Kannan Chandrasekar, CHENNAI V. ITO, CHENNAI

ITA 2932/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4631 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 12-04-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 17-10-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: S DEEPA
• Keywords: Capital asset
• Section: 54F; 54; 12; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ ITA NO.: 2932/MDS/2016 / ASSESSMENT YEARS: 2012-13 MR. KANNAN CHANDRASEKAR , A1/A, SANDEEP KALA APARTMENTS, SANDEEP ROAD, NEELANKARAI, CHENNAI 600 041. PAN: AGWPK8322K V. THE INCOME TAX OFFICER, CORPORATE WARD 16(2), CHENNAI ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI S. DEEPA, CA /RESPONDENT BY : SHRI SUPRIYO PAL, JCIT / DATE OF HEARING : 12.04.2017 / DATE OF PRONOUNCEMENT : 11.05.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-4,CHENNAI DATED 19.08.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. 2 I.T.A. NO.2932/MDS/2016 2. THE ONLY GRIEVANCE IN THIS APPEAL OF ASSESSEE IS NON- GRANTING OF EXEMPTION U/S.54 OF THE ACT IN RESPECT OF SALE OF THE RESIDENTIAL PROPERTY. 3. THE LD.A.R SUBMITTED BEFORE US THAT THE ASSESSEE CL AIMED CAPITAL GAINS U/S.54 OF THE ACT. FURTHER, LD.A.R SU BMITTED THE FOLLOWING POINTS FOR OUR CONSIDERATION. (I) THE APPELLANT HAS CLAIMED CAPITAL GAINS EXEMPT ION UNDER SECTION 54 OF THE INCOME TAX ACT,1961 IN RESPECT OF THE SALE OF THE RESIDENTIAL PROPERTY SITUATED AT FLAT NO. 4D , 4TH FLOOR, CITY LIGHTS KINGS MEAD, NO: 14/3, SOUTH MADA STRE ET, SRI NAGAR COLONY, SAIDAPET, CHENNAI 600 015, BY INVES TING IN NEW RESIDENTIAL PROPERTY SITUATED AT UNIT NO: 3, H E VILLAGE,KALAVAKKAM, CHENGLEPET TALUK, KANCHEEPURAM DISTRICT. (II) THE APPELLANT SOLD THE PROPERTY ON 22-6-2011 FOR A CONSIDERATION OF ` 1,15,00,000/- AND THE CONSIDERATION AMOUNT WAS CREDITED IN HIS PUNJAB NATIONAL BANK SAVINGS BA NK ACCOUNT. 3 I.T.A. NO.2932/MDS/2016 (III) THE CAPITAL GAINS ARISING OUT OF THE SALE WA S ` 74,20,062/- AND THE APPELLANT CLAIMED EXEMPTION OF THE ENTIRE C APITAL GAINS U/S 54 SINCE HE INVESTED IN THE NEW RESIDENTI AL PROPERTY. THE APPELLANT PAID ` 50,00,000/- TO THE BUILDER M/S. PHOENIX HODU DEVELOPERS PVT LTD VIDE TWO PAYMENTS, FIRST PA YMENT FOR ` 8,00,000/- ON 08-12-2011 AND THE SECOND ONE FOR ` 42,00,000/- ON 21-12-2011 FOR WHICH THE BUILDER HAS ISSUED RECEIPTS. THE APPELLANT AVAILED HOME LOAN FROM M/S. INDIA BULLS HOUSING FINANCE LIMITED FOR AN AMOUNT OF ` 46,12,572/- AND THE COMPANY PAID AN AMOUNT OF ` 40,00,000/- TO THE BUILDER ON 11-01- 2012 WHICH IS ALSO ACKNOWLEDGED B Y THE BUILDER AND THIS LOAN AMOUNT ALSO IS CONSTRUED AS APPROPRIATION TOWARDS PURCHASE OF NEW HOUSE PROPERT Y QUALIFYING FOR EXEMPTION UNDER SEC.54. (IV) THE APPELLANT HAS THUS INVESTED A TOTAL AMOUNT OF ` 1,04,02,567/- IN THE NEW PROPERTY AND HAS FULLY UTI LIZED CAPITAL GAINS AMOUNT. HOWEVER THE CONSTRUCTION OF T HE BUILDING PROPERTY COULD NOT BE COMPLETED AND THE POSSESSION HANDED OVER WITHIN THE STIPULATED TIME O F 3 YEARS FROM THE DATE OF SALE OF THE PROPERTY. THE DA TE OF 4 I.T.A. NO.2932/MDS/2016 SALE OF THE PROPERTY WAS 22-6-2011 AND THE POSSESSI ON WAS HANDED OVER TO THE APPELLANT ON 05-11-2015. (V) THE