Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. Sh. Ram Prakash Miyan Bazaz., S

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 166 / 2014 COMMISSIONER OF INCOME TAX, JAIPUR-II, JAIPUR ----Appellant Versus SH. RAM PRAKASH MIYAN BAZAZ., S-225, MAHAVEER NAGAR, TONK ROAD, JAIPUR ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.D. Mathur & Mr. Prateek Kedawat for Mr. R.B. Mathur For Respondent(s) : Mr. Archit Bohra _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 13/09/2017 1. By way of this appeal, the appellant has assailed thejudgment and order of the tribunal whereby tribunal has allowedthe appeal of the assessee and reversing the view taken by theCIT(A) as well as AO. 2.This court while admitting the appeal on 12.7.2016 framedfollowing substantial question of law:- “Whether on the facts and in circumstancesof the case, the ITAT was justified in law indeleting the addition of Rs.1,27,14,208/-made on account of long term capital gainby disallowing the claim u/s 54F as theassessee was having more than one 3.Counsel for the appellant Mr. Mathur has taken us to theorder of AO more particularly detail with regard to assessee andreply filed thereto which reads as under:- “Please refer to your rely dt. 18.7.2011:you have submitted a copy of booklet ofyou have submitted a copy of booklet of EMAAR MGF Land Limited and formregarding booking of a flat of total valueRs.79,66,275/- which includes charges ofregarding booking of a flat of total valueRs.79,66,275/- which includes charges of Rs.5,33,250/- for IDC & EDC Rs.2,50,000/- for car parking slot and Rs.75,000/- forclub membership. The agreement as perstamp paper it was purchase on 10[th] Dec.2009 from HP Singh Stamp Agent PatialaHouse, New Delhi. It means you haveentered into agreement for purchase of flatafter due date of furnishing of return ofincome. Please justify your claim?”club membership. The agreement as perstamp paper it was purchase on 10[th] Dec.2009 from HP Singh Stamp Agent PatialaHouse, New Delhi. It means you haveentered into agreement for purchase of flatafter due date of furnishing of return ofincome. Please justify your claim?” 4.He also taken us to the order passed by the authority withregard to comparison to statement which is reproduced as under:- IntentionThe intention and actual use ofIntention was to eitherthe house was always asearn capital gain bysecond residential house of thesurrenderingtheself and family membersbooking to builder/inmarket before gettingthe ownership of flat oruseforbusinesspurposes on gettingflats.Present UseUsedforresidence.Used for assessee’sMaintenance charges are beingbusiness.Thepaid by assessee from his ownmaintenance chargesaccountare being paid fromthefirmwhereassessee is a workingpartner.PaymentAll cheques delivered beforeThe payments made in30/09/2009tobuilders,the installments aspayment made to architect forintentionistosupervisionandbalancemaximize gain byamount deposited in Capitalselling even beforeGain for registration and otherpossession.expenses.Difference inCBDT has granted the benefitThesearesimpleStatusofto the Assessee that anRights to acquire theBookingsassessee is entitled to theflat.benefit of sections 54 and 54F,if an assessee gets anallotment under the self-financing scheme and pays thefirst installment of the cost ofthe construction. Therefore thisbooking is deemed to beCompleted House for Section54F. Assessee wishes to emphasize that Emar MGFflat is the second residential house for thepurpose of capital gain and theNoida/Chandigarh were not the residentialhouses owned by assessee at the time oftransfer of original asset i.e. on 05/06/2008.” 4.1He also pointed out the finding on the points raised before AO which reads as under:- Assessee wishes to emphasize that Emar MGFflat is the second residential house for thepurpose of capital gain and theNoida/Chandigarh were not the residentialhouses owned by assessee at the time oftransfer of original asset i.e. on 05/06/2008.” 4.1He also pointed out the finding on the points raised before AO which reads as under:- “14. After going through rival submissionsfollowing points emerge:- 1. Section 54F applicable as the original assettransferred is not a residential house: This is not disputed that for the purpose ofcomputing tax of LTCG, Section 54Fprovisions have to be taken into account.According to Section 54F(1) the appellant canclaim exemption of LTCG if a residential houseis purchased or constructed from the netconsideration from the transfer of the originalasset. 2. As per Proviso to Section 54F(1) exemptionnot available if the assessee owns more thanone residential house on the date of transferof the original asset: As per Proviso (a) and(b) to Section 54F(1) if the assessee ownsmore than on residential house on the date oftransfer of the original asset, no exemptioncan be allowed to him on account ofinvestment of capital gains in the residentialflat constructed or purchased. 