TaxTMI 
TaxTMI 
2026 (7) TMI 1640
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....ed by his mother vide sale deed dated 31.03.2008 for a consideration of Rs. 21,17,000/- (including stamp duty). After the demise of his mother and family settlement, the assessee received 50% share holding of the above property and converted the same as capital asset i.e. land into stock in trade with the date of conversion as 01.04.2017. On converting the capital asset into stock in trade, the assessee declared long term capital gain u/s 45(2) of the Act as under:- Fair Market value of the property (stamp valuation) (9510 X 11125 X 1/2) Rs. 5,28,99,375/- Less: Indexed cost of acquisition (Rs. 21,17,0000 X 1/2 X 272/129) Rs. 22,31,876/- Rs. 5,06,67,499/- Less: Deduction u/s. 54F being construction of new house Taxable Long Term Capital Gains Rs. NIL 2.1. The return was taken for limited scrutiny assessment, and assessment order was made assessing the total income at Rs. 2,91,89,313/- (after current year business loss set off of Rs. 1,59,99,246/-). The AO made a single addition of Rs. 4,51,31,369/- on account of Long Term Capital Gain and also rejected the claim of deduction u/s. 54F of the Act. 3. Aggrieved, against the assessmen....
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.... spirit of the section. As the section contemplates investment of the net consideration in specified assets for a minimum period and as earnest money or advance is a part of the sale consideration. The Board have decided that if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of asset, the amount so invested will qualify for exemption under section 54E. Circular: No. 359 [F. No. 207/8/82-IT(A-II)] dated 10-05-1983 This is for Section 54E but he same analogy is for Section 54D in my considered view. It is also observed that the Appellant has given view that benefiting/exempting sections of the Act should be liberally construed to give benefit/relief to assessee intended to be benefited/relieved. The appellant has relied on following decisions: i. CIT v/s. Gwalior Rayon Silk Mfg. Co. Ltd. (1992) 104 CTR 243 (SC); (1992) 196 ITR 149 (SC). Gist of the judgement is enclosed at Pages No. 9 & 10. ii. Bajaj Tempo Ltd. v/s. CIT (1992) 104 CTR 116 (SC); (1992) 196 ITR 188 (SC). iii. CIT v/s. J.H. Gotla (1985) 45 CTR 363 (SC); (1985) 156 ITR 323 (SC). iv. C. W....
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....xmann.com 72 (Kolkata enclosed at Pages No. 42 & 43 2(4), Siliguri (2017) 86 Trib.). I note that this includes two judgements of Surat Tribunal and ITAT, Ahmedabad which are directly applicable to instant case. In view of the aforesaid factual matrix and legal decision of Hon'ble Supreme Court and Hon'ble Jurisdictional ITAT which are binding on me, Ground 1 & 2 are decided in favour of the appellant. 4. Aggrieved against the appellate order, Revenue is in appeal before us, raising following Grounds of Appeal:- 1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in the allowing the deduction u/s 54F of the I.T. Act, disallowed by the Assessing Officer, despite the fact that the amount of the net consideration which is not utilized by him for the construction of the new asset and also not deposited by him in an account in any such specified bank or institution before the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 of the I.T. Act in contravention to the provisions of section 54F(4) of the I.T. Act. 2) On the facts and in th....
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....alt with together. 6. Grounds relating to cost of land purchased before the transfer of the original asset. The principal contention of the Revenue is that the assessee had purchased the plot before the date of transfer of the original capital asset and therefore, the cost of such land could not be considered while computing exemption under section 54F. The Ld AO proceeded on the premise that since section 54F provides for construction of a residential house within three years after the date of transfer, every component of investment, including acquisition of land, should necessarily be made only after such transfer. In our considered opinion, the above interpretation is not borne out either by the language of the statute or by the judicial precedents governing the issue. 6.1. Section 54F(1), insofar as it relates to construction of a residential house, merely provides that the assessee should have constructed one residential house within three years after the date of transfer of the original asset. The provision does not prescribe that the land on which such residential house is ultimately constructed should itself have been acquired only after the date of transfer. Had the ....
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.... of the provision. The Ld CIT(A) has rightly observed that the same principle applies while interpreting section 54F, which is likewise a beneficial provision intended to promote investment in residential housing. The Circular reflects the legislative intent that exemption provisions relating to capital gains should receive a pragmatic and purposive interpretation rather than one founded upon technicalities. 7.1. It is equally well settled by a long line of decisions of the Hon'ble Supreme Court, including Bajaj Tempo Ltd. v. CIT, K.P. Varghese v. ITO, J.H. Gotla, and Gwalior Rayon Silk Manufacturing Co. Ltd., that provisions granting incentives or exemptions intended to encourage specified economic activities deserve liberal construction so as to advance the object of the legislation. Section 54F is a beneficial provision enacted to encourage investment in residential housing. Once the substantive conditions are fulfilled, the benefit should not ordinarily be denied on the basis of an interpretation importing conditions not expressly found in the statute. 7.2. This apart the Revenue has neither disputed that the residential house was ultimately constructed within the per....
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....s not appropriated or utilized before the due date of filing the return, the unutilized amount should be deposited in the Capital Gain Account Scheme before such due date. The object behind sub-section (4) is to ensure that the unutilized consideration remains earmarked for the specified purpose until it is actually invested in the new residential house. The provision is thus intended to safeguard the future utilization of the funds and not to deny exemption where the investment has, in fact, been made within the period specifically permitted by the statute. In other words, the deposit contemplated under section 54F(4) is a mechanism for preservation of unutilized funds. Where the funds are actually utilized within the statutory period, the purpose underlying the provision stands substantially achieved. The issue is no longer res integra, the Hon'ble Karnataka High Court in CIT v. K. Ramachandra Rao (2015) 56 taxmann.com 163 held that where the assessee invests the entire capital gains in construction of the residential house within the period of three years prescribed under section 54F, exemption cannot be denied merely because the amount had not been deposited in the Capital ....