ASSESSING OFFICER HAS IN HIS ORDER DENIED EXEMPTION U/S.54 OF INCOME TAX ACT 1961 BY PRESCRIBING AS PE R SECTION 54 OF THE ACT, CONSTRUCTION OF THE PROPERTY SHOULD HAVE BEEN COMPLETED BY 22.06.2014. SINCE THE CONSTRUCTION AS STIPULATED IN SECTION 54 IS NOT COM PLETED WITHIN THREE YEARS FROM THE DATE OF SALE OF HOUSE P ROPERTY, THE EXEMPTION CLAIMED U/S.54 BY THE ASSESSEE AT ` 74,20,062/- IS NOT ALLOWED (VI) THE LD.A.R STATED THAT THE INTENTION OF THE LEGISLATURE WAS TO ENCOURAGE INVESTMENTS IN THE ACQUISITION OF A RESID ENTIAL HOUSE AND COMPLETION OF CONSTRUCTION OR OCCUPATION IS NOT THE REQUIREMENT OF LAW. THE WORDS USED IN THE SECTION A RE PURCHASED OR CONSTRUCTED. THE CONDITION PRECEDENT FOR CLAIMING BENEFIT UNDER SECTION 54 IS THAT THE CAPIT AL GAIN SHOULD BE PARTED BY THE APPELLANT AND INVESTED EITH ER IN PURCHASING A RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE. IF THE CONSTRUCTION IS NOT COMPLETED AND IT IS NOT IN A FIT 5 I.T.A. NO.2932/MDS/2016 CONDITION TO BE OCCUPIED, IT DOES NOT DISENTITLE TH E APPELLANT TO CLAIM SECTION 54 RELIEF. (VII) FURTHER THERE IS NO DISPUTE THE FACT THAT T HE APPELLANT HAD INVESTED LARGE SUMS OF MONEY IN THE CONSTRUCTIO N OF THE HOUSE. THE REQUIREMENT OF THE PROVISION IS THAT THE APPELLANT WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TR ANSFER HAS TO CONSTRUCT A RESIDENTIAL HOUSE IN ORDER TO BECOME EL IGIBLE FOR EXEMPTION. THE APPELLANT RELIES ON THE RATIO OF TH E FOLLOWING DECISIONS: A) COMMISSIONER OF INCOME TAX VS. SHRI. SARDARMAL K OTHARI (MADRAS HIGH COURT) REPORTED IN 302 ITR 286. B) COMMISSIONER OF INCOME TAX VS. SAMBANDAM UDAYAKU MAR (KARNATAKA HIGH COURT) REPORTED IN 345 ITR 389. (VIII) FURTHER, THE APPELLANT SUBMITS THAT AS SUBS TANTIAL PAYMENTS HAVE BEEN MADE, THE APPELLANT IS ENTITLED TO DEDUCTION U/S. 54 OF THE ACT. THE APPELLANT RELIES ON THE RAT IO OF THE BELOW DECISIONS IN SUPPORT OF ITS CLAIM: ANDHRA PRADESH HIGH COURT IN CIT VS MRS.SHAHZADA BEGUM (173 ITR 397) BOMBAY HIGH COURT IN CIT V. LAXMICHAND NARPAL NAG DA (211 ITR 804) DELHI HIGH COURT IN CIT V. R.L. SOOD (242 ITR 727 ) ITAT, HYDERABAD IN SRI PRADEEP KUMAR CHOWDRY VS D CIT ITA 1520/HYD/2013) 6 I.T.A. NO.2932/MDS/2016 (IX) THE APPELLANT PAID ` 50 LAKHS TOWARDS PURCHASE OF NEW PROPERTY OUT OF THE SALE PROCEEDS RECEIVED FROM THE AIE OF HIS PROPERTY. THE APPELLANT PAID AN AMOUNT OF ` 14.99 LAKHS TOWARDS THE CLOSURE OF HOME LOAN TAKEN FROM PUNJAB NATIONAL BANK IN RESPECT OF THE PROPERTY SOLD BY HIM. ALSO HE PAID A N AMOUNT OF ` 17.69 IAKHS TO HIS FATHER IN LAW TOWARDS HIS MEDICA L EXPENSES WHO HAD TO UNDERGO A MAJOR HEART SURGERY. THE APPEL LANT HAD FUNDS SHORTAGE TOWARDS PAYMENT OF NEW PROPERTY AND FOR THIS REASON ONLY, HE HAD TO AVAIL HOME LOAN FROM INDIA B ULLS HOUSING FINANCE LIMITED. (X) THE LD.A.R SUBMITTED THAT IN ORDER TO CLAIM E XEMPTION U/S 54, THERE NEED NOT BE NEXUS BETWEEN THE FUNDS TO BE INVESTED IN NEW PROPERTY AND THE UTILIZATION OF CAPITAL GAINS E XEMPTION AMOUNT. THE ONLY PRE-REQUISITE / CONDITION IS THAT IN ORDER TO CLAIM EXEMPTION U/S 54, THE ASSESSEE SHOULD INVEST IN PUR CHASE OF NEW RESIDENTIAL PROPERTY EITHER WITHIN ONE YEAR PRIOR T O THE DATE