3. Date of transfer of original asset should betaken as 5.6.08 and not 3.10.08 it is notdisputed that RICO acquired land of theappellant, for which the appellant receivedconsideration from RICO, which is taxableunder the head Long term capital gains. Inthe computation filed with return theappellant has taken the date of lastinstallment paid by RICCO on 3.10.08 as thedate of sale consideration for computingcapital gain. The AO has also accepted3.10.08 as the date but in my view the dateon which land was acquired through order ofRICCO (copy enclosed as Annexure-1 of thisorder) which is 5[th] June, 2008 should be takenas the date of transfer of land. This date wasso accepted as the date of transfer by theappellant through reply dt. 23.1.2013 as well. 4. On the date of transfer of original assetthat is land acquired by RICCO the appellantowns more than one residential house: Whether the date of transfer is taken5.6.2008 or 3.10.2008, it is not disputed thatas per Balance sheet ending on 31.3.2008 theappellant owns following flats: 1. S-225, Mahaveer nagar, Jaipur 2. Flat No. 101, block No.43, Heritage City,GurgaonGurgaon 3. ATS Paradiso, Greater Noida flat 4. ATS Prelude-Golf Meadow Chandigarh flat. The falt at mahaveer nagar, jaipur is acceptedby the appellant as the residential flat by theappellant, but exemption u/s 54F will not beavailable to him for investment in MGFGurgaon residential flat because as per hisbalance sheet for the period ending on31.3.2008 the appellant owns other flats aswell. The flat in Heritage City, Gurgaon can betaken out of the purview of residential flatsowned by the appellant because this flat isowned jointly with brother and is used forguest house purposes etc. but besides thisthere are two more flats one at ATS, Noidaand the other one at Golf Meadow,Chandigarh. The argument that the flats at Noida andChandigarh are just booked and notpossessed does not hold water, because if thesame logic is applied, no exemption would beavailable to the appellant because the flat atGurgaon with respect to which exemption isbeing sought from capital gains is also justbooked and possession has not been given tothe appellant in the AY under consideration.” 4.2He has also taken us the CBDT circular dt. 15.10.1986 and the finding of AO which reads as under:- The argument that the flats at Noida andChandigarh are just booked and notpossessed does not hold water, because if thesame logic is applied, no exemption would beavailable to the appellant because the flat atGurgaon with respect to which exemption isbeing sought from capital gains is also justbooked and possession has not been given tothe appellant in the AY under consideration.” 4.2He has also taken us the CBDT circular dt. 15.10.1986 and the finding of AO which reads as under:- “The CBDT Circular no. 471 (1986) 162 ITR(St.) 41 dated October 15, 1986 has beenissued clarifying that when the DelhiDevelopment Authority issues the allotmentletter to an allottee under its self-financingscheme, on payment of the first installment ofthe cost of construction, the allottee gets titleto the property and such allotment should betreated as cost of construction for the purposeof capital gains. Therefore substantial amount invested in flatseven if the possession not formally handedover to the appellant would be taken as flatsallottedtotheappellantorconstructed/acquired/owned by the appellant,and investment in Gurgaon MGF flat wouldhave qualified for exemption u/s 54F had theappellant not been owning other thanMahaveer Nagar, Jaipur residential flat, on5.6.2008 or 3.10.2008. But the flats at Noidaand Chandigarh in which substantial amountshad been invested and the flats are appearingin the Balance sheet of the appellant as on31.3.2008 (copy of balance sheet enclosed asAnnexure-2 of this order) have to be taken asresidential flats owned by the appellant on thedate of transfer – whether this date is taken at5.6.2008 which is the date of RICCO order ofas informed by the appellant – because asruled by Hon’ble Delhi High Court in the caseof CIT vs R L Sood-245 ITR 727 (Del) and asclarified by substantial investment inresidential flats without the possession beinghanded over has to be treated as flatsacquired/purchased for the purpose of capitalgains. 5. Noida and Chandigarh flats argued wronglyas not residential flats. The appellant has come forth withcontradictory arguments. On one hand he isstating that the investment in Noida andChandigarh flats had been made even beforeacquisition proceeds were received by theappellant, that flats were acquired/booked forinvestment purposes to earn capital gains, buttill date the flats are retained that is in 2013the flats are in possession of the appellant.The other argument is that Noida andChandigarh flats are being used for businessand cannot be branded as residential flats fordenying exemption u/s 54F becausemaintenance charges of these flats are beingpaid by the firm in which appellant is apartner, also does not hold water, because theflats at Noida and Chandigarh appear in thepersonal Balance sheet of the appellant, it isnot disputed by the appellant that the flats areacquired/owned by him. The argument thatinvestment in these flats was made evenbefore the sale consideration from landacquisition from government was received bythe appellant, goes against the appellant,because he is himself accepting that the flats at ATS Paradiso, Noida and ATS Golf Meadow,Chandigarh were with him on the date oftransfer. Just because maintenance charges ofthese two flats are being paid by the firm(Miyanbazaz Exports) in which appellant is apartner, does not stop these flats from beingresidential flats as the actual character ofthese flats is residential flats, rather they areluxurious residential flats located in prestigiousresidential complexes built by well knowncompany – ATS – at Noida and Chandigarh. Noproofs other than maintenance chargespayments were filed in support of theargument that the flats at Noida andChandigarh are not residential flats. Thoughthe flats are being argued used for businessbut no business income has been declared bythe appellant. The AO through letter dated20.6.2011 asked the appellant to file copy ofreturn (copy of this letter is enclosed asAnnexure-3 of this order), Audit report etc butthe appellant through letter dated 6.7.2011instead of filing of copy of return informed theAO that the return had been filed on30.9.2009 which might be available on theAO’s record. The reply dated 6.7.2011 isenclosed as Annexure-4 of this order. With this reply, computation of income wasenclosed and summary of prepaid taxes likeTDS etc, but no copy of return was filed.” 