TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1239
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....e circumstances of the case and in law, the Ld. CIT(A) has erred in: 2.1. Confirming the finding of the Assessing Officer that the appellant's case falls under the category of purchase of new house and not the construction of a residential house as stipulated u/s 54 in complete disregard to Circular no.672 dated 16.12.93 issued by the Central Board of Direct Taxes. 2.2. Not appreciating the fact that the circulars and instructions, issued by the CBDT in exercise of powers under section 119 are binding on the authorities administering the tax department and are also clearly in the nature of contemporaneous exposition furnishing legitimate aid to the construction of the Act. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating: 3.1. The fact that booking of an apartment with a builder was a case of construction and not purchase of residential flat, therefore, applicable time period would be three years and not two year. 3.2. The fact that where the appellant has made investment in the construction of new house property within a period of three years exemption u/s 54 could not be denied. 3.3. Further, that taking of....
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....ition by holding that the assessee has not satisfied various requirements of Section 54 of the Act & therefore, exemption u/s 54 of the act is not available. As relates to issue of interest expenses on borrowed funds the same was also not allowed by the CIT(A) by holding that the assessee can claim deduction of such expenses u/s 24(b) of the Act & there is no provision in the Act for treating such expenses as cost of acquisition of the house. 5. The Ld. AR submitted that investment made by the assessee in the new asset falls under the category of 'construction' and not 'purchase' as specified in section 54 of I.T. Act for which Ld. AR relied upon the CBDT Circular No. 471 dated 15/10/1986 read with Circular No. 672 dated 16/12/1993 and stated that the terms of scheme of allotment and construction of Belaire Apartment (new asset) as provided in Apartment Buyers Agreement are similar to those as mentioned in para 2 of CBDT Circular 471 dated 15/10/1986. The Circular No. 672 dated 16/12/1993 was considered by ITAT Mumbai judgment in the case of ACIT vs. Smt. Sunder Kaur Sujan Singh Gadh (3 SOT 206). Relevant extracts from para 10 off such judgment are reproduced below: "As per Boar....
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.... for ambiguity and confusion which requires moderation or reading the words of the said sub-section in a different manner". Thus, the Ld. AR submitted that as mentioned in para 6 of such judgment, Section 54 is pari materia to section 54F. Hence the above Jurisdictional Delhi High Court judgment applies on all fours to the facts of Assessee's case. In view of the above facts, circumstances and legal position, it is immaterial that the assessee had entered into Apartment Buyer's Agreement for the New Asset with the builder DLF prior to one year before the date of transfer of original asset particularly when such construction was completed subsequent to the transfer of Original Asset and substantial amount of about 94% of the cost of the New Asset had been paid within the time limits as specified u/s 54 of the Act. 7. The Ld. AR further submitted that time limit as provided in section 54(1) for making investment of capital gains in new asset have been fully complied with by the assessee as explained below: (i) Old asset was sold on 11/04/2008 and therefore, time limit for investing capital gains in construction of new asset would have expired on 10/04/2011. (ii) From clause 10....
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....cumstances beyond the control of the Appellant. CCI's order dated 12/08/2011 and also the appellate order dated 13/01/2013 are in public domain. (vii) The delay in construction/ handing over the possession beyond January 2010 is attributable to DLF which is also borne out by the fact that DLF admitted to compensate the Appellant for this delay w.e.f. January 2010 to January 2012 and actually paid a compensation of Rs. 873,465/-. Please see DLF's letter dated 31/01/2012 of the paper book. Possession of the new asset was taken by the Appellant on 26/08/2012 vide possession letter (viii) Hence, the Appellant having invested the entire sale proceeds from sale of Original Asset in the construction of New Asset before the expiry of stipulated 3 year period from sale of Original Asset, therefore, conditions of section 54 stand fulfilled. The delay in completion of construction and handing over of New Asset beyond the stipulated 3 year period was due to circumstances beyond the control of the Appellant as explained above for which benefit of section 54 cannot be denied. Reliance is placed on the following case laws: 8. For claiming exemption u/s 54, it is not necessary that the Assess....
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.... that section 54 speaks of purchase. This case has been relied upon by the Indore Bench of Madhya Pradesh High Court in CIT vs. Ajit Singh Khajanchi (2008) 297 ITR 95 (MP). Thus, the Ld. AR further submitted that the Assessee had acquired substantial domain over the New Asset and had paid substantial amount of the cost of New Asset within the specified time limits of section 54 of the I.T. Act from the date of sale of Original Asset. 9. The Ld. AR submits that Section 54 of I.T. Act being an incentive provision, the same should be liberally construed and benefit should be given to the assessee. Reliance is placed on the following case laws: i. Bajaj Tempo Ltd. Vs. CIT 196 ITR 188 (Supreme Court) in which at page 189, it was held as under: "A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it." ii. CIT Vs. Gwalior Rayon Silk Co. Ltd. 196 ITR 149 (Supreme Court), in which it was held as under "It is equall....
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....(b) or 57 of I.T. Act, therefore, it was entitled to claim it as part of cost of acquisition of such house. Mode of computation of capital gains is defined in section 48 according to which cost of acquisition of the asset and the cost of any improvement thereto is to be deducted from full value of consideration to arrive at the capital gains. Hence, interest paid on borrowings for acquisition of a capital asset must fall for deduction u/s 48 provided the same has not been claimed as a deduction under other heads like those u/s 57 as has been held by Karnataka High Court in the case of CIT vs. Maithrevi Pai 152 ITR 247. 12. The Ld. DR submitted that construction and purchase are different aspects. Circular No. 471 read with 672 is not applicable to the construction and developers. The agreement was prior to one year almost 50% payment was done by the assessee. So, he was the owner. There was no conversation which was done within two years on the possession was also not obtain by the assessee so this does amount to purchase. The assessee has not established that it has made 94% of the amount of the sale value into purchase value. The Ld. DR also submitted that cases submitted by the....
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....CIT(A) Vs. Dy CCT [1992 Supp (1) SCC 21] to which reference has been made earlier)." 22. In G.P Ceramics (P) Ltd. Vs. Dy. Commissioner, Trade Tax (2009) 2 SCC 90], this Court has held: (SCC pp. 101-02, para 29) 29. It is now a well-established principle of law that whereas eligibility criteria and laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfied the same, the exemption notification should be construed liberally, [ See CTT Vs. DFM Group of Industries [ (2005)] 1 SCC 657] (SCC Para 26); TISCO Ltd. Vs. State of Jharkhan [(2005) 4 SCC 272] (SCC paras 42-45); State Level Committee Vs. Morgardshammar India Ltd. { [(1996) 1 SCC 108}; Novopan India Ltd Vs. CCE & Customs {1994 Supp (3) SCC 606); A.P. Steel Re-Rolling Mill Ld. Vs. State of Kerala {2007) 2 SCC 725} and Reiz Electroncontrol (P) Ltd. Vs. CCE {2006) 6 SCC 213]'" The contention of the assessee that there is investment made by the assessee in the new asset definitely falls under the category of construction and not purchase as specified in Section 54 of the Act. The same is supported by CBDT Circular No. 471 dated 15/10/1986 read with Circular No. 6....