OF SALE OR PURCHASE WITHIN TWO YEARS AFTER THE DATE OF SALE OR CONSTRUCT WITHIN THREE YEARS FROM THE DATE OF SALE. THE APPEL LANT HAS FULFILLED THE CONDITION THAT HE HAS INVESTED IN CON STRUCTION OF THE 7 I.T.A. NO.2932/MDS/2016 NEW RESIDENTIAL PROPERTY WITHIN THREE YEARS AND HE GOT THE POSSESSION OF THE PROPERTY ON 05-11-2015. THE APPEL LANT RELIES ON THE FOLLOWING CASE LAWS RELATED TO HIS CLAIM FOR DE DUCTION UNDER SECTION 54(1) OF THE ACT: A ) ISHAR SINGH CHAWLA VS. DY.COMMISSIONER OF INCOME TAX (ITAT) (ITA NO.608/KOL/2010) B) J.V.KRISHNA RAO VS. DY.COMMISSIONER OF INCOME TAX (ITAT) (ITA NO.1866/HYD/2011) AND C) MEERA DEVI JAM VS. INCOME TAX OFFICER (ITA NO.50 5/KOL/2010) 3.1 BASED ON THE FACTS OF THIS CASE AND THE VARIO US ORDERS OF THE TRIBUNAL, THE LD.A.R PLEADS FOR RELIEF FROM THE AD DITION MADE BY THE REVENUE AND REQUESTS FOR DELETION OF ADDITION MADE AMOUNTING TO ` 74,20,062/- IN RESPECT OF CAPITAL GAINS EXEMPTION C LAIMED BY THE APPELLANT. 4. ON THE OTHER HAND, LD.D.R SUBMITTED THAT THE RELE VANT PROVISIONS OF SECTION 54 (1) STIPULATES THAT FOR CL AIMING THE BENEFIT OF CAPITAL GAINS TAX EXEMPTION THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH TH E TRANSFER TOOK PLACE PURCHASED], OR HAS WITHIN A PERIOD OF THREE Y EARS AFTER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE. THE WORDS USE D IN THE SECTION ARE PURCHASED OR CONSTRUCTED. NOW THE QUESTION AR ISES AS TO 8 I.T.A. NO.2932/MDS/2016 WHETHER BOOKING OF A FLAT BY INVESTING THE ENTIRE C APITAL GAINS WITHIN THE STIPULATED PERIOD OF THREE YEARS FROM THE DATE OF SALE OF THE ORIGINAL PROPERTY, ALTHOUGH THE CONSTRUCTION WAS NE VER COMPLETED BEFORE THE END OF THE THREE YEARS, CAN BE CONSTRUED AS THE NEW PROPERTY CONSTRUCTED OR PURCHASED MAKING THE ASS ESSEE ELIGIBLE FOR EXEMPTION UNDER SECTION 54 OF THE ACT. ACCORDIN G TO D.R, FOR CLAIMING THE BENEFIT OF SECTION 54, THE ASSESSEE SH OULD HAVE COMPLETED THE CONSTRUCTION OF THE NEW HOUSE/PROPERT Y WITHIN THE PERIOD OF THREE YEARS FROM THE END OF THE DATE ON W HICH THE OLD PROPERTY WAS TRANSFERRED. 4.1 THE LD.D.R RELIED ON THE FOLLOWING CASE LAWS. A) FARIDA A. DUNGERPURWALA( 2014) 52 TAX MANN.COM 527, WHEREIN HELD THAT BOOKING OF A FLAT WHICH WAS GOING TO BE C ONSTRUCTED BY A BUILDER HAS TO BE CONSIDERED A CASE OF CONSTRUCTION OF FLAT AND NOT PURCHASE OF FLAT FOR THE PURPOSES OF SECTION 54. MO REOVER, IT WAS ALSO HELD THAT DEDUCTION UNDER SECTION 54 IS AVAILA BLE ONLY IF THE ASSESSEE HAS CONSTRUCTED A NEW HOUSE WITHIN THREE Y EARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL PROPERTY. B) JAGWINDER SINGH VS CIT(A),(2104) 50, TAXMANN.CO M 145, THE HIGH COURT OF PUNJAB & HARYANA WHEREIN HELD THAT TH E BENEFIT OF 9 I.T.A. NO.2932/MDS/2016 SECTION 54F CANNOT BE GRANTED IN THE ABSENCE OF ANY EVIDENCE ESTABLISHING CONSTRUCTION OF NEW RESIDENTIAL HOUSE. C) ANU AGGARWAL VS ITO (2012) 28 TAXMANN.COM 286 A S PER WHICH THE ASSESSEE IS DISENTITLED FROM CLAIMING DED UCTION UNDER SECTION 54F ON HER FAILURE TO CONSTRUCT NEW RESIDEN TIAL PROPERTY WITHIN SPECIFIED PERIOD ON THE PLOT PURCHASED BY HE R OUT OF SALE PROCEEDS OF HER OLD PROPERTY. D) RASIKALA M. PARIKH VS ACIT( 2012) 28 TAXMANN.CO M 195 WHEREIN HELD THAT THE ALLOTMENT LETTER OF A FLAT ISSUED BY BUILDER COULD NOT BECOME A BASIS FOR THE CLAIM OF DEDUCTION UNDER SEC TION 54F. E) YOSHOVARDHAN SINHA VS ITO( 2016). 