Sohanlal Mohanlal Bhandari, Nashik V. Assistant Commissioner of Income tax, Nashik

ITA 294/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0724 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 06-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S EMANATES FROM PA SSED
• Keywords: Capital asset; Cost of acquisition; Benefit of exemption
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NO.294/PUN/2017 / ASSESSMENT YEARS : 2013-14 SHRI SOHANLAL MOHANLAL BHANDARI, 1, VYAPAR BHAVAN, OLD AGRA ROAD, AT POST PIMPALGAON, TAL. NIPHAD, NASHIK 422 029 PAN : ABTPB2116L VS. ACIT, CIRCLE-1, NASHIK (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEES EMANATES FROM THE ORDER PA SSED BY THE LD. CIT(A) ON 18-10-2016 IN RELATION TO THE ASSESSME NT YEAR 2013-14. 2. THE ONLY ISSUE ARGUED BY THE LD. AR IS AGAINST THE DENIAL OF EXEMPTION U/S.54F OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO APPELLANT BY SHRI ABHAY AVCHAT RESPONDENT BY SHRI PANKAJ GARG DATE OF HEARING 26-03-2019 DATE OF PRONOUNCEMENT 28-03-2019 ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 2 CALLED `THE ACT) ON A SUM OF RS.34,83,440/-, BEING, THE AMOUNT PAID BY THE ASSESSEE FOR PURCHASE OF A PART OF LAND ON 11-10-2010, ON WHICH CONSTRUCTION WAS DONE. 3. SUCCINCTLY, THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESS EE TRANSFERRED CERTAIN PLOT OF LAND (BEING, ORIGINAL ASSET) ON 11-06-2012 WHICH RESULTED INTO LONG TERM CAPITAL GAIN OF RS.97,46,504/-. THE ASSESSEE CLAIMED EXEMPTION U/S.54F OF THE ACT FOR A SUM OF RS.87,73,454/- ON PROPORTIONATE BASIS TOWARDS INVESTMENT OF RS.1,12,92,650/- ON PURCHASE OF PLOT AND CONSTRUCTION OF A NEW RESIDENTIAL HOUSE THEREON. THE ASSES SING OFFICER (AO) OBSERVED THAT EXEMPTION U/S.54F OF THE ACT WAS CLAIMED, INTER ALIA, ON THE TOTAL COST OF PLOT AMOUNTING TO RS.44,14,840/-. TAKING NOTE OF THE PRESCRIPTION OF SECTION 54F, GRANTING EXEMPTION ON CONSTRUCTION OF A NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER O F ORIGINAL ASSET, THE AO HELD THAT SUCH PURCHASE OF LAND BY THE ASSES SEE FOR RS.44,14,840/-, MADE PRIOR TO THE DATE OF THE TRANSFER OF ORIGINAL ASSET, COULD NOT BE CONSIDERED AS QUALIFYING AMOUNT. ALLOW ING EXEMPTION U/S.54F ON THE COST OF CONSTRUCTION INCURRED BY THE ASSESSEE TO THE TUNE OF RS.67,59,973/-, THE AO REJECTED THE CLAIM OF THE ASSESSEE FOR EXEMPTION QUA PURCHASE OF TOTAL PLOT AMOUNTING ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 3 TO RS.44,14,940/-. IN HOLDING SO, THE AO RELIED ON CIRCU LAR NO.667 ISSUED BY THE CBDT ON 18-10-1993. THE LD. CIT(A) HELD THAT THE PART OF COMMON PLOT OF LAND PURCHASED BY THE ASSESSEE W ITHIN ONE YEAR BEFORE THE DATE OF TRANSFER OF THE ORIGINAL ASSET QUALIF IED FOR EXEMPTION U/S.54F. INVESTMENT IN THE PART OF THE COMMON P LOT MADE BEFORE ONE YEAR FROM THE DATE OF TRANSFER OF THE O RIGINAL ASSET WAS HELD TO BE NOT ELIGIBLE FOR EXEMPTION, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. THE FACTUM OF FILING OF ANY CROSS APPEAL BY THE REVENUE HAS NOT BEEN BR OUGHT TO OUR NOTICE BY THE LD. DR. 4. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD. THE UNDISPUTED POSITION IS THAT THE ASSES SEE TRANSFERRED THE ORIGINAL ASSET ON 11-06-2012 AND PURCHASE D A COMMON PLOT OF LAND FOR CONSTRUCTION OF A NEW RESIDENTIAL HO USE THEREON, IN THE FOLLOWING DIFFERENT PARTS, WHICH FOR CONVENIE NCE, CAN BE DIVIDED INTO TWO PARTS, VIZ., THE FIRST PART OF THE PLOT PURCHASED ON 11.10.2010 AND THE SECOND PART OF THE PLOT PURCHASED IN THE YEAR 2011/12 : 11-10-2010 RS.34,83,440/- 04-11-2011 RS.73,00/- 04-11-2011 RS.2,82,500/- ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 4 04-11-2011 RS.2,82,500/- 04-11-2011 RS.7,300/- 11-11-2011 RS.2,82,500/- 11-11-2011 RS.7,300/- 25-01-2012 RS.62,000/- TOTAL RS.44,14,840/- 5. IN ADDITION, THE ASSESSEE INCURRED COST OF CONSTRUCTION AMOUNTING TO RS.67,59,973/- ON THE ABOVE COMMON PLOT FO R A NEW RESIDENTIAL HOUSE, WHICH COMPONENT HAS BEEN HELD BY THE AO AS ELIGIBLE FOR EXEMPTION. THE DISPUTE IS ONLY QUA THE COST OF COMMON PLOT PURCHASED BY THE ASSESSEE FOR CONSTRUCTING THE NEW HOUSE. WHEREAS, THE AO HELD THE ASSESSEE TO BE NOT ELIG IBLE FOR EXEMPTION IN RESPECT OF THE ENTIRE PURCHASE COST OF PLOT AT RS.44,14,840/-, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE ONLY TO PURCHASE OF THE FIRST PART OF PLOT OF LAND ON 11.10.2010 F OR RS.34,83,440/-, WHICH IS BEYOND A PERIOD OF ONE YEAR BEFORE THE DATE OF TRANSFER OF THE ORIGINAL ASSET. IT IS NOT DISPUTED THAT ALL OTHER RELEVANT CONDITIONS CONTAINED IN SECTION 54F OF THE ACT STAND D ULY COMPLIED WITH. THE NEAT CONTROVERSY WHICH, THEREFORE, CRY STALISES IS WHETHER THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 54F OF THE A CT QUA THE FIRST PART OF THE PLOT OF LAND PURCHASED FOR CONSTRUCTING A NEW RESIDENTIAL HOUSE, BEFORE ONE YEAR FROM THE DATE OF TR ANSFER OF THE ORIGINAL ASSET. IN ORDER TO ANSWER THE ISSUE AT HAND, IT W OULD BE ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 5 APPOSITE TO CONSIDER RELEVANT PARTS OF PROVISION OF SECTION 5 4F, AS UNDER :- (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIV IDED FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-T ERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SE CTION 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 TRA NSFER TOOK PLACE PURCHASED , OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DE ALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SE CTION, THAT IS TO SAY, ( A ) IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; ( B ) IF THE COST OF THE NEW ASSET IS LESS THAN THE NE T CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPIT AL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION A S THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45: PROVIDED THAT .. (2) TO (4) .. 