Mr. Sanjay Sharma, Bangalore V. Assistant Commissioner of Income Tax, Circle-5(3)(1), Bangalore

ITA 1958/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7604 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 05-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH JT BENGALURU
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 1958/BANG/2017 ASSESSMENT YEAR : 2013 - 14 SHRI SANJAY SHARMA, FLAT NO.1, INDRAPRASTHA ENERCO, 9, KINGS STREET, RICHMOND TOWN, BANGALORE 560 025. PAN: AABPS 5779F VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 5(3)(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI BALRAM R. RAO, ADVOCATE RE SPONDENT BY : SHRI B.R. RAME SH, JT.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 14 .06 .201 8 DATE OF PRONOUNCEMENT : 20.07 .2018 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER D ATED 11.07.2017 OF THE CIT(APPEALS)-5, BENGALURU RELATING TO ASSESS MENT YEAR 2013-14. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN D ISALLOWING THE CLAIM OF ASSESSEE FOR DEDUCTION OF RS.82,33,620 U/S. 54 OF T HE ACT. 3. THE FACTUAL DETAILS ARE AS FOLLOWS. THE ASSESSE E IS AN INDIVIDUAL. HE SOLD A RESIDENTIAL PROPERTY AT NO.76, BLOCK C, N OIDA (HEREINAFTER REFERRED TO AS THE NOIDA PROPERTY) FOR A SALE CONSIDERATION OF RS.1,50,00,000/- ITA NO. 1958/BANG/2017 PAGE 2 OF 9 UNDER A SALE DEED DATED 20.6.2012. THE ASSESSEE COM PUTED LONG TERM CAPITAL GAIN (LTCG) OF RS.82,33,620 ON THE SALE OF THE NOIDA PROPERTY. THE ASSESSEE CLAIMED DEDUCTION OF THE ENTIRE LTCG O N THE GROUND THAT THE ENTIRE LTCG WAS INVESTED IN ACQUIRING A RESIDENTIAL PROPERTY VIZ., NO.D-301, VIVAREA, KORAMANGALA, BANGALORE (HEREINAFTER REFERR ED TO AS THE NEW ASSET). THE MEMORANDUM OF UNDERSTANDING (MOU) FOR PURCHASE OF THE AFORESAID PROPERTY WAS ENTERED INTO BY THE ASSESSEE ON 9.12.2010 MUCH BEFORE THE SALE OF THE PROPERTY AT NOIDA WHICH GAVE RISE TO THE LTCG. AS PER THE MOU, THE COST OF THE NEW ASSET WHICH WAS A FLAT WAS AGREED TO BE PURCHASED BY THE ASSESSEE FROM CHALET HOTELS PRIVAT E LIMITED FOR A CONSIDERATION OF RS.2,50,24,000/-. THE ASSESSEE MA DE PAYMENT OF RS.37,53,600/- TO THE BUILDER BY CHEQUES DATED 30.1 1.2010, 6.12.2010 AND 12.12.2010. 4. AFTER SALE OF THE NOIDA PROPERTY THE ASSESSEE MA DE A PAYMENT OF RS.88,10,246/- FOR ACQUIRING THE NEW ASSET IN THE F OLLOWING MANNER:- AMOUNT INVESTED IN KORAMANGALA HOUSE AFTER THE DATE OF SALE OF ORIGINAL ASSET DAT E BANK STATEMENT REFERENCE AMOUNT RS. 27.06.2012 STATE BANK OF INDIA 1335041 13.09.2012 STATE BANK OF INDIA 1335041 12.10.2012 STATE BANK OF INDIA 1335041 05.11.2012 STATE BANK OF INDIA 1335041 05.12.2012 STATE BANK OF INDIA 1335041 12.03.2013 STATE BANK OF INDIA 1335041 08.04.2013 STATE BANK OF INDIA 800000 8810246 5. THE ASSESSEE CLAIMED DEDUCTION OF THE ENTIRE LTCG OF RS.82,33,620 U/S. 54 OF THE INCOME TAX ACT, 1961 (A CT) ON THE GROUND THAT ITA NO. 1958/BANG/2017 PAGE 3 OF 9 THE LTCG HAS BEEN INVESTED IN CONSTRUCTING THE NEW ASSET. THE PROVISIONS OF SEC.54 OF THE ACT READ THUS: SEC.54: PROFIT ON SALE OF PROPERTY USED FOR RESIDE NCE. 54. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED F AMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASS ET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPER TY' (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 CONSTRUCTED, A RESIDENTIAL HOUSE, THEN], INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEA R IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WI TH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, ( I ) IF THE AMOUNT OF THE CAPITAL GAIN [IS GREATER THA N THE COST OF [THE RESIDENTIAL HOUSE] SO PURCHASED OR CONSTRUCTED (HER EAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET)], THE DIFFERENCE BETW EEN 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 ASSET ANY CAPITAL GAIN ARISIN G FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR C ONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE NIL ; OR ( II ) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO 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 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 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 O NE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PL ACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139, SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN [SUCH DEPOSIT BEING M ADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASS ESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 1 39] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AN D UTILISED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE ITA NO. 1958/BANG/2017 PAGE 4 OF 9 OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RET URN 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 CONSTRUCTION O F 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 EXPIRES; AND ( II ) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUCH AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. 6. IT CAN BE SEEN FROM THE PROVISIONS OF SEC.54(1) OF THE ACT THAT FOR CLAIMING DEDUCTION U/S.54 OF THE ACT TWO CONDITIONS HAVE TO BE SATISFIED VIZ., (I) THE LTCG HAS TO BE INVESTED IN CONSTRUCTION AF TER THE TRANSFER OF THE ASSET GIVING RAISE TO CAPITAL GAIN AND (II) THE CON STRUCTION OF THE NEW ASSET SHOULD BE COMPLETED WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER OF THE ASSET GIVING RAISE TO CAPITAL GAIN. 7. THE ADMITTED POSITION IS THAT BUILDER COULD NOT COMPLETE THE CONSTRUCTION WITHIN THE PERIOD OF 3 YEARS FROM THE TRANSFER OF THE ASSET WHICH GAVE RISE TO LTCG BECAUSE OF CANCELLATION OF NO OBJECTION CERTIFICATE GIVEN BY HINDUSTAN AERONAUTICS LTD. (HA L), AND COURT PROCEEDINGS IN THIS REGARD BY THE BUILDER AGAINST H AL. 8. THE AO WAS OF THE VIEW THAT THE ASSESSEES CLAIM FOR DEDUCTION U/S. 54 OF THE ACT FOR INVESTMENT BY WAY OF CONSTRUCTION OF ANOTHER RESIDENTIAL HOUSE CAN BE ALLOWED ONLY IN RESPECT OF INVESTMENTS