SUMAN PAREEK, Jaipur V. ITO, Jaipur

ITA 1004/JPR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5093 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 22-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Capital asset; Question of law
• Section: 143(3); 54F; 54; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 1004/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. MRS. SUMAN PAREEK, O-4, HOSPITAL ROAD, C-SCHEME, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 6(5), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AEYPP 1229 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (C.A) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01.09.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 19/09/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (A)-2, JAIPUR DATED 29.10.2015 PERTAINING TO A.Y. 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE LD. CIT (A) HAS GROSSLY ERRED IN NOT ALLOWING THE DEDUCTION CLAIMED U/S 54 OF THE INCOME TAX ACT, 1961 AND AS A CONSEQUENCE UPHOLD TH E ADDITION OF RS. 68,10,074/- ARBITRARILY, THUS ADDITION SO UPHOL D DESERVES TO BE DELETED. 1.1. THAT, THE LD. CIT (A) HAS FURTHER ERRED IN IGNORING THE FACT THAT CONSTRUCTION OF FLAT COULD NOT BE COMPLETED WITHIN STIPULATED PERIOD OWING TO CIRCUMSTANC4ES BEYOND THE CONTROL O F THE ASSESSEE THOUGH THE ENTIRE AMOUNT OF CAPITAL GAINS WAS GIVEN TO THE BUILDERS WITHIN THE STIPULATED TIME, THUS ADDIT ION SO UPHOLD DESERVES TO DELETED. 2 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK 1.2. THAT, THE LD. CIT (A) HAS FURTHER ERRED IN IGNORING THE FACT THAT THE LD. AO HAS FAILED TO BROUGHT ON RECORD ANY ADVE RSE MATERIAL AND SIMPLY NON REVERT OF THE LETTER ISSUED BY THE L D. AO TO M/S. GRANITE GATE PROPERTIES PVT. LTD. CANNOT BE MADE A BASIS FOR DISALLOWING THE CLAIM PARTICULARLY WHEN THE APPELLA NT BEING AN INDIVIDUAL AND NOT HAVING ANY CONTROL OVER THE AFFA IRS OF THE BUILDER AND COMPLETE PAYMENT BEING MADE AS PER THE PROVISIONS OF THE LAW, THE DEDUCTION AS CLAIMED DESERVES TO BE ALLOWED. 1.3. THAT THE LD. CIT (A) HAS FURTHER ERRED IN MISINTERP RETATING THE CIRCULAR ISSUED BY CBDT DIRECTING TO ALLOW DEDUCTIO N IN SUCH CIRCUMSTANCES WHICH CIRCULAR IS BINDING IN NATURE, THUS THE DEDUCTION SO CLAIMED DESERVES TO BE ALLOWED AS CLAI MED. 2. ON THE FACTS AND CIRCUMSTANCES LD. CIT (A) HAS GROS SLY ERRED IN UPHOLDING THE DISALLOWANCE OF THE DEDUCTION U/S 10( 13A) CLAIMED BY ASSESSEE AT RS. 60,000/- ON ACCOUNT OF HRA BY IGNOR ING THE INFORMATION WHICH WAS FURNISHED DURING THE ASSESSME NT PROCEEDINGS WITH RESPECT TO THE CLAIM, THUS DISALLO WANCE SO UPHOLD DESERVES TO BE DELETED. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY AND THE ASSESSMENT WAS FRAME D UNDER SECTION 143(3) OF THE IT ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) V IDE ORDER DATED 04.03.2015. WHILE FRAMING THE ASSESSMENT, THE AO MADE ADDITION ON ACC OUNT OF LONG TERM CAPITAL GAIN OF RS. 68,10,074/- AND DISALLOWANCE OF HRA OF RS. 60,000/-. THE ASSESSEE AGGRIEVED BY THIS ORDER, PREFERRED AN APPEAL BEFORE LD. CIT (A), WHO AFTER CONSIDERING THE SUBMISSIONS AND MATERIAL AVAILABLE ON RECORD, DISMISSED THE APPEAL OF THE ASSESSEE. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO. 1 TO 1.3 OF THE ASSESSEES APPEAL IS AGAINST CONFIRMATION OF ADDITION OF RS. 68,10,074/-. 3 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK 4.1. THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATE D THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF AND SUBMITTED THAT THE AUTHORITIE S BELOW WERE NOT JUSTIFIED IN DENYING THE DEDUCTION UNDER SECTION 54. HE SUBMITTE D THAT THE DECISION OF THE AUTHORITIES BELOW IS CONTRARY TO THE JUDICIAL PRONO UNCEMENTS. 4.2. ON THE CONTRARY, THE LD. D/R SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE DEDUCTION IS NOT AVAILABLE T O THE ASSESSEE IN VIEW OF THE FACT THAT THE TRANSACTION OF PURCHASE WAS NOT COMPLETE A ND THE CBDT CIRCULAR PERTAINS TO DELHI DEVELOPMENT AUTHORITY, A GOVERNMENT AGENCY AN D THE ASSESSEE CANNOT TAKE THE BENEFIT OF THE SAME IN CASE OF OTHER PRIVATE BU ILDERS. HE SUBMITTED THAT EVEN OTHERWISE ALSO THE ALLOTMENT WAS TEMPORARY AND CANN OT BE CONSTRUED AS A SALE DEED. 4.3. IN RE-JOINDER, THE LEARNED COUNSEL FOR THE ASS ESSEE SUBMITTED THAT IN VIEW OF THE DECISION IN THE CASE OF CIT VS. R.L. SOOD, 245 ITR 727 IN SUPPORT OF THE CONTENTION THAT MERELY BECAUSE THE POSSESSION WAS N OT HANDED OVER BY THE BUILDER WOULD NOT DIS-ENTITLE THE ASSESSEE FOR CLAIMING DED UCTION UNDER SECTION 54F. 4.4. WE HAVE HEARD RIVAL CONTENTION, PERUSED THE MA TERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE HAS SUBMITTED IN THE WRITTEN BRIEF AS UNDER :- DURING THE YEAR UNDER APPEAL, THE ASSESSEE HAD SO LD A DDA (DELHI DEVELOPMENT AUTHORITY) FLAT FOR A TOTAL CONSIDERATI ON OF RS. 85,00,000/-, IN RESPECT OF WHICH, CAPITAL GAIN OF RS. 68,10,074/- W AS WORKED OUT AND WAS INVESTED BY THE ASSESSEE BY MAKING BOOKING FOR A RE SIDENTIAL PROPERTY BEING A FLAT IN LOTUS PANACHE, SECTOR 110 NOIDA, GAUTAM BUD H NAGAR, UP. THE BOOKING OF ABOVEMENTIONED FLAT IS CLEARLY EVIDENT F ROM THE BOOKING CUM ALLOTMENT LETTER DATED 14.08.2010 (APB 24) AND IN RESPECT OF THE SAME THE 4 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK ASSESSEE HAD PAID MAJOR AMOUNT PRIOR TO THE FILING OF RETURN OF THE ASSESSMENT YEAR UNDER APPEAL. THE DATE WISE EVENTS WITH RESPECT TO BOOKING OF THE FLAT AND MAKING PAYMENTS IN RESPECT THEREOF IS TABULATED AS UNDER: PARTICULARS DATE AMOUNT PURCHASE OF DDA FLAT 11.12.2001 9,62,269.00 SALE OF DDA FLAT 24.05.2011 85,00,000.00 APPLICATION FOR BOOKING OF NEW FLAT 23.07.2010 50,0 00.00 INSTALLMENT PAID 28.07.2010 6,60,640.00 DATE OF ALLOTMENT 14.08.2010 INSTALLMENT PAID 28.09.2010 6,65,520.00 INSTALLMENT PAID 12.11.2010 6,88,080.00 INSTALLMENT PAID 19.04.2011 53,157.00 PAYMENT MADE FOR THE FLAT AFTER THE DDA FLAT WAS SOLD 20.08.2011 8,32,299.00 PAYMENT MADE FOR THE FLAT AFTER THE DDA FLAT