65 TAXMANN.C OM 31 AS PER THIS JUIDGEMENT THE ASSESSEE WOULD NOT BE ENTITLED TO EXEMPTION UNDER SECTION 54 WHERE THE COHSTRUCTION OF NEW RESI DENTIAL FLAT WAS NOT COMPLETED BY END OF THREE YEARS FROM TRANSFER O F THE OLD PROPERTY. F) IN THE CASE OF SMT. SESHA JAGGAIAH VS ITO ( 201 2) 20 TAXMANN.COM 521, WHEREIN HELD THAT ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 54 WAS DENIED BY THE AO ON THE GROUND S THAT THE CONSTRUCTION OF THE PROPERTY WAS COMPLETED BEYOND T HE PERIOD PRESCRIBED BY THE PROVISIONS OF SECTION 54. 10 I.T.A. NO.2932/MDS/2016 4.2 THE LD.D.R FURTHER SUBMITTED THAT GOING THROUG H THE ABOVE CASE LAWS, IT IS EVIDENT THAT THE FACTS OF THE PRES ENT CASE ARE SIMILAR TO THOSE DISCUSSED ABOVE. THE JUDGMENTS REFERRED TO BY THE APPELLANT GET DIFFERENTIATED BY THE CASE LAWS RELIE D UPON BY THE REVENUE AUTHORITIES. IN THE PRESENT CASE, THE OLD P ROPERTY WAS SOLD ON 22/06/2011 AND THE PERIOD OF THREE YEARS EXPIRED ON 22106/2014. THE APPELLANT ACCEPTED THAT THE NEW PRO PERTY WAS NOT COMPLETED BY THE END OF 26/06/2014. THIS CLEARLY SH OWS THAT THE CONSTRUCTION OF THE PROPERTY WAS COMPLETED ONLY AFT ER THE EXPIRY OF THE PERIOD OF THREE YEARS. FURTHER, LD.D.R SUBMITTE D THAT THE POSSESSION OF THE NEW PROPERTY WAS HANDED OVER TO T HE APPELLANT ONLY ON 05/11/2015 ALTHOUGH NO SUCH DOCUMENTARY EVI DENCE WAS EVER FILED DURING THE APPELLATE PROCEEDING TO SUBST ANTIATE THAT THE POSSESSION WAS HANDED OVER TO THE APPELLANT ON 05/1 1/2015. HENCE, IN VIEW OF THE ABOVE FACTS OF THE CASE, THE ASSESSEE IS NOT ENTITLED FOR BENEFIT U/S.54 OF THE ACT. THEREFORE, LD.D.R PLEADED THAT THE ACTION OF THE AO MAY BE UPHELD. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IN THIS CASE TRANSFERRED THE R ESIDENTIAL 11 I.T.A. NO.2932/MDS/2016 PROPERTY ON 22.06.2011 FOR CONSIDERATION OF ` 115 LAKHS. THE ASSESSEE EARNED CAPITAL GAINS AT ` 74,20,062/- AND CLAIMED EXEMPTION U/S.54 OF THE ACT FOR THE SAME AMOUNT. TH E ASSESSEE PAID TOWARDS PURCHASE OF THE NEW RESIDENTIAL PROPER TY AS FOLLOWS:- AMOUNT ( `) DATE OF PAYMENT PAYMENT TO 8 LAKHS 08.12.2011 M/S.PHOENIX HODU DEVELOPERS PVT LTD. 42 ALKHS 21.02.2011 M/S.PHOENIX HODU DEVELOPERS PVT LTD. THE ASSESSEE AVAILED HOME LOAN FROM M/S.INDIA BULLS HOUSING FINANCE LTD. FOR AN AMOUNT OF ` 46,12,572/- AND THE COMPANY HAS PAID ` 40 LAKHS TO BUILDER M/S.PHOENIX HODU DEVELOPERS PVT LTD. ON 11.01.2012, WHICH LAWS DULY ACKNOWLEDGED BY THE DEV ELOPER. ON THE WHOLE AMOUNT, THE ASSESSEE CLAIMED EXEMPTION U/ S.54 OF THE ACT SUBJECT TO CAPITAL GAINS OF ` 74,20,062/-. THIS WAS DISALLOWED BY THE AO ON THE REASON THAT THE CONSTRUCTION OF RESID ENTIAL PROPERTY WAS NOT COMPLETED WITHIN 3 YEARS FROM THE TRANSFER OF RESIDENTIAL CAPITAL ASSET. WE HAVE GONE THROUGH THE PROVISIONS OF THE SECTION 54 OF THE ACT AS FOLLOWS:- SEC. 54. 'PROFIT ON SALE OF PROPERTY USED FOR RESID ENCE. