The ACIT, Circle-7, Ahmedabad V. Shri Rajal Rashmikant Dalal, Ahmedabad

ITA 166/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73113 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Capital asset; Source of fund
• Section: 54F; 54; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER ACIT, AHMEDABAD (APPELLANT) VS SHRI RAJAL RASHMIKANT DALAL, 102, SUMEL-II, NEAR GURUDWARA SARKHEJ GANDHINAGAR HIGHWAY, AHMEDABAD PAN: AAVPD4652J (RESPONDENT) REVENUE BY: SRI D.C. MISHRA, SR.D.R. ASSESSEE BY: SRI SUNIL H. TALATI, A. R. DATE OF HEARING : 04-03-2014 DATE OF PRONOUNCEMENT : 28-03-20 14 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A)-XIV AHMEDABAD DATED 02-11-2010. ITA NO. 166/AHD/2011 ASSESSMENT YEAR 2007-08 I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 2 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEA L:- 1. THE LD. CIT(A)-XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 37,76,948/- MADE U/ S. 54F OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)-XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDE R OF THE ASSESSING OFFICER. 3. THE AO WHILE MAKING ADDITION OF RS. 37,76,948/- BY REDUCING THE CLAIM OF THE ASSESSEE U/S. 54F OF THE ACT HAS OBSER VED AS UNDER:- 6. UNDER THE HEAD INCOME FROM LONG TERM CAPITAL G AIN, THE ASSESSEE HAS DISCLOSED INCOME AS UNDER:- SALE OF SHARES RS. 2,35,41,030/- LESS : INDEXED COST RS. 15,06,037/- ------------------ RS. 2,20,34,993/- LESS: EXEMPTION : (I)U/S. 54EC OF THE ACT RS. 50,00,000 (II) U/S. 54F OF THE ACT RS. 1,17,00,000 RS. 167, 00,000 --------------------- LONG TERM CAPITAL GAINS RS. 53,34,993 ============= EVIDENCE OF CONSTRUCTION AND OCCUPATION OF THE HOUS E HAS BEEN DULY SUBMITTED IN SUPPORT OF CLAIM UNDER SECTION 54F OF THE ACT. HOWEVER, ON A COMPARISON WITH THE SUBMISSIONS DATED 22 ND AUGUST, 2009, IT IS SEEN THAT THE INDEXED COST IS NOW CLAIMED AT RS.14, 88,825 INSTEAD OF RS . 15,06 , 037/- IN THE RETURN OF INCOME. THESE CALCULATIONS B EING CORRECT ARE ACCEPTED. THUS, CAPITAL GAINS BEFORE EX EMPTION WORKS OUT TO RS. 2,20,52,205/-. 6.1 AT THE OUTSET, IT IS SEEN THAT IN THE CASE OF CLAIM U/S.54F OF THE ACT, SINCE THE COST OF THE NEW ASSET IS LESS THAN T HE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE PROVISIONS OF SE CTION 54F(1)(B) WILL COME INTO PLAY. ACCORDINGLY, THE ASSESSEE WOULD BE ELIGIBLE FOR PROPORTIONATE EXEMPTION. THE EXEMPTION UNDER THIS S ECTION WILL BE LIMITED ACCORDINGLY AS UNDER - I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 3 COST OF NEW ASSET ---------------------- X CAPITAL GAIN NET CONSIDERATION 6.2 VIDE SUBMISSIONS DATED 3 RD JULY, 2009, THE ASSESSEE HAS SUBMITTED DETAILS OF THE BUNGALOW UNDER CONSTRUCTIO N. AS PER THE ACCOUNT, THE OPENING BALANCE AS ON 01.04.2006 WAS