WAS SOLD 13.11.2011 6,48,849.00 PAYMENT MADE FOR THE FLAT AFTER THE DDA FLAT WAS SOLD 31.01.2012 6,29,349.00 PAYMENT MADE FOR THE FLAT AFTER THE DDA FLAT WAS SOLD 02.05.2012 6,32,007.00 PAYMENT MADE FOR THE FLAT AFTER THE DDA FLAT WAS SOLD 16.07.2012 5,98,019.00 PAYMENT MADE FOR THE FLAT AFTER THE DDA FLAT WAS SOLD 23.07.2012 16,78,966.00 TOTAL 71,36,886.00 DATE OF FILING OF RETURN 31.07.2012 A BARE PERUSAL OF THE TABLE ABOVE WOULD SHOW THAT T HE ASSESSEE HAS BEEN ALLOTTED THE AFOREMENTIONED FLAT IN TERMS OF THE AL LOTMENT LETTER DATED 14.08.2010 AND THE AMOUNT OF CAPITAL GAIN WAS PAID IN INSTALLMENTS TO THE BUILDER BEFORE THE FILING OF RETURN TOTALING TO RS. 71,36,886/- [THE CAPITAL GAIN WAS OF RS. 68,10,074/-] AND THE RETURN OF INCOME WA S FILED WITHIN THE STATUTORY TIME LIMIT U/S 139(1) OF THE INCOME TAX A CT, 1961. ACCORDINGLY, THE CAPITAL GAIN WAS CLAIMED AS EXEMPT BY THE ASSESSEE UNDER THE PROVISIONS OF SECTION 54 OF THE INCOME TAX ACT, 1961. THE CLAIM M ADE BY ASSESSEE U/S 54 WAS OF RS. 71,25,886/- BEING THE TOTAL AMOUNT PAID BY ASSESSEE BEFORE DUE DATE OF FILING OF RETURN AS INVESTMENT IN THE AFORE SAID RESIDENTIAL PROPERTY. 5 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK HOWEVER, THE LD. AO HAS DISALLOWED THE CLAIM OF ASS ESSEE MERELY BY ALLEGING THAT THE ASSESSEE HAS NOT TAKEN POSSESSION OF THE N EW RESIDENTIAL PROPERTY AND HAS MERELY ENTERED INTO AGREEMENT WITH THE DEVE LOPER, HOWEVER, THE FACT OF PAYMENT OF AMOUNT OF CAPITAL GAIN BEFORE TH E DUE DATE OF FILING OF RETURN HAS NOT BEEN DOUBTED BY THE LD. AO. IT HAS B EEN ALLEGED BY THE LD. AO THAT, THE INVESTMENT MADE BY ASSESSEE DOES NOT AMOU NT TO PURCHASE WITHIN THE MEANING OF SECTION 54 OF THE INCOME TAX ACT, 1961, SINCE IT HAS BEEN MADE TO DEVELOPER AND POSSESSION HAS NOT BEEN GIVEN / TAKEN BY THE ASSESSEE AND THE ALLOTMENT MADE WAS PROVISIONAL. IN THIS REGARD, IT IS HUMBLY SUBMITTED THAT, IT IS A SETTLED LEGAL POSITION THAT WHEN SUBSTANTIAL AMOUNT OF THE SALE CONSIDERATION / CAPITAL GAIN IS INVESTED IN THE ACQUISITION OF NEW PROPERTY, IT SHOULD BE DEEME D THAT SUFFICIENT STEPS HAD BEEN TAKEN AND IT WOULD SATISFY THE REQUIREMENT S OF SECTION 54 OF THE ACT. AS PER THE SETTLED LAW IN THIS REGARD, THE BAS IC PURPOSE BEHIND SECTION 54 OF THE ACT IS TO ENSURE THAT THE ASSESSEE IS NOT TA XED ON THE CAPITAL GAIN, IF HE REPLACES HIS HOUSE AND SPEND MONEY EARNED ON THE CA PITAL GAIN WITHIN THE STIPULATED PERIOD, WHICH THE ASSESSEE HAS DONE IN T HE PRESENT CASE. THEREFORE, THE EXEMPTION U/S 54 CANNOT BE DENIED TO ASSESSEE IN ANY MANNER. IN THIS CONTEXT, KIND ATTENTION OF THE HONBLE BENC H IS INVITED TO THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KULDEEP SINGH REPORTED IN 270 CTR 561 (DEL) WHEREIN, THE COURT HAS EXPLAINED THE MEANING OF TH E EXPRESSION PURCHASED IN THE CONTEXT OF SECTION 5 4 OF THE ACT IN FOLLOWING WORDS:- 8. THE WORD 'PURCHASE' CAN BE GIVEN BOTH RESTRICTI VE AND WIDER MEANING. A RESTRICTIVE MEANING WOULD MEAN TRANSACTIONS BY WH ICH LEGAL TITLE IS FINALLY TRANSFERRED, LIKE EXECUTION OF THE SALE DEED OR ANY OTHER DOCUMENT OF TITLE. 'PURCHASE' CAN ALSO REFER TO PAYMENT OF CONSIDERATI ON OR PART CONSIDERATION ALONGWITH TRANSFER OF POSSESSION UNDER SECTION 53A OF THE TRANSFER OF 6 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK PROPERTY ACT, 1882. SUPREME COURT WAY BACK IN 1979 IN CIT V. T.N ARAVINDA REDDY [1979] 120 ITR 46/2 TAXMAN 541, HOWEVER, GAVE IT A WIDER MEANING AND IT WAS HELD THAT THE PAYMENT MADE FOR EXECUTION OF RELEASE DEED BY THE BROTHER THEREBY JOINT OWNERSHIP BECAME SEPARATE OWN ERSHIP FOR PRICE PAID WOULD BE COVERED BY THE WORD 'PURCHASE'. IT WAS OBS ERVED THAT THE WORD 'PURCHASE' USED IN SECTION 54 OF THE ACT SHOULD BE INTERPRETED PRAGMATICALLY. IN A PRACTICAL MANNER AND LEGALISM SHALL NOT BE ALL OWED TO PLAY AND CREATE CONFUSION OR LINGUISTIC DISTORTION. THE ARGUMENT TH AT PURCHASE PRIMARILY MEANT ACQUISITION FOR MONEY PAID AND NOT ADJUSTMENT , WAS REJECTED OBSERVING THAT IT NEED NOT BE RESTRICTED TO CONVEYA NCE OF LAND FOR A PRICE CONSISTING WHOLLY OR PARTLY OF MONEYS WORTH. THE W ORD 'PURCHASE', IT WAS OBSERVED WAS OF A PLURAL SEMANTIC SHADES AND WOULD INCLUDE BUYING FOR A PRICE OR EQUIVALENT OF PRICE BY PAYMENT OF KIND OR ADJUSTMENT OF OLD DEBT OR OTHER MONETARY CONSIDERATIONS. IT WAS OBSERVED THAT IF YOU SELL A HOUSE AND MAKE PROFIT, PAY CAESAR (STATE) BUT IF YOU BUY A HO USE OR BUILD ANOTHER AND THEREBY SATISFY THE CONDITIONS OF SECTION 54, YOU W ERE EXEMPT. THE PURPOSE WAS PLAIN; THE SYMMETRY WAS SIMPLE; THE LANGUAGE WA S PLAIN. 9. RECENTLY SUPREME COURT IN CIVIL APPEAL NOS. 589 9-5900/2014 TITLED SANJEEV LAL V.CIT [2014] 46 TAXMANN.COM 300 AGAIN E XAMINED SECTION 54 IN A CASE WHERE THE ASSESSEE HAD ENTERED INTO AN AGREEME NT TO SELL A HOUSE TO A THIRD PARTY ON 27 TH DECEMBER, 2002 AND HAD RECEIVED RS.15 LACS BY WAY O F EARNEST MONEY AND SUBSEQUENTLY RECEIVED THE BALANCE SALE CONSIDERATION OF RS.L.17 CRORES (TOTAL BEINGRS.1.32 CRORES) WHEN THE SALE DEED WAS EXECUTED ON 24TH SEPTEMBER, 2004. IN THE MEANWHILE, HE ASSESSEE HAD PURCHASED ANOTHER HOUSE ON 30TH APRIL, 2003. BENEFIT UNDER SECTION 54 WAS DENIED] BY THE HIGH COURT OBSERVING THAT THE NEW HOUSE HAD BEEN PURCHAS ED PRIOR TO EXECUTION OF THE SALE AND NOT WITHIN ONE YEAR PRIOR TO SALE O F ORIGINAL ASSET I.E. NEW HOUSE HAS BEEN PURCHASED ON 30TH APRIL, 2003 WHEREA S THE EARLIER ASSET WAS SOLD ONLY ON 24TH SEPTEMBER, 2004. THE SUPREME COUR T ALLOWING THE APPEAL NOTICED THAT THE AGREEMENT TO SELL WAS EXECUTED ON 27TH DECEMBER, 2002 BUT THE SALE DEED COULD NOT BE EXECUTED BECAUSE OF INTE R-SE LITIGATION BETWEEN THE LEGAL HEIRS, AS ONE OF THEM HAD CHALLENGED THE WILL UNDER WHICH THE ASSESSEE HAD IN HERITEDTHE PROPERTY. THE AGREEMENT TO SELL, IT WAS HELD HAD GIVEN SOME RIGHTS TO THE VENDOR AND REDUCED OR EXTI NGUISHED RIGHTS OF THE ASSESSEE. THIS, IT WAS OBSERVED WAS SUFFICIENT THE PURPOSE OF SECTION 2(47), WHICH DEFINES THE TERM TRANSFER IN