6. SUB-SECTION (1) OF SECTION 54F PROVIDES THAT WHERE THE CA PITAL GAIN ARISES FROM TRANSFER OF ANY LONG TERM CAPITAL ASSET ( ORIGINAL ASSET), OTHER THAN A RESIDENTIAL HOUSE 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 TH REE YEARS AFTER THAT DATE CONSTRUCTED A NEW RESIDENTIAL HOUSE, THEN NO CAPITAL GAIN ON TRANSFER OF THE ORIGINAL ASSET SHALL BE CHARGED IF THE COST OF ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 6 NEW ASSET IS MORE THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET. THE RELEVANT PART OF SUB-SECTION (1) OF SE CTION 54F PROVIDING EXEMPTION STATES THAT : `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 (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEA LT WITH. ON A CAREFUL CIRCUMSPECTION OF THE ABOVE PART OF SUB- SECTION (1), IT IS CLEARLY DISCERNIBLE THAT THE LEGISLATURE HAS GIV EN THREE DISJUNCTIVE AND MUTUAL EXCLUSIVE MODES IN WHICH THE EXEMPTION CAN BE CLAIMED. THE USE OF WORD OR AT THE RELEVANT PLACES IN THE ABOVE PROVISION LEAVES NOTHING TO DOUBT THAT THER E ARE THREE DISTINCT NON-OVERLAPPING MODES PROVIDING FOR EXEMPTION, NAMELY, I. WHERE THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED .. A RESIDENTIAL HOUSE II. WHERE THE ASSESSEE HAS, WITHIN A PERIOD OF TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, . A RESIDENTIAL HOUSE III. WHERE THE ASSESSEE HAS, HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 7 7. BEFORE CATEGORICALLY DEALING WITH THE ABOVE THREE MODES SEPARATELY, WE CONSIDER IT RELEVANT TO STATE IN COMMON WHICH IS RELEVANT FOR ALL OF THEM THAT THE REFERENCE TO THE COST OF PURCHASE OR CONSTRUCTION OF RESIDENTIAL HOUSE INCLUDES THE COST OF PLOT ALS O AND ACCORDINGLY, THE COST OF LAND IS LIABLE TO BE CONSIDERED FOR TH E PURPOSE OF GRANTING EXEMPTION ALONG WITH THE AMOUNT SPENT ON PURCHASE OR CONSTRUCTION OF SUPERSTRUCTURE THEREON. THE POSITION THAT THE COST OF PLOT SHOULD ALSO BE CONSIDERED AS ELIGIBLE FOR EXEMPTION U/S.54F ALONG WITH THE COST OF CONSTRUCTION HAS NOT B EEN AGITATED BY THE AUTHORITIES BELOW AND RIGHTLY SO. THE CBDT HAS ALSO ACCEPTED THIS POSITION VIDE CIRCULAR NO.667 DATED 18-10-1 993 BY PROVIDING THAT THE BOARD ARE OF THE VIEW THAT THE COST OF LAND IS AN INTEGRAL PART OF THE COST OF THE RESIDENTIAL HOUSE, WHETHER PURCHASED OR BUILT. ACCORDINGLY, IF THE AMOUNT OF CAPITAL GA IN FOR THE PURPOSES OF SECTION 54 AND THE NET CONSIDERATION FOR TH E PURPOSES OF SECTION 54F, IS APPROPRIATED TOWARDS PURCHASE OF A PLOT AND ALSO TOWARDS CONSTRUCTION OF A RESIDENTIAL HOUSE THEREON , THE AGGREGATE COST SHOULD BE CONSIDERED FOR DETERMINING THE QUA NTUM OF DEDUCTION U/S.54/54F.. 8. NOW WE TURN SEPARATELY TO THE ABOVE REFERRED THRE E DIFFERENT MODES OF GRANTING EXEMPTION U/S 54F. THE FIRST MODE GRANTS ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 8 EXEMPTION WHEN THE ASSESSEE PURCHASES A RESIDENTIAL HOUSE WITHIN A PERIOD OF ONE YEAR BEFORE THE DATE OF TRANSFER OF THE ASSET. THIS PART OF THE PROVISION STRAIGHTAWAY TALKS OF PURCHASING A RE SIDENTIAL HOUSE. THE PROCESS OF PURCHASING A NEW RESIDENTIAL HOUS E MAY HAVE KICKSTARTED AT ANY POINT OF TIME, BUT IT MUST CULMINATE WITH COMPLETION OF PURCHASE OF A NEW RESIDENTIAL HOUSE