TaxTMI 
TaxTMI 
2019 (5) TMI 534
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....res of the company on 13/07/2010 for a consideration of INR 8,000,000/- and claimed the indexed cost of purchase of these shares at INR 14239/- and therefore earned long-term capital gain of INR 7985761/-. Assessee has booked a flat/Apartment No. 3C in Belgravia, Tower No. 12 in Central Park- II, Sector 48, Gurgaon on 18/8/2016. The assessee over a period of time in various installments paid Rs. 14245000/- for this flat. Therefore, the assessee claim the benefit under section 54F of the Act. 3. The learned Assessing Officer examined the claim of the assessee and found that according to the provisions of Section 54F the assessee has been given two time limits for "purchase' and 'construction' of the 'new asset'. In the present case the Assessing Officer noted that whether the new asset is purchased or constructed. On the basis of this assumption he examined various payment schedule submitted by the assessee before him. The learned AO came to conclusion that at the time of booking of the above apartment flat the construction of the flat had not started. It commenced in the year 2007 and completed in FY 2012-13. Therefore according to him this flat cannot be considered as a "new as....
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....wer No. 12 in Central Park-ll, sector 48, Gurgaon as per which the assessee was required to make a payment of Rs. 1,42,45,000 which in fact was paid by assessee on various dates in a phased manner outlined in page 3-4 of AO order being an undisputed position. Copy of said agreement is on record as submitted in Assessee's PB. ii. As admitted by AO in page 4 of its order, at the time of booking the construction of flat has not started which commenced in 2007 only. The last payment as per the payment schedule outlined in pages 3-4 of AO order was paid on 21/08/12. iii. As per the aforesaid agreement the Owners have entered into a collaboration agreement with a company to develop the group housing colony including constructions, marketing and disposal of various apartments to be constructed therein. 3) View of the AO. In the course of assessment proceedings the AO required the assessee to show cause as to why not the transaction of acquiring property as per the Apartment Buyers Agreement be not regarded as a transaction of 'construction' of property rather than 'purchase' of property as claimed by the assessee. Being not satisfied with the submis....
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.... the decisions of Allahabad & Karnataka High Court directly on the subject observed as follows vide para 6 &7: 6. Commissioner (Appeals) and the tribunal have relied upon decisions of Allahabad High Court and Karnataka High Court in CIT v. H.K. Kapoor [1998] 234 ITR 753 (Alt.) and CIT v. J.R. Subramanya Bhat [1987] 165 ITR 571/[1986] 28 Taxman 578 (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 Section 54 applies to investment in a new house where the original asset sold was/is residential property and provisions of Section 54F were/are applicable to all other assets, not being a residential house. In J.R. Suhramanya Bhat (supra). Karnataka High Court noticed language of Section 54 which stipulated that the assessee should within one year from the dale of transfer purchase, or within a period of two years thereafter, construct a residential house to avail of concession under the said Section. The contention of the Revenue that construction of the new building had commenced earlier to the sale of the original asset, it was observed, cannot bar or prevent the assessee f....
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....on differently after almost two decades Finally it would be very important to outline the following as held by Delhi High Court vide paras 12 & 13 of its judgment: "12. Section 54F(1) if read caiefully 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 (Hi) 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 in the Section that the construction must begin after (he date of sale of the original/old asset. There is no condition or reason for ambiguity and confusion which requires moderation or reading the words of the said sub-section in a different manner. The apprehension of I he Reve....
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....perative portions vide para 22 & 23 of this decision is very important to note as below "22. It is axiomatic that Section 54(1) of the said Act does not contemplate that the same money received from the sale of a residential house should be used in the acquisition of new residential house. Had it been the intention of the Legislature that the very same money that had been received as consideration for transfer of a residential house should be used for acquisition of the new asset, Section 54(1} would not have allowed adjustment and/or exemption in respect of property purchased one year prior to the transfer, which gave rise to the capital gain or may be in the alternative have expressly made the exemption in case of prior purchase, subject to purchase from any advance that might have been received for the transfer of the residential house which resulted in the capital gain. 23.. ...........It is not a requisite of Section 54 that construction could not have commenced prior to the date of transfer of the asset resulting in capital gain. If the amount of capital gain is greater than the cost of the new house, the difference between the amount of capital gain and the....