RELATION TO A CA PITAL ASSET. IN THE LIGHT OF THE FACTUAL MATRIX, IT WAS OBSERVED THAT THE INTENT ION BEHIND SECTION 54 WAS TO GIVE RELIEF TO A PERSON WHO HAD TRANSFERRED HIS RESIDENTIAL HOUSE AND HAD PURCHASED ANOTHER RESIDENTIAL HOUSE WITHIN TWO YEAR S OF TRANSFER OR HAD 7 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK PURCHASED A RESIDENTIAL HOUSE ONE YEAR BEFORE TRANS FER. IT WAS ONLY THE EXCESS AMOUNT NOT USED FOR MAKING PURCHASE OR CONSTRUCTION OF THE PROPERTY WITHIN THE STIPULATED PERIOD, WHICH WAS TAXABLE AS LONG TE RM CAPITAL GAIN WHILE ON THE AMOUNT SPENT, RELIEF SHOULD BE GRANTED. PRINCIP LE OF PURPOSIVE INTERPRETATION SHOULD BE APPLIED TO SUB SERVE THE O BJECT AND MORE PARTICULARLY WHEN ONE WAS CONCERNED WITH EXEMPTION FROM PAYMENT OF TAX. THE ASSESSEE, THEREFORE, SUCCEEDED. THE OBSERVATION S MADE IN THE SAID DECISION ARE ALSO RELEVANT ON THE QUESTION WHETHER THE PAYMENTS MADE BY THE ASSESSEE TO THE PERSON WITH WHOM HE HAD ENTERED .INTO.AN EARLIER AGREEMENT TO SELL SHOULD BE ALLOWED TO BE SET OFF A S EXPENSES INCURRED IN RELATION TO THE SALE DEED WHICH WAS EXECUTED. FROM THE ABOVE OBSERVATIONS IT IS CLEAR THAT THE TE RM PURCHASE CANNOT BE GIVEN A RESTRICTED MEANING AND HAS TO BE INTERPRETE D IN LIGHT OF THE LEGISLATIVE INTENT BEHIND INSERTION OF SECTION 54, THE THRUST O F WHICH IS TO ENCOURAGE INVESTMENT IN RESIDENTIAL PROPERTY AND WHEN IN THE PRESENT CASE, THE MAKING OF INVESTMENT IN THE SHAPE OF PAYMENT TO BUILDERS B EFORE THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE INCOME TAX ACT, 1961 HAS NOT BEEN DOUBTED BY THE LD. AO, THE CLAIM OF ASSESSEE COULD NOT HAVE BEEN DENIED MERELY FOR THE REASON THAT PHYSICAL POSSESSION COULD NOT BE GI VEN WITHIN THE SPECIFIED PERIOD PARTICULARLY WHEN ENTIRE EVIDENCE AVAILABLE ON RECORD ESTABLISHED THE FACT OF INVESTMENT MADE BY ASSESSEE AND NOTHING ADV ERSE WAS BROUGHT ON RECORD BY THE LD. AO. AT THIS JUNCTURE, REFERENCE IS REQUIRED TO BE MADE TO THE PROVISIONS OF SECTION 54 WHICH HAS BEEN REPRODUCED UNDER FOR QUICK REFERE NCE: PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE. 54. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDE D FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITA L ASSET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'I NCOME FROM HOUSE PROPERTY' (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED , OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE 3 [CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA], THEN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFE R TOOK PLACE, IT SHALL 8 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROV ISIONS OF THIS SECTION, THAT IS TO SAY, (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER TH AN THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED (HERE AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE DIFFEREN CE BETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSE T ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE NIL; OR (II) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL T O OR LESS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGED UN DER SECTION 45 ; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF T HREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE C OST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. (2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT AP PROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGIN AL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CO NSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF I NCOME UNDER SECTION 139 , SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE D UE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139 ] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION I N THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSES OF SUB -SECTION (1), THE AMOUNT, IF ANY, ALREADY UTILISED BY THE ASSESSEE FO R THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET TOGETHER WITH THE AMO UNT SO DEPOSITED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONST RUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1 ), THEN, (I) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPI RES; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUCH AMO UNT IN ACCORDANCE WITH THE SCHEME AFORESAID. EXPLANATION.[OMITTED BY THE FINANCE ACT, 1992, W. E.F. 1-4-1993.] 9 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK FROM THE PERUSAL OF THE PROVISIONS OF SECTION 54 IT IS VERY MUCH CLEAR THAT IN CASE THE ASSESSEE HAS PURCHASED/CONSTRUCTED A HOUSE ONE YEAR PRIOR TO SALE OR WITHIN A PERIOD OF TWO YEARS PURCHASED A RESIDENTIAL HOUSE OR WITHIN A PERIOD OF THREE YEARS CONSTRUCT A RESIDENTIAL HOUSE WHERE THE AMOUN T OF CAPITAL GAIN IS FULLY INVESTED THEN THE SAID INVESTMENT IS ENTITLED FOR E XEMPTION U/S 54 OF THE INCOME TAX ACT, 1961. FURTHER THE CBDT VIDE CIRCULAR NO. 4 71 DATED 15.10.1986 (APB 22) HAS CLARIFIED THAT IN CASE OF ALLOTMENT OF FLAT BY DDA, THE ALLOTMENT LETTER IS ISSUED AT THE TIME OF PAYMENT OF FIRST INSTALLMENT TOWARDS THE COST OF CONSTRUCTION AND PAYMENT OF INSTALLMENTS AND TAKING THE DELIVERY OF POSSESSION IS ONLY A FORMALITY THEREFORE BENEFIT OF SECTION 54 OR 54F ARE TO BE ALLOWED TO THE ALLOTTEES OF DDA. FURTHER CBDT VIDE CIRCULAR NO. 67 2 DATED 16.12.1993 (APB 23) HAS EXTENDED THIS BENEFIT TO THE SCHEMES OF ALLOTME NT AND CONSTRUCTION OF FLATS / HOUSES BY CO-OPERATIVE SOCIETIES OR OTHER INSTITUTI ONS (APB 23) . FURTHER, IN AN IDENTICAL CASE, ON SIMILAR FACTS AND CIRCUMSTANCES, THE HONBLE ITAT, MUMBAI BENCH A IN THE CASE OF HASMUKH N. GALA VS. ITO, WARD-20(1)(3) IN ITA NO. 7512/MUM/2013 HELD AS UNDER: 7.3 THE PLEA OF THE REVENUE IS THAT NO PURCHASE DEE D WAS EXECUTED BY THE BUILDER AND THAT THERE WAS ONLY AN ALLOTMENT LETTER ISSUED. AS PER THE REVENUE THE ADVANCE COULD BE RETURNED AT ANY TIME A ND, THEREFORE, THE ASSESSEE MAY LOSE THE EXEMPTION UNDER SECTION 54 OF THE ACT. IN OUR CONSIDERED OPINION, THE