R S. 43,22,233/- AND REPRESENTED EXPENDITURE INCURRED PRIOR TO 01.04 .2006 WHICH WAS THE DATE OF SALE OF THE ORIGINAL ASSET. IN VIEW OF THE PROVISIONS OF SECTION 54(1) OF THE ACT ALLOWING ONE YEAR PRIOR AN D TWO YEARS AFTER BUT CONSTRUCTION ONLY THREE YEARS AFTER THE DATE OF THE SALE OF THE ORIGINAL ASSET, THE ASSESSEE WAS REQUESTED TO EXPLA IN THE ALLOWABILITY OF EXEMPTION U/S.54F OF THE ACT ON THIS AMOUNT OF R S.43 , 22,233/-. 6.3 THE AUTHORIZED REPRESENTATIVE HAS PLACED RELIA NCE ON TWO DECISIONS I.E. CIT VS. H. K. KOPOOR 150 CTR 128 (AL L) AND CIT VS. J\ R. SUBRAMANYA BHAT 165 ITR 571 (KAR). HOWEVER, BOTH THESE DECISIONS RELATE TO ALLOWING EXEMPTION EVEN IF CONS TRUCTION BEGAN PRIOR TO SALE OF THE RESIDENTIAL HOUSE. THIS ASPECT HAS NOT BEEN QUESTIONED AND HENCE THE RELIANCE PLACED IS MISCONC EIVED. THE QUESTION THAT IS MATERIAL IS THE APPLICABILITY OF S ECTION 54F(1) OF THE ACT WHICH DISTINGUISHES BETWEEN PURCHASE AND CONSTR UCTION OF THE NEW RESIDENTIAL HOUSE. WHILE PURCHASE IS PERMITTED ONE YEAR PRIOR, CONSTRUCTION IS NOT. HENCE , THE COST OF CONSTRUCTION CAN ONLY BE ARRIVED AT AFTER THE DATE OF SALE OF THE ORIGINAL A SSET AND IN ACCORDANCE WITH CIRCULAR MO.667 DATED 18.10.1953 WH ICH CLARIFIES THAT EVEN COST OF LAND HAS TO BE OUT OF THE NET CON SIDERATION. ON THE OTHER HAND , THE AUTHORIZED REPRESENTATIVE HAS CONSISTENTLY ARG UED THAT THE DATE OF COMMENCEMENT OF CONSTRUCTION IS IM MATERIAL WITHOUT APPRECIATING THAT THIS IS NOT THE ISSUE IN QUESTION . THE EXEMPTION U/S. 54F OF THE ACT IS RECOMPUTED KEEPING IN MIND THE PR OVISIONS OF SECTION 54F(1) OF THE ACT BY EXCLUDING EXPENDITURE INCURRED ON CONSTRUCTION PRIOR TO THE DATE OF SALE. 6.4 AS PER THE ASSESSEES' SUBMISSION, THE EXPENDIT URE ON THE BUNGALOW INCURRED PRIOR TO 01 . 04.2006 I.E. THE DATE OF SALE OF ORIGINAL ASSET IS RS, 43,22 , 233/-. 75% OF THIS COST IS ATTRIBUTED TO THE ASSESS EE AND 25% TO HIS FATHER, BEING ON JOINT OWNERSHIP, IN THAT RATIO. I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 4 THEREFORE, 75% OF RS. 43 , 22,233/- BEING RS. 32,41,6757- IS REDUCED FROM THE CLAIM OF RS L,17,00,000 U/S.54F OF THE ACT . THE COST OF CONSTRUCTION FOR THE PURPOSES OF SECTION 54F(1) OF THE ACT IS TAKEN AT RS. 1,17,00,000 - RS. 32,41,675 = RS.84,58,325/-. 6.5 THE ASSESSEE WAS ALSO QUERIED REGARDING INVEST MENT OF AMOUNTS INTO CONSTRUCTION OF THE HOUSE FROM THE SALE CONSID ERATION AND ON PERSONAL FUNDS, IN VIEW OF THE DECISION IN THE CASE OF MILAN SHARED RUPAREL 121 TTJ 770, SPECIALLY SO, WHEN THE ASSESSE E HAD BORROWED AN AMOUNT OF RS.82,30,000/-FROM THE STATE BANK OF I NDIA ALLEGEDLY FOR THE PURCHASE OF THE NEW RESIDENTIAL HOUSE UNDER CON STRUCTION. HOWEVER, AS HELD IN PARA - 5.1 RELATING TO INCOME F ROM SELF OCCUPIED HOUSE