Commissioner Of Income Tax v. Shri.s.sudhakar (Huf

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HON'BLE MR.JUSTICE V.RAMASUBRAMANIANANDTHE HON'BLE MR.JUSTICE T.MATHIVANAN Commissioner of Income Tax,No.63, Race Course Road,Coimbatore. ...Appellantvs. Shri.S.Sudhakar (HUF)...Respondent Tax Case (Appeal) against the order dated 19.12.2014 inI.T.A.No.2176/Mds/2014 by the Income Tax Appellate Tribunal, Madras"A" Bench, against the order dated 10.06.2014 made in AppealNo.46/13-14 by the Commissioner of Income Tax (Appeals)-I,Coimbatore, and against the order dated 11.03.2013 made under section143 (3) read with section 263 for the Assessment year 2008-2009 bythe office of the Income Tax Officer, Ward - II (1), Coimbatore. For appellant: Mr.T.R.Senthilkumar JUDGMENT (Judgment of the Court was delivered by V.RAMASUBRAMANIAN, J. ) The Revenue has come up with the above appeal under Section 260Aof the Income Tax Act, 1961, raising the following questions of law:- "Whether, on the facts and in the circumstances of thecase, the Appellate Tribunal was right in holding thatthe assessee was entitled to exemption under Section54 of the Income Tax Act, when the assessee failed toconstruct a habitable house within a period of threeyears from the date of transfer?" 2. Heard Mr.T.R.Senthilkumar, learned Standing counsel for theRevenue. 3. The assessment for the assessment year 2008-09 in respect ofthe respondent herein was completed on 29.12.2009 under section 143(3). In the return of income, the assessee claimed a long termcapital gain of Rs.1,58,43,569/- and claimed exemption under section54 to the extent of Rs.1,18,94,408/-. He had also claimed a longterm capital loss brought forward from the assessment year 2006-07 ofRs.41,10,207/-. 4. Subsequently, the Commissioner of Income Tax-I, Coimbatore,issued an order dated 30.3.2012 under section 263 of the Income TaxAct, holding that the order of assessment passed under section 143(3)was contrary to law and that the claim of exemption allowed underSection 54 was wrong. The Commissioner directed the assessingofficer to redo the assessment afresh as per the law. 5. Therefore, notices was issued and after giving opportunity,the assessing officer passed an order dated 11.3.2013 holding thatthe assessee could not complete the construction of habitableresidential house, within a period of three years, as required undersection 54 so as to claim exemption. Consequently, the assessingofficer disallowed the claim and computed the taxable income asRs.1,19,54,550/-. 6. As against the order of assessment, the assessee filed astatutory appeal in Appeal No.46/13-14. The first appellateauthority dismissed the appeal by an order dated 10.6.2014 on theground that the construction of the residential house was notcompleted within the stipulated period. Therefore, the assesseefiled a further appeal before the Tribunal. The Tribunal allowed theappeal of the assessee by an order dated 19.12.2014 forcing theRevenue to come up with the present appeal. 7. As seen from the order of the Tribunal, the assessee and twoothers sold their residential property situate at Annanagar, Chennaion 28.11.2007 for a total sale consideration of Rs.2,75,00,000/-. Outof his share of the sale consideration, the assessee purchased threeadjoining residential sites in a residential lay out known as "MidasPark" at Bangalore on 10.3.2008 at a total cost of Rs.1,18,94,408/-.The assessee paid an advance of Rs.70,00,000/- on 28.6.2008. Thispayment was by way of two cheques. The payment was to a Builder byname Concept City Developers. The Builder was supposed to construct 7. As seen from the order of the Tribunal, the assessee and twoothers sold their residential property situate at Annanagar, Chennaion 28.11.2007 for a total sale consideration of Rs.2,75,00,000/-. Outof his share of the sale consideration, the assessee purchased threeadjoining residential sites in a residential lay out known as "MidasPark" at Bangalore on 10.3.2008 at a total cost of Rs.1,18,94,408/-.The assessee paid an advance of Rs.70,00,000/- on 28.6.2008. Thispayment was by way of two cheques. The payment was to a Builder byname Concept City Developers. The Builder was supposed to construct a residential house for the assessee. Admittedly, the Builderobtained approval for the building plan for construction of a puccaresidential house at Plot Nos.21, 22 and 23 in Survey No.85 atHegganahalli Village. The construction was claimed to have beencompleted vide a letter dated 12.11.2010 issued by the Builder.However, it was, later, found that there was no prior approval. TheBuilder appears to have got it only after a no objection certificatewas issued by the Airports Authority of India, Bangalore on28.12.2011. The local authorities approved the building plan on19.4.2012, only after the issue of no objection certificate by theAirports Authority, since the plot was located near the BangaloreAirport. 8. In the facts and circumstances narrated above, the Tribunaltook note of an order passed by a Coordinate Bench in the case ofACIT v SHRI.PRAKASH CHAND BORA (ITA 1490/Mds/2013) for the assessmentyear 2007-08. In the said case, the Tribunal held that the assesseewas entitled to deduction under section 54(2) to the extent of theamount paid on or before two years. 9. The Tribunal also took note of another decision of a Co-ordinate Bench in SMT.V.A.THARABAI v. DCIT ((2012) 19 Taxmann.com276) and a decision of the Madhya Pradesh High Court in SMT.SHASHIVARMA v. CIT ((1999) 224 ITR 106) as well as CBDT Circular No.667dated 18.10.1993 and came to the conclusion that the assessee wasentitled to the benefit of section 54. We are of the considered viewthat the Tribunal did not commit any error of law in deciding theissue in favour of the assessee. The benefit of section 54(1) isavailable, if the assessee has, within a period of one year beforeor two years after a date on which the transfer took place,purchased, or has, within a period of three years after that date,constructed, a residential house in India. The fact that the assesseesold the residential house at Chennai onn 28.11.2007 and the factthat he purchased three adjoining residential house-sites on10.3.2008 are not in dispute. The fact that the purchase of theresidential sites was at a cost of Rs.1,18,94,408/- and the fact thatan advance of Rs.70,00,000/- was paid to a builder on 28.6.2008 arealso not in dispute. Therefore, the assessee has actually purchasedthree residential sites within a year and had entrusted the work ofconstruction to a builder. If the completion of construction had beendelayed on account of the delay in the Airports Authority of India ingiving clearance and the Town Planning Authority giving approval tothe building plan, the benefit of section 54 cannot be denied to theassessee. After all, the object of section 54(1) is to ensure that ifthe sale proceedings are invested in a residential house, the assessee should be entitled to the benefit. Therefore, the order ofthe Tribunal does not call for interference. Hence, the appeal isdismissed. Sd/-Assistant Registrar(CS-V)//True Copy//Sub Assistant Registrarssk. To1. Income Tax Appellate Tribunal, Madras "A" Bench.2. The Commissioner of Income Tax Appeals -I,Coimbatore.3. The Income Tax Officer,Ward II (1),Coimbatore.T.C.(A) No.692 of 2015GP (CO)PSI (25.09.2015)