AFORESAID DOES NOT MILITATE AGAINST ASSESSEES CLAIM FOR EXEMPTION IN THE INSTANT ASSESSMENT YEAR, AS TH ERE IS NO EVIDENCE THAT THE ADVANCE HAS BEEN RETURNED. IN CASE, IF IT IS FOUND THAT THE ADVANCE HAS BEEN RETURNED, IT WOULD CERTAINLY CALL FOR FORFEITURE OF THE ASSESSEES CLAIM UNDER SECTION 54 OF THE ACT. IN SUCH A SITUATION, THE PRO VISO BELOW SECTION 54(2) OF THE ACT WOULD APPLY WHEREBY IT IS PRESCRIBED THAT S UCH AMOUNT SHALL BE CHARGED UNDER SECTION 45 AS INCOME OF THE PREVIOUS YEAR, IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES. THE AFORESAID PROVISIONS ALSO DOES NOT JUSTIFY THE ACTI ON OF THE ASSESSING OFFICER IN DENYING THE CLAIM OF EXEMPTION UNDER SECTION 54 IN THE INSTANT ASSESSMENT YEAR. 7.4 IN VIEW OF THE AFORESAID DISCUSSION AND ON THE BASIS OF MATERIAL AND EVIDENCE ON RECORD, WE FIND THAT THE ASSESSEE CAN B E SAID TO HAVE COMPLIED 10 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK WITH THE REQUIREMENT OF SECTION 54 OF THE ACT; AND, THE EXEMPTION HAS BEEN INCORRECTLY DENIED BY THE LOWER AUTHORITIES. AS A M ATTER OF PASSING, WE MAY ALSO MENTION HERE THE RELIANCE PLACED BY LD. REPRES ENTATIVE OF THE ASSESSEE ON THE DECISION OF OUR COORDINATE BENCH IN THE CASE OF SHRI KHEMCHAND FAGWANI VS. ITO, ITANO.7876/M/10 ORDER DATED 10/09/ 2014, WHEREIN ALSO CLAIM OF EXEMPTION UNDERSECTION 54 OF THE ACT WAS A LLOWED UNDER SIMILAR CIRCUMSTANCES. IN THE LIGHT OF THE PRECEDENT, WE FI ND NO REASON TO DENY THE CLAIM UNDER SECTION 54 OF THE ACT. WE DIRECT ACCORD INGLY. FROM THE ABOVE OBSERVATIONS, IT IS CLEAR THAT THE C LAIM OF EXEMPTION CANNOT BE DENIED TO ASSESSEE MERELY ON THE GROUND THAT POSSES SION WAS NOT OBTAINED BY THE ASSESSEE IN THE SPECIFIED PERIOD. IN THIS REGARD, FURTHER RELIANCE IS PLACED ON THE F OLLOWING CASE LAWS: CIT VS. R.L. SOOD 245 ITR 727 (APB 78-80) REFERENCEQUESTION OF LAWEXEMPTION UNDER S. 54ASS ESSEE ENTERED INTO AN AGREEMENT FOR PURCHASE OF NEW FLAT WITHIN FOUR DAYS OF SALE OF OLD PROPERTY AND PAID A SUBSTANTIAL AMOUNTTHUS, ASSESSEE ACQUIRED SUBSTA NTIAL DOMAIN OVER THE NEW FLAT WITHIN THE SPECIFIED PERIOD OF ONE YEAR AND CO MPLIED WITH THE REQUIREMENTS OF S. 54MERELY BECAUSE THE BUILDER FAILED TO HAND OVER P OSSESSION OF FLAT TO ASSESSEE WITHIN ONE YEAR OR THE SALE DEED WAS REGISTERED LAT ER, THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF SAID PROVISIONNO QUESTION OF LAW AR ISES FOR REFERENCE HELD ADMITTEDLY, THE ASSESSEE HAD PAID A SUM OF RS. 2,39 ,850 OUT OF THE TOTAL SALE CONSIDERATION OF RS. 2,75,000 FOR PURCHASE OF FLAT WITHIN THE PERIOD OF ONE YEAR FROM THE DATE OF SALE OF HIS OLD RESIDENTIAL HOUSE. THUS , ON PAYMENT OF A SUBSTANTIAL AMOUNT IN TERMS OF THE AGREEMENT OF PURCHASE DT. 25TH SEPT ., 1981, I.E., WITHIN FOUR DAYS OF THE SALE OF HIS OLD PROPERTY, THE ASSESSEE ACQUIRED SUB STANTIAL DOMAIN OVER THE NEW RESIDENTIAL FLAT WITHIN THE SPECIFIED PERIOD OF ONE YEAR AND COMPLIED WITH THE REQUIREMENTS OF S. 54. MERELY BECAUSE THE BUILDER F AILED TO HAND OVER POSSESSION OF THE FLAT TO THE ASSESSEE WITHIN THE PERIOD OF ONE Y EAR, THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF THE SAID BENEVOLENT PROVISION. THIS WOULD NOT BE IN CONSONANCE WITH THE SPIRIT OF S. 54. REALISING THE PRACTICAL DIFFICULTY FACED BY THE ASSESSEE IN SUCH SITUATIONS, THE BOARD ISSUED A CIRCULAR NO. 471, DT . 15TH OCT., 1986, CLARIFYING THAT WHEN THE DDA ISSUES THE ALLOTMENT LETTER TO AN ALLO TTEE UNDER ITS SELF-FINANCING SCHEME, ON PAYMENT OF FIRST INSTALMENT OF COST OF C ONSTRUCTION, THE ALLOTTEE GETS TITLE TO THE PROPERTY AND SUCH ALLOTMENT SHOULD BE TREATED A S COST OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS. ON THE SAME ANALOGY, THE ASSESSEE HAVING BEEN ALLOTTED THE FLAT, HE HAVING PAID A SUBSTANTIAL AMOUNT TOWARDS I TS COST WITHIN THE STIPULATED PERIOD OF ONE YEAR, HE CANNOT BE DENIED THE BENEFIT OF THE SAID SECTION BECAUSE THE FLAT PURCHASED BY HIM HAD COME INTO HIS FULL DOMAIN WITH IN THE PERIOD OF ONE YEAR, THOUGH THE SALE DEED IN HIS FAVOUR WAS REGISTERED SUBSEQUE NTLY. IN THE LIGHT OF THE SAID CIRCULAR AND KEEPING IN VIEW THE SPIRIT OF S. 54, T HE REQUEST OF THE REVENUE TO CALL FOR A REFERENCE ON THE PROPOSED QUESTION IS DECLINED. 11 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK (PARAS 6 TO 8) M/S FIBRE BOARDS PVT. LTD. VS. CIT (SC) CIVIL APPEA L NOS. 5525-5526 OF 2005 A READING OF SECTION 54G MAKES IT CLEAR THAT THE AS SESSEE IS GIVEN A WINDOW OF THREE YEARS AFTER THE DATE ON WHICH TRANSFER HAS TAKEN PL ACE TO PURCHASE NEW MACHINERY OR PLANT OR ACQUIRE BUILDING OR LAND. THE HIGH CO URT HAS COMPLETELY MISSED THE WINDOW OF THREE YEARS GIVEN TO THE ASSESSEE TO PUR CHASE OR ACQUIRE MACHINERY AND BUILDING OR LAND. THIS IS WHY THE EXPRESSION USED I N 54G(2) IS WHICH IS NOT UTILIZED BY HIM FOR ALL OR ANY OF THE PURPOSES AFORESAID.. IT IS CLEAR THAT FOR THE ASSESSMENT YEAR IN QUESTION ALL THAT IS REQUIRED FOR THE ASSES SEE TO AVAIL OF THE EXEMPTION CONTAINED IN THE SECTION IS TO UTILIZE THE AMOUNT OF CAPITAL GAINS FOR PURCHASE AND ACQUISITION OF NEW MACHINERY OR PLANT AND BUILDING OR LAND. IT IS UNDISPUTED THAT THE ENTIRE AMOUNT CLAIMED IN THE ASSESSMENT YEAR IN QUESTION HAS BEEN SO UTILIZED FOR PURCHASE AND/OR ACQUISITION OF NEW M ACHINERY OR PLANT AND LAND OR BUILDING. (PARA 36) UNDER SUB-SECTION (1), THE ASSESSEE IS GIVEN A PERI OD OF THREE YEARS AFTER THE DATE ON WHICH THE TRANSFER TAKES PLACE TO PURCHASE NEW MACH INERY OR PLANT AND ACQUIRE BUILDING OR LAND OR CONSTRUCT BUILDING FOR THE PURP OSE OF HIS BUSINESS IN THE SAID AREA. IF THE HIGH COURT IS RIGHT, THE ASSESSEE HAS TO PUR CHASE AND/OR ACQUIRE MACHINERY, PLANT, LAND AND BUILDING WITHIN THE SAME ASSESSMENT YEAR IN WHICH THE TRANSFER TAKES PLACE. FURTHER, THE HIGH COURT HAS MISSED THE KEY W ORDS NOT UTILIZED IN SUB-SECTION (2) WHICH WOULD SHOW THAT IT IS ENOUGH THAT THE CAP ITAL GAIN MADE BY THE ASSESSEE SHOULD ONLY BE UTILIZED BY HIM IN THE ASSESSMENT YEAR IN QUESTION FOR ALL OR ANY OF THE