PROPERTY, THE ASSESSEE HAS ADMITTED THAT THE SAID FUNDS BORROWED FROM STATE SANK OF INDIA WERE NOT UTILIZED FOR THE CONSTRUCTION OF THE HOUSE AND A DISALLOWANCE OF RS. 1,50,000/- HAS BEEN MADE'. FURTHER, THE AVAILABILITY OF FUNDS AND THE CASE LAWS CITED BY THE ASSESSEE VIDE SUBMISSIONS DATED 06.10.2009 H AVE ALSO BEEN CONSIDERED IN ACCEPTING THE AVAILABILITY OF FUNDS F OR CONSTRUCTION OF THE HOUSE. HOWEVER, IN CASE, IN FURTHER PROCEEDINGS , THE DISALLOWANCE OF INTEREST ON HOUSE PROPERTY IS NOT UPHELD, THEN I N ACCORDANCE WITH THE DECISION IN THE CASE OF MILAN SHARAD RUPAREL, T HE AMOUNTS BORROWED FROM THE STATE BANK OF INDIA OF RS.82,30,0 00/- WHICH WOULD THEN BE ASSUMED TO BE INVESTED IN THE CONSTRUCTION OF THE HOUSE WILL NOT BE CONSIDERED FOR THE PURPOSE OF COMPUTING EXEM PTION U/S.54F OF THE ACT. 6.6 THE EXEMPTION U/S. 54F IS ACCORDINGLY RECOMPUTE D AS UNDER:- COST OF NEW ASSET ---------------------- X CAPITAL GAIN NET CONSIDERATION RS. 84,58,325 =----------------- X RS. 2,20,52,20 5 RS. 2,35,41,030 I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 5 = RS. 79,23,052/- ============= 6.7 INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS I S RECOMPUTED AS UNDER:- SALES OF SHARES RS. 2,35,41,030 LESS : INDEXED COST RS. 14,88,825 ----------------- RS 2,20,52,205 LESS: EXEMPTION : (I) U/S. 54EC OF THE ACT RS. 50,00,000 (II) U/S 54F OF THE ACT RS. 79,23,052 RS. 1,29,2 3,052 ------------------- LONG TERM CAPITAL GAINS RS. 91,29,153 ========== (ADDITION: RS. 37,76,948/-) 4. LD. CIT(A) AFTER TAKING INTO CONSIDERATION THE S UBMISSIONS OF THE ASSESSEE WHICH HAVE BEEN REPRODUCED BY HIM IN PARA 5.1 OF HIS ORDER HAS GIVEN RELIEF TO THE ASSESSEE BY OBSERVING AS UNDER: - 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND AR GUMENTS OF THE LEARNED AR CAREFULLY. THE LEGAL POSITION EMANATING FROM THE DECISIONS CITED BY THE APPELLANT HAVE ALSO BEEN PER USED. IT IS SEEN THAT DURING THE YEAR UNDER CONSIDERATION, THE APPEL LANT HAD SOLD SHARES FOR RS. 2,35,41.230/-. AFTER DEDUCTING INDEX ED COST, THE APPELLANT EARNED CAPITAL GAIN OF RS. 2,20,34,993/- OUT OF SUCH CAPITAL GAIN, APPELLANT CLAIMED DEDUCTION U/S.54EC OF THE A CT FOR AN AMOUNT OF RS. 50,00,000/- AND 54F AMOUNTING TO RS. 1,L7,00 ,000/-. ON PERUSAL OF THE PROVISIONS OF SECTION 54F OF THE ACT, IN ORD ER TO CLAIM THE SAID DEDUCTION IN RESPECT OF CAPITAL GAINS ARISING FROM THE TRANSFER OF A RESIDENTIAL PROPERTY, TWO CONDITIONS HAVE BEEN LAID DOWN VIZ THE ASSESSEE SHOULD EITHER PURCHASE A RESIDENTIAL HOUSE PROPERTY (NEW OR OLD) WITHIN ONE YEAR BEFORE, OR WITHIN 2 YEARS AFTE R THE DATE OF TRANSFER OF THE ORIGINAL ASSET OR CONSTRUCT A RESIDENTIAL HO USE PROPERTY SUCH THAT THE CONSTRUCTION SHOULD BE COMPLETED WITHIN 3 YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET. THAT