4.3He contended that the tribunal has committed serious errorin reversing the view taken by the CIT(A) & AO. 5.Counsel for the respondent has taken us to the order oftribunal which reads as under:- “Undisputedly, the assessee became owner ofthe Noida flat only on 10.7.2010 and has notacquired ownership of the Chandigarh flat tilldate. Thus, picture becomes clear in respect ofproviso (a)(i) to section 54F of the Act that theresidential house mentioned therein has adifferent connotation because ‘house’ means abuilding in its normal residential conditionswhich is found fit for living by human-beingsand not a house under construction’ and thishouse should be completely owned by the 4.3He contended that the tribunal has committed serious errorin reversing the view taken by the CIT(A) & AO. 5.Counsel for the respondent has taken us to the order oftribunal which reads as under:- “Undisputedly, the assessee became owner ofthe Noida flat only on 10.7.2010 and has notacquired ownership of the Chandigarh flat tilldate. Thus, picture becomes clear in respect ofproviso (a)(i) to section 54F of the Act that theresidential house mentioned therein has adifferent connotation because ‘house’ means abuilding in its normal residential conditionswhich is found fit for living by human-beingsand not a house under construction’ and thishouse should be completely owned by the assessee at the relevant time. The Legislatorsin their wisdom have used two different termsto refer to the original residential house soldas ‘old asset’ and by referring to the newresidential house to be purchased orconstructed as the case may be, as ‘newasset’. The collective reading of this sectionmakes it clear that two conditions should besatisfied and both are co-exist at the relevanttime of transfer of original asset (1) theassessee must owned the residential house onthe date of transfer and (2) income from suchresidential house should be chargeable underthe head ‘income from other house property’.If the above two conditions co-exist, theassessee becomes disentitled to theexemption section 54F of the Act, particularlywhen, the assessee owns such a house otherthan the original asset and its income ischargeable as a income from house propertyas per the provisions of section 22 of the Act.The assessee needs to be owner rather legalowner of that house. Hon’ble Supreme court inthe case of CIT vs. Podar Cement (P) Ltd. etc.reported in 226 ITR 625 (SC) has clearlyexplained this position by holding that ‘owner’is a person who is entitled to receive incomefrom the property in his own right. In theabsence of completion and possession by wayof registration and transfer of its title etc., ofthese two flats booked by the assessee on thedate of transfer original capital asset i.e.05.06.2008, the question of assessing ‘Incomefrom House property’ under section 22 of theAct will not arise. The Ld. CIT(A) hasmisdirected himself treating even ‘right toacquire a flat’ as owned by the assessee. Inour considered opinion, the conclusion of Ld.CIT(A) is not correct. Thus with regard toNoida & Chandigarh flats it can be safelyconcluded that these were not owned by theassessee on 5.6.2008 in terms of section 54Fof the Act. The Ld. CIT(A) has observed (atpage 14 of her order) that “the argument athtthe flats at Noida and Chandigarh are justbooked and not possessed does not holdwater, because if the same logic is applied, noexemption would be available to the appellantbecause the flat at the Grugaon with respectto which exemption is being sought fromcapital gain is also just booked and possessionhas not been given to the appellant in theassessment year under consideration”. The above observation seems to be plausibleat the first reading. Why – the booking atNoida/Chandigarh is to be treated differentlyfrom the booking of Gurgaon flat. But, whenthis aspect is examined in depth withratiocination the above observation becomeswrong and contrary to the intention of the Act.The meaning of term ‘owns’ used in section54F (conditions) - ‘owns more than oneresidential house on the date of transfer of thecapital asset’ - has a different meaning. Thathouse needs to be. This owner means a legalowner who is entitled to receive income fromthe property in his own right. This houseshould be real and not symbolic. In theabsence of possession, registration title etc.question of assessing ‘income from houseproperty’ under section 22 of the Act does notarise. Thus, Ld. CIT(A) has failed todifferentiate between the nature of assetowned by the assessee when a flat is bookedhe has a ‘right to acquire’ and this ‘right toacquire’, is not equivalent to ‘own’ a house. Onthe other hand the parameters which apply toinvestment