WITH IN A P ERIOD OF ONE YEAR BEFORE THE DATE OF TRANSFER OF THE ORIGINAL AS SET. THE SECOND MODE PROVIDES FOR EXEMPTION WHEN THE ASSESSEE PU RCHASES A NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF TWO YEARS AFTER THE DATE OF TRANSFER OF THE ASSET. HERE AGAIN, IT IS MANIFEST THAT TH E PROCESS OF PURCHASING A NEW RESIDENTIAL HOUSE MAY HAVE STARTED AT ANY POINT OF TIME, BUT IT MUST TERMINATE WITH THE COMPLETION OF PURCHASE OF A NEW RESIDENTIAL HOUSE WITH IN A PERIOD OF TWO YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET. THE THIRD MODE, IN THE LIKE MANNER, ALSO PROVIDES FOR EXEMPTION TO THE ASSESSE E CONSTRUCTING A NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE Y EARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET. REFERENCE TO THE PERIOD OF THREE YEARS FOR CONSTRUCTING A NEW RESIDENTIAL HO USE IS ONLY FOR COMPLETING THE CONSTRUCTION AND NOT COMMENCING THE CONSTRUCTION. THE ABOVE VIEW EMERGES ON A HARMONIOUS RE ADING OF DIFFERENT LIMBS OF SECTION 54F INCLUDING SUB-SECTION (4), WHO SE PROVISO PROVIDES THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB- ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 9 SECTION IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN S UB- SECTION (1), THEN, (I) THE AMOUNT BY WHICH (A) THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NO T CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF THE NEW ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAUSE (B) OF SUB- SECTION (1), EXCEEDS (B) THE AMOUNT THAT WOULD NOT HAVE B EEN SO CHARGED HAD THE AMOUNT ACTUALLY UTILISED BY THE ASSESSEE FO R THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1) BEEN THE COST OF THE NEW ASSE T, 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 . IT, THEREFORE, FOLLOWS THAT IN ALL THE THREE MODES DISCUSSED SUPRA , THE PERIOD OF ONE/TWO/THREE YEARS RESPECTIVELY IS THE OUTER LIMIT FOR COMPLETING THE PROCESS OF PURCHASING OR CONSTRUCTING A NEW RESIDENTIAL HOUSE. 9. AT THIS JUNCTURE IT WOULD BE RELEVANT TO COMPREHEND THE OBJECT OF ENACTMENT OF SECTION 54F, WHICH CAN BE CULLED OUT F ROM ITS LANGUAGE. SUB-SECTION (1) PROVIDES FOR EXEMPTION FROM CA PITAL GAIN ARISING FROM THE TRANSFER OF ORIGINAL ASSET WHERE THE AS SESSEE HAS PURCHASED WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 10 OR CONSTRUCTED WITHIN THREE YEARS A NEW RESIDENTIAL HOUSE. SU B- SECTION (4) PROVIDES THAT WHERE THE NEW RESIDENTIAL HOUSE IS N OT PURCHASED OR CONSTRUCTED WITHIN THE STIPULATED PERIODS AS GIVEN UNDER SUB-SECTION (1), THE ASSESSEE WILL BE OBLIGED TO DEPOS IT THE UNUTILIZED NET SALE CONSIDERATION IN A DESIGNATED CAPITAL GAIN SCHEME BANK ACCOUNT BEFORE THE DATE OF FURNISHING OF RETU RN U/S.139(1) OF THE ACT. IN SUCH A SCENARIO, THE ASSESSE E WILL BE ALLOWED EXEMPTION QUA SUCH AMOUNT OF DEPOSIT AS WELL. SUB- SECTION (2) PROVIDES THAT WHERE THE ASSESSEE PURCHASES OR CONSTRUCTS ANOTHER RESIDENTIAL HOUSE WITHIN THE TWO/THREE YEARS, WHICH IS DIFFERENT FROM THE RESIDENTIAL HOUSE PURCHASED/CONSTRUCTED BY THE ASSESSEE QUALIFYING FOR EXEMPTION U/S.54F, THEN THE AMOUNT OF EXEMPTION ALLOWED UNDER SUB-SECTION (1) OF SECTION 54F SHALL BE DEEMED TO BE THE INCOME OF THE YEAR IN WHICH NEW NON-QU ALIFYING RESIDENTIAL HOUSE IS PURCHASED OR CONSTRUCTED. SUB-SECTION ( 3) PROVIDES THAT WHERE THE NEW QUALIFYING RESIDENTIAL HOUSE IS TRANSFERRED WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF ITS PURCHASE OR CONSTRUCTION ETC., THE AMOUNT FOR WHICH EXEMP TION UNDER SUB-SECTION (1) OF SECTION 54F WAS ALLOWED ON ACCOU NT OF INVESTMENT IN SUCH PURCHASE/CONSTRUCTION OF NEW HOUSE, SHA LL BE DEEMED TO BE THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS FOR THE YEAR IN WHICH SUCH NEW QUALIFYING RESIDENTIAL H OUSE ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 11 IS TRANSFERRED. ON A CONJOINT READING OF ALL THE FOUR SUB-S ECTIONS OF SECTION 54F, IT BECOMES VIVID THAT THE EXEMPTION UNDER THIS SECTION IS GRANTED FROM CAPITAL GAIN ARISING ON THE TRANSFER OF ORIGINA L ASSET WHEN AN ASSESSEE PURCHASES OR CONSTRUCTS A NEW RESID ENTIAL HOUSE WITHIN THE PRESCRIBED PERIOD. IT IS FURTHER PERTINENT TO NOTE THA T SUCH AN EXEMPTION IS NOT AVAILABLE FOR ANY NUMBER OF RESIDENTIAL HO USES CONSTRUCTED/PURCHASED BY THE ASSESSEE BUT THERE IS A CAP C ONTAINED IN SUB-SECTION (2). AT THE SAME TIME, THERE IS ANOTHER DETERR ENT PROVISION IN SUB-SECTION (3) WHICH RESTRICTS TRANSFER OF QUALIF YING NEW RESIDENTIAL HOUSE WITHIN THE STIPULATED PERIOD. AN OVERVIEW O F SECTION 54F, IN TOTALITY, INDICATES THAT THE OBJECT OR PURPOSE OF ITS ENACTMENT IS TO ENCOURAGE BUILDING OF NEW RESIDENTIAL HOUSE F OR AN ASSESSEE AND THEN STAYING INVESTED IN IT FOR CERTAIN DURATION. SO LONG AS SUCH AN OBJECT IS ACHIEVED AND THERE IS NO BREACH OF ANY OF THE EXPRESS CONDITIONS, THE PROVISION SHOULD BE INTERPRETED IN SUCH A MANNER AS ADVANCES ITS PURPOSE AND NOT FRUSTRATES IT. RE CENTLY, THE HONBLE SUPREME COURT IN PR. CIT VS. AARHAM SOFTRINCS , VIDE ITS JUDGMENT DATED 20.2.2019, HAS REITERATED THE RULE OF PUR POSIVE INTERPRETATION BY LAYING DOWN THAT IF A STATUTORY PROVISION IS OPE N TO MORE THAN ONE MEANING, THE COURT HAS TO CHOOSE THE INTERPRETATION WHICH REPRESENTS THE INTENTION OF THE LEGISLATURE. TURNING TO THE RELEVANT PART OF SECTION 54F, WE FIND THAT WHA T THE ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 12 LEGISLATURE HAS CONTEMPLATED FOR ALLOWING EXEMPTION U/S 54F IS THAT : `THE ASSESSEE . HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, ONE RESIDENTIAL HOUSE. IT IS ONLY THE CLOSING DEADLINE OF THREE YEARS FROM THE DATE OF TRANSFER OF THE O RIGINAL ASSET, WHICH HAS BEEN STIPULATED FOR COMPLETING THE CONSTRUCTION . 10. THE LD. DR CONTENDED THAT EVEN THOUGH NO OPENING TIM E LIMIT IS ENSHRINED IN THE PROVISION FOR STARTING CONSTRUCTION OF A NEW QUALIFYING RESIDENTIAL HOUSE, IT SHOULD BE LOGICALLY INFERRED W.R. T. THE DATE OF TRANSFER OF ORIGINAL ASSET AS IS THE CASE WITH TH E PURCHASE OF A NEW RESIDENTIAL HOUSE WITHIN ONE YEAR BEFORE OR TWO Y EARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET. WE FIND THIS CONTEN TION SANS MERITS. IT IS PALPABLE ON A SIMPLE READING OF THE PRO VISION THAT THERE IS NO REFERENCE WHATSOEVER TO THE OPENING TIME LIMIT FR OM WHICH THE PROCESS OF PURCHASING OR CONSTRUCTING A NEW RES IDENTIAL HOUSE HAS TO BEGIN. SIMILAR TO A SITUATION WHEN AN ASSESSEE COMPLETES THE PROCESS OF PURCHASING A NEW RESIDENTIAL HOUSE WITHIN ONE/TWO YEARS, IF AN ASSESSEE COMPLETES THE PROCESS OF CONSTRUCTION OF A NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS F ROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET, HE BECOMES ENTITLED TO EXEMPTION. IN THE ABSENCE OF ANY OPENING DEADLINE GIVEN IN THE PROVISION FOR PURCHASE OF LAND OR START OF CONSTRUCTION THER EON, IT IS ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 13 WHOLLY IMPERMISSIBLE TO READ THE DATE OF TRANSFER OF THE OR IGINAL ASSET AS THE STARTING PERIOD UNDER THIS MODE. 11. IT IS IMPORTANT TO BEAR IN MIND THAT SALE OF AN ORIGINAL A SSET AND SIDE-BY-SIDE PURCHASE OR CONSTRUCTION OF A NEW RESID ENTIAL HOUSE IS NOT ONLY AN IMPORTANT DECISION OF ONES LIFE HAV ING REPERCUSSIONS FOR A LONGER PERIOD OF TIME, BUT IS ALSO A TI ME- CONSUMING MATTER AS THE CONCERNED PERSON HAS TO MOBILISE HIS RESOURCES. IF A PLOT IS PURCHASED IN CONTEMPLATION OF ENS UING CONSTRUCTION WITHIN A REASONABLE TIME EVEN BEFORE THE TRANSF ER OF THE ORIGINAL ASSET, THERE CAN BE NO FETTERS ON THE ALLOWABILITY OF EXEMPTION U/S 54F, IF OTHER CONDITIONS ARE FULFILLED. WHAT IS A REASONABLE PERIOD, DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE, WHICH SHOULD NORMALLY NOT EXCEED TWO YEARS BEFORE THE DATE OF TRANSFER OF THE ORIGINAL ASSET, ALBEIT SUCH A PERIOD OF TW O YEARS CANNOT BE A BENCHMARK. A PLOT OF LAND PURCHASED PRIOR TO SUCH A REASONABLE PERIOD CANNOT ORDINARILY BE VIEWED AS HAVING BE EN PURCHASED FOR STARTING CONSTRUCTION OF A NEW RESIDENTIAL HOUS E. IT, ERGO, FOLLOWS THAT SO LONG AS THE CONSTRUCTION OF A NEW RESID ENTIAL HOUSE IS COMPLETED WITHIN A PERIOD OF THREE YEARS FROM THE D ATE OF TRANSFER OF THE ORIGINAL ASSET, THE BENEFIT OF EXEMPTION U/S.54 F HAS TO BE ALLOWED WITH REFERENCE TO WHOLE OF THE COST OF PLOT OR THE COST ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 14 OF CONSTRUCTION THEREON, EVEN IF SUCH A PROCESS OF PURCH ASING THE PLOT OR CONSTRUCTING THE HOUSE STARTED WITHIN A REASONABLE TIME ANTERIOR TO THE DATE OF TRANSFER OF THE ORIGINAL ASSET. EX CONSEQUENTI, CIRCULAR 667, PROVIDING FOR ACQUISITION OF PLOT AND ALSO COMPLETING CONSTRUCTION WITHIN A PERIOD OF THREE YEARS FR OM THE DATE OF TRANSFER OF THE ASSET, BEING CONTRARY TO THE INTENT AND LANGUAGE OF THE PROVISION, CANNOT BE GIVEN EFFECT TO THAT EX TENT. 12. THE LD. DR TRIED TO FORTIFY HIS POINT OF VIEW OF HAVING THE DATE OF TRANSFER OF THE ORIGINAL ASSET AS THE DATE OF INITIATION OF PROCESS OF CONSTRUCTION BY ARGUING THAT THE SAME IS IMPLICIT IN THE PROV ISION IN ASMUCHAS THE NET CONSIDERATION FROM THE TRANSFER OF