> v. Shri Sardarmal Kothari

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 17.06.2008 CORAM: THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case(Appeal) Nos.354 and 355 of 2008 andM.P.No.1 of 2008 in T.C.A.355/08 The Commissioner of Income TaxTamil Nadu VII, Madras -vs- Shri Sardarmal Kothari,No.64, T.H.Road,Chennai 600 081... Respondent in T.C.A.354/08 Shri Shanthilal Kothari,No.64, T.H.Road,Chennai 600 081... Respondent in T.C.A.355/08 TAX CASES filed under Section 260 A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, MADRAS 'C'Bench, Chennai dated 18.07.2007 passed in ITA.NoS.290/291/mds/2005against the order of the Commissioner of Income-Tax (Appeals) in ITANo.335/04-05 and 336/0.4.05 respectively dated 29.11.2004, againstthe Assessment Order of the Income Tax Officer ward VII (1) Chennai-34 in PAN/GIR NO. /566297-S and AADPK 8673G/566384.8respectively dated 31.3.2004. (Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J) The relevant assessment year is 2001-2002. The assessees ShriSardarmal Kothari and Shri Shanthilal Kothari, filed their respectivereturn of income admitting a total income of Rs.3,02,593/- apart fromthe agricultural income of Rs.25,000/- each. The assessees haveclaimed exemption of capital gain tax under Section 54F of the Incomehttps://hcservices.ecourts.gov.in/hcservices/Tax Act. The Assessing Officer rejected the same on the ground thatthe construction was not completed when he made a personal visit.Against that order, the assessees preferred appeals before the Commissioner of Income Tax (Appeals) who allowed the appeal byholding that the assessees have invested the capital gains in theland and substantially completed the construction and directed theAssessing Officer to grant the benefit to the assessees. Against thatorder, the department preferred appeals before the Income TaxAppellate Tribunal and the Tribunal has confirmed the order of theCommissioner and dismissed the appeals. The correctness of the saidorders is now canvassed in these appeals by formulating the followingquestions of law:- "1. Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law in holdingthat the assessees are entitled for exemptionunder Section 54F of the Income Tax Act is valid?2. Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law in holding,when the conditions laid down in sub clause (1) ofSection 54F and the Board Circular No.667 dated18.10.1993clearlystatedthatthepurchase/construction is to be completed withinstipulated time is not mandatory for claimingexemption under the Act?2. We have heard the argument of the learned counsel for theappellant and perused the materials available on record. 3. There is no dispute about the fact that the assessees haveinvested the entire net consideration of sale of capital asset in theland itself and subsequently the assessees have invested large sumsof money in the construction of the house. The cost of investment inland and the cost of expenditure towards the construction of thehouses is not in dispute. The one and only ground on which theAssessing Officer has non suited the assessees for the claim ofexemption was that the houses have not been completed. There remainssome more construction to be made. 3. There is no dispute about the fact that the assessees haveinvested the entire net consideration of sale of capital asset in theland itself and subsequently the assessees have invested large sumsof money in the construction of the house. The cost of investment inland and the cost of expenditure towards the construction of thehouses is not in dispute. The one and only ground on which theAssessing Officer has non suited the assessees for the claim ofexemption was that the houses have not been completed. There remainssome more construction to be made. 4. The requirement of the provision is that the assessee, withina period of three years after the date of transfer, has to constructa residential house in order to become eligible for exemption. Inthe cases on hand, it is not in dispute that the assessees havepurchased the lands by investing the capital gain and they have alsoconstructed residential houses. In order to establish the same, theassessees submitted before the Commissioner of Income Tax (Appeals)several material evidence, viz., invitation card printed for thehouse warming ceremony to be held on 12.07.2003. The assessees havealso produced the completion certificates from the Municipalauthority on 30.01.2004. On the basis of the above documents, theCommissioner of Income Tax (Appeals) concluded that the requirementof the statutory provision has been complied with by the assesseeshttps://hcservices.ecourts.gov.in/hcservices/and that was reconfirmed by the Tribunal in the orders impugned. 5. In the second question of law formulated, a reference is made to the Board Circular No.667 dated 18.10.1993.On a reading of thecircular, we are of the view that the Circular would not in any wayadvance the case of the revenue to come to the conclusion that inorder to have the benefit under Section 54F of the Income Tax Act,the construction should have been completed. 6. The Tribunal has also taken note of its own earlier order inthe case of Seetha Subramanain vs. Assistant Commissioner of IncomeTax reported in 59 ITD 94, wherein the Tribunal has held that, inorder to get the benefit under Section 54F, the assessee need notcomplete the construction of the house and occupy the same. It isenough if the assessee establish that the assessee had invested theentire net consideration within the stipulated period. The said viewtaken consistently by the Tribunal has been applied in these casesalso. The Tribunal has distinguished the Delhi High Court Judgementin the case of D.P.Mehta vs. Commissioner of Income Tax reported in251 ITD 259, relied on by the revenue in their favour to non suitthe assessees for exemption. In our view the Tribunal hasdistinguished the same rightly because in the cited case, there was afactual finding by the authorities that the assessee himself hasadmitted that the construction put up was only a garage and servicequarters and it was not fit enough for occupation of the assessee.That factual finding is totally absent in these cases. There is nomaterial to entertain these appeals. The appeals fail and the sameare dismissed. Consequently, connected miscellaneous petition isalso dismissed. Sd/Asst.Registrar/true copy/Sub Asst.Registrar rg To 1. THE COMMISSIONER OFINCOME TAX,TAMIL NADU VII,MADRAS. 2. THE INCOME TAX APPELLATETRIBUNAL, C BENCH, CHENNAI. 3. THE COMMISSIONER OFINCOME TAX (APPEALS) IX,121, MAHATMA GANDHI ROAD,https://hcservices.ecourts.gov.in/hcservices/CHENNAI 34 4. THE INCOME TAX OFFICER,WARD VII (1), CHENNAI 345. THE ASSISTANT REGISTRAR,INCOME TAX APPELLATE TRIBUNAL,RAJAJI BHAVAN, III FLOOR, BESANT NAGAR, MADRAS 90. +1cc to M/s. Pushya Sitaraman, Standing counsel for Income Tax Sr30216 Tax Case(Appeal) Nos.354 and 355 of 2008 RA (CO)km/15.7.