FROM THE AB OVE CONDITIONS I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 6 MENTIONED IN SECTION 54F OF THE ACT, I FIND THAT IN SO FAR AS CONSTRUCTION OF THE HOUSE PROPERTY IS CONCERNED, TH E STRESS LAID DOWN BY THE LEGISLATURE IS ON COMPLETION WITHIN THE PERI OD OF 3 YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET AND THE LEGISLATURE IS SILENT ABOUT THE DATE OF COMMENCEMENT OF THE CONSTRUCTION OF HOUSE PROPERTY, HAD IT BEEN THE INTENTION OF THE LEGISLAT URE TO RESTRICT THE EXEMPTION ONLY TO THE EXTENT OF INVESTMENT MADE AFT ER THE DATE OF TRANSFER THE ORIGINAL ASSET, IT WOULD HAVE CATEGORI CALLY SPECIFIED IN THE SECTION ITSELF. THE ABSENCE OF SUCH A CONDITION IN THE SECTION IS ITSELF SUFFICIENT TO CONCLUDE THAT THE DATE OF COMMENCEMEN T OF CONDUCTION IS IRRELEVANT. THE CONTENTION OF THE APPELLANT THAT N OWHERE THE SECTION SPECIFIES THAT THE INVESTMENT IN NEW 'RESIDENTIAL P ROPERTY CANNOT BE MADE PRIOR TO THE DATE OF TRANSFER OR RECEIPT OF SA LE CONSIDERATION AND THAT HAD IT BEEN THE CASE, THE LEGISLATURE WOULD NO T HAVE ALLOWED QUALIFICATION OF NEW INVESTMENT ONE YEAR PRIOR TO T HE DATE OF TRANSFER AS IT IS A MATTER OF COMMON SENSE THAT THE SALE CON SIDERATION WOULD NOT HAVE BEEN RECEIVED BY THAT DATE I.E. PRIOR TO T HE DATE OF TRANSFER APPEARS TO BE REASONABLE AND LOGICAL. THE VERY FACT THAT THE LEGISLATURE HAS ALLOWED INVESTMENT IN NEW PROPERTY ONE YEAR PRIOR TO THE DATE OF TRANSFER ESTABLISHES IN NO UNCERTAIN TE RMS THAT IT NEED NOT BE THE SALE CONSIDERATION OUT OF WHICH THE INVESTME NT SHOULD BE MADE FOR QUALIFYING FOR THE SAID DEDUCTION U/S.54F OF TH E ACT. THIS INTERPRETATION OF THE PROVISIONS OF SECTION 54F BY VARIOUS COURTS OF LAW IS NOT ONLY LOGICAL BUT BASED ON SOUND PRINCIPL ES OF LAW AND ACCORDINGLY IN MY OPINION JUSTIFIES THE CLAIM OF TH E APPELLANT. ON GOING THROUGH THE FACTS OF THE APPELLANT'S CASE, I FIND THAT THE CONDITIONS LAID CLOWN IN THE SAID SECTION HAVE BEEN DULY MET WITH IN CASE OF THE APPELLANT. THE NEW RESIDENTIAL HOUSE PR OPERTY HAS BEEN PURCHASED WITHIN THE PERIOD SPECIFIED IN THE SECTIO N I.E ONE YEAR PRIOR AND WITHIN 3 YEARS FROM THE DATE OF TRANSFER ACCORD INGLY, ARGUMENT OF THE LEARNED AR THAT THE QUESTION OF DISALLOWANCE OF ANY CAPITAL GAIN ON THE REASONS MENTIONED BY THE A.O. DOES NOT ARISE SINCE THE SAME BEING CONTRARY TO THE LEGAL POSITION AND LEGISLATIV E INTENT HAS SUFFICIENT FORCE. 