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIV IDED FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TER M CAPITAL ASSET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND B EING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABL E UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' (HEREAFTER IN THIS SECTION 12 I.T.A. NO.2932/MDS/2016 REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSE E HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DA TE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERI OD OF THREE YEARS AFTER THAT DATE 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 TRANSFER TOOK PLA CE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISI ONS 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 PREVI OUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PER IOD 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 TO OR LESS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHA RGED UNDER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RES PECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WI THIN 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 APP ROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE O RIGINAL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FU RNISHING THE RETURN OF INCOME UNDER SECTION 139, SHALL BE DEPOSI TED 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 ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTI ON (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 IN THE OFFI CIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOM PANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSES OF SUB-SECTI ON (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 SU B-SECTION 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, 13 I.T.A. NO.2932/MDS/2016 (I) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UND ER 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 SUC H AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID'. 5.1 THE TIME PERIOD ALLOWED FOR MAKING A PURCHASE IF IT IS DONE AFTER THE DATE OF TRANSFER IS TWO YEARS AND IF IT I S A CONSTRUCTION IT IS THREE YEARS. THUS, IF THE INTENTION WAS TO CONSTRUC T A RESIDENTIAL HOUSE THE PERIOD IS THREE YEARS, THE OUTER LIMIT OF THREE YEARS FOR CONSTRUCTING A HOUSE IN THE GIVEN CASE BEFORE US WA S 21-06-2011. VIDE SUB-SEC. (2) OF SECTION 54 A DEPOSIT UNDER CAP ITAL GAINS SCHEME, IF THE CAPITAL GAIN IS NOT APPROPRIATED FOR SUCH CONSTRUCTION HAS TO BE DONE BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF INCOME U/S (1) OF SEC.139 OF THE IT ACT, 1961. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. M S JAGRITI AGGARWAL [2011] 339 ITR 610/ 203 TAXMAN 203/15 TAXM ANN.COM 146 HAS HELD THAT SUB-SEC. (4) OF SEC.139 CAN ONLY BE CONSTRUED TO AS A PROVISO TO SUB-SEC. (1) AND THUS, THE DUE DATE FURNISHING THE RETURN MENTIONED IN SEC. 139(1) IS SUBJECT TO THE E XTENDED PERIOD PROVIDED UNDER SECTION 139(4) OF THE IT ACT, 1961. THE IMPUGNED ASSESSMENT YEAR BEFORE US IS ASSESSMENT YEAR : 2012 -13, AND THE EXTENDED TIME PERIOD U/S 139(4) IS BEFORE EXPIRY OF ONE YEAR FROM 14 I.T.A. NO.2932/MDS/2016 THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE C OMPLETION OF ASSESSMENT WHICHEVER IS EARLIER. ONE YEAR FROM THE END OF THE IMPUGNED ASSESSMENT YEAR