TaxTMI 
TaxTMI 
2014 (8) TMI 463
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....red a taxable income of Rs. 47,88,579/-, but as noticed above he had claimed benefit of Section 54 of the Act on sale consideration of Rs. 2 crores declared as income from capital gains on the sale of house property bearing No. B-383, New Friends Colony, New Delhi vide sale deed dated 3rd June, 2005 from the purchaser Bansi Lal Gupta. Under Section 54 of the Act, exemption of Rs. 37,86,273/- had been claimed, inter alia, on the ground that the said amount had been invested in purchase of a new residential property at Gurgaon. The assessee filed details before the Assessing Officer to establish that he had paid Rs. 61,15,000/- upto 12th May, 2006 for purchase of property at Gurgaon along with details, date of payments etc. 3. The Assessing Officer referred to the copy of the flat buyers agreement dated 9th February, 2006 between the assessee and the builder and observed that the ownership in the new property would be conferred on the date of issuance of occupation certificate. Further, the expected date of completion was 36 months from the date of the agreement dated 9th February, 2006 i.e. 8th February, 2009. He held that the assessee was not entitled to benefit of Section 54 as....
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....and on the basis of the said facts, the tribunal has rightly held that the aforesaid expenditure was incurred and was wholly connected with the sale transaction dated 3rd June, 2005. By cancelling earlier transaction and ensuring that the rights created by the earlier agreement to sell do not obstruct the sale transaction, aforesaid payments of Rs. 5,00,000/- to Ashok Singhal and Rs. 2,50,000/- to Rajat Kapur, have been made. 6. This brings us to the other question whether the assessee had "purchased" the second property and, therefore, payment made of Rs. 37,86,273/- was entitled to exemption under Section 54 of the Act. Section 54 of the Act as applicable to assessment year 2006-07 reads as under:- "54. Profit on sale of property used for residence.--(1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family the capital gain arises from the transfer of a long-term capital asset being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the as....
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....chase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset: Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,-- (i) the amount not so utilised shall be charged under section 45 as the 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) theassessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. Explanation.--Omitted by Finance Act, 1992, wef 1-4-1993." 7. It is accepted position and it is not disputed by the Revenue that Rs. 37,86,273/- had been invested by the assessee for purchase of the property at Gurgaon. However, legal title in the said property was not passed or transferred to the assessee within a period of two years from the date of sale of the first property on 3rd June, 2005. The second property it is apparent was still under construction though the builder had entered into and executed the flat buyers agreement with the assessee d....
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....th December, 2002 and had received Rs. 15 lacs by way of earnest money and subsequently received the balance sale consideration of Rs. 1.17 crores (total being Rs. 1.32 crores) when the sale deed was executed on 24th September, 2004. In the meanwhile, the assessee had purchased another house on 30th April, 2003. Benefit under Section 54 was denied by the High Court observing that the new house had been purchased prior to execution of the sale and not within one year prior to sale of original asset i.e. new house has been purchased on 30th April, 2003 whereas the earlier asset was sold only on 24th September, 2004. The Supreme Court allowing the appeal noticed that the agreement to sell was executed on 27th December, 2002 but the sale deed could not be executed because of inter-se litigation between the legal heirs, as one of them had challenged the will under which the assessee had inherited the property. The agreement to sell, it was held had given some rights to the vendor and reduced or extinguished rights of the assessee. This, it was observed was sufficient for the purpose of Section 2(47), which defines the term transfer in relation to a capital asset. In the light of the fac....
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.... that flats or apartments being constructed by builders take time. The Government Housing Boards also take time and seldom adhere to the promised date. Similar view has been taken in Bharati C. Kothari (supra) wherein reference was made to the decision of Andhra Pradesh High Court in CIT vs. Shahzada Begum (Mrs.) [1988] 173 ITR 397 and it was observed that assessee had entered into an agreement within two years for purchase of a flat which was under construction. Payment for the said flat was made within three years from the date of sale of the first property. No doubt the assessee was not constructing the new asset herself but she had purchased the flat. Reference was made to the decision of the Surpeme Court in CIT vs. J.H. Gotla [1985] 156 ITR 323 (SC), wherein it has been observed: "Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the Legislature, the court might modify the language used by the Legislature so as to achieve the intention of the Legislature and produce a rational construction. The task of interpretation of a statutory provision is an attempt to discover the intention of ....