ORIGIN AL ASSET IS REQUIRED TO BE UTILIZED FOR CONSTRUCTING A NEW RESIDEN TIAL HOUSE AND IT IS NOT POSSIBLE TO START CONSTRUCTING A NEW RESIDE NTIAL HOUSE UNLESS THE ORIGINAL ASSET IS TRANSFERRED AND THE FULL VA LUE OF CONSIDERATION IS REALIZED. WE ARE UNABLE TO ACCORD OUR IMP RIMATUR TO THE ARGUMENT TENDERED ON BEHALF OF THE REVENUE. IT IS NOWHERE STIPULATED IN THE PROVISION THAT ONLY THE SALE CONSIDERATION REALIZE D FROM THE TRANSFER OF THE ORIGINAL ASSET HAS TO BE NECESSAR ILY USED FOR PURCHASING OR CONSTRUCTING A NEW RESIDENTIAL HOUSE SO AS TO QUALIFY FOR EXEMPTION U/S.54F. THE REQUIREMENT, COUCHED IN THE LAN GUAGE OF SUB-SECTION (1) ITSELF, IS THAT : `THE ASSESSEE HAS, WITH IN A PERIOD ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 15 OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEA RS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE. THE INTENT AND THE STIPULATION OF THE PROVISION IS TO PURCHASE OR CONSTRUCT A NEW RESIDENTIAL HOUSE. IT IS NOWHERE PROVIDED THAT ONLY THE SALE PROCEEDS OF THE ORIGINAL ASSET SHOULD BE UTILIZED FOR THIS PUR POSE. IT IS OPEN TO AN ASSESSEE TO USE EITHER OWN OR BORROWED FU NDS FOR THE PURPOSE OF PURCHASE OR CONSTRUCTION OF A NEW RESIDENTIAL H OUSE. OUR VIEW IS FURTHER AMPLIFIED FROM THE MANDATE OF THE FIRST M ODE OF GRANTING EXEMPTION UNDER THIS PROVISION, WHICH IS, THAT THE ASSE SSEE HAS PURCHASED A NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF ON E YEAR BEFORE THE DATE OF TRANSFER OF THE ORIGINAL ASSET. POSSIBILITY OF AVAILING EXEMPTION UNDER THIS MODE CAN BE ONLY IN A SCENARIO WHERE THE ORIGINAL ASSET HAS NOT BEEN TRANSFERRED AND THE S ALE CONSIDERATION OF THE ORIGINAL ASSET IS NOT REALIZED, EXCEPT TO THE EXTENT OF ADVANCE RECEIVED, IF ANY, ON THE ENSUING SALE OF THE ORIGINAL ASSET. ERGO, IT IS FAR-FETCHED TO ARGUE THAT UTILIZATION O F ONLY THE SALE CONSIDERATION FROM THE TRANSFER OF ORIGINAL ASSET IS SINE QUA NON FOR PURCHASE OR CONSTRUCTION OF A NEW RESIDENTIAL HOUSE S O AS TO QUALIFY FOR THE EXEMPTION. WE, THEREFORE, REPEL THE CONTENTIO N OF THE LD. DR THAT FOR AVAILING EXEMPTION UNDER SECTION 54F OF THE ACT, IT IS MANDATORY TO PURCHASE OR CONSTRUCT A NEW RESIDENTIA L ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 16 HOUSE ONLY BY USING THE CONSIDERATION REALIZED ON THE TRAN SFER OF ORIGINAL ASSET. ONCE THIS ARGUMENT FAILS, THE EDIFICE OF THE REVENUES CONTENTION THAT THE STARTING POINT WOULD CONSEQUEN TLY BE THE DATE OF TRANSFER OF THE ORIGINAL ASSET, FALLS FLAT ON THE GR OUND. 13. IT IS SEEN THAT WHEREAS THE AO CANVASSED A VIEW THAT TH E PERIOD OF THREE YEARS FOR THE PURPOSES OF CONSTRUCTION OF A NE W RESIDENTIAL HOUSE, AS GIVEN IN THE THIRD MODE, SHOULD BE RECKONED FRO M THE DATE OF TRANSFER OF THE ORIGINAL ASSET, THE LD. CIT(A) WENT A STEP AHEAD AND ALSO SUPERIMPOSED THE ABOVE NOTED FIRST MODE A ND HELD THAT THE COST OF LAND PURCHASED WITHIN A PERIOD OF ONE YEAR BEFORE THE DATE OF TRANSFER OF THE ORIGINAL ASSET SHOULD ALSO BE CON SIDERED AS ELIGIBLE ALONG WITH THE COST OF CONSTRUCTION OF NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRA NSFER OF THE ORIGINAL ASSET. IN OUR CONSIDERED OPINION, BOTH THE VIEWS TAK EN BY THE AUTHORITIES BELOW ARE NOT IN ACCORDANCE WITH LAW. WE HAVE HELD HEREINABOVE THAT THE AFOREDISCUSSED THREE MODES ARE DISTINCT FROM EACH OTHER AND THE AVAILABILITY OF EXEMPTION U/S.54F HAS TO BE TESTED ON THE TOUCHSTONE OF THE MANDATE GIVEN IN EACH OF THEM SEPARATELY. IN OUR OPINION, THE LD. CIT(A) WAS NOT JUSTIFIED IN COMBINING THE ABOVE NOTED FIRST MODE WITH THE THIRD MODE FOR CONFERRING PARTIAL RELIEF TO THE ASSESSEE. THOUGH TECHNICALLY, THE ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 17 AO WAS CORRECT IN HIS VIEW IN RESTRICTING HIMSELF TO THE ABOVE NOTED THIRD MODE BY CONSIDERING A PERIOD OF THREE YEARS O NLY, BUT FELL INTO AN ERROR WHEN HE CONSIDERED THE DATE OF INITIATION O F THE PROCESS OF CONSTRUCTION AS THE DATE OF TRANSFER OF THE ORI GINAL ASSET. 14. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS SEEN FROM PAGES 5 AND 6 OF THE IMPUGNED ORDER THAT THE ASSESSEE A CQUIRED LAND IN TWO PARTS FOR CONSTRUCTION OF A NEW RESIDENTIAL HOUSE, VIZ, THE FIRST PART OF THE PLOT PURCHASED ON 11.10.2010 AND THE SECOND PART OF THE PLOT PURCHASED IN THE YEAR 2011/12. THE DATE O F CERTIFICATE FOR COMMENCEMENT OF CONSTRUCTION IS 26-07-2011. THE ASSESSEE ACTUALLY STARTED CONSTRUCTION WORK ON 21-04-2012 WHICH WENT ON UP TO 27-09-2013 AND THE DATE OF COMPLETION OF CONSTRUCTION AS PER THE CERTIFICATE IS 15-09-2014. THE ORIGIN AL ASSET WAS TRANSFERRED BY THE ASSESSEE ON 11-06-2012. THE DA TE OF COMPLETION OF CONSTRUCTION, BEING 15-09-2014 IS WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASS ET. IN SUCH CIRCUMSTANCES, THE DATE OF PURCHASE OF THE FIRST PART OF THE PLOT ON 11.10.2010, WHICH IS WITHIN THE REASONABLE PERIOD AS DISCU SSED ABOVE, CONSTITUTES THE DATE OF INITIATION OF PROCESS OF CONSTRUC TION, AND THE DEADLINE FOR THE COMPLETION OF CONSTRUCTION WOULD BE 10.6.2015. AS THE CONSTRUCTION ACTUALLY GOT CONCLUDED LATEST BY ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 18 15.9.2014, WE HOLD THAT THE ASSESSEE IS ENTITLED TO EXEMPTIO N U/S 54F WITH REFERENCE TO THE FULL AMOUNT OF RS.1.12 CRORE SPE NT ON PURCHASE OF TWO PARTS OF LAND AND CONSTRUCTION OF NEW RES IDENTIAL HOUSE THEREON. THE IMPUGNED ORDER IS OVERTURNED PRO TANTO. 15. NO OTHER ISSUE WAS ARGUED ON BEHALF OF THE ASSE SSEE. 16. IN THE RESULT, THE APPEAL IS ALLOWED TO THIS EXTENT. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH, 2019. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VI CE PRESIDENT PUNE; DATED : 28 TH MARCH, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-1, NASHIK 4. 5. 6. THE PR. CIT-1, NASHIK , , / DR B, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE ITA NO.294/PUN/2017 SOHANLAL M. BHANDARI 19 DATE 1. DRAFT DICTATED ON 26-03-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 26-03-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *