TaxTMI 
TaxTMI 
2019 (8) TMI 289
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....Long Term Capital Gain. While computing income under the head long term capital gain, the Assessee will be entitled to a deduction u/s.54 of the Act, if the Assessee invests the capital gain in any one of the following modes viz., (i) purchase of a new asset i.e., a residential house or (ii) construction of new asset i.e., one residential house in India. In the event of purchase of new asset the time limit laid down in the section is within a period of one year before or two years after the date on which the transfer took place. In the event of construction of new asset i.e., one residential house in India, such construction has to be within a period of three years after the date of transfer. and the computation thereof has already been furnished in the paper book filed. The provisions of Sec.54 of the Act, reads thus:- "Profit on sale of property used for residence. 54. (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 longterm capital asset, being buildings or lands appurtenant thereto, and being a residential hou....
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....anied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase 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) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid." 3. The Assessee took land on lease for a period of 20 years under a lease deed dated 14.3.2013 and constructed a residential house on such land. The amount of capital gain to the extent it was so utilized was claimed as deduction u/s.54 of the Act. As per the lease dated 14.03.2013, the Assessee entitled to construct a building after reimbursing a sum of Rs. 4.9 Lakhs already spent by the lessor. The ....
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....uction u/s. 54B of the Act. 7. Aggrieved by the order of CIT(Appeals), the assessee is in appeal before the Tribunal. We have heard the rival submissions. The learned counsel for Assessee drew our attention to the provisions of Sec.54 of the Act which we have extracted in the earlier part of this order and submitted that to claim deduction u/s.54 of the Act, there are two modes of investment of the capital gain viz., (i) purchase of a new asset i.e., a residential house or (ii) construction of new asset i.e., one residential house in India. In the event of purchase of new asset the time limit laid down in the section is within a period of one year before or two years after the date on which the transfer took place. In the event of construction of new asset i.e., one residential house in India, such construction has to be within a period of three years after the date of transfer. He submitted that in so far as construction of one residential house in India is concerned, all that the Assessee has to do is to invest the capital gain in construction of a residential house. It is immaterial whether the Assessee has ownership of the land over which the new asset i.e., one residential ....
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....perstructure. Petitioners' counsel contend that the maxim relied upon by the learned Advocate-General is one of antiquity and obsolete in law and has no application in India and that ownership in land could be with one person and that the superstructure could be owned by another, provided there is a legal relationship between them. It may originate by granting him a permission, which in law means licence, or may be the resultant effect of a long lease granted by the owner for putting up the superstructure etc." After an exhaustive analysis of the case laws on the issue, the Court finally concluded as follows:- "Rather, the Transfer of Property Act proceeds on the basis that in law ownership of a building is different from ownership in the land, and that land and building could be owned by different persons in the eye of law. Therefore, reliance placed on Sections 8, 63-A and 108(h) does not in any manner advance the propositions put forth by the learned Advocate General. 63. Rather, Advocates appearing for the petitioners have relied on the decisions undermentioned to show that this obsolete maxim has no application in India. Mr, Mohan Parasaran, learned co....
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....rstructure constructed by utilizing the capital gain and this is clear from clause-10 of the lease deed by which the land over which the construction has been put up was given on lease to the Assessee. 10. Reliance was also placed on the decision of the Hon'ble Karnataka High Court in the case of D.R.Puttanna and sons Vs. CIT 162 ITR 468 (Karn.) wherein the Hon'ble Karnataka High Court took the view that when building is constructed on a land taken on lease, the income derived from letting out of such building will have to be assessed as income from house property because u/s.22 of the Act, the charge of income under the head income from house property is on the owner of the building and the ownership of the land is immaterial. He submitted on the same analogy the Assessee in the present case should be construed as owner of the building and the deduction u/s.54 of the Act ought to have been allowed. 11. Arguments were advanced on the applicability of Sec.269 UA(d) (i) & (f)(i) of the Act and Sec.27(iii) of the Act, which provide that in the case of lease over a period beyond 12 years, such leases have to be regarded as transfer for the purpose of the Act. We are not discussin....
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....ch the new asset i.e., one residential house in India, is constructed. Such a condition does not emanate from a plain reading of Sec.54 of the Act. In our view the AO fell into an error in reading such a condition and refusing the claim of deduction u/s.54 of the Act. 14. As far as the decision of the Mumbai ITAT in the case of Yogesh Sunderlal Shah (supra) is concerned, as rightly pointed out by the learned counsel for the Assessee, the claim for deduction u/s.54 in that case was made under the first limb of Sec.54 of the Act. This would be clear from the facts of that case which was that the assessee had sold a Bungalow No.32 at Dariyalal C.H. Society, Mumbai 49, for a consideration of Rs. 3.50 crores on 8.8.2007 and on 16.8.2007, the assessee purchased tenancy rights in two flats in the third floor of 'Symphony' situated at junction of 8th and 12th Road, Khar (West), Mumbai, for a consideration of Rs. 1.85 crores. The assessee computed the long term capital gain from sale of residential Bungalow at Rs. 2,13,02,427/- which was claimed exempt to the extent of Rs. 2,04,11,610/- because of the investments made in acquisition of the tenancy rights in the new two flats. The....
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....ssee. 5.2 Further, as rightly pointed out by the ld. CIT-DR, provisions of section 54 are exemption provisions and, therefore, in case two interpretations are possible i.e. whether assessee should acquire the new residential house as owner or even the perpetual tenancy right would suffice, the interpretation favorable to the revenue shall be followed as held by Hon'ble Supreme Court in case of Novopan India Ltd. (3 SCR 549). In the said case, the Hon'ble Supreme Court held that the principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee would not apply to the construction of an exception or an exempting provision; these have to be construed strictly. The Hon'ble Supreme Court also held that the AY : 08-09 person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. Following the said judgment, therefore, even if there is some ambiguity in the provision, the same has to be interpreted in favour of the revenue because it is an exemption provision. In the presen....