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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: SHRI JOGINDER SINGH & SHRI ASHWANI TANEJA
Date of hearing : 22-08-2016 Date of pronouncement : 24-08-2016 O R D E R
Per ASHWANI TANEJA, AM
This appeal has been filed by the revenue against the order of the Ld.CIT(A) dt 30-10-2014 passed against the assessment order u/a 143(3) dt 31- 01-2014 for A.Y. 2011-12 on the following grounds:- “On the facts and in the circumstances of the case and in law, 1) the Ld.CIT (A) erred in holding that the condition relating to "construction" of flat instead of condition relating to "buying" of the flat is applicable while allowing the exemption of long term capital gain under section 54 of the Income Tax Act, 1961. On the facts and in the circumstances of the case and in law, 2) the Ld.CIT (A) erred in allowing the exemption of long term capital gain under section 54 of the Income Tax Act, 1961, wherein purchase of residential house is not within the period of two years from the transfer of original asset.”
None appeared on behalf of the assessee despite of service of notice by RPAD. However, we find that the matter could be disposed of even without the presence of the assessee. Therefore, we heard the Ld. Ld. Departmental Representative and the appeal is disposed of on the basis of material available on record.
The solitary issue raised by the revenue challenges the action of the Ld.CIT(A) for allowing exemption of long term capital gain (LTCG in short) claimed by the assessee u/s 54 of the Act. 4. The brief facts and background of the case are that during the year under consideration assessee sold a flat for Rs.1,17,00,000 on 04-03-20111 and earned LTCG of Rs.69,23,238 and claimed it as exempt u/s 54 of the Act on account of investment in new flat at Chembur, Mumbai vide registered agreement dt 07-09-2011 for an aggregate amount of Rs.1,27,00,932/-. Upto the due date of return, i.e. 30-09-2011 the assessee had made payment of Rs.52,58,953. But the Assessing Officer rejected the claim of the assessee u/s 54 of the Act on the ground that the assessee had not received possession of the said flat and construction was still incomplete. It was also noted by the Assessing Officer that the purchase of the flat denotes absolute control over the property which the assessee did not acquire as the building was not complete. Being aggrieved, the assessee filed appeal before the Ld.CIT(A) and made exhaustive submissions to show that all the conditions prescribed u/s 54 were duly complied with and the Assessing Officer has misunderstood the case and that is why benefit of exemption u/s 54 was wrongly rejected by the Assessing Officer under misconception of law and facts. The Ld.CIT(A) considered the submissions of the assessee and found force therein; therefore, he allowed the exemption reversing the action of the assessing officer with the following observations:
“2.3 1 have gone through the contention of the appellant as well as that of the A.0. I have perused the copies of agreements produced before me in regard to the claim of deduction made by the appellant u/s.54 of the Act. The claim of exemption was primarily denied on the ground that the appellant failed to take possession new residential property within two years of sale of old residential property and the building was not complete as on 0303.2013 The A.O. throughout the assessment order went on applying the condition of purchase of new residential property within two years of sale of old property, however, she overlooked the prevailing condition of construction of new property within three years of sale of old property. In the instant case, the appellant sold the flat at Vanmali OHS, Navi Mumbal on 04.03,2011 for a consideration of Rs.1,17,00,000 and capital gain thereon was arrived at Rs.69,23,238/-. The appellant had purchased a new flat at Vijay Shree Krishna Homes in Navi Mumbai on 07.09.2011. The appellant made total payment of Rs.52,58,953/- upto 30/09/2011 to the builder. As per agreement, the appellant was to make payment in installments and builder was to hand over the possession of the flat after construction. Thus, in the present case, the condition of construction of new house within three years of sale of old property is applicable.