PURPOSES AFORESAID, THAT IS TOWARDS PURCHASE AN D ACQUISITION OF PLANT AND MACHINERY, AND LAND AND BUILDING. ADVANCES PAID FOR THE PURPOSE OF PURCHASE AND/OR ACQUISITION OF THE AFORESAID ASSETS WOULD CERTAINLY AMOUNT TO UTILIZATION BY THE ASSESSEE OF THE CAPITAL GAINS MADE BY HIM FOR THE P URPOSE OF PURCHASING AND/OR ACQUIRING THE AFORESAID ASSETS. (PARA 38) IT IS FURTHER SUBMITTED THAT IN THE PRESENT CASE, T HE LD. AO HAS COMMITTED A GROSS ERROR IN DISALLOWING THE CLAIM OF ASSESSEE BY APPLY ING STRICT / RIGOROUS INTERPRETATION TO THE PROVISIONS OF SECTION 54 BY COMPLETELY IGNOR ING THE PURPOSE BEHIND INSERTION OF THE SAID PROVISION ON THE STATUTE. SECTION 54 IS INTENDED TO CONFER BENEFIT ON THE INDIVIDUALS BY PROVIDING EXEMPTION FROM TAX ON CAPI TAL GAIN WITH THE MOTIVE OF ENCOURAGING INVESTMENT IN THE RESIDENTIAL PROPERTIE S, THEREFORE, SUCH A BENEFICIAL 12 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK PROVISION IS REQUIRED TO BE CONSTRUED LIBERALLY AND THE INTERPRETATION PLACED BY THE LD. AO RUNS COMPLETELY CONTRARY TO THE OBJECT SOUGH T TO BE ACHIEVED BY THE SAID PROVISION. IT IS WELL SETTLED LAW THAT A BENEFICIAL PROVISION CONFERRING SOME BENEFIT ON THE ACCUSED HAS TO BE CONSTRUED LIBERALLY. KIND ATT ENTION OF HONBLE BENCH IS INVITED TO THE BOARD'S CIRCULAR NO.346 DATED 30TH JUNE, 198 2 WHEREIN, THE BOARD HAS CLARIFIED THAT THE OBJECT BEHIND INSERTION OF SECTI ON 54F IS TO ENCOURAGE HOUSE CONSTRUCTION. IT IS AN ENCOURAGEMENT GIVEN TO THE A SSESSEE TO EXCHANGE ONE OF THE RESIDENTIAL HOUSES FOR ANOTHER OR WHERE HE HAS NONE TO CONVERT ANY OF HIS LONG TERM ASSETS INTO A RESIDENTIAL HOUSE. THE OBJECT BEHIND SUCH A PROVISION IS TO ENCOURAGE LARGE SCALE HOUSE BUILDING ACTIVITY OR INVESTMENT I N HOUSE PROPERTY TO MEET ACUTE HOUSING SHORTAGE IN THE COUNTRY. THEREFORE, LOOKING AT THE LEGISLATIVE INTENT, A LIBERAL INTERPRETATION HAS TO BE GIVEN TO SECTION 54 WHICH IS A BENEFICIAL PROVISION. IN SUPPORT OF THIS CONTENTION, RELIANCE IS PLACED ON THE FOLLO WING CASE LAWS: CIT V. VEGETABLE PRODUCTS LTD. [1973] 88 ITR 192 (S C) THERE IS NO DOUBT THAT THE ACCEPTANCE OF ONE OR THE OTHER INTERPRETATION SOUGHT TO BE PLACED ON SECTION 271(1)(A)(I) BY THE PARTIES WO ULD LEAD TO SOME INCONVENIENT RESULT, BUT THE DUTY OF THE COURT IS TO READ THE SE CTION, UNDERSTAND ITS LANGUAGE AND GIVE EFFECT TO THE SAME. IF THE LANGUAGE IS PLAIN, THE FACT THAT THE CONSEQUENCE OF GIVING EFFECT TO IT MAY LEAD TO SOME ABSURD RESULT IS NOT A FACTOR TO BE TAKEN INTO ACCOUNT IN INTERPRETING A PROVISION. IT IS FOR THE LEGISLATURE TO STEP IN AND REMOVE THE ABSURDITY. ON THE OTHER HAND, IF TWO REASONABLE CON STRUCTIONS OF A TAXING PROVISION ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE A SSESSEE MUST BE ADOPTED. THIS IS A WELL-ACCEPTED RULE OF CONSTRUCTION RECOGNISED BY TH IS COURT IN SEVERAL OF ITS DECISIONS. CIT VS. ASHOK KUMAR RALHAN 360 ITR 575 THE WORD 'CONSTRUCT' IS DISTINGUISHABLE FROM MAINTE NANCE, WHICH MEANS TO KEEP UP, TO KEEP FROM CHANGE, TO PRESERVE. THE WORD 'CONSTRU CTION' FOR THE PURPOSES OF SECTION 54F OF THE INCOME-TAX ACT, 1961, HAS TO BE GIVEN A REALISTIC, PRACTICAL AND PRAGMATIC MEANING KEEPING IN MIND THE OBJECT AND PU RPOSE OF THE PROVISION. SECTION 54F IS A BENEFICIAL PROVISION AS A CAPITAL ASSET, W HICH IS SOLD, IS REPLACED BY A NEW CAPITAL ASSET IN THE FORM OF A RESIDENTIAL HOUSE, W HICH SHOULD BE PURCHASED OR CONSTRUCTED WITHIN THE PERIOD STIPULATED. THE ASSESSEE, AN INDIVIDUAL, SOLD A PROPERTY AND DE CLARED CAPITAL GAINS OF RS. 51,71,994. HE PURCHASED A FULLY BUILT UP PROPERTY, DEMOLISHED IT AND REBUILT IT. THE 13 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK MONEY SPENT ON CONSTRUCTION AS DECLARED BY THE ASSE SSEE WAS RS. 59,98,451. THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54F. THE A SSESSING OFFICER DENIED THE EXEMPTION. THE ASSESSING OFFICER HELD THAT THERE WA S NEITHER THE NEED FOR THE ASSESSEE TO RECONSTRUCT NOR RENOVATE THE PURCHASED PROPERTY AS IT WAS ALREADY FULLY CONSTRUCTED. THE COMMISSIONER (APPEALS) HELD THAT I T WAS A CASE OF NEW CONSTRUCTION AFTER DEMOLITION. THIS WAS AFFIRMED BY THE TRIBUNAL . THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HELD THAT THE ASSESSEE WAS ENTITLED TO THE BENEFIT UNDER SECTION 54F. ON APPEAL TO THE HIGH COURT : HELD, DISMISSING THE APPEAL, THAT THE FACTUAL FINDI NG RECORDED BY THE COMMISSIONER (APPEALS) AND AFFIRMED BY THE TRIBUNAL SHOWED THAT IT WAS A CASE OF 'CONSTRUCTION' UNDER SECTION 54F. THE CONSTRUCTION WAS CARRIED OUT WITHIN THE OUTER LIMIT OF THREE YEARS. THE ASSESSEE WAS ENTITLED TO THE BENEFIT UND ER SECTION 54F. CIT VS. KAMAL WAHAL 351 ITR 04 IT ALSO NOTED THE JUDGMENT OF THE BOMBAY HIGH COURT IN PRAKASH V. ITO [2009] 312 ITR 40 (BOM) ; [2008] 173 TAXMAN 311 IN WHICH A CON TRARY VIEW WAS TAKEN BUT PREFERRED THE VIEW TAKEN BY THE MADRAS AND KARNATAK A HIGH COURTS ADOPTING THE RULE LAID DOWN BY THE SUPREME COURT IN CIT V. VEGETABLE PRODUCTS LTD. [1973] 88 ITR 192 (SC) WHICH SAYS THAT IF A STATUTORY PROVISION IS C APABLE OF MORE THAN ONE VIEW, THEN THE VIEW WHICH FAVOURS THE TAXPAYER SHOULD BE PREFE RRED. THE TRIBUNAL ALSO OBSERVED THAT SECTION 54F BEING A BENEFICIAL PROVISION ENACT ED FOR ENCOURAGING INVESTMENT IN RESIDENTIAL HOUSES SHOULD BE LIBERALLY INTERPRETED. WE HAVE NO HESITATION IN AGREEING WITH THE VIEW TAK EN BY THE TRIBUNAL. CIT VS. J.H. GOTLA [1985] 156 ITR 0323 IF A STRICT AND LITERAL CONSTRUCTION OF THE STATUTE LEADS TO AN ABSURD RESULT, I.E., A RESULT NOT INTENDED TO BE SUBSERVED BY THE OBJECT OF THE L EGISLATION ASCERTAINED FROM THE SCHEME OF THE LEGISLATION, THEN, IF ANOTHER CONSTRU CTION IS POSSIBLE APART FROM THE STRICT LITERAL CONSTRUCTION, THEN, THAT CONSTRUCTIO N SHOULD BE PREFERRED TO THE STRICT LITERAL CONSTRUCTION. WHERE THE PLAIN LITERAL INTERPRETATION OF A STATUTO RY PROVISION PRODUCES A MANIFESTLY UNJUST RESULT WHICH COULD NEVER HAVE BEEN INTENDED BY THE LEGISLATURE, THE COURT MIGHT MODIFY THE LANGUAGE USED BY THE LEGISLATURE S O AS TO ACHIEVE THE INTENTION OF THE LEGISLATURE AND PRODUCE A RATIONAL RESULT. BY THE COURT: 'THOUGH EQUITY AND TAXATION ARE OFTEN STRANGERS, ATTEMPTS SHOULD BE MADE THAT THESE DO NOT REMAIN ALWAYS SO AND IF A CO NSTRUCTION RESULTS IN EQUITY RATHER THAN IN INJUSTICE, THEN SUCH CONSTRUCTION SH OULD BE PREFERRED TO THE LITERAL 14 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK CONSTRUCTION.' N. RAM KUMAR VS. ASST. CIT 138 ITD 317 THE INTENTION OF THE LEGISLATURE IN INTRODUCING SEC . 