of ‘capital gain’ in the constructionor in the purchase of a house within two yearsof sale of the original asset. That is why theCBDT has issued circular No. 471 dated15.10.1986 and circular No. 672 dated6.12.1993 which clarify that the amount paidtowards booking as to be treated towards‘construction’ for the purpose of section54/54F. This assessee made payment to thebuilder Emaar – MGF Gurgaon before30.9.2009 for buying a II residential house.Builder has promised to give possession of thehouse before 5.6.2010 i.e. within 2 years ofthe sale of the original asset but could not givepossession by that time. Section 54F is abeneficial provision for promoting theconstruction of residential houses and requiresan assessee to construct houses and forachieving that purpose to intention of theLegislature is to encourage investments in theacquisition of a residential hose andcompletion of construction or occupation is notthe requirement of the law. In view of theabove discussion the assessee cannot betreated owner of Noida/Chandigarh flats on5.6.2010. At the same time, he to be allowedbenefit of section 54F because he has investedthe capital gain as per the requirement of theAct. 12. We have found that section 54F of the Actis a beneficial provision aimed at promotingconstruction or addition of new residentialhouses to meet out the needs of the society inrespect of increasing demand of houses. Thus,the intention of the Legislator is to encourageand give an impetus towards investments inthe acquisiton of ‘residential houses’. Theprovisions of section 54F of the Act prescribesand proscribes the conditions for availing itsbenefit. The terms/words used in this sectionhave been very selectively & prudentiallychosen by the Legislators. This benefit isavailable against the ‘capital gain’ arising outof transfer of any ‘long term capital asset’ notbeing a residential house and which has beenreferred to as an ‘original asset’. This benefit isavailable subject to the condition that if the‘net-sale-consideration’ is invested either inpurchasing or construction a ‘residentialhouse’ within the limits of time prescribed insection 54F. However, if the assessee ownedmore than one residential house other thanthe ‘new asset’ on the date of transfer of the‘original asset’, this benefit will not beavailable to him. In the given case,undisputedly, the assessee had sold a capitalasset in the from of land on 3.10.2008 andhas earned ‘long term capital gain’ ofRs.2,03,76,237/- (this LTCG has beencalculated by the Assessing Officer atRs.2,04,37,654/- as there was some error inthe computation failed by the assessee withthe return because in the indexing of the costof land in F.Y. 1991-92, the assessee’s halfshare was not considered). The assessee hasclaimed exemption under section 54F (1)(b) ofthe Act to the extent of Rs.1,26,52,789/- asagainst total investment of Rs.1,29,66,275/-.Thus, by now we have come to the conclusionthat the assessee did not own more than oneresidential house on the date of transfer of theoriginal asset. Therefore, one condition of thisprovision stands satisfied.” 6.He has relied upon the following decisions:- 6.1In Commissioner of Income Tax-II vs. Kuldeep Singh ITANo.117/2014 decided on 12.8.2014 wherein Delhi High Court held as under:- “8. The word 'purchase' can be given bothrestrictive and wider meaning. A restrictivemeaning would mean transactions by whichlegal title is finally transferred, like executionof the sale deed or any other document oftitle. 'Purchase' can also refer to payment ofconsideration or part consideration along withtransfer of possession under Section 53A ofthe Transfer of Property Act, 1882. SupremeCourt way back in 1979 in CIT AndhraPradeshvs.T.N.AravindaReddyMANU/SC/0302/1979MANU/SC/0302/1979 :(1979) 4 SCC 721, however, gave it a widermeaning and it was held that the paymentmade for execution of release deed by thebrother thereby joint ownership becameseparate ownership for price paid would becovered by the word 'purchase.' It wasobserved that the word 'purchase' used inSection 54 of the Act should be interpretedpragmatically in a practical manner andlegalism shall not be allowed to play andcreate confusion or linguistic distortion. Theargument that 'purchase' primarily meantacquisition for money paid and notadjustment, was rejected observing that itneed not be restricted to conveyance of landfor a price consisting wholly or partly ofmoneys worth. The word 'purchase,' it wasobserved was of a plural semantic shades andwould include buying for a price or equivalentof price by payment of kind or adjustment ofold debt or other monetary considerations. Itwas observed that if you sell a house andmake profit, pay Caesar (State) but if you buya house or build another and thereby satisfythe conditions of Section 54, you wereexempt. The purpose was plain; thesymmetry was simple; the language wasplain. 9. Recently Supreme Court in Civil AppealNos. 5899-5900/2014 titled Sh. Sanjeev Laletc. etc. vs. CIT, Chandigarh & Anr., decidedon01/07/2014,MANU/SC/0555/2014MANU/SC/0555/2014 : 9. Recently Supreme Court in Civil AppealNos. 