2020 (9) TMI 416

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.... heard Mr.Ramanakumar, learned counsel appearing for the appellant - assessee and Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the respondent - Revenue. 4. The facts, which are necessary for answering the substantial question of law framed for consideration, are as follows : The assessee, who is an individual, filed her return of income for the assessment year under consideration namely 2013-14 on 07.4.2014 for a total income of Rs. 2,52,480/-. The return of income was processed under Section 143(1) of the Act. Subsequently, the case was selected for scrutiny and the assessment was completed under Section 143(3) of the Act by order dated 23.3.2016 whereby the Assessing Officer disallowed the investments made by the assessee prior to the sale of asset, which was on 15.11.2012. 5. As against the said order of assessment dated 23.3.2016, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)-4, Chennai-34 [hereinafter called the CIT(A)]. However, the appeal was dismissed vide order dated 29.11.2016. Aggrieved by that, the assessee filed further appeal before the Tribunal, which also dismissed the appeal by the impugned order. 6. The ....

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....tial question of law, arises for consideration. Accordingly, the tax case appeal is devoid of merits and the same is dismissed." And (ii) in the case of C.Aryama Sundaram Vs. CIT [reported in (2018) TaxCorp (DT) 73811] wherein one of the substantial questions of law framed for consideration was when capital gain arises from sale of building and/or land appurtenant thereto and a residential house is constructed within three years from the date of such sale, whether the cost of the new asset, which is eligible for set-off against capital gain, would include the cost of the land, if such land had been purchased three years prior to sale of the property from which capital gain arose. 7. In fact, the argument of the Revenue in the said case is identical to that of the argument made by Mrs.R.Hemalatha, learned Standing Counsel appearing for the Revenue in the case on hand. She has argued that the language of Section 54(1) of the Act is very clear and that this being a benefit given to the assessee, it requires a strict interpretation. In this regard, she has referred to the decision in the case of Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar & Co. and Ors [repo....

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.... the cost of the new asset is to be charged under Section 45 as the income of the previous year. (iii)If the amount of the capital gain is equal to or less than the cost of the new residential house, the capital gain shall not be charged under Section 45. 20. What has to be adjusted and/or set off against the capital gain is, the cost of the residential house that is purchased or constructed. Section 54(1) of the said Act is specific and clear. It is the cost of the new residential house and not just the cost of construction of the new residential house, which is to be adjusted. The cost of the new residential house would necessarily include the cost of the land, the cost of materials used in the construction, the cost of labour and any other cost relatable to the acquisition and/or construction of the residential house. 21. A reading of Section 54(1) makes it amply clear that capital gain is to be adjusted against the cost of new residential house. The condition precedent for such adjustment is that the new residential house should have been purchased within one year before or two years after the transfer of the residential house, which resulted in the c....

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....the provisions had to be construed strictly and the benefit of any ambiguity should lean in favour of the Revenue. 9. The Hon'ble Supreme Court in the case of Sh.Sanjeev Lal Vs. CIT [reported (2014) 365 ITR 0389] considered the scope of Section 54 of the Act and held as follows : "In addition to the fact that the term "transfer" has been defined under Section 2(47) of the Act, even if looked at the provisions of Section 54 of the Act which gives relief to a person who has transferred his one residential house and is purchasing another residential house either before one year of the transfer or even two years after the transfer, the intention of the Legislature is to give him relief in the matter of payment of tax on the long term capital gain. If a person, who gets some excess amount upon transfer of his old residential premises and thereafter purchases or constructs a new premises within the time stipulated under Section 54 of the Act, the Legislature does not want him to be burdened with tax on the long term capital gain and therefore, relief has been given to him in respect of paying income tax on the long term capital gain. The intention of the Legislature or the pu....

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....assessee. 13. In another decision of the Karnataka High Court in the case of CIT Vs. J.R.Subramanya Bhat [reported in (1987) 165 ITR 0571], the Income Tax Officer rejected the claim of the assessee on the ground that construction of the new building had commenced much earlier to the sale of the old building. This finding was reversed by the Court by holding that the date of sale of the old building was immaterial, that what was required to be seen was as to whether the assessee constructed the building within two years from the date of sale of the old building and that he was entitled to the relief under Section 54F of the Act. The same effect is in the decision of the Punjab & Haryana High Court in the case of CIT, Faridabad Vs. Shri.Kapil Kumar Agarwal [reported in (2015) TaxCorp (DT) 62501] wherein it was held that Section 54F of the Act nowhere envisages that the sale consideration obtained by the assessee from the original capital asset is mandatorily required to be utilized for the purchase or construction of a house property. 14. In the decision of the Kerala High Court in the case of ITO Vs. K.C.Gopalan [reported in (1999) 107 Taxman 591], a learned Single Judge held ....