54F AS EXPLAINED IN BOARD'S CIRCULAR NO.346 DATED 30.06.1982 IS FOR ENCOURAGING HOUSE CONSTRUCTION. IT IS AN ENCOURAGEMENT GIVEN TO THE ASSESSEE TO EXCHANGE ONE OF THE RESIDENTIAL HOUSES FOR ANOTHER OR WHERE HE HAS NONE TO CONVERT ANY OF HIS LONG TERM ASSETS INTO A RESIDENTIAL HOUSE. THE OBJECT BEHIND SUCH A PROVISI ON IS TO ENCOURAGE LARGE SCALE HOUSE BUILDING ACTIVITY OR INVESTMENT IN HOUSE PROP ERTY TO MEET ACUTE HOUSING SHORTAGE IN THE COUNTRY. THEREFORE, LOOKING AT THE LEGISLATIVE INTENT, A LIBERAL INTERPRETATION HAS TO BE GIVEN TO SECTION 54F WHICH IS A BENEFICIAL PROVISION. VARGHESE (K.P.) V. INCOME-TAX OFFICER131 ITR 597 IT IS A WELL-RECOGNISED RULE OF CONSTRUCTION THAT A STATUTORY PROVISION MUST BE SO CONSTRUED, IF POSSIBLE, THAT ABSURDITY AND MISCHIEF MAY BE AVOIDED. THERE ARE MANY SITUATIONS WHERE THE CONSTRUCTION SUGGESTED ON BEHA LF OF THE REVENUE WOULD LEAD TO A WHOLLY UNREASONABLE RESULT WHICH COULD NEVER HAVE BEEN INTENDED BY THE LEGISLATURE. FURTHER RELIANCE IS PLACED ON THE FOLLOWING CASE LA WS: CIT VS. MRS. HILLA J.B. WADIA 113 CTR 173 SEC. 54 WILL HAVE TO BE CONSTRUED IN THE CONTEXT OF THE MANNER IN WHICH SUCH RESIDENTIAL PROPERTIES ARE NOW BEING CONSTRUCTED IN A CITY LIKE BOMBAY WHERE, LOOKING TO THE COST OF THE LAND, CO-OPERATIVE HOUSING SOCIE TIES ARE BEING FORMED FOR CONSTRUCTING A BUILDING IN WHICH FLATS ARE ALLOTTED TO MEMBERS. THIS MUST ALSO BE VIEWED AS A METHOD OF CONSTRUCTING RESIDENTIAL TENE MENTS. WHAT ONE HAS TO SEE IS WHETHER THE ASSESSEE HAS ACQUIRED A RIGHT TO A SPEC IFIC FLAT IN SUCH A BUILDING WHICH IS BEING CONSTRUCTED BY THE SOCIETY AND WHETHER SHE HA S MADE A SUBSTANTIAL INVESTMENT WITHIN THE PRESCRIBED PERIOD WHICH WILL ENTITLE HER TO OBTAIN POSSESSION OF THE FLAT SO CONSTRUCTED AND IN WHICH SHE INTENDS TO RESIDE. THE MATERIAL TEST IN THIS CONNECTION IS DOMAIN OVER THE FLAT AND INVESTMENT IN IT. THE ASSE SSEE SATISFIES BOTH THESE CONDITIONS. SHE HAS ACQUIRED SUCH A DOMAIN AND HAS INVESTED ALMOST THE ENTIRE REQUISITE AMOUNT IN IT WITHIN A PERIOD OF 2 YEARS P RESCRIBED UNDER S. 54. IN THIS CONNECTION ATTENTION IS DRAWN TO A CIRCULAR OF THE CBDT BEARING NO. 471 DT. 15TH OCT., 1986 WHICH DEALT WITH THE INVESTMENT IN FLATS UNDER THE SELF FINANCING SCHEME OF THE DELHI DEVELOPMENT AUTHORITY. THE BOARD HAS STATED I N THE CIRCULAR THAT WHEN AN ALLOTMENT LETTER IS ISSUED TO AN ALLOTTEE UNDER THI S SCHEME ON PAYMENT OF THE FIRST INSTALMENT OF THE COST OF CONSTRUCTION, THE ALLOTME NT IS FINAL UNLESS IT IS CANCELLED. THE ALLOTTEE, THEREUPON, GETS TITLE TO THE PROPERTY ON THE ISSUANCE OF THE ALLOTMENT LETTER 15 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK AND THE PAYMENT OF INSTALMENTS IS ONLY A FOLLOW UP ACTION AND TAKING DELIVERY OF POSSESSION IS ONLY A FORMALITY. THE BOARD HAS DIREC TED THAT SUCH AN ALLOTMENT OF FLAT UNDER THIS SCHEME SHOULD BE TREATED AS COST OF CONS TRUCTION FOR THE PURPOSE OF CAPITAL GAINS. THE PRESENT CASE IS ON A MUCH STRONGER FOOTI NG BECAUSE THERE IS NOT MERELY AN ALLOTMENT OF THE FLAT BUT EVEN ALMOST THE ENTIRE CO ST OF CONSTRUCTION IS PAID BY THE ASSESSEE WITHIN A PERIOD OF 2 YEARS. THE PRESENT CA SE FALLS WITHIN THE PROVISIONS OF S. 54 IN VIEW OF THE FACT THAT THE ASSESSEE HAD ACQUIR ED SUBSTANTIAL DOMAIN OVER THE FLAT IN QUESTION UNDER THE AGREEMENT WITH THE SOCIETY CO UPLED WITH THE PAYMENT OF ALMOST THE ENTIRE COST OF CONSTRUCTION WITHIN A PER IOD OF TWO YEARS. CIT VS. MRS. SHAHZADA BEGUM (1988) 73 CTR (AP) 229 : (1988) 173 ITR 397 (AP) & KESHO RAM PASSEY VS. RESERVE BANK OF INDIA (1983) 36 CTR (P&H) 148 : (1984) 146 ITR 16 (P&H) RELIED ON; SMT. SHANTABEN P. GANDHI VS. CIT (1981) 129 ITR 218 (GUJ) & CIT VS. J.R. SUBRAMANYA BHAT (1987) 64 CTR (KAR) 280 : (1987) 165 ITR 571 (KAR) DISTINGUISHED SHASHI VERMAVS. CIT 152 CTR 227 CAPITAL GAINSEXEMPTION UNDER S. 54INVESTMENT FOR ACQUISITION OF A FLAT UNDER THE SCHEME OF DDASATISFIES THE CONDITION OF S. 54 AS P ER CIRCULAR NO. 471 DT. 15TH OCT., 1986THAT APART, FIRST INSTALMENT PAID TO DDA WHICH IS MUCH MORE THAN CAPITAL GAINSSEC. 54 DOES NOT REQUIRE THAT CONSTRUCTION OF NEW HOUSE SHOULD NECESSARILY BE COMPLETE WITHIN TWO YEARSIF SUBSTANTIAL INVESTM ENT IS MADE IN THE CONSTRUCTION OF HOUSE, REQUIREMENTS OF S. 54 ARE SATISFIED HELD IT WAS NOT PROPER FOR THE TRIBUNAL TO HAVE IGNORED THE CIRCULAR NO. 471, DT. 15TH OCT., 1986, BECAUSE IT HAS A PERSUASIVE VALUE AND IT WAS IN THE NATURE OF GRANTING RELIEF. THEREFORE, THE TRIBUNAL SHOULD HAVE CONSIDERED THE CIRCULAR SYMPATHETICALLY AND GRANTED THE RELIEF. MORE SO, S. 54 ONLY SAYS THAT W ITHIN TWO YEARS, THE ASSESSEE SHOULD HAVE CONSTRUCTED THE HOUSE BUT THAT DOES NOT MEAN THAT THE CONSTRUCTION OF HOUSE SHOULD NECESSARILY BE COMPLETE WITHIN TWO YEA RS. WHAT IT MEANS IS THAT THE CONSTRUCTION OF HOUSE SHOULD BE COMPLETED AS FAR AS POSSIBLE WITHIN TWO YEARS. IN THE MODERN DAYS, IT IS NOT EASY TO CONSTRUCT A HOUSE WI THIN THE TIME LIMIT OF TWO YEARS AND UNDER THE GOVERNMENT SCHEMES, CONSTRUCTION TAKE S YEARS TO YEARS. THEREFORE, CONFINING TO TWO YEARS PERIOD FOR CONSTRUCTION AND HANDING OVER POSSESSION THEREOF IS IMPOSSIBLE AND UNWORKABLE UNDER S. 54. IF THE SU BSTANTIAL INVESTMENT IS MADE IN THE CONSTRUCTION OF HOUSE, THEN IT SHOULD BE DEEMED THAT SUFFICIENT STEPS HAVE BEEN TAKEN AND THIS SATISFIES THE REQUIREMENTS OF S. 54. THEREFORE, THE VIEW TAKEN BY THE TRIBUNAL IS NOT CORRECT. 