2.4 The appellant had sold the property on 04.03.2011 and, therefore, he was required to construct a new residential property by 04.03.2014. The purpose of section 54 is to allow exemption to the assessee of long term capital gain arising from sale of residential house if the capital gain is invested in construction of new residential house within a period of three years from the date of transfer and, therefore, in case the assessee had invested the capital gains in construction of a new residential house within a period of three years, this should be treated as sufficient compliance of the provisions, and it is not necessary that the possession of the flat should also be taken within the period of three years. In the case before me, within the of three years he had invested Rs. 1,03,50,932/- which was more than the amount of capital gain forming substantial part of his sale consideration, in construction of new residential house. Thus, in my view, the claim of exemption cannot be denied on the ground that the possession of the flat had not been taken within the period of three years.
2.5 The A.O. has tried to distinguish the case of the appellant and CBDT circular no.672 dated 16.12.1933, relied upon by the appellant on the ground that the same is applicable to specified authorities. In this regard, the reliance is to be placed on the case of Srnt. Sunder Kaur Sujan Singh Gadh (2005) 3 SOT 206, Mumbai Bench of Tribunal, wherein it was held that the builder would fail in the /category of other institutions and, therefore, booking of the flat with the builder has to be treated as construction of flat by the assessee. 2.6 I have gone through the assessment order & the submission made appellant in this regard. It is not in dispute that the appellant has purchased residential flat and has invested the entire capital gain for the purchase of said flat- However, the dispute is that since the appellant has not received the possession within the specified period, the A.O. has denied the exemption. It is also pertinent to note that out of the entire capital gain of Rs. 69,23,238/- the appellant had invested Rs. 52,58,953/- on or before furnishing of return u/s 139(1). Whereas the balance amount of Rs. 16,64,285/ - was not deposited in Capital Gain Account for making the payment for such purchasesubsequently. I am of the considered view that merely because the appe11ant has not received possession of flat within the prescribed time, it Should not be the ground for disallowance under section 54 of the -Act as held by the Hon'ble Bombay High Court in Hula J.B. Wadia considering the fact that assessee has invested a sum of Rs. 52,58,953/-.He is eligible for deduction to the extent of Rs. 52,58,953/-on the amount involved for purchase of flat as against Rs. 69,23,238/- claimed by appellant. The A.O. is, therefore, directed to recompute the capital gain accordingly.”
During the course of hearing before us, the Ld.DR supported the order of the Assessing Officer.
It is noted by us that the assessee had sold the property on 04- 03-2011 and, therefore, as per section 54, the assessee was required to construct a new residential house by 04-03-2014 since section 54 allows exemption to an assessee of long term capital gain arising from sale of residential house if the amount of capital gain is invested in construction of new residential house within a period of 3 years. There is no specific requirement that assessee should also obtain the possession of the same within the period of three years. The emphasis is upon the utilization of the amount in purchase / construction of the new residential house. It is noted that undisputedly, the assessee invested a sum of Rs.1,03,50,932 which was more than the capital gain earned by the assessee. In our opinion, the Ld.CIT(A) rightly drew support from the circular issued by the CBDT No.672 dt 16-12-1993. It is further noted by us that section 54 is a beneficial provision intending to provide benefits to the assessee with a view to boost investment in housing infrastructure. Thus, while interpreting such provisions, an effort should be made in the direction so as to find out how the benefit of deduction can be granted and not to find out how the same can be denied. In case the assesse has fulfilled the conditions in substance, then the benefit should not be denied on mere technicalities. In our view, the assessee has made compliance of the requisite conditions of section 54 and, therefore, the benefit has been rightly granted by The CIT(A). Nothing could be brought on record by the Ld.DR to negate the factual findings of the Ld.CIT(A) and no contrary judgement has been brought to our knowledge to contradict the view taken by the Ld.CIT(A). In our considered views, the Ld.CIT(A) has rightly relied upon the judgment of Hon’ble Bombay High Court in the case of CIT vs Hilla JB Wadia (1995) 216 ITR 376 (Bom). We do not find any justification to make any interference in the order of the Ld.CIT(A), and therefore, the grounds raised by the revenue are dismissed.
In the result, the appeal filed by the revenue is dismissed. Order pronounced in the court on this 24th day of Aug, 2016.