WOULD EXPIRE ONLY ON 31-03 -2014. THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR HAVING BEEN COMPLETED ONLY ON 24-12-2014 THE DATE TO BE RECKONE D FOR THE PURPOSE OF APPLICATION OF SUB-SEC. 2 OF SEC. 54 IN THE CASE BEFORE US IS 31-03-2014. THE ASSESSEE HAD TIME UPTO 31-03- 2014 TO DEPOSIT THE CAPITAL GAINS IN CAPITAL GAINS ACCOUNT SCHEME, IF HE COULD NOT UTILIZE IT FOR ACQUIRING OR CONSTRUCTING A RESIDENCE. THIS BRINGS US TO THE QUESTION OF WHETHER ASSESSEE CAN B E CONSIDERED TO HAVE CONSTRUCTED OR ACQUIRED A RESIDENCE BEFORE 31-03-2014. 5.2 HOW THE TERM PURCHASE HAS TO BE CONSTRUED IN RELATION TO INTERPRETATION OF SEC. 54 OF THE IT ACT, 1961 HAD C OME UP BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. KULDEEP SINGH [2014] 49 TAXMANN.COM 167/226 TAXMAN 133. THEIR LOR DSHIP HELD AT PARAS 8 TO 10 OF JUDGMENT DATED 12-08-2014 THAT:- '8. THE WORD 'PURCHASE' CAN BE GIVEN BOTH RESTRICTI VE AND WIDER MEANING. A RESTRICTIVE MEANING WOULD MEAN TRANSACTI ONS BY WHICH LEGAL TITLE IS FINALLY TRANSFERRED, LIKE EXEC UTION OF THE SALE DEED OR ANY OTHER DOCUMENT OF TITLE. 'PURCHASE' CAN ALSO REFER TO PAYMENT OF CONSIDERATION OR PART CONSIDERATION ALON G WITH TRANSFER OF POSSESSION UNDER SECTION 53A OF THE TRA NSFER OF PROPERTY ACT, 1882. SUPREME COURT WAY BACK IN 1979 IN CIT ANDHRA PRADESH V. T.N. ARAVINDA REDDY (1979) 4 SCC 721, 15 I.T.A. NO.2932/MDS/2016 HOWEVER, GAVE IT A WIDER MEANING AND IT WAS HELD TH AT THE PAYMENT MADE FOR EXECUTION OF RELEASE DEED BY THE B ROTHER THEREBY JOINT OWNERSHIP BECAME SEPARATE OWNERSHIP F OR PRICE PAID WOULD BE COVERED BY THE WORD 'PURCHASE'. IT WAS OBSERVED THAT THE WORD 'PURCHASE' USED IN SECTION 54 OF THE ACT SHOULD BE INTERPRETED PRAGMATICALLY IN A PRACTICAL MANNER AND LEGALISM SHALL NOT BE ALLOWED TO PLAY AND CREATE CONFUSION OR LING UISTIC DISTORTION. THE ARGUMENT THAT '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 MONEY'S WORT H. THE WORD 'PURCHASE', IT WAS OBSERVED WAS OF A PLURAL SEMANTI C SHADES AND WOULD INCLUDE BUYING FOR A PRICE OR EQUIVALENT OF P RICE BY PAYMENT OF KIND OR ADJUSTMENT OF OLD DEBT OR OTHER MONETARY CONSIDERATIONS. IT WAS OBSERVED THAT IF YOU SELL A H OUSE AND MAKE PROFIT, PAY CAESAR (STATE) BUT IF YOU BUY A HO USE OR BUILD ANOTHER AND THEREBY SATISFY THE CONDITIONS OF SECTI ON 54, YOU WERE EXEMPT. THE PURPOSE WAS PLAIN; THE SYMMETRY WA S SIMPLE; THE LANGUAGE WAS PLAIN. 9. RECENTLY SUPREME COURT IN CIVIL APPEAL NOS. 5899 -5900/2014 TITLED SH. SANJEEV LAL ETC. ETC. V. CIT, CHANDIGARH & ANR., DECIDED ON 01/07/2014, 2014 (8) SCALE 432 AGAIN EXA MINED SECTION 54 IN A CASE WHERE THE ASSESSEE HAD ENTERED INTO AN AGREEMENT TO SELL A HOUSE TO A THIRD PARTY ON 27TH DECEMBER, 2002 AND HAD RECEIVED RS. 15 LACS BY WAY OF EARNEST MONEY AND SUBSEQUENTLY RECEIVED THE BALANCE SALE CONSIDERATIO N OF RS. 1.17 CRORES (TOTAL BEING RS. 1.32 CRORES) WHEN THE SALE DEED WAS EXECUTED ON 24TH SEPTEMBER, 2004. IN THE MEANWHILE, THE ASSESSEE HAD PURCHASED ANOTHER HOUSE ON 30TH APRIL, 2003. BENEFIT UNDER SECTION 54 WAS DENIED BY THE HIGH COU RT OBSERVING THAT THE NEW HOUSE HAD BEEN PURCHASED PRIOR TO EXEC UTION OF THE SALE AND NOT WITHIN ONE YEAR PRIOR