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....t satisfied requirement of Section 54. 11. What has been stated in the judgment of the Madhya Pradesh High Court in 1997, in practical terms and in reality still holds good. This is a matter of common knowledge that flats or apartments being constructed by builders take time. The Government Housing Boards also take time and seldom adhere to the promised date. iii) Decision of Karnataka High Court in the case of CIT Vs Sambandam UdayKumar (2012) 345 ITR 389. In this regard it would be also important to quote once again the following from the operative portion of decision of Madras High Court in the case of C.Aryama Sundaram Vs CIT dated 06/08/18 (supra) as under: 23.............It is not a requisite of Section 54 that construction could not have commenced prior to the date of transfer of the asset resulting in capital gain. If the amount of capital gain is greater than the cost of the new house, the difference between the amount of capital gain and the cost of the new asset is to he charged under Section 45 as the income of the previous year. If the amount of capital gain is equal to or less than the cost of the new residential house, including th....
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....as not the subject matter of issue in these ITAT cases as to whether assessee can be denied benefit of Section 54F if construction commences prior to the transfer of original asset; iii) Thirdly these ITAT decisions are prior to the decisions from Delhi High Court & Madras High as relied supra. 6.2 Decisions relied upon by CIT(A). The CIT(A) has additionally relied upon two ITAT decisions i.e. decision of Ahmedabad ITAT in the case of Smt. Ushaben Jayantilal Sodhan & decision of of Hyderabad ITAT in the case of Smt. Nimgad Sncevi. Both these ITAT decisions will not make any impact on assessee's claim of exemption / deduction u/s 54F in the present case of assessee in view of the following clear reasons: i) In the case of Smt. Ushaben Jayantilal Sodhan before Ahmedabad ITAT exemption was denied u/s 54F on the ground that the entire construction including possession had materialized prior to the sale of property subject to capital gains. This is not at all the fact situation in the present case. In the present case of assessee the construction as is evident from the payment scheduled is happening in a phased manner and is continuing uptill 21/08/12....
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....coordinate bench. Therefore following 2 questions arise before us:- i. whether the acquisition of an apartment under a builders buyers agreement wherein the builder gets construction done in a phased manner and the payments are linked to construction are a case of purchase of a new asset or construction of new asset ii. whether the construction of new asset even if commenced before the date of sale of the original asset, the assessee is eligible for deduction of the amount of investment made in the property. 8. The 1st question has been answered by the honourable Delhi High Court in case of CIT vs Kuldeep Singh in [2014] 49 taxmann.com 167 (Delhi)/[2014] 226 Taxman 133 (Delhi)/[2014] 270 CTR 561 (Delhi) wherein the honourable High Court has held as under:- "8. The word 'purchase' can be given both restrictive and wider meaning. A restrictive meaning would mean transactions by which legal title is finally transferred, like execution of the sale deed or any other document of title. 'Purchase' can also refer to payment of consideration or part consideration along with transfer of possession under Section 53A of the Transfer of Pro....
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....harti Mishra (supra) has held as under:- "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 CIT v. H.K. Kapoor [1998] 234 ITR 753 (All.) and CIT v. J.R. Subramanya Bhat [1987] 165 ITR 571/[1986] 28 Taxman 578 (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 Section 54 applies to investment in a new house where the original asset sold was/is residential property and provisions of Section 54F were/are applicable to all other assets, not being a residential house. In J.R. Subramanya Bhat (supra), Karnataka High Court noticed language of Section 54 which stipulated that the assessee should within one year from the date of transfer purchase, or within a period of two years thereafter, construct a residential house to avail of concession under t....
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....ter 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 CIT v. Sardarmal Kothari , [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 which the Assessing Officer has non-suited the assessees for the claim of exemption was that the houses have not been completed. There remains some more construction to be made. 4. The requirement of the provision is that the assessee, within a period of three years after the date of transfer, has to construct a residential house in order to become eligible for exemption. In the cases on hand, it is not in dispute that the assessees have purchased the lands by investing the capital gain and they have also constructed residential houses. In order to....
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....tion 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 misunderstood by the Revenue. Section 54-F reads as under:- "54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house- (1) Subject to the provisions of sub-section (4), where in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the assets not original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has wit....
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....ub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to longKapil term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, 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 new asset is transferred. (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under Section 139, shall be deposited by him before furnishing such return such deposi....
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....ion, it is not stipulated or indicated in the Section that the construction must begin after the date of sale of the original/old asset. There is no condition or reason for ambiguity and confusion which requires moderation or reading the words of the said sub-section in a different manner. The apprehension of the Revenue that the entire money collected or received on transfer of the original/capital asset would not be utilised in the construction of the new capital asset, i.e., residential house, is ill-founded and misconceived. The requirement of sub-section (4) is that if consideration was not appropriated towards the purchase of the new asset one year before date of transfer of the original asset or it was not utilised for purchase or construction of the new asset before the date of filing of return under Section 139 of the Act, the balance amount shall be deposited in an authorized bank account under a scheme notified by the Central Government. Further, only the amount which was utilised in construction or purchase of the new asset within the specified time frame stand exempt and not the entire consideration received. 14. Section 54F is a beneficial provision and is ap....