5.3 THUS, IT IS IMPLIED THAT WHEN THE LEGISLATURE ITSELF QUALIFIES INVESTMENT IN NEW RESIDENTIAL PROPERTY ONE YEAR PRI OR TO THE DATE OF TRANSFER FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 54F OF THE ACT, THE QUESTION OF RESTRICTING THE EXEMPTION U/S. 54F OF T HE ACT TO THE EXTENT OF INVESTMENT MADE AFTER THE RECEIPT OF SALE CONSID ERATION DOES NOT I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 7 ARISE AND WOULD BE CONTRADICTORY TO THE ANALOGY OF CLAUSE (A) AS DISCUSSED HEREINABOVE. IT IS CONTENDED THAT THE SAM E ANALOGY IS APPLICABLE IN CASE OF CLAUSE (B) ABOVE I.E , IN RES PECT OF CONSTRUCTION OF HOUSE. THE FACT THAT DATE OF COMMENCEMENT OF CON STRUCTION OF NEW RESIDENTIAL HOUSE IS IRRELEVANT ALSO SUPPORTS THE S AID ANALOGY. IT IS FURTHER CONTENDED THAT IT IS ALSO NOT NECESSARY THA T SALE CONSIDERATION HAS TO BE INVESTED IN CONSTRUCTION OTHERWISE IT WOU LD HAVE BEEN SPECIFICALLY MENTIONED IN THE SAID CLAUSE BY THE LE GISLATURE, WHICH OTHERWISE SPEAKS ONLY OF COMPLETION OF THE CONSTRUC TION WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF SALE AND NOT COM MENCEMENT OF CONSTRUCTION. THUS, IT IS IMPLIED THAT WHEN THE DA TE OF COMMENCEMENT OF CONSTRUCTION IS NOT RELEVANT AND SPECIFIED IN TH E CLAUSE BY THE LEGISLATURE, THE QUESTION OF RESTRICTING THE EXEMPT ION U/S 54 OF THE ACT TO THE AMOUNT OF INVESTMENT IN CONSTRUCTION DOES NO T ARISE AND WOULD BE CONTRADICTORY TO THE ANALOGY OF CLAUSE (A) AS DI SCUSSED HEREIN ABOVE. 5.4 IN THE INSTANT CASE, THE SALE OF ORIGINAL ASSE T WAS MADE ON 01.04.2006. THE RIGHTS/TITLE IN THE SAID PROPERTY H AVE BEEN ASSIGNED ON 01.04.2006 AND ACCORDINGLY AS PER THE DEFINITION OF THE TRANSFER AS DEFINED U/S.2(47) AND SECTION 45, CAPITAL GAIN ARIS ES IN CASE OF THE APPELLANT ONLY ON 01 04 2006. THEREFORE, ANY INVEST MENT DURING THE PERIOD 01-04-2005 TO 01.04.2008 IS ELIGIBLE FOR DED UCTION U/S.54F. THEREFORE, I AGREE WITH THE CONTENTION OF THE APPEL LANT THAT THE PAYMENT MADE DURING THE PERIOD PRIOR TO 01-04-2006 AGGREGATING TO RS 43,22,233/- WILL ALSO BE ELIGIBLE FOR DEDUCTION U/S.54F AS THE CONDITION OF ONE YEAR BEFORE AND TWO YEARS AFTER TH E SALE IS DULY COMPLIED WITH. MOREOVER THE A.O HAS NOT BROUGHT ANY THING ON RECORD TO SHOW THAT THE APPELLANT HAD EXPENDED ANY AMOUNT PRIOR TO 01.04.2005. THE CLAIM OF THE APPELLANT ALSO FINDS SUPPORT FROM THE DECISION OF VARIOUS COURTS OF LAW AS CITED IN HIS W RITTEN SUBMISSIONS FILED BEFORE ME. THE ALLAHABD HIGH COURT IN THE CA SE OF CIT VS. H K. KAPOOR(DECD.) LR HIGH COURT OF ALLAHABAD (1998) 150 CTR 12B (ALL) HAS CLEARLY HELD THAT THE 'EXEMPTION ON CAPIT AL GAINS UNDER S.54 COULD BE ALLOWED NOTWITHSTANDING THE FACT THAT THE CONSTRUCTION OF THE NEW HOUSE HAD BEGUN BEFORE THE SALE OF THE OLD HOUS E. THE SAID PROPOSITION OF LAW ALSO FINDS SUPPORT IN THE CASE O F THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. J R SUBRAMANYA BH AT (1987) 165 1TR 571 (KAR) WHEREIN INTERALIA IT IS HELD THAT IT WAS IMMATERIAL THAT I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 8 THE CONSTRUCTION OF THE NEW BUILDING WAS STARTED BE