TO SALE OF ORIGI NAL ASSET I.E. NEW HOUSE HAS BEEN PURCHASED ON 30TH APRIL, 2003 WH EREAS THE EARLIER ASSET WAS SOLD ONLY ON 24TH SEPTEMBER, 2004 . THE SUPREME COURT 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 INTER-SE LITIGATIO N BETWEEN THE LEGAL HEIRS, AS ONE OF THEM HAD CHALLENGED THE WILL UNDER WHICH THE ASSESSEE HAD INHERITED THE PROPERTY. THE AGREEM ENT TO SELL, IT WAS HELD HAD GIVEN SOME RIGHTS TO THE VENDOR AND REDUCED OR EXTINGUISHED RIGHTS OF THE ASSESSEE. THIS, IT WAS O BSERVED WAS SUFFICIENT FOR THE PURPOSE OF SECTION 2(47), WHICH DEFINES THE TERM TRANSFER IN RELATION TO A CAPITAL ASSET. IN THE LIGHT OF THE FACTUAL MATRIX, IT WAS OBSERVED THAT THE INTENTION BEHIND SECTION 54 WAS TO GIVE RELIEF TO A PERSON WHO HAD TRANSFERR ED HIS RESIDENTIAL HOUSE AND HAD PURCHASED ANOTHER RESIDEN TIAL HOUSE 16 I.T.A. NO.2932/MDS/2016 WITHIN TWO YEARS OF TRANSFER OR HAD PURCHASED A RES IDENTIAL HOUSE ONE YEAR BEFORE TRANSFER. IT WAS ONLY THE EXCESS AM OUNT NOT USED FOR MAKING PURCHASE OR CONSTRUCTION OF THE PRO PERTY WITHIN THE STIPULATED PERIOD, WHICH WAS TAXABLE AS LONG TE RM CAPITAL GAIN WHILE ON THE AMOUNT SPENT, RELIEF SHOULD BE GR ANTED. PRINCIPLE OF PURPOSIVE INTERPRETATION SHOULD BE APP LIED TO SUBSERVE THE OBJECT AND MORE PARTICULARLY WHEN ONE WAS CONCERNED WITH EXEMPTION FROM PAYMENT OF TAX. THE A SSESSEE, THEREFORE, SUCCEEDED. THE OBSERVATIONS 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 AS EXPENSES INCURRED IN RELATION TO THE SALE DEED W HICH WAS EXECUTED. 10. MORE DIRECT ARE THE TWO DECISIONS OF MADHYA PRA DESH HIGH COURT IN SHASHI VERMA (SMT.) V. CIT [1997] 224 ITR 106AND CALCUTTA HIGH COURT IN CIT V. SMT. BHARATI C. KOTHA RI (2000) 244 ITR 352. IN SHASHI VERMA (SUPRA), THE ASSESSEE HAD I NVESTED THE SALE CONSIDERATION FOR PURCHASE OF A FLAT FROM DELH I DEVELOPMENT AUTHORITY AND HAD PAID PART INSTALMENTS. REVERSING THE DECISION OF THE TRIBUNAL AND ALLOWING THE APPEAL OF THE ASSE SSEE, THE HIGH COURT OBSERVED THAT THE TRIBUNAL HAD ADOPTED A PEDA NTIC APPROACH WITHOUT NOTICING THE FACT THAT THE CAPITAL GAIN WAS RS. 31,980/- WHEREAS THE INSTALMENTS PAID WERE RS. 71,2 56/-, I.E. MUCH MORE THAN THE AMOUNT OF CAPITAL GAIN. REFERENC E WAS MADE TO CIRCULAR NO. 471 DATED 15TH OCTOBER, 1986 [ 1986] 162 ITR (STAT.) 41 . IT WAS OBSERVED THAT SECTION 54 OF THE ACT SAYS THAT ASSESSEE COULD HAVE CONSTRUCTED THE HOUSE AND NOT THAT THE CONSTRUCTION SHOULD HAVE NECESSARILY BEEN COMPLETED . NOTICING THAT IT WAS NOT EASY TO CONSTRUCT A HOUSE WITHIN TH E TIME LIMIT OF THREE YEARS AND UNDER THE GOVERNMENT SCHEMES, CONST RUCTION TAKES YEARS. WHEN SUBSTANTIAL INVESTMENT WAS MADE I N THE CONSTRUCTION AND IT SHOULD BE DEEMED THAT SUFFICIEN T STEPS HAD BEEN TAKEN AND IT SATISFIED REQUIREMENT OF SECTION' . 