5899-5900/2014 titled Sh. Sanjeev Laletc. etc. vs. CIT, Chandigarh & Anr., decidedon01/07/2014,MANU/SC/0555/2014MANU/SC/0555/2014 : 2014 (8) SCALE 432 again examined Section54 in a case where the assessee had enteredinto an agreement to sell a house to a thirdparty on 27th December, 2002 and hadreceived Rs.15 lacs by way of earnest moneyand subsequently received the balance saleconsideration of Rs.1.17 crores (total beingRs.1.32 crores) when the sale deed wasexecuted on 24th September, 2004. In themeanwhile, the assessee had purchasedanother house on 30th April, 2003. Benefitunder Section 54 was denied by the HighCourt observing that the new house had beenpurchased prior to execution of the sale andnot within one year prior to sale of originalasset i.e. new house has been purchased on30th April, 2003 whereas the earlier assetwas sold only on 24th September, 2004. TheSupreme Court allowing the appeal noticedthat the agreement to sell was executed on27th December, 2002 but the sale deed couldnot be executed because of inter-se litigationbetween the legal heirs, as one of them hadchallenged the will under which the assesseehad inherited the property. The agreement tosell, it was held had given some rights to thevendor and reduced or extinguished rights ofthe assessee. This, it was observed wassufficient for the purpose of Section 2(47),which defines the term transfer in relation toa capital asset. In the light of the factualmatrix, it was observed that the intentionbehind Section 54 was to give relief to aperson who had transferred his residentialhouse and had purchased another residentialhouse within two years of transfer or hadpurchased a residential house one year beforetransfer. It was only the excess amount notused for making purchase or construction ofthe property within the stipulated period,which was taxable as long term capital gainwhile on the amount spent, relief should begranted. Principle of purposive interpretationshould be applied to subserve the object andmore particularly when one was concernedwith exemption from payment of tax. Theassessee,therefore,succeeded.Theobservations made in the said decision arealso relevant on the question whether thepayments made by the assessee to theperson with whom he had entered into anearlier agreement to sell should be allowed tobe set off as expenses incurred in relation tothe sale deed which was executed. 10. More direct are the two decisions ofMadhya Pradesh High Court in Shashi Verma(Smt.)vs.CITMANU/MP/0213/1996MANU/MP/0213/1996 :[1997] 224 ITR 106 and Calcutta High Courtin CIT vs. Smt. Bharati C. KothariMANU/WB/0265/2000MANU/WB/0265/2000 :(2000) 244 ITR 352. In Shashi Verma(supra), the assessee had invested the saleconsideration for purchase of a flat from DelhiDevelopment Authority and had paid partinstallments. Reversing the decision of theTribunal and allowing the appeal of theassessee, the High Court observed that theTribunal had adopted a pedantic approachwithout noticing the fact that the capital gainwas Rs.31,980/- whereas the installmentspaid were Rs.71,256/-, i.e. much more thanthe amount of capital gain. Reference wasmadetoCircularNo.471:MANU/DTCR/0018/1986 dated 15th October,1986 [1986] 162 ITR (Stat.) 41. It wasobserved that Section 54 of the Act says thatassessee could have constructed the houseand not that the construction should havenecessarily been completed. Noticing that itwas not easy to construct a house within thetime limit of three years and under theGovernment schemes, construction takesyears. When substantial investment wasmade in the construction and it should bedeemed that sufficient steps had been takenand it satisfied requirement of Section 54. 13. The view we have taken gets supportfrom sub-section (2) to Section 54. Theaforesaid sub-section requires the assessee todeposit unspent amount not utilized by theassessee for purchase or construction of anew asset before the date of furnishing ofreturn, in a specified account. It further statesthat the amount, if already utilized forpurchase or construction of the new assetwith the amount so deposited will be deemedto be cost of a new asset subject to theproviso. The word 'purchase' is used in sub-section (2) and indicates that the said word isnot restricted or confined to registered saledeed or even possession but has a wider connotation. The proviso supports theaforesaid interpretation and stipulates thatthe amount deposited but not utilized whollyor partly for purchase or construction of newasset within the specified period will becharged to tax under Section 45 in theprevious year in which the period of threeyears from the date of transfer of originalasset expired. The period of three years isstipulated as this is the longer periodspecified in the sub-section (1) to Section 54.It is only the balance amount which is notutilized which is to be brought and charged totax. The entire amount of sale considerationor the capital gains is not to be brought totax, but the unspent amount/figure is taxed. 6.2In Commissioner of Income Tax vs. R.L. Sood (2000) 245 ITR 727 wherein Delhi High Court held as under:- “7. In our view, the Tribunal was justified indeclining" to make a reference on theproposed question to this court. Admittedly,the assessed had paid a sum of Rs. 2,39,850out of the total sale consideration of Rs.2,75,000 for the purchase of the flat withinthe period of one year from the date of sale ofhis old residential house. Thus, on payment ofa substantial amount in terms of theagreement of purchase dated September 25,1981, i.e., within four days of the sale of hisold property, the assessed acquiredsubstantial domain over the new residentialflat within the specified period of one yearand complied with the requirements ofSection 54 of the Act. Merely because thebuilder failed to hand over possession of theflat to the assessed within the period of oneyear, the assessed cannot be denied thebenefit of the said benevolent provision. Thiswould not be in consonance with the spirit ofSection 54 of the Act.” 6.3In Commissioner of Income Tax-XII vs. Sh. Kamal Wahal (2013) 351 ITR 4 (Delhi) wherein it has been held as under:- “5. The revenue preferred an appeal beforethe Tribunal questioning the decision of the CIT (Appeals). The Tribunal, however, by theimpugned order, agreed with the decision ofthe CIT (Appeals) and in doing so followed thejudgment of the Madras and Andhra PradeshHigh Courts cited supra and also anotherjudgment of the Karnataka High Court inDirector of Income-tax, International Taxation,Bangalore : (2011) 203 Taxman 208. It alsonoted the judgment of the Bombay High CourtinPrakashVs.ITO:MANU/MH/0825/2008MANU/MH/0825/2008 :(2008) 173 Taxman 311 in which a contraryview was taken but preferred the view takenby the Madras and Karnataka High Courtsadopting the rule laid down by the SupremeCourt in CIT Vs. Vegetable Products Ltd :MANU/SC/0241/1973MANU/SC/0241/1973 :88 ITR 192 which says that if a statutoryprovision is capable of more than one view,then the view which favours the tax payershould be preferred. The Tribunal alsoobserved that Section 54F being a beneficialprovision enacted for encouraging investmentin residential houses should be liberallyinterpreted.” 6.4In Commissioner of Income Tax vs. Kapil Nagpal (2016) 381ITR 351 (Delhi) wherein it has been held as under:- 6.4In Commissioner of Income Tax vs. Kapil Nagpal (2016) 381ITR 351 (Delhi) wherein it has been held as under:- 19. Turning to question (i) whether theexemption under Section 54F could be availedof by the Assessee, it requires to be firstnoticed that in light of the decision of theSupreme Court in CIT v. Podar Cements (P)Limited (supra), CIT v. T.N. Aravinda Reddy(supra)andBalrajv.CITMANU/DE/0294/2002MANU/DE/0294/2002 :(2002) 254 ITR 22 (Del), in order to constitutepurchase for the purpose of Section 54 andSection 54F of the Act it is not necessary thatthere should be registered sale deed. ThisCourt in Balraj v. CIT (supra) noticed thedecisions in Mysore Minerals Ltd. v. CITMANU/SC/0540/1999MANU/SC/0540/1999:(1999) 239 ITR 775 (SC) and CIT v. R.L. SoodMANU/DE/1147/1999MANU/DE/1147/1999 :(2000) 245 ITR 727 (Del) and held that "forthe purpose of attracting the provisions ofSection 54 of the IT Act, it is not necessarythat the Assessee should become the owner ofthe property. Section 54 of the said Act speaks of purchase. Moreover, the ownership of theproperty may have different connotation indifferent statutes." It was concluded that theTribunal in that case "went wrong in holdingthat for the purpose of applicability of Section54, registration of document is imperative." InDr. P.K. Vasanthi Rangarajan v. CITMANU/TN/1474/2012MANU/TN/1474/2012:(2012) 252 CTR 336 the Assessee and herhusband were co-owners to the extent of 50%share in a building that had a clinic and aresidential house. It was held that since theentire property was not an exclusive residentialproperty and 50% of the ownership was withreference to the clinic on the ground floor, theharshness of the proviso to Section 54F cannotbe applied "unless and until there are materialsto show that the Assessee is the exclusiveowner of the residential property." 20. In the present case, as pointed out bythe CIT (A), the sale deed dated 13th March1996 does show that what was purchased bythe Appellant (Assessee herein) is anagricultural land bearing Khasra Nos. 75 and90. Khasra Girdawri also clarifies that whilethere is a kothi, i.e., house on Khasra No. 76(purchased by the Assessee's father), theland in Khasra Nos. 75 and 90 purchased bythe Assessee was used only for agriculturalpurpose. The explanation by the Assesseethat only the rental income from letting outthe constructed portion property was beingshared between him and the father in theratio of 15%: 85% appears to be a plausibleone. Unless there is document to show thatthe Assessee was a co-owner of the saidbuilding to the extent of even 15%, therecannot be an inference in that regard. Asexplained by Umacharan Shaw & Bros v. CITMANU/SC/0080/1959MANU/SC/0080/1959 :(1959) 37 ITR 271 (SC) suspicion howsoeverstrong cannot partake the character ofevidence. The evidence produced by theAssessee showed that the house waspurchased by him on 10th April 2007 withinthe time allowed under Section 54F of theAct, after making payment and by obtainingthe possession thereof. A substantial part ofthe consideration of Rs. 2 crores was paid onthe date of the agreement to sell itself. Thebalance payment of Rs. 22 lakhs was madeon 17th April 2007 when the possession was handed over. The conclusion that the housewas in fact purchased on 10th April 2007within the time allowed under Section 54F ofthe Act stands supported by the documentsplaced on record by the Assessee. The Courtis satisfied that the prior to 10th April 2007the Assessee was not the owner of anotherresidential house and therefore theexemption under Section 54 read withSection 54F of the Act could not be denied tohim.” 