FORE THE SALE OF THE OLD BUILDING. SIMILARLY, THE ITAT, MUMBAI BENCH IN THE CASE OF ASSTT. CIT V/S. DR. P.S. PASRICHA (2008) 20 SOT 46B (MUMBA I) HAS HELD THAT NOWHERE IT HAS BEEN MENTIONED THAT THE SAME FUNDS MUST BE UTILIZED FOR THE PURCHASE OF NEW RESIDENTIAL HOUSE. THE REQU IREMENT OF LAW IS THAT ASSESSEE SHOULD PURCHASE A RESIDENTIAL HOUSE W ITHIN THE SPECIFIED PERIOD AND SOURCE OF FUND IS QUITE IRRELEVANT'. INT ERESTINGLY, THE MUMBAI BENCH IN THE CASE OF MRS. PREM P. SHAH, SANJ EEV P. SHAH V/S. ITO ( 2006) 282 ITR (AT) 211 (MUMBAI) HAS HELD THAT 'EVEN WHERE THE ASSESSEE HAS UTILIZED SALE CONSIDERATION FOR OT HER PURPOSES AND FOR THE PURPOSE OF NEW ASSET ACQUIRED FUNDS FROM OTHER SOURCES, HE IS ENTITLED FOR BENEFIT U/S 54.' FOLLOWING THE RATIO L AID DOWN IN THE ABOVE DECISIONS AND CONSIDERING THE FACTS OF THE AP PELLANT'S CASE IN TOTALITY, 1 AM OF THE CONSIDERED OPINION THAT THE A PPELLANT IS ELIGIBLE FOR EXEMPTION IN RESPECT OF THE AMOUNT OF INVESTMEN T IN NEW PROPERTY. THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S. 54F I S THUS ALLOWED. THE APPELLANT SUCCEEDS IN THIS GROUND OF APPEAL. 5. AGGRIEVED BY THIS ORDER OF LD. CIT(A) NOW THE RE VENUE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING LD. DR VEHEMENTLY SUPPORT ED THE ORDER OF AO WHILE LEARNED COUNSEL OF THE ASSESSEE RELIED ON THE ORDER OF LD. CIT(A) AND ALSO PLACED RELIANCE ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. BHARTI MISHRA IN IT APPEAL NO. 567 OF 2013 DATE D DECEMBER 18, 2013 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT ASSESSEE EARNED LONG TERM CAPITAL GAIN ON SALE OF S HARES OF RS. 2,35,41,031/- ON 01-04-2006 OUT WHICH RS. 50,00,000/- WAS INVESTE D IN SPECIFIED FUND AND RS. 1,17,00000/- WAS CLAIMED EXEMPT U/S. 54F TOWARD S COST OF CONSTRUCTION INCURRED ON CONSTRUCTION OF HOUSE WHICH INCLUDED EX PENDITURE OF RS. 32,41,765/- BEING 75% SHARE OF RS. 43,22,233/- INCU RRED UPTO 31-03-2006. I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 9 THE AO DISALLOWED THIS EXPENDITURE OF RS. 32,41,765 /- SPENT PRIOR TO 01-04- 2006 HOLDING THAT THE COST OF CONSTRUCTION CAN BE A RRIVED AT AFTER THE DATE OF SALE OF THE ORIGINAL ASSET. HE THUS TOOK THE COST OF CONSTRUCTION OF THE NEW ASSET AT RS. 84,58,325/- (RS. 1,17,00000- RS. 32,41 ,675/-) FOR THE PURPOSE OF CALCULATING THE EXEMPTION U/S. 54F OF THE ACT AND R EDUCED THE CLAIM OF THE ASSESSEE U/S. 54F FROM RS. 1,17,00000/- TO RS. 79,2 3,052/-. LD. CIT(A) HELD THAT ASSESSEE WAS ENTITLED FOR EXEMPTION AS CLAIMED BY ASSESSEE. NOW WE HAVE TO DECIDE FOLLOWING TWO QUESTIONS IN THIS CASE :- I WHETHER EXEMPTION U/S. 54F CAN BE ALLOWED TO ASSE SSEE NOTWITHSTANDING THE FACT THAT THE CONSTRUCTION OF T HE HOUSE HAD STARTED PRIOR TO SALE OF THE ORIGINAL ASSET. II WHETHER ONLY WHEN SALE CONSIDERATION IS UTILIZED FOR CONSTRUCTING THE NEW HOUSE WITHIN SPECIFIED TIME ASSESSEE WILL BE EN TITLED FOR EXEMPTION. 8. BOTH THESE QUESTIONS HAVE NOW BEEN ANSWERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE HONBLE DELHI HIGH C OURT IN THE CASE OF CIT VS. BHARTI MISHRA (SUPRA) WHEREIN HONBLE HIGH COUR T HAS OBSERVED AS UNDER:- 12. SECTION 54F(1) IF READ CAREFULLY STATES THAT THE ASSESSEE BEING AN INDIVIDUAL OR HINDU UNDIVIDED FAMILY, WHO HAD E ARNED CAPITAL GAINS FROM TRANSFER OF ANY LONG-TERM CAPITAL NOT BE ING A RESIDENTIAL HOUSE COULD CLAIM BENEFIT UNDER THE SAID SECTION PR OVIDED, ANY ONE OF THE FOLLOWING THREE CONDITIONS WERE SATISFIED; (I) THE ASSESSEE HAD WITHIN A PERIOD OF ONE YEAR BEFORE THE SALE, PURCHASED A RESIDENTIAL HOUSE; AND (II) WITHIN TWO YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL CAPITAL ASSET, PURCHASED A RESIDENTIAL HOU SE ID (III) WITHIN A I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 10 PERIOD OF THREE YEARS AFTER THE DATE OF SALE OF THE ORIGINAL ASSET, CONSTRUCTED A RESIDENTIAL HOUSE. 13. FOR THE SATISFACTION OF THE THIRD CONDITION, I T IS NOT STIPULATED OR INDICATED IN THE SECTION THAT THE CONSTRUCTION MUST BEGIN AFTER THE DATE OF SALE OF THE ORIGINAL/OLD ASSET. THERE IS NO CON DITION OR REASON FOR AMBIGUITY AND CONFUSION WHICH REQUIRES MODERATION O R READING THE WORDS OF THE SAID SUB-SECTION IN A DIFFERENT MANNER . THE APPREHENSION OF THE REVENUE THAT THE ENTIRE MONEY C OLLECTED OR RECEIVED ON TRANSFER OF THE ORIGINAL/CAPITAL ASSET WOULD NOT BE UTILIZED IN THE CONSTRUCTION OF THE NEW CAPITAL ASSET, I.E. RESIDENTIAL HOUSE, IS ILL-FOUNDED AND MISCONCEIVED, THE REQUIREMENT OF SUB-SECTION (4) IS THAT IF CONSIDERATION WAS NOT APPROPRIATED TOWARDS THE PURCHASE OF THE NEW ASSET ONE YEAR BEFORE DATE OF TRANSFER OF T HE ORIGINAL ASSET OR IT WAS NOT UTILIZED FOR PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FILING OF RETURN UNDER SECTION 139 OF T HE ACT, THE BALANCE AMOUNT SHALL BE DEPOSITED IN AN AUTHORIZED BANK ACC OUNT UNDER A SCHEME NOTIFIED BY THE CENTRAL GOVERNMENT. FURTHER , ONLY THE AMOUNT WHICH WAS UTILIZED IN CONSTRUCTION OR PURCHASE OF T HE NEW ASSET WITHIN THE SPECIFIED TIME FRAME STAND EXEMPT AND NOT THE E NTIRE CONSIDERATION RECEIVED. 14. SECTION 54F IS A BENEFICIAL PROVISION AND IS A PPLICABLE TO AN ASSESSEE WHEN THE OLD CAPITAL ASSET IS REPLACED BY A NEW CAPITAL ASSET IN FORM OF A RESIDENTIAL HOUSE. ONCE AN ASSESSEE FA LLS WITHIN THE AMBIT OF A BENEFICIAL PROVISION, THEN THE SAID PROVISION SHOULD BE LIBERALLY INTERPRETED. THE SUPREME COURT IN CCE. FAVOURITE IN DUSTRIES [2012] 7 SCC 153 HAS SUCCINCTLY OBSERVED:- '21. FURTHERMORE, THIS COURT IN ASSOCIATED CEMENT C OMPANIES LTD. V. STATE OF BIHAR [(2004) 7 SCC 642), WHILE EX PLAINING THE NATURE OF THE EXEMPTION NOTIFICATION AND ALSO THE M ANNER IN WHICH IT SHOULD BE INTERPRETED HAS HELD: (SCC P. 64 8, PARA 12) '12. LITERALLY 'EXEMPTION' IS FREEDOM FROM LIABILIT Y, TAX OR DUTY. FISCALLY IT MAY ASSUME VARYING SHAPES, SPECIALLY, I N A GROWING ECONOMY. IN FACT, AN EXEMPTION PROVISION IS LIKE AN EXCEPTION AND ON NORMAL PRINCIPLE OF CONSTRUCTION OR INTERPRE TATION OF STATUTES IT IS CONSTRUED STRICTLY EITHER BECAUSE OF LEGISLATIVE INTENTION OR ON ECONOMIC JUSTIFICATION OF INEQUITAB LE BURDEN OF I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 11 PROGRESSIVE APPROACH OF FISCAL PROVISIONS INTENDED TO AUGMENT STATE REVENUE. BUT ONCE EXCEPTION OR EXEMPTION BECO MES APPLICABLE NO RULE OR PRINCIPLE REQUIRES IT TO BE C ONSTRUED STRICTLY. TRULY SPEAKING, LIBERAL AND STRICT CONSTR UCTION OF AN EXEMPTION PROVISION IS TO BE INVOKED AT DIFFERENT S TAGES OF INTERPRETING IT. WHEN THE QUESTION IS WHETHER A SUB JECT FALLS IN THE NOTIFICATION OR IN THE EXEMPTION CLAUSE THEN IT BEING IN THE NATURE OF EXCEPTION IS TO BE CONSTRUED STRICTLY AND AGAINST THE SUBJECT BUT ONCE AMBIGUITY OR DOUBT ABOUT APPLICABI LITY IS LIFTED AND THE SUBJECT FALLS IN THE NOTIFICATION THEN FULL PLAY SHOULD BE GIVEN TO IT AND IT CALLS FOR A WIDER AND LIBERAL CO NSTRUCTION. (SEE UNION OF INDIA V.. WOOD PAPERS LTD. [(1990) 4 SCC 2 56 : 1990 SCC (TAX) 422] AND MANGALORE CHEMICALS AND FERTILIZ ERS LTD. V . CCT[1992 SUPP(L)SCC 21] TO WHICH REFERENEE HAS BEEN MADE EARLIER.)' 22. IN G.P. CERAMICS (P) LTD. V. CIT[(2009) 2 SCC 9 0] , THIS COURT HAS HELD: (SCC PP. 101- 02. PARA 29) '29. IT IS NOW A WELL-ESTABLISHED PRINCIPLE OF LAW THAT WHEREAS ELIGIBILITY CRITERIA LAID DOWN IN THE EXEMPTION NOT IFICATION ARE REQUIRED TO BE CONSTRUED STRICTLY, ONCE IT IS FOUND THAT THE APPLICANT SATISFIES THE SAME, THE EXEMPTION NOTIFIC ATION SHOULD BE CONSTRUED LIBERALLY. [SEE CTT V. DSM GROUP OF IN DUSTRIES (2005) 1 SCC 657] (SCC PARA 26); TISCO LTD. V. STAT E OF JHARKHAND [(2005) 4 SCC 272] (SCC PARAS 42- 45); ST ATE LEVEL COMMITTEE V. MORGARDSHAMMAR INDIA LTD [(1996) 1 SCC 108]; NOVOPAN INDIA LTD. V. CCE & CUSTOMS [1994 SUPP (3) SCC 606]; A.P. STEEL RE-ROLLING MILL LTD. V. STATE OF K ERALA [(2007) 2 SCC 725] AND REIZ ELECTROCONTROLS (P) LTD. V. CCE . [(2006) 6 SCC 213] 15. IN VIEW OF THE AFORESAID POSITION, WE DO NOT F IND ANY MERIT IN THE PRESENT APPEAL AND THE SAME IS DISMISSED. IN VIEW OF THE ABOVE, WE FEEL NO NEED TO INTERFERE WITH THE ORDER PASSED BY LD.CIT(A) AND THE SAME IS HEREBY UPHELD. I.T.A NO. 166/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. RAJAL RASHMIKANT DALAL 12 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 28/03/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,