AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (1) TMI 1460
X X X X Extracts X X X X
X X X X Extracts X X X X
....) was not justified in disallowing the exemption claim of Rs. 2.16 crores u/s 54F of the Act." 3. Briefly stated, during the year under dispute, the assessee had sold shares of Axess Technologies India Pvt. Ltd., for Rs. 4.18 crores and, according to the assessee, a part of the sale proceed was invested in purchase of a house property to the extent of Rs. 2.16 crores and, accordingly, claimed the same as exemption u/s 54F of the Act. However, the AO, on the basis of the report of his Inspector that the construction of the building was not complete even after an elapse of three years etc., took a view that the assessee had neither purchased the property within two years nor constructed within three years after the date of transfer of the asset on which capital gain was derived and, accordingly, denied the exemption claim u/s 54F of the Act, brushing aside the reliance placed by the assessee on the finding of the Hon'ble Tribunal, Madras Bench reported in 59 ITD 94 as well as Board's Circular Nos: 471/15.10.1986 and 672/16.12.1993 (sic) 16.3.1993. 4. Aggrieved, the assessee challenged the stand of the AO on the issue before the CIT (A). Taking into account the elaborate content....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ruction of the property to the builders, the claim for exemption was restricted to Rs. 2.16 crores only which was shown as investment in the residential house property in his books of account - case laws relies on: * Mrs. Seetha Subramanian v. ACIT (1996) 59 ITD 94 (Mad); * CIT v. Sardarmal Kothari (2008) 302 ITR 286 (Mad); * Asst. Collector of Central Excise v. Dunlop India Ltd. and Others 154 ITR 172 (SC) 5.1. On the other hand, the Ld. D R had vociferously supported the stand of the AO to the effect that the construction of the residential property was not completed even after elapse of three years from the date of transfer of the shares on which the capital gain was derived; that the assessee had neither purchased the property within the period of two years nor constructed the same within the period of three years after the date of transfer of the asset and as such, the assessee's case didn't fall within the purview of s.54F of the Act so as to claim the exemption. To buttress her argument, the Ld. D R drew support from the finding of the Ld. CIT (A) who had sustained the action of the AO in disallowing the assessee's claim for exemption. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee had neither purchased nor constructed the property within the time frame as stipulated in the provisions of s.54F of the Act and, thus, the assessee was disentitled to seek exemption for the investment in the residential property. Further, the AO had refused to take note of the finding of the Hon'ble Tribunal, Madras Bench in the case of Mrs. Seetha Subramanian v. ACIT cited supra, according to him, the said finding of the Hon'ble Tribunal was to extend the provisions in general to all the individuals contrary to the specific provisions of the Act and the Circulars of the CBDT. 6.4. When the assessee, on an appeal, had specifically drew the attention of the Ld. CIT(A) to the ruling of the Hon'ble Madras High Court in the case of CIT v. Sardarmal Kothari cited supra, the Ld. CIT (A), instead of analyzing the pros and cons of the issue dealt with by the Hon'ble Court, strangely went ahead in adding that "I observe that the ratio of Sardarmal decision is not binding in Karnataka. Secondly, with due regards humbly, I point out that I do not subscribe to the point of law enunciated by the Honourable Madras High Court." 6.5. To put the record straight, we would like to reca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Therefore, the assessee is entitled for exemption under the said provision. This was accepted by the Assessing Officer. The CIT initiated action under section 263 on the ground that the construction of the house was not completed within the period of three years. Further, the CIT relied upon the report of the Inspector of Income-tax, who has stated that still certain work is to be completed so as to make it fit for occupation. The contention of the assessee was that the entire net sale consideration was invested on the construction of the building, excluding a sum of Rs. 1,03,000, which was deposited in the Units of UTI (Capital Gains Scheme) within six months from the date of the sale. According to the assessee, the entire net consideration was invested in the construction of the residential house and the entire construction of the structure was completed, though a little more work is to be completed so as to make it fit for occupation. As the entire net consideration was invested in the construction of the house property, it should be considered that the assessee has complied with the conditions specified under section 54F. But, however, the CIT did not accept the assessee's....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 54F. A similar case was considered by the Delhi Bench of this Tribunal in the case of Satish Chandra Gupta v. Assessing Officer [1995] 54 ITD 508 and this Tribunal after considering the provisions of section 54 as well as section 55 held that the claim cannot be denied on the ground that the construction of the house started by the assessee was not completed within the stipulated period of three years and some work was carried out thereafter. The said decision also supports the assessee's contention. Under the above circumstances, especially in the light of the circulars issued by the Central Board of Direct Taxes, we hold that the CIT was not justified in revising the assessment of the AO. Hence we set aside the order of the CIT and restore that of the AO." 6.7. More strikingly, the Hon'ble Madras High Court had an occasion to deal with an identical issue in the case of CIT v. Sardarmal Kothari and CIT v. Shanthilal Kothari reported in 302 ITR 286 (Mad). To be precise, the issue before the Hon'ble Court was - Whether the Tribunal was right in law in holding, when the conditions laid down in sub-cl. (1) of s. 54F and the Board Circular No. 667, dt.18-10-1993 cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....concluded that the requirement of the statutory provision has been complied with by the assessees and that was reconfirmed by the Tribunal in the orders impugned. 5. In the second question of law formulated, a reference is made to the Board Circular No. 667, dt.18-10-1993 [(1993) 115 CTR (St) 1]. On a reading of the circular, we are of the view that the circular would not in any way advance the case of the Revenue to come to the conclusion that in order to have the benefit under s. 54F of the IT Act, the construction should have been completed. 6. The Tribunal has also taken note of its own earlier order in the case of Mrs. Seetha Subramanian vs. Asstt. CIT (1996) 56 TTJ (Mad) 417 : (1996) 59 ITD 94 (Mad), wherein the Tribunal has held that, in order to get the benefit under s. 54F, the assessee need not complete the construction of the house and occupy the same. It is enough if the assessee establishes that the assessee had invested the entire net consideration within the stipulated period. The said view taken consistently by the Tribunal has been applied in these cases also. The Tribunal has distinguished the Delhi High Court judgment in the case of D.P. Mehta v....