6.5In Commissioner of Income Tax vs. Bharti Mishra (2014) 222 Taxman2 (Delhi) wherein it has been held as under:- handed over. The conclusion that the housewas in fact purchased on 10th April 2007within the time allowed under Section 54F ofthe Act stands supported by the documentsplaced on record by the Assessee. The Courtis satisfied that the prior to 10th April 2007the Assessee was not the owner of anotherresidential house and therefore theexemption under Section 54 read withSection 54F of the Act could not be denied tohim.” 6.5In Commissioner of Income Tax vs. Bharti Mishra (2014) 222 Taxman2 (Delhi) wherein it has been held as under:- “11. Section 54F(1) if read carefully statesthat the assessee being an individual orHindu Undivided Family, who had earnedcapital gains from transfer of any long-termcapital not being a residential house couldclaim benefit under the said Sectionprovided, any one of the following threeconditions were satisfied; (i) the assesseehad within a period of one year before thesale, purchased a residential house; (ii)within two years after the date of transfer ofthe original capital asset, purchased aresidential house and (iii) within a period ofthree years after the date of sale of theoriginal asset, constructed a residentialhouse. 12. For the satisfaction of the third condition,it is not stipulated or indicated in the Sectionthat the construction must begin after thedate of sale of the original/old asset. There isno condition or reason for ambiguity andconfusion which requires moderation orreading the words of the said sub-section ina different manner. The apprehension of theRevenue that the entire money collected orreceived on transfer of the original/capitalasset would not be utilised in theconstruction of the new capital asset, i.e.,residential house, is ill-founded andmisconceived. The requirement of sub-section (4) is that if consideration was notappropriated towards the purchase of thenew asset one year before date of transfer ofthe original asset or it was not utilised forpurchase or construction of the new asset before the date of filing of return underSection 139 of the Act, the balance amountshall be deposited in an authorized bankaccount under a scheme notified by theCentral Government. Further, only theamount which was utilised in construction orpurchase of the new asset within thespecified time frame stand exempt and notthe entire consideration received. 13. Section 54F is a beneficial provision andis applicable to an assessee when the oldcapital asset is replaced by a new capitalasset in form of a residential house. Once anassessee falls within the ambit of a beneficialprovision, then the said provision should beliberally interpreted. The Supreme Court inCCEversusFavouriteIndustries,MANU/SC/0270/2012MANU/SC/0270/2012 :(2012) 7 SCC 153 has succinctly observed:- 21. Furthermore, this Court in AssociatedCement Companies Ltd. v. State of Bihar[MANU/SC/0840/2004MANU/SC/0840/2004 :(2004) 7 SCC 642], while explaining thenature of the exemption notification and alsothe manner in which it should be interpretedhas held: (SCC p. 648, para 12) 13. Section 54F is a beneficial provision andis applicable to an assessee when the oldcapital asset is replaced by a new capitalasset in form of a residential house. Once anassessee falls within the ambit of a beneficialprovision, then the said provision should beliberally interpreted. The Supreme Court inCCEversusFavouriteIndustries,MANU/SC/0270/2012MANU/SC/0270/2012 :(2012) 7 SCC 153 has succinctly observed:- 21. Furthermore, this Court in AssociatedCement Companies Ltd. v. State of Bihar[MANU/SC/0840/2004MANU/SC/0840/2004 :(2004) 7 SCC 642], while explaining thenature of the exemption notification and alsothe manner in which it should be interpretedhas held: (SCC p. 648, para 12) 12. Literally 'exemption' is freedom fromliability, tax or duty. Fiscally it may assumevarying shapes, specially, in a growingeconomy. In fact, an exemption provision islike an exception and on normal principle ofconstruction or interpretation of statutes it isconstrued strictly either because oflegislative intention or on economicjustification of inequitable burden ofprogressive approach of fiscal provisionsintended to augment State revenue. Butonce exception or exemption becomesapplicable no rule or principle requires it tobe construed strictly. Truly speaking, liberaland strict construction of an exemptionprovision is to be invoked at different stagesof interpreting it. When the question iswhether a subject falls in the notification orin the exemption clause then it being in thenature of exception is to be construed strictlyand against the subject but once ambiguityor doubt about applicability is lifted and thesubject falls in the notification then full playshould be given to it and it calls for a widerand liberal construction. (See Union of Indiav.WoodPapersLtd. [MANU/SC/0454/1991MANU/SC/0454/1991 :(1990) 4 SCC 256: 1990 SCC (Tax) 422] andMangalore Chemicals and Fertilisers Ltd. v.CCT [MANU/SC/0035/1992MANU/SC/0035/1992 :1992 Supp (1) SCC 21] to which referencehas been made earlier.) 22. In G.P. Ceramics (P) Ltd. v. CTT[MANU/SC/8275/2008MANU/SC/8275/2008 :(2009) 2 SCC 90], this Court has held: (SCCpp. 101-02, para 29) 29. It is now a well-established principle oflaw that whereas eligibility criteria laid downin an exemption notification are required tobe construed strictly, once it is found that theapplicant satisfies the same, the exemptionnotification should be construed liberally.[SeeCTTv.DSMGroupofIndustries[MANU/SC/1044/2004MANU/SC/1044/2004 : (2005) 1 SCC 657] (SCC para 26);TISCO Ltd. v. State of Jharkhand[MANU/SC/0237/2005MANU/SC/0237/2005 :(2005) 4 SCC 272] (SCC paras 42-45); StateLevel Committee v. Morgardshammar IndiaLtd.