6.1 NOW, THE QUESTION BEFORE US IS THAT WHETHER THE ASSESSEE CAN BE CONSIDERED TO HAVE CONSTRUCTED OR A CDQUIRED RESIDENTIAL PROPERTY WITHIN 3 YEARS FROM THE SALE O F RESIDENTIAL PROPERTY I.E. 21.06.2014. AS SEEN FROM THE RECORD, ASSESSEE ENTERED INTO A CONSTRUCTION AGREEMENT DATED 21.12.2 011 AND MADE 17 I.T.A. NO.2932/MDS/2016 PAYMENT AS ABOVE WITH REFERENCE TO THIS CONSTRUCTIO N AGREEMENT. AS PER THE CONSTRUCTION AGREEMENT, THE ASSESSEE IS REQUIRED TO MAKE PAYMENT AS FOLLOWS:- PARTICULARS AMOUNT BALANCE PAYABLE REMARKS BOOKING ADVANCE 8,00,000 1,16,02,567 PAID RS.8 LAKHS VIDE CHEQUE NO.635912 DT.5.12.11 AT THE TIME OF AGREEMENT ON DEC.,2011 42,00,000 74,02,567 PAID RS.41,66,818/- VIDE CHEQUE NO. DT.21.12.2011 AT THE TIME OF REGISTRATION 40,00,000 34,02,567 11.01.2012 ON JANUARY 2012 10,00,000 24,02,567 AT THE TIME OF POSSESSION 24,02,567 TOTAL 124,02,567 NOTE: PAYMENT SCHEDULE INCLUDES COST OF UDS AS PER SALE AGREEMENT DATED 21 ST DEC.,2011. THE CONSTRUCTION WAS COMPLETED AS ON 05.11.2015 AN D THE POSSESSION WAS HANDED OVER TO THE ASSESSEE ON 05.11 .2015 FOR WHICH NO DISPUTES. 6.2 SINCE IT WAS COMPLETED BEYOND THE STIPULATED P ERIOD U/S.54 OF THE ACT, THE LOWER AUTHORITY DENIED THE EXEMPTIO N U/S.54 OF THE ACT. HOWEVER, THE ASSESSEE HAS TAKEN THE POSSESSIO N OF THE PROPERTY VIDE THE SALE DEED DATED 03.01.2012 AND VE NDOR ON THIS DAY PUT THE ASSESSEE IN LEGAL POSSESSION OF THE SCH EDULED PROPERTY. THE PERIOD ALLOTTED FOR MAKING A PURCHASE, IF IT IS DONE AFTER THE DATE OF TRANSFER OF CAPITAL ASSET IS TWO YEARS AND IF IT IS A CONSTRUCTION, IT 18 I.T.A. NO.2932/MDS/2016 IS WITHIN 3 YEARS. THUS, IF THE INTENTION WAS TO CO NSTRUCT THE RESIDENTIAL HOUSE , THE PERIOD IS 3 YEARS. THE LIMI T OF THREE YEARS FOR CONSTRUCTING A HOUSE, IN THIS CASE IT IS UPTO 21.06 .2014 VIDE SEC.54(2) OF THE ACT. THE CAPITAL GAINS WHICH IS N OT APPROPRIATED BY THE ASSESSEE IS TO BE DEPOSITED INTO CAPITAL GAINS SCHEME BEFORE THE DUE DATE OF FILING OF RETURN U/S.139(1) OF THE ACT. 6.3 IN THE PRESENT CASE, THE ASSESSEE HAD ALREADY APPROPRIATED THE CAPITAL GAINS FOR THE PURPOSE OF CONSTRUCTION O F RESIDENTIAL UNIT. HOWEVER, CONSTRUCTION WAS NOT COMPLETED WITHIN THE STIPULATED PERIOD. IN OUR OPINION, LIBERAL INTERPRETATION TO BE CONSIDERED WHILE GRANTING EXEMPTION U/S.54 OF THE ACT AS IT IS A BEN EFICIAL PROVISION. THE JUDGEMENT OF KARNATAKA HIGH COURT IN THE CASE O F CIT VS. SMT. V.S.SHANTHA KUMARI IN 126 DTR 436(KAR.) WHEREIN HEL D THAT COMPLETION OF CONSTRUCTION WITHIN THREE YEARS WAS N OT MANDATORY AND WAS NECESSARY WAS THAT THE CONSTRUCTION SHOULD BE COMMENCED. THAT CANNOT BE DISPUTED. WHEN THE COMME NCEMENT OF THE CONSTRUCTION OF THE RESIDENTIAL UNIT WHICH I S EVIDENCED BY CONSTRUCTION AGREEMENT CITED SUPRA AND ALSO SALE DE ED CITED SUPRA, IN OUR OPINION, ASSESSEE OVER AND ABOVE SATISFIED THE CONDITIONS LAID DOWN BY SEC.54 OF THE ACT AND DEMONSTRATED HI S INTENTION TO 19 I.T.A. NO.2932/MDS/2016 INVEST THE CAPITAL GAINS IN RESIDENTIAL HOUSE. IN O UR OPINION, ASSESSEE OUGHT NOT TO HAVE DENIED THE CLAIM OF DEDU CTION U/S.54 OF THE ACT. ACCORDINGLY, WE ARE OF THE OPINION THAT TH E ASSESSEE IS ENTITLED FOR EXEMPTION U/S.54 OF THE ACT AND THE SA ME IS TO BE GRANTED. THE ORDER OF LOWER AUTHORITIES IS REVERSED . ACCORDINGLY, THE GROUND TAKEN BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 11 TH MAY, 2017 AT CHENNAI. SD/- SD/- ( . ) ( ) (G. PAVAN KUMAR) (CHANDRA POOJARI) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 11 TH MAY, 2017. K S SUNDARAM. /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF.