ITO, WARD - 2(3), SILIGURI, SILIGURI vs. SMT. SAROJ RANI GUPTA, SILIGURI

The assessee in the present case is an individual, who filed her return of income for the year under consideration on 20.03.2014 declaring total income of Rs.1,81,800/-. During the year under consideration, the assessee had sold land admeasuring 58.3 decimal situated at Mouza-Debgram, Pargana-Baikunthapur, District Jalpaiguri vide six separate deeds for a total sale consideration of Rs.1,10,00,000/- and the entire capital gain arising from the said sale was claimed to be exempt by the assessee under section 54F on account of investment made in the residential house. During the course of assessment proceedings, working of long-term capital gain declared by the assessee as well as her claim for exemption under section 54F was examined by the Assessing Officer. On such examination, he found that the market value of the land sold by the assessee for a consideration of Rs.1,10,00,000/- was determined by the Registering Authority at Rs.1,16,98,750/-. He also found that two separate flats were purchased by the assessee and that too after the stipulated period of two years. When the assessee was confronted by the Assessing Officer with these adverse findings and she was asked to explain as to why her claim for exemption under section 54F should not be disallowed, it was submitted by the assessee that the entire amount towards purchase of flats was paid by her within the stipulated period of two years and since the requirement of section 54F for investing the amount of capital gain was satisfied, the purchase of the flat beyond of period of two years was not relevant. It was also submitted by the assessee that the two units of flats purchased by her on the same

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) allowed the claim of the assessee for exemption under section 54F for the following reasons given in paragraph no. 4.3 of his impugned order:- “4.3. I have perused the assessment order and submissions made by the Ld. A/R of the appellant. The first question under consideration is whether the appellant has constructed the residential house within three years or purchased it within two years, to save her from the liability of paying capital gain tax in terms provisions of Sec. 54F. The A.O., in his assessment order, has contended that the construction of fiats, in which the appellant has made investment, was not complete even after expiry of stipulated time and the appellant could not produce registered sale deed for the same during assessment. The Ld. A/R of the appellant made submission that the condition precedent for claiming benefit u/s 54F is that the

The ld. D.R. submitted that the new flat was not purchased by the assessee within the stipulated period of two years so as to make her entitled for exemption under section 54F on account of long-term capital gain. He submitted that even the flats claimed to be purchased by the assessee were two different flats having different access and since the same were incapable of joining together, it was not a case of purchase of a new residential house by the assessee as required by the provisions of section 54F. He contended that these adverse findings recorded by the Assessing Officer while disallowing the claim of the assessee for exemption under section 54F, however, were not properly appreciated by

The ld. Counsel for the assessee, on the other hand, submitted that her land was sold by the assessee on 27.04.2012 and since the agreement for purchase of new residential house was made by her on 17.07.2012 and even the entire consideration was paid to the builder well within the stipulated period of two years, she was entitled to claim exemption under section 54F. Relying on the decision of the Hon’ble Madras High Court in the case of CIT –vs.- Sardarmal Kothari [302 ITR 286] and that of the Hon’ble Bombay High Court in the case of CIT –vs.- Mrs. Hilla J.B. Wadia [216 ITR 376], he contended that the only requirement for claiming exemption under section 54F is to make the investment in purchase of a residential house and there is no requirement that the construction of the new house should be completed within that period and the assessee gets possession of the said flat. As regards the other reasons given by the Assessing Officer while denying the claim of the assessee for exemption under section 54F that the assessee had made investment in two separate flats having separate access by relying on the decision of the Special Bench of ITAT, Mumbai in the case of Sushila M. Jhaveri (supra), the ld. Counsel for the assessee submitted that this issue now stands covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in the case of CIT –vs- Smt. K.G. Rukminiamma [331 ITR 211] and that of the Hon’ble Andhra Pradesh High Court in the case of CIT –vs.- Syed Ali Adil [352 ITR 418], wherein it was held that the expression “a residential house” used in section 54 necessarily has to include buildings or land appurtenant thereto and it cannot be construed as one residential house. It was also held that section 54 only requires that property purchased by the assessee out of sale proceeds should be of residential nature and the fact that residential house consisted of several independent units could not be an impediment for granting relief under

We have considered the rival submissions and also perused the relevant material available on record. It is observed that the claim of the assessee for exemption of long-term capital gain under section 54F was disallowed by the Assessing Officer on two grounds. Firstly he held that the construction of new residential house, having not been completed within the stipulated period and the assessee having not got the possession of the said new house, the requirement for claiming exemption under section 54F was not satisfied. The ld. CIT(Appeals), on the other hand, found that the entire amount was invested by the assessee in purchase of a new residential house within the stipulated period and the assessee, therefore, had satisfied the requirement for claiming exemption under section 54F. In support of this conclusion, the ld. CIT(Appeals) relied on the decision of the Hon’ble Madras High Court in the case of CIT –vs.- Sardarmal Kothari (supra), wherein it was held that the assessee in order to get benefit under section 54F was not required to complete construction of the house and occupy the same and it was enough if the assessee had invested the entire net consideration for purchase/construction of new house within the stipulated period. This position gets further fortified by the decision of the Hon’ble Bombay High Court in the case of CIT –vs.- Mrs. Hilla J.B. Wadia (supra), wherein it was held that the only requirement for claiming exemption under section 54F is to make the investment in purchase of a residential house within the stipulated period and there is no requirement that the construction of new house should be completed within that period and the assessee gets possession of the said flat.

Secondly the reason given by the Assessing Officer for denying the claim of the assessee for benefit under section 54F was that two separate flats were purchased by the assessee having separate entrance and the

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on February 06, 2019.