[MANU/SC/0129/1996MANU/SC/0129/1996 :(1996) 1 SCC 108]; Novopan India Ltd. v.CCE&Customs[MANU/SC/1216/1994MANU/SC/1216/1994 :1994 Supp (3) SCC 606]; A.P. Steel Re-RollingMillLtd.v.StateofKerala[MANU/SC/8792/2006MANU/SC/8792/2006 : (2007) 2 SCC 725] and ReizElectrocontrols(P)Ltd.v.CCE.[MANU/SC/3456/2006MANU/SC/3456/2006 :(2006) 6 SCC 213].” 6.6In Commissioner of Income Tax vs. Girish L. Ragha (2016) 289 CTR (Bom)213 wherein Bombay High Court held as under:- “2. We are in respectful agreement with theview taken by the Delhi High Court to cometo the conclusion that the purchase would becomputed when the consideration is dulypaid by the assessee for the purpose ofpurchasing the premises and the constructionhad already commenced by the builder whichremained to be completed on account of the 6.6In Commissioner of Income Tax vs. Girish L. Ragha (2016) 289 CTR (Bom)213 wherein Bombay High Court held as under:- “2. We are in respectful agreement with theview taken by the Delhi High Court to cometo the conclusion that the purchase would becomputed when the consideration is dulypaid by the assessee for the purpose ofpurchasing the premises and the constructionhad already commenced by the builder whichremained to be completed on account of the litigation. In the present case, the learnedTribunal has noted that the assessee has soldthe property on 01.12.2009 and the assesseehas made the payment on 16.03.2010. Theassessee was required to get the house andoccupancy certificate on or before01.12.2011. But however, the assessee gotthe occupancy certificate of the property on17.01.2014. The learned Tribunal furthernoted that the assessee submitted thedocumentary evidence to show that afterpurchasing the property there was a civil suitfiled by the other parties and the assesseecould not complete the construction and thelicence for constructing the house wasaccordingly delayed. The learned Tribunalfurther noted that CIT(A) in his order reliedupon the decision of the Madras High Courtin the case of CIT v. Sardarmal KothariMANU/TN/0835/2008MANU/TN/0835/2008 :[2008] 302 ITR 286 wherein, it is held that inorder to get the benefit under Section 54 ofthe Income-tax Act, the assessee need notcomplete the construction of the house andoccupy the same. It is further noted that theassessee has invested the money and theoccupancy certificate is delayed which isbeyond the control of the assessee then theassessee is entitled for deduction underSection 54 of the Act. The learned Tribunal assuch found that the assessee was entitled fordeduction under Section 54 of the Act andconsequently, dismissed the appeal of theRevenue. Considering the said facts and theratio of the judgment referred to hereinabove, we find that there is no substantialquestion of law which arises for considerationin the present appeal under Section 260A ofthe Income-tax Act, 1961. Hence, no case ismade out by the appellant for interference inthe order passed by the Income TaxAppellate Tribunal. The appeal standsaccordingly rejected.” 6.7In Commissioner of Income Tax vs. Sardarmal Kothari(2008) 302 ITR 286 (Mad) wherein Madras High Court held asunder:- “5. In the second question of lawformulated, a reference is made to theBoard Circular No. 667, dt. 18th Oct., 1993(1993) 115 CTR (St) 1. On a reading of thecircular, we are of the view that the circularwould not in any way advance the case ofthe Revenue to come to the conclusion thatin order to have the benefit under Section54F of the IT Act, tire construction shouldhave been completed.” 6.8In DR. (Smt) P.K. Vasanthi Rangarajan vs. Commissioner of Income Tax (2012) 5 L.W. 58 wherein Madras High Court held as under:- 6.7In Commissioner of Income Tax vs. Sardarmal Kothari(2008) 302 ITR 286 (Mad) wherein Madras High Court held asunder:- “5. In the second question of lawformulated, a reference is made to theBoard Circular No. 667, dt. 18th Oct., 1993(1993) 115 CTR (St) 1. On a reading of thecircular, we are of the view that the circularwould not in any way advance the case ofthe Revenue to come to the conclusion thatin order to have the benefit under Section54F of the IT Act, tire construction shouldhave been completed.” 6.8In DR. (Smt) P.K. Vasanthi Rangarajan vs. Commissioner of Income Tax (2012) 5 L.W. 58 wherein Madras High Court held as under:- “12. A reading of the provisions contained ins. 54F(1), as it stood at the relevant point oftime, shows that exemption from paymentof tax on the capital gains arising on thetransfer of any long-term capital asset notbeing a residential house is available to anassessee being an HUF or an individual, ifthe long-term capital gain is invested inpurchasing a residential house orconstructing the residential house within thetime stipulated therein. Proviso to sub-s. (1)states that the exemption contemplatedunder sub-s. (1) would not be availablewhere an assessee owns a residential houseas on the date of the transfer and that theincome from the residential house ischargeable under the head "Income fromhouse property". The Finance Act, 2001amended the proviso w.e.f. 2001-02 topermit exemption under s. 54F, even if theassessee has owned one residential houseas on the date of transfer, other than thenew asset, or purchased in investments anyresidential house other than the new assetwithin a period of one year or three years,as the case ma