TaxTMI 
TaxTMI 
2020 (10) TMI 925
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....t of amount of Rs. 65,00,000/- invested in residential property a) The learned CIT(A) erred in confirming the action of the assessing officer in disallowing the exemption claimed under section 54F of the Act on the amount invested of Rs. 65,00,000/- in residential property under the facts and circumstances of the case. b) The learned CIT(A) erred in stating that exemption under section 54F of the Act cannot be claimed on the amount invested in residential property prior to the date of sale of original asset on the facts and circumstances of the case. c) The action of the learned CIT(A) in disallowing the exemption claimed under section 54F in respect of the investment made in residential property prior to the date of sale of original asset is against the principles laid down by the Jurisdictional High Court in the decision of CIT vs. J. R. Subramanya Bhat reported in 165 ITR 571 on the facts of the case. d) The authorities below ought to have provided the exemption under section 54F of the Act amounting to Rs. 44,10,070/- on the facts of the case e) The authorities below failed to appreciate. that exemption claimed Wider section 54F of the Act cannot be denied merely....
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....d.AO noted that possession of the property was not taken by assessee and registered sale deed was not executed in favour of assessee. Ld.AO thus came to the conclusion that, conditions for claiming exemption under section 54F did not stand satisfied. 5. He accordingly, disallowed claim of assessee and made additions amounting to Rs. 87,92,748/-, that was claimed as exemption by assessee. 6. Aggrieved by addition made, assessee preferred appeal before Ld.CIT(A). 7. Ld.CIT(A) allowed exemption claimed by assessee under section 54F to the extent of Rs. 64,00,000/- that was deposited into capital gains account scheme maintained with Indian overseas bank and state bank of India. However he disallowed exemption claimed amounting to Rs. 65,00,000/- in respect of investment made in residential property by holding that, investment in residential property was made prior to date of sale of original asset, and construction of residential property was not completed within stipulated time. Ld.CIT(A), denied deduction u/s.54F by observing as under: "4.8 Thus after discussing a plethora of' decisions on the issue and following decision of Karnataka High Court in the case JR S....
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....f 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..." 4.10 So in view of the above binding decision of the Hon'ble Supreme Court, the exemption provision needs to be interpreted strictly and in case of doubt the benefit would go to the revenue, So the action of the AO in disallowing exemption under Section 54F of the Act in relation to investment in construction to the extent of Rs. 65,00,000/- is upheld, although for the reasons as discussed supra." 8. Aggrieved by order of Ld.CIT(A), assessee is in appeal before us now. 9. At the outset, Ld.AR submitted that, Ld.CIT(A) remanded to Ld.AO vide letter dated 08/01/2019, for verification whether, amount of Rs. 64 Lacs, was deposited by assessee in capital gains account scheme. 10. In response to the same, Ld.AO filed report vide letter dated 24/01/2019, wherein categorically it is mentioned that assessee is eligible to claim exemption under section 54F of the total sale consideration for year under consideration. He referred to para 4.3 of order by Ld.CIT(A), wherein relevant portion of remand report is reproduced, th....
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....uction of residential property cannot be allowed to assessee, since property could not be constructed within period of 3 years. There is no finding by authorities below that, delay in construction was attributable to assessee but was beyond the control of assessee since the construction was carried out by the builder. 16. Assessee in the synopsis filed before this Tribunal gave details of date wise payments, made to the builder for acquisition of property as under: a) Payments made prior to sale of original asset Date Amount (Rs.) 21.08.2013 1,00,000/- 13.09.2013 30,00,000/- 04.12.2013 19,00,000/- 16.12.2013 15,00,000/- Total (a) 65,00,000/- b) Payments made after the sale of original asset Date Amount (Rs.) 24.08.2015 5,83,000/- 08.12.2017 18,31,500/- 03.05.2018 23,76,000/- 04.04.2019 24,75,000/- 05.07.2019 10,00,000/- 05.07.2019 24,69,500/- Total (b) 1,07,35,000/- Total Payments (a+b) 1,72,35,000/- 16. In decision relied by Ld.AR in case of Ms.Moturi Luxmi vs ITO (supra), decisions referred by Ld.CIT(A) was considered by Hon'ble Madras High....
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.... 17. It is not necessary for this Court to go into the question of mode and method of computation of capital gain as there is no dispute in this regard, which requires adjudication in this appeal. 18. The question is, whether any part of the capital gain from transfer of the residential house is exempt from the capital gain tax and if so to what extent? 19. The conditions precedent for exemption of capital gain from being charged to income tax are: (i)The assessee should have purchased a residential house in India either one year before or two years after the date of transfer of the residential house which resulted in capital gain or alternatively constructed a new residential house in India within a period of three years from the date of the transfer of the residential property which resulted in the capital gain. (ii)If the amount of capital gain is greater than the cost of the residential house so purchased or constructed, the difference between the amount of the capital gain and the cost of the new asset is to be charged under Sect/On 45 as the income of the previous year. (iii)If the amount of the capital gain is equal to or les....
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.... constructed within a period of three years after the date of transfer of the residential house. It is not in dispute that the new residential house has been constructed within the time stipulated in Section 54(1) of the said Act. 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 be 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 the land on which the residential house is constructed, the capital gain is not to be charged under Section 45 of the said Act." "16. From the above, it is dear that the intention of the Legislature was to either purchase before or after the date of sale and the word 'purchased or 'constructed' used in the Notes on Clauses amply makes the intention clear. In the light of the above discussions, we hold that the substantial question of law is required to be answered in ....
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.... Constitution Bench in Hari Chand Case(supra). 20. Hon'ble Court thus summarised their observation as under:- "52.To sum up, we answer the reference holding as under: 1) Exemption notification should be interpreted strictly; the burden of Proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands overruled. 21. Now coming to the decision of Hon'ble Madras High Court in case of C Aryama Sundaram (Supra) relied in case of M/s Moturi Laxmi Vs. ITO (Supra). Hon'ble Court first analysed the conditions assessee fulfilled to enter exemption clause and thereafter applicability was liberally interpreted. 22. Similar is the analysis by Hon'ble Madras High Court in other decisions referred to in M....