MADE AFTER THE DATE OF SALE OF THE OLD ASSET. SINCE THE ASSESSEE ENTERED I NTO AGREEMENT WITH BUILDER FOR ACQUIRING THE NEW ASSET ON 9.12.2010 MU CH PRIOR TO THE SALE OF THE OLD ASSET, THE ASSESSEE WAS NOT ENTITLED TO DED UCTION U/S.54 OF THE ACT. ITA NO. 1958/BANG/2017 PAGE 5 OF 9 9. ON APPEAL BY THE ASSESSEE, THE CIT(A) UPHELD THE ORDER OF THE AO ON THE GROUND THAT CONSTRUCTION OF THE NEW ASSET WA S NOT COMPLETED WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER OF TH E OLD ASSET. 10. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. BEFORE THE TRIBUNAL, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. J.R. SUBRAMANYA BHAT, 165 ITR 571 (KAR) . THE HONBLE HIGH COURT IN THE AFORESAID JUDGMENT AF TER REFERRING TO THE CONDITIONS FOR GRANT OF DEDUCTION U/S. 54 OF THE AC T, ALLOWED THE CLAIM OF ASSESSEE FOR DEDUCTION BY OBSERVING AS FOLLOWS:- 4. THE TRIBUNAL HAS HELD THAT THE GROUND OR LAND APPURTENANT TO THE BUILDING WAS IN THE OCCUPATION OF THE ASSESS EE. IT HAS FURTHER HELD THAT THOUGH THE COMMENCEMENT OF THE NE W BUILDING WAS EARLIER TO THE SALE OF THE OLD BUILDING, THE NE W BUILDING WAS COMPLETED IN MARCH, 1977, WHICH WAS WITHIN THE TWO- YEAR PERIOD CONTEMPLATED BY SECTION 54. SO STATING, THE TRIBUNA L ALLOWED THE RELIEF CLAIMED BY THE ASSESSEE. 5. THERE IS NO DISPUTE THAT THE BUILDING HAS BEEN CONSTRUCTED WITHIN TWO YEARS FROM THE DATE OF SALE OF THE OLD B UILDING. THE OLD BUILDING WAS SOLD IN FEBRUARY, 1977. THE NEW BUILDI NG WAS COMPLETED IN MARCH, 1977, THE CONSTRUCTION OF WHICH HAD COMMENCED IN 1976. SECTION 54 OF THE INCOME-TAX ACT SO FAR AS IT IS RELEVANT PROVIDES : 'WHERE A CAPITAL GAIN ARISES FROM THE TRANSFER OF A CAPITAL ASSET TO WHICH THE PROVISIONS OF SECTION 53 ARE NOT APPLICABLE, BEING BUILDINGS OR LANDS APPURTENANT TH ERETO THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'I NCOME FROM HOUSE PROPERTY', WHICH IN THE TWO YEARS IMMEDI ATELY PRECEDING THE DATE ON WHICH THE TRANSFER TOOK PLACE , WAS BEING USED BY THE ASSESSEE OR A PARENT OF HIS MAINL Y FOR THE PURPOSES OF HIS OWN OR THE PARENT'S OWN RESIDENCE, AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THAT DATE PURCHASED, OR HAS WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE CONSTRUCTED, A HOUSE PROPERTY FOR T HE PURPOSES OF HIS OWN RESIDENCE, THEN, INSTEAD OF THE CAPITAL ITA NO. 1958/BANG/2017 PAGE 6 OF 9 GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISI ONS OF THIS SECTION, THAT IS TO SAY,.......' UNDER THIS SECTION, IF THE ASSESSEE HAS WITHIN A PE RIOD OF ONE YEAR AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PUR CHASED OR HAS WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE CONSTR UCTED A RESIDENTIAL HOUSE, THEN, INSTEAD OF THE CAPITAL GAI N BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHI CH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCO RDANCE WITH THE OTHER PROVISIONS SET OUT IN THE SAID SECTION. THE T RIBUNAL ON AN APPRECIATION OF THE EVIDENCE HAS FIRSTLY FOUND THAT THE BUILDING WAS USED BY THE ASSESSEE MAINLY FOR HIS RESIDENTIAL PURPOSE. TAKING INTO CONSIDERATION THE AREA OF THE BUILDING UNDER THE OCCUPATION OF THE ASSESSEE, IT HAS STATED THAT THE GROUND FLOOR OCCUPIED BY THE ASSESSEE INCLUDING THE GARAGE WAS 1 ,330 SQ. FT. THE LAND APPURTENANT TO THE GROUND FLOOR EXCLUDING THE LAND OCCUPIED BY THE HOUSE WAS 4,795 SQ. FT. THAT WAS AL SO HELD TO BE UNDER THE OCCUPATION OF THE ASSESSEE. THIS BUILDING WITH THE LAND HAS BEEN SOLD. IT WAS ONLY THE FIRST FLOOR THAT WAS LET OUT. THE TRIBUNAL TOOK INTO CONSIDERATION THE EXTENT OF THE BUILDING USED MAINLY FOR THE RESIDENTIAL PURPOSE OF THE ASSESSEE AND FOUND THAT THE MAJOR PORTION OF THE BUILDING WAS UNDER THE OCC UPATION OF THE ASSESSEE. THE TRIBUNAL, THEREFORE, CONCLUDED THAT T HE FIRST CONDITION PRESCRIBED UNDER SECTION 54 WAS SATISFIED . THIS FINDING, IT MAY BE SEEN, HAS BEEN ARRIVED AT BY THE TRIBUNAL UPON APPRECIATION OF THE EVIDENCE AND THE FACTUAL ASPECT S OF THE CASE. 6. SO TOO WAS THE NEXT CONCLUSION REACHED BY THE T RIBUNAL. THE DATE OF THE SALE OF THE OLD BUILDING WAS FEBRUA RY 9, 1977. THE COMPLETION OF THE CONSTRUCTION OF THE NEW BUILD ING WAS IN MARCH, 1977, ALTHOUGH THE COMMENCEMENT OF THE CONST RUCTION STARTED IN 1976. IT IS IMMATERIAL, AS THE TRIBUNAL, IN OUR OPINION, HAS RIGHTLY OBSERVED, ABOUT THE DATE OF COMMENCEMENT OF THE CONSTRUCTION OF THE NEW BUILDIN G. SINCE THE ASSESSEE HAS CONSTRUCTED THE BUILDING WITHIN TW O YEARS FROM THE DATE OF SALE OF THE OLD BUILDING, HE WAS E NTITLED TO RELIEF UNDER SECTION 54 OF THE ACT. ITA NO. 1958/BANG/2017 PAGE 7 OF 9 7. BOTH THE CONCLUSIONS REACHED BY THE TRIBUNAL AR E ON AN APPRAISAL OF THE EVIDENCE ON RECORD AND THEY ARE NO T SHOWN TO BE UNREASONABLE OR PERVERSE. 8. WE, THEREFORE, ANSWER THE QUESTION IN THE AFFIR MATIVE AND AGAINST THE REVENUE. IN THE CIRCUMSTANCES OF THE CA SE, WE MAKE NO ORDER TO COSTS. 11. AS WE HAVE ALREADY SEEN, DEDUCTION U/S. 54 OF THE ACT IS ALLOWED IF A PROPERTY BEING RESIDENTIAL HOUSE IS TRANSFERRED A ND LONG TERM CAPITAL GAIN IS DERIVED BY THE ASSESSEE. IF THE ASSESSEE, ONE Y EAR BEFORE THE TRANSFER OF OLD ASSET OR ONE YEAR THEREAFTER PURCHASED A NEW AS SET, HE IS ENTITLED TO DEDUCTION U/S.54 OF THE ACT. IF THE ASSESSEE CONST RUCTS A NEW HOUSE, THEN THE CONSTRUCTION SHOULD BE COMPLETED WITHIN A PERIO D OF THREE YEARS AFTER THE TRANSFER OF OLD ASSET. IN THE PRESENT CASE, TH E EXPENSES FOR CONSTRUCTING THE NEW RESIDENTIAL HOUSE, IS PARTLY INCURRED PRIOR TO ONE YEAR BEFORE THE TRANSFER AND THE ENTIRE LTCG HAS BEEN INVESTED IN C ONSTRUCTION WITHIN TWO YEARS AFTER THE TRANSFER OF THE OLD ASSET. IN SUCH CIRCUMSTANCES, THE ASSESSEE IS ENTITLED TO DEDUCTION U/S. 54 OF THE AC T FOR THE ENTIRE LTCG THAT WAS INVESTED IN CONSTRUCTION OF THE NEW ASSET, AS A DMITTEDLY THESE INVESTMENTS WERE MADE WITHIN THE PERIOD OF 3 YEARS FROM THE DATE OF THE OLD ASSET. THE FACTS ARE IDENTICAL TO THE FACTS OF THE CASE OF THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF J.R. SUBRAMANYA BHAT (SUPRA) . THE ASSESSEE IS THEREFORE ENTITLED TO DEDUCTION U/S.54 OF THE ACT ON THE ENTIRE LTCG INVESTED IN CONSTRUCTION OF THE NEW ASSET. 12. WITH REGARD TO THE ORDER OF THE CIT(A) HOLDING THAT THE ASSESSEE HAS NOT COMPLETED THE CONSTRUCTION WITHIN THE AFORESAID PERIOD OF 3 YEARS, WE ARE OF THE VIEW THAT THE SAME CANNOT BE A GROUND TO DENY DEDUCTION U/S. 54 OF THE ACT IN THE PRESENT AY 2013-14. SUCH A COURS E CAN BE ADOPTED ONLY ITA NO. 1958/BANG/2017 PAGE 8 OF 9 IN THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEA R IN WHICH THE PERIOD OF 3 YEARS EXPIRES. THIS IS LAID DOWN BY THE PROVISO TO SEC.54(2) OF THE ACT. APART FROM THE ABOVE, THE HONBLE KARNATAKA HIGH CO URT IN THE CASE OF CIT VS. SAMBANDAM UDAYAKUMAR 251 CTR 317 (KARN.) HAD TAKEN THE VIEW THAT THE NON-COMPLETION OF CONSTRUCTION WITHIN A PE RIOD OF 3 YEARS CANNOT BE A GROUND TO DENY DEDUCTION U/S.54F OF THE ACT, WHIC H PROVISIONS ARE PARI MATERIA THE SAME AS SEC.54 OF THE ACT ON THIS ASPECT. IN THAT CASE, THE ASSESSEE SOLD SHARES FOR RS. 4.18 CRORES AND, WITHI N 12 MONTHS, INVESTED RS. 2.16 CRORES THEREOF TO CONSTRUCT A HOUSE PROPER TY AND CLAIMED EXEMPTION U/S 54F. HOWEVER, AS EVEN AFTER THE EXPIRY OF 3 YEARS OF THE DATE OF TRANSFER, THE CONSTRUCTION OF THE HOUSE WAS NOT COMPLETE AND SALE DEED NOT EXECUTED, THE AO & CIT (A) DENIED RELIEF U/S 54 F THOUGH THE TRIBUNAL GRANTED IT. ON APPEAL BY THE DEPARTMENT TO THE HIGH COURT, HELD THAT SEC. 54F IS A BENEFICIAL PROVISION FOR PROMOTING THE CON STRUCTION OF RESIDENTIAL HOUSE & REQUIRES TO BE CONSTRUED LIBERALLY FOR ACHIEVING THAT PURPOSE. THE INTENTION OF THE LEGISLATURE WAS TO ENCOURAGE INVESTMENTS IN THE ACQUISITION OF A RESIDENTIAL HOUSE AND COMPLETION OF CONSTRUCTION OR OCCUPATION IS NOT THE REQUIREMENT OF LAW . THE WORDS USED IN THE SECTION ARE PURCHASED OR CONSTRUCTED. THE CONDITION PRE CEDENT FOR CLAIMING BENEFIT U/S 54F IS THAT THE CAPITAL GAIN SHOULD BE PARTED BY THE ASSESSEE AND INVESTED EITHER IN PURCHASING A RESIDENTIAL HOU SE OR IN CONSTRUCTING A RESIDENTIAL HOUSE. MERELY BECAUSE THE SALE DEED HAD NOT BEEN EXECUTED OR THAT CONSTRUCTION IS NOT COMPLETE AND IT IS NOT IN A FIT CONDITION TO BE OCCUPIED DOES NOT DISENTITLE THE ASSESSEE TO CLAIM S. 54F RELIEF. THE HONBLE KARNATAKA HIGH COURT FOLLOWED SIMILAR DECIS ION RENDERED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF SARDARMAL KOTHARI 302 ITR 286 (MAD) . WE ARE THEREFORE OF THE VIEW THAT EVEN ON THE BASIS OF NON- COMPLETION OF CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD OF 3 YEARS, THE DEDUCTION U/S.54 OF THE ACT CANNOT BE DENIED TO THE ASSESSEE. ITA NO. 1958/BANG/2017 PAGE 9 OF 9 13. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JULY, 2018. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 20 TH JULY, 2018. / D ESAI S MURTHY / COPY TO: 1. T HE APP ELL ANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.