (Kar). These two cases deal with interpretation of Section 54 of the Act. The said Section is pari materia to Section 54F. The only distinction being that Secti....
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....struction of the new building was started before the sale of the old building. We fully agree with the view taken by the Karnataka High Court. The Appellate Tribunal was right in holding that capital gains arising from the sale of the Golf Link house to the extent it got invested in the construction of the Surya Nagar house, will be exempted under section 54 of the Act." 8. Commissioner (Appeals) in his order while accepting the plea of the assessee has referred to several judgments of the Tribunal thereafter in which the aforesaid reasoning and interpretation of Section 54/54F has been followed. Reference has been made to the judgment of Madras High Court in Commissioner of Income Tax v. Sardarmal Kothari and Another, [2008] 302 ITR 286 in which it has been held as under:- "3. There is no dispute about the fact that the assessees have invested the entire net consideration of sale of capital asset in the land itself and subsequently the assessees have invested large sums of money in the construction of the house. The cost of investment in land and the cost of expenditure towards the construction of the houses is not in dispute. The one and only ground on ....
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....hree- Judge Bench in Chloro Controls India Private Limited v. Seven Trent Water Purification Inc. and others [2013] 1 SCC 641 has inappositely and incorrectly understood the principles stated in the major part of the decision rendered by a larger bench in SBP & Company v. Patel Engineering Ltd and another [2005] 8 SCC 618 and, in resistance, Mr. Harish Salve amd Dr. A.M. Singhvi, learned senior counsel for the respondent, while defending the view expressed later by the three- Judge Bench, have laid immense emphasis on consistency and certainty of law that garner public confidence, especially in the field of arbitration, regard being had to the globalization of economy and stability of the jurisprudential concepts and pragmatic process of arbitration that sparkles the soul of commercial progress. We make it clear that we are not writing the grammar of arbitration but indubitably we intend, and we shall, in course of our delineation, endeavour to clear the maze, so that certainty remains "A Definite" and finality is 'Final'." The aforesaid observations are equally, if not more important and relevant to tax matters. 11. Even otherwise, we find that Section 54F(4) is misread and misu....
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....Explanation. - For the purposes of this section,- (i) [Omitted] (ii) "net consideration", in relation to the transfer of a capital asset, means the full value of the 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) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under Section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the ne....
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....the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under Section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid." 12. Section 54F(1) if read carefully states that the assessee being an individual or Hindu Undivided Family, who had earned capital gains from transfer of any long-term capital not being a residential house could claim benefit under the said Section provided, any one of the following three conditions were satisfied; (i) the assessee had within a period of one year before the sale, purchased a residential house; (ii) within two years after the date of transfer of the original capital asset, purchased a residential house and (iii) within a period of three years after the date of sale of the original asset, constructed a residential house. 13. For the satisfaction of the third condition, it is not stipulated or indicated....