16 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK CIT VS. SARDARMAL KOTHARI 217 CTR 414 CAPITAL GAINSEXEMPTION UNDER S. 54FCONSTRUCTION O F NEW RESIDENTIAL HOUSE REQUIREMENT OF S. 54F IS THAT THE ASSESSEE, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER, HAS TO CONSTRUCT A RESIDENTIAL HO USE IN ORDER TO BECOME ELIGIBLE FOR EXEMPTIONREADING OF CIRCULAR NO. 667, DT. 18TH OCT ., 1993 DOES NOT LEAD TO THE CONCLUSION THAT THE CONSTRUCTION SHOULD BE COMPLETE D WITHIN THE STIPULATED TIME IN ORDER TO AVAIL OF THE BENEFIT OF S. 54FASSESSEES H AVE INVESTED THE ENTIRE NET CONSIDERATION OF SALE OF CAPITAL ASSET IN THE LAND ITSELF AND SUBSEQUENTLY THE ASSESSEES HAVE INVESTED LARGE SUMS OF MONEY IN THE CONSTRUCTION OF THE HOUSE AND THEY PRODUCED COMPLETION CERTIFICATES FROM THE MUNI CIPAL AUTHORITYTHEREFORE, EXEMPTION UNDER S. 54F COULD NOT BE DENIED ON THE G ROUND THAT THE CONSTRUCTION WAS NOT COMPLETED WITHIN THE SPECIFIED PERIODD.P. MEHT A VS. CIT (2001) 168 CTR (DEL) 321 : (2001) 251 ITR 529 (DEL) DISTINGUISHED; MRS. SEETHA SUBRAMANIAN VS. ASSTT. CIT (1996) 56 TTJ (MAD) 417 : (1996) 59 ITD 94 (MAD) IM PLIEDLY APPROVED THEREFORE, IN VIEW OF THE SETTLED POSITION AS MENTI ONED ABOVE, IT IS SUBMITTED THAT THE ASSESSEES CLAIM OF DEDUCTION U/S 54F HAS WRONG LY BEEN DENIED BY THE LD. AO AND THUS, IT IS PRAYED THAT THE SAME MAY PLEASE BE DIRECTED TO BE ALLOWED. SIMILAR SUBMISSIONS WERE MADE BEFORE LD. CIT (A) WH O DECIDED THE ISSUE AT PAGE 8 OF HIS ORDER AS UNDER :- HOWEVER, THIS IS NOT THE CASE OF THE AO, THE FACT THAT POSSESSION HAS NOT BEEN RECEIVED BY THE ASSESSEE BECOMES IMPORTANT IN THE LIGHT OF THE FACT THAT THE ALLOTMENT WAS PROVISIONAL AND IF POSSESSION WAS GIVEN, IT WOULD HAVE PROVED THE PURCHASE, POSSESSION MAY N OT BE MATERIAL, WHERE THE FACTUM OF POSSESSION IS ESTABLISHED. SINC E IN THE CASE IN HANDS NEITHER THE PURCHASE IS EVIDENCED BY VALID AG REEMENT NOT PURCHASE DEED NOR THE PHYSICAL POSSESSION HAS BEEN RECEIVED, THE EXEMPTION U/S 54F CANNOT BE ALLOWED. THE RELEVANT P ART OF SECTION 54F READS AS FOLLOWS : [ SUBJECT TO THE PROVISION OF SUB-SECTION (4), WHE RE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR HINDU UNDIVID ED FAMILY], THE CAPITAL GAIN ARISE FROM THE TRANSFER OF ANY LON G-TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSE E HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR [TWO YEAR] AFTER THE D ATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITH IN P ERIOD OF THREE YEARS AFTER THAT DATE [CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA](HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET., THE 17 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTIN, THAT IS TO SAY . FURTHER, I PLACE RELIANCE ON THE DECISION OF GULSHA N MALIK VS. CIT (2014) 43 TAXMANN. COM 250 (DELHI) WHERE THE HONBL E DELHI HIGH COURT HAS HELD THAT BOOKING RIGHTS OF AN APARTMENT WITH A BUILDER HAS TO BE COUNTED FROM THE DATE OF EXECUTION AGREEMENT TO SELL I.E. BUYERS AGREEMENT. THE FACTS OF THE CASE ARE SIMILAR TO OUR CASE WHERE THE BUILDER IS A PRIVATE BUILDER DLF. FURTHER ARS RELI ANCE ON SHASHI VERMA VS. CIT 152 CTR 227 WHICH RELATES TO ALLOTMENT BY D DA, A GOVT. AGENCY FOR WHICH A SPECIAL CIRCULAR HAS BEEN PASSED BY THE CBDT. IN THE CASE OF A PRIVATE BUILDER, AS HELD BY THE HONB LE COURT A BUILDER AGREEMENT AND NOT THE PROVISIONAL AGREEMENT IS TO B E CONSIDERED AS CONFERRING DOMAIN RIGHTS OVER THE PROPERTY IN QUEST ION LEADING TO IS PURCHASE. IN VIEW OF THE ABOVE DISCUSSION, THE AO HAS CORRECT LY DENIED THE EXEMPTION U/S 54F. FROM THE ABOVE FINDING OF LD. CIT (A), IT IS CLEAR THAT LD. CIT (A) DISALLOWED THE CLAIM ON THE BASIS THAT THE ALLOTMENT TO THE ASSESSEE WAS PROVISIONAL. THE CONTENTION OF THE ASSESSEE IS THAT THE ALLOTMENT WOULD REMAIN PRO VISIONAL TILL THE ASSESSEE MAKES THE PAYMENT OF THE DUES. IN THE CASE IN HAND, THE ASSESSEE HAS MADE PAYMENT OF SUBSTANTIAL AMOUNT. IT IS THE CONTENTION OF THE ASS ESSEE THAT SHE HAD MADE TOTAL PAYMENT OF RS. 71,36,886/- TILL 23.07.2012. THE TO TAL CONSIDERATION OF THE FLAT WAS RS. 79,57,800/- OUT OF WHICH THE ASSESSEE HAD MADE PAYMENT OF RS. 71,36,886/-. ONE OF THE TERMS OF THE AGREEMENT WAS THAT HOUSING PROJECT WAS TO BE COMPLETED WITHIN 39 MONTHS I.E. BY OCTOBER, 2013 FROM THE DAT E OF ALLOTMENT MEANING THEREBY THE DATE OF ALLOTMENT WAS 14.08.2010. THE ASSESSEE HAS MADE PAYMENT IN ACCORDANCE WITH THE PAYMENT PLAN ANNEXED AT PAGE 32 OF PAPER BOOK. 4.5. NOW THE ISSUE THAT REQUIRES TO BE DECIDED IS W HETHER THE ASSESSEE WOULD BE ENTITLED FOR THE DEDUCTION AS CONTEMPLATED UNDER SE CTION 54F OF THE ACT. THE LD. 18 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE JUDGME NT OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF M/S. FIBRE BOARDS PVT . LTD. VS. CIT (SC) CIVIL APPEAL NOS. 5525-5526 OF 2005. THE HONBLE SUPREME COURT W HILE ALLOWING THE APPEAL OF THE ASSESSEE HAS HELD AS UNDER :- 38. WE ARE OF THE VIEW THAT THE AFORESAID CONSTRU CTION OF SECTION 54G WOULD RENDER NUGATORY A VITAL PART OF THE SAID SECTION SO FAR AS THE ASSESSEE IS CONCERNED. UNDER SUB-SECTION (1), THE A SSESSEE IS GIVEN A PERIOD OF THREE YEARS AFTER THE DATE ON WHICH THE T RANSFER TAKES PLACE TO PURCHASE NEW MACHINERY OR PLANT AND ACQUIRE BUIL DING OR LAND OR CONSTRUCT BUILDING FOR THE PURPOSE OF HIS BUSINESS IN THE SAID AREA. IF THE HIGH COURT IS RIGHT, THE ASSESSEE HAS TO PURCHA SE AND/OR ACQUIRE MACHINERY, PLANT, LAND AND BUILDING WITHIN THE SAME ASSESSMENT YEAR IN WHICH THE TRANSFER TAKES PLACE. FURTHER, THE HIG H COURT HAS MISSED THE KEY WORDS NOT UTILIZED IN SUB-SECTION (2) WHI CH WOULD SHOW THAT IT IS ENOUGH THAT THE CAPITAL GAIN MADE BY THE ASSESSE E SHOULD ONLY BE UTILIZED BY HIM IN THE ASSESSMENT YEAR IN QUESTIO N FOR ALL OR ANY OF THE PURPOSES AFORESAID, THAT IS TOWARDS PURCHASE AN D ACQUISITION OF PLANT AND MACHINERY, AND LAND AND BUILDING. ADVANCE S PAID FOR THE PURPOSE OF PURCHASE AND/OR ACQUISITION OF THE AFORE SAID ASSETS WOULD CERTAINLY AMOUNT TO UTILIZATION BY THE ASSESSEE OF THE CAPITAL GAINS MADE BY HIM FOR THE PURPOSE OF PURCHASING AND/OR AC QUIRING THE AFORESAID ASSETS. WE FIND THEREFORE THAT ON THIS GR OUND ALSO, THE ASSESSEE IS LIABLE TO SUCCEED. THE APPEALS ARE, ACC ORDINGLY, ALLOWED AND THE JUDGMENT OF THE HIGH COURT IS SET ASIDE. FURTHER RELIANCE IS PLACED ON THE JUDGMENT OF THE H ONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. KULDEEP SINGH, 270 CTR 561 ( DELHI). THE HONBLE HIGH COURT IN PARA 11 TO 13 HAS HELD AS UNDER :- 11. WHAT HAS BEEN STATED IN THE JUDGMENT OF THE MAD HYA PRADESH HIGH COURT IN 1997, IN PRACTICAL TERMS AND IN REALITY ST ILL HOLDS GOOD. THIS IS A MATTER OF COMMON KNOWLEDGE THAT FLATS OR APARTMENTS BEING CONSTRUCTED BY BUILDERS TAKE TIME. THE GOVERNMENT HOUSING BOARD S ALSO TAKE TIME AND SELDOM ADHERE TO THE PROMISED DATE. SIMILAR VIEW HA S BEEN TAKEN INBHARATI C. KOTHARI (SUPRA) WHEREIN REFERENCE WAS MADE TO THE DECISION OF ANDHRA PRADESH HIGH COURT IN CIT VS. SHAHZADA BEGUM [1988] 73 CTR (AP) 229 : (1988) 173 ITR 397 (AP) AND IT WAS OBSERVED THAT ASSESSEE HAD ENTERED INTO AN AGREEMENT WITHIN TWO YEARS FOR PURCHASE OF A FLAT WHICH WAS UNDER CONSTRUCTION. PAYMENT FOR THE SAID FLAT WAS MADE WITHIN THREE YEARS FROM THE DATE OF SALE OF THE FIRST PROP ERTY. NO DOUBT THE 19 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK ASSESSEE WAS NOT CONSTRUCTING THE NEW ASSET HERSELF BUT SHE HAD PURCHASED THE FLAT. REFERENCE WAS MADE TO THE DECIS ION OF THE SURPEME COURT IN CIT VS. J.H. GOTLA [1985] 48 CTR (SC) 363 : [1985] 156 ITR 323 (SC), WHEREIN IT HAS BEEN OBSERVED: WHERE THE PLAIN LITERAL INTERPRETATION OF A STATUT ORY PROVISION PRODUCES A MANIFESTLY UNJUST RESULT WHICH COULD NEV ER HAVE BEEN INTENDED BY THE LEGISLATURE, THE COURT MIGHT MODIFY THE LANGUAGE USED BY THE LEGISLATURE SO AS TO ACHIEVE THE INTENT ION OF THE LEGISLATURE AND PRODUCE A RATIONAL CONSTRUCTION. TH E TASK OF INTERPRETATION OF A STATUTORY PROVISION IS AN ATTEM PT TO DISCOVER THE INTENTION OF THE LEGISLATURE FROM THE LANGUAGE USED . IT IS NECESSARY TO REMEMBER THAT LANGUAGE USED IS AT BEST AN IMPERF ECT INSTRUMENT FOR THE EXPRESSION OF HUMAN INTENTION. IT IS WELL T O REMEMBER THE WARNING ADMINISTERED BY JUDGE LEARNED HAND THAT ONE SHOULD NOT MAKE A FORTRESS OUT OF THE DICTIONARY BUT REMEMBER THAT STATUTES ALWAYS HAVE SOME PURPOSE OR OBJECT TO ACCOMPLISH AN D SYMPATHETIC AND IMAGINATIVE DISCOVERY IS THE SUREST GUIDE TO THEIR MEETING. 12. MOREOVER, IN BHARATI C. KOTHARI'S CASE (SUPRA)I T WAS STATED AS UNDER: THE PURPOSE BEHIND THE EXEMPTION UNDER S. 54(1) IS THAT IF ANY ASSESSEE SELLS HIS RESIDENTIAL HOUSE AND PURCHASES A NEW HOUSE AGAINST THOSE SALE CONSIDERATIONS THAT CAPITAL GAIN S TAX ARISING OUT OF THE SALE OF THE EARLIER HOUSE SHOULD NOT BE TAXE D. WHETHER THE ASSESSEE HIMSELF CONSTRUCTS THE HOUSE OR HE GETS IT CONSTRUCTED BY A CONTRACTOR OR A THIRD PARTY THAT DOES NOT MAKE AN Y DIFFERENCE. THE BASIC REQUIREMENT FOR THE PURPOSE OF RELIEF UND ER S. 54(1), IS THAT THE ASSESSEE SHOULD INVEST THE SALE PROCEEDS I N THE CONSTRUCTION OF A RESIDENTIAL HOUSE, WHICH HAS BEEN CONSTRUCTED FOR THE ASSESSEE. KEEPING IN VIEW THE ABOVE OBSERVATION S AND REASONS GIVEN BY THE TRIBUNAL, NO CASE IS MADE OUT FOR INTE RFERENCE. IT WAS OBSERVED THAT THE BASIC PURPOSE BEHIND S. 54 IS TO ENSURE THAT THE ASSESSEE IS NOT TAXED ON THE CAPITAL GAINS, IF HE R EPLACES HIS HOUSE WITH ANOTHER HOUSE AND SPENDS MONEY EARNED ON THE CAPITA L GAINS WITHIN THE STIPULATED PERIOD. 13. THE VIEW WE HAVE TAKEN GETS SUPPORT FROM SUB-S. (2) TO S. 54. THE AFORESAID SUB-S. REQUIRES THE ASSESSEE TO DEPOSIT U NSPENT AMOUNT NOT UTILIZED BY THE ASSESSEE FOR PURCHASE OR CONSTRUCTI ON OF A NEW ASSET BEFORE THE DATE OF FURNISHING OF RETURN, IN A SPECIFIED AC COUNT. IT FURTHER STATES THAT THE AMOUNT, IF ALREADY UTILIZED FOR PURCHASE O R CONSTRUCTION OF THE NEW ASSET WITH THE AMOUNT SO DEPOSITED WILL BE DEEMED T O BE COST OF A NEW ASSET SUBJECT TO THE PROVISO. THE WORD „PURCH ASE? IS USED IN SUB-S. (2) AND INDICATES THAT THE SAID WORD IS NOT RESTRIC TED OR CONFINED TO REGISTERED SALE DEED OR EVEN POSSESSION BUT HAS A W IDER CONNOTATION. THE PROVISO SUPPORTS THE AFORESAID INTERPRETATION AND S TIPULATES THAT THE AMOUNT DEPOSITED BUT NOT UTILIZED WHOLLY OR PARTLY FOR PURCHASE OR CONSTRUCTION OF NEW ASSET WITHIN THE SPECIFIED PERI OD WILL BE CHARGED TO TAX UNDER S. 45 IN THE PREVIOUS YEAR IN WHICH THE PERIO D OF THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET EXPIRED. THE PERIOD OF THREE YEARS IS STIPULATED AS THIS IS THE LONGER PERIOD SPECIFIED I N THE SUB-S. (1) TO S. 54. IT IS ONLY THE BALANCE AMOUNT WHICH IS NOT UTILIZED WH ICH IS TO BE BROUGHT AND 20 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK CHARGED TO TAX. THE ENTIRE AMOUNT OF SALE CONSIDERA TION OR THE CAPITAL GAINS IS NOT TO BE BROUGHT TO TAX, BUT THE UNSPENT AMOUNT/FIGURE IS TAXED. IN VIEW OF THE ABOVE BINDING PRECEDENTS, WE ARE OF THE CONSIDERED VIEW THAT THE WORD PURCHASE OUGHT TO HAVE BEEN GIVEN WIDER IMPO RT. THE AO AS WELL AS LD. CIT (A) DECLINED THE EXEMPTION ON THE BASIS THAT THE AL LOTMENT IS PURELY PROVISIONAL. HOWEVER, WE FIND THAT THE ALLMENT WAS SUBJECT TO CO MPLIANCE. THE ASSESSEE HAS MADE SUBSTANTIAL PAYMENT, THEREFORE, COMPLIED WITH THE TERMS OF THE AGREEMENT UNDER THESE FACTS, THE AO OUGHT TO HAVE CONSIDERED THE CLAIM OF EXEMPTION AS THE ASSESSEE HAS DEMONSTRATED THAT SHE HAS UTILIZED THE CAPITAL GAIN BY MAKING PAYMENT TO THE BUILDER. WE, THEREFORE, DIRECT THE AO TO ALL OW THE CLAIM OF EXEMPTION UNDER SECTION 54 OF THE ACT. THE GROUND OF THE ASSESSEE I S ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 19.09. 2016. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 19/09/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- MRS. SUMAN PAREEK, JAIPUR. 2. THE RESPONDENT THE ITO WARD 6(5), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 1004/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 21 ITA NO. 1004/JP/15 MRS. SUMAN PAREEK