TaxTMI 
TaxTMI 
2021 (10) TMI 786
X X X X Extracts X X X X
X X X X Extracts X X X X
....set i.e. 13.11.2015 when section 54F does not bar construction within one year prior to date of transfer and when the expenses upto Rs. 12,50,000/- were incurred during one year prior to the said date and expenses upto Rs. 23,63,380/- were incurred after the said date towards furnishing the villa. 4. The Learned Commissioner (Appeals) has erred in placing reliance on the decision of Parswanath Padmarajaiah Jam [2019] 102 taxmann.com 92 (Bengaluru), when the facts were different and ignoring the decision of Jurisdictional High Court in CIT vs. K Ramachandra Rao, [2015] 230 Taxman 334 wherein it was held that all investments made in the construction of the residential house within a period of one year prior to sale of original asset are eligible for exemption under Section 54F(1). 5. The Learned Commissioner (Appeals) has failed to appreciate that the registration charges of Rs. 3,12,765/-, stamp duty Rs. 17,44,200/-, statutory charges of Rs. 3,29,655/- and interior works of Rs. 36,13,380/- form part of purchase cost of new residential house (i.e., Adarsh Palm Retreat Villa) and the Appellant is entitled to claim exemption under section 54F on such investments. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee is a director and shareholder in the company M/s. Vistaar Financial Services Pvt. Ltd., and was allotted 29,97,433 shares under ESOP. Assessee sold 7 lakh equity shares on 13/11/2015 for a consideration of Rs. 13,50,00,000/- during financial year relevant to assessment year under consideration. Assessee earned long term capital gain of Rs. 13,44,03,010/-. The Ld. AO observed that assessee invested Rs. 60 lakh in new residential house and claimed exemption of an amount of Rs. 59,73,467/- under section 54F of the Act. 2.1. The Ld. AO called upon assessee to submit the details to satisfy all the conditions to claim exemption under section 54F of the Act. Assessee submitted that he purchased the new residential house on 21/02/2015 for which he invested Rs. 60 lakhs and claimed exemption under section 54F of the act. Assessee provided the following breakup of investment before the Ld. AO: Invested(date) Amount 21/Feb/2015-Paid towards registration charges-Refer Pg 2 of Sale deed 3,12,765 21/Feb/2015-Paid towards stamp duty charges-Refer Pg 8 of Sale deed 17,44,200 28/Jan/2015-Paid to builder-Refer the Statement of Account 1,23,836 1,89,663 04/Mar/....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of sale of capital asset the assessee had constructed one residential house in India. 2.5. The Ld. CIT(A) was thus of the opinion that assessee sold ESOP shares on 13/11/2015 and for claiming deduction under section 54F, the construction of the house needs to be completed within 3 years after the date of sale of capital asset. The Ld. CIT(A) held that the construction of the house at APR had already completed on 21/02/2015 and therefore assessee was not eligible for claiming deduction under section 54F for investing in the villa at APR. The Ld. CIT(A) placed reliance on following to decision: * Decision of coordinate bench of this Tribunal in case of Parswanath Padmarajaiah Jain reported in 102 Taxmann.com 92; * Decision of Hon'ble Supreme Court in case of Commissioner of Customs (Import), Mumbai vs M/s. Dilip Kumar & Co.& Ors. reported in (2018) 9 SCC 1. 2.6. The Ld. CIT(A) also observed that the assessee had incurred expenditure for interior decorator which was for making the house more comfortable. On verification of various invoices filed by the assessee, the Ld. CIT(A) held that expenditure on interiors to make the house plush and luxurious is not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as under: 4.2. The Ld. AR has submitted that the sale of ESOP shares was on 13/11/2015 and assessee had invested the capital gain arising out of the sale of shares towards stamp duty & registration + increased the balance CG toward interior works of new residential house within one year before the date of transfer of the original capital asset being the ESOP shares. He submitted that the primary condition for being eligible for deduction under section 54F stands satisfied. 4.3. The Ld. AR placed reliance on the decisions of Hon'ble Karnataka High Court in case of CIT vs K Ramachandra Rao reported in (2015) 230 Taxmann 334. The Hon'ble Court observed and held as under: "If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein, then Section 54F(4) is not at all attracted and therefore, the contention that the assessee has not deposited the amount in the Bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct." 4.4. It is also noted that Hon'ble Karnat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... respects and as required under the law, that would not disentitle the assessee from the said benefit." 4.5. 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 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. 4.6. Hon'ble Karnataka High Court analysed the conditions that needs to be fulfilled to enter exemption clause and thereafter applicability was liberally inter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exemption notification should be construed in favour of the subject. In subsequent cases, this Court diluted the principle saying that mandatory requirements of exemption clause should be interpreted strictly and the directory conditions of such exemption notification can be condoned if there is sufficient compliance with the main requirements. This, however, did not in any manner tinker with the view that an ambiguous exemption clause should be interpreted favouring the revenue. Here again this Court applied different tests when considering the ambiguity of the exemption notification which requires strict construction and after doing so at the stage of applying the notification, it came to the conclusion that one has to consider liberally." 4.10. Hon'ble Court on considering catena of decisions observed as under:- "46. The above decision, which is also a decision of two Judge Bench of this Court, for the first time took a view that liberal and strict construction of exemption provisions are to be invoked at different stages of interpreting i....