Ms. Bhavna Cuccria, Chandigarh V. ITO, Chandigarh

ITA 341/CHANDI/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5115 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 21-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Capital asset; Cost of acquisition; Benefit of exemption
• Section: 54F; 54; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.341/CHD/2017 ASSESSMENT YEAR: 2013-14 MS. BHAVNA CUCCRIA VS. THE ITO #1099/2, SECTOR 39-B WARD 4(1) CHANDIGARH CHANDIGARH PAN NO. ANPPC0876L (APPELLANT) (RESPONDENT) APPELLANT BY : SH. TEJ MOHAN SINGH RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 18/04/2017 DATE OF PRONOUNCEMENT : 23/05/2017 ORDER PER ANNAPURNA GUPTA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-2, CHANDIGARH DT. 20/01/2017. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND FACTS IN UPHOLDING THE DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 54 IN UTTER DISREGARD OF THE EXPLANATION FILED AND VARIOUS JUDI CIAL PRECEDENTS WHICH IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN FAILING TO APPRECIATE THAT THE ASSESSEE HAD FULFILLED ALL THE STATUTORY REQUIREMENTS FOR AVAILING DEDUCTION UNDER SECTION 54 OF THE ACT AND AS SUCH THE DISALLOWANCE OF DEDUCTION UPHELD IS ILLEGAL, ARBITRARY AND UNJUSTIF IED. 2. BRIEFLY STATED THE FACTS RELATING TO THE CASE A RE THAT DURING THE RELEVANT YEAR THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN S OF RS. 12,23,137/- FROM SALE OF A RESIDENTIAL HOUSE IN SHIMLA IN HER RETURN FILE D ON 04/08/2013. THE SAID PROPERTY WAS SOLD ON 06/11/2012 AND SALE CONSIDERAT ION RECEIVED WAS RS. 1 CRORE, BEING 20% SHARE OF THE ASSESSEE IN THE PROPE RTY. AFTER TAKING BENEFIT OF INDEXED COST OF ACQUISITION, LONG TERM CAPITAL GAIN S OF RS. 74,33,137/- WAS COMPUTED, AGAINST WHICH EXEMPTION U/S 54 OF THE ACT , WAS CLAIMED BY THE ASSESSEE, ON THE GROUND THAT AMOUNT OF RS. 62,10,0 00/- HAD BEEN INVESTED IN A FLAT. THE ASSESSING OFFICER, ON PERUSAL OF THE AGRE EMENT FOR THE PURCHASE OF FLAT 2 WITH M/S ATS ESTATES PVT. LTD. NEW DELHI DT.15-04- 2013,FOUND THAT THE AGREEMENT HAD BEEN DRAWN FOR BUYING APARTMENT IN THE PROJECT ATS GOLF MEADOWS LIFESTYLE AT VILLAGE MADHAVPUR, DERABASSI, MOHALI A ND AS PER CLAUSE 14 OF THE SAID AGREEMENT THE FLAT WOULD BE DELIVERED TO THE A SSESSEE WITHIN A PERIOD OF 36 MONTHS WITH A GRACE PERIOD OF SIX MONTHS FROM THE D ATE OF ACTUAL START OF CONSTRUCTION OF THE SAID TOWER. THE AO CONCLUDED TH AT THE SAID FLAT COULD NOT BE HANDED OVER TO THE ASSESSEE BY THE BUILDER WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET I.E. 06/11/2 012, AND THEREFORE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN AS TO WHY T HE EXEMPTION CLAIMED U/S 54 SHOULD NOT BE WITHDRAWN. THE ASSESSEE SUBMITTED THA T SINCE FULL/SUBSTANTIAL CONSIDERATION HAD BEEN PAID BY HER SHE WAS ENTITLED TO BENEFIT OF DEDUCTION ON ACCOUNT OF THE INVESTMENT IN THE FLAT U/S 54 OF THE ACT. THE ASSESSEE SUBMITTED THAT LEGAL TITLE IS NOT NECESSARY FOR CLAIMING DEDU CTION. THE AO REJECTED THE ASSESSES SUBMISSIONS AND HELD THAT THE ASSESSEE HAS NOT PURCHASED THE FLAT WITHIN TWO YEARS FROM THE DATE OF TRANSFER OF THE C APITAL ASSET AND WAS FULLY AWARE THAT SHE WOULD NOT GET POSSESSION OF THE FLAT IN THREE YEARS FROM THE DATE OF TRANSFER AND HAD THEREFORE FAILED TO FULFILL THE BASIC CONDITIONS OF SECTION 54, THUS BECOMING INELIGIBLE FOR CLAIMING EXEMPTION U/S 54 OF THE ACT. THE ASSESSING OFFICER THEREFORE, DISALLOWED EXEMPTION CLAIMED U/S 54 OF RS. 62,10,000/-. 3. BEFORE THE LD. CIT(A) THE ASSESSEE CONTENDED THA T SHE HAD INVESTED CAPITAL GAIN EARNED TO THE EXTENT OF RS. 62,10,000/ - ON 15/04/2013 I.E; BEFORE DUE DATE OF FILING OF RETURN OF INCOME AND ON PAYME NT THEREOF HAD BEEN ALLOTTED AND GRANTED TITLE, POSSESSION AND OWNERSHI P RIGHTS FOR THE SAID APARTMENT. THE ASSESSEE SUBMITTED THAT EXEMPTION C OULD NOT BE DENIED MERELY BECAUSE PAYMENT WAS MADE BUT POSSESSION NOT OBTAINE D AND RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. KULDEEP SINGH (2014) 270 CTR 561(DEL). THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSION HELD THAT AS PER THE FACTS OF THE CASE THE ASSESSEE COULD NOT BE SAID TO HAVE PURCHASED A HOUSE WITHIN TWO YEARS OR EVEN CONSTRUCTED A HOUSE WITHIN THREE YEARS FROM THE DATE OF SALE I.E; 06/11/2012 SINCE AS PER THE ASSES SEES OWN ADMISSION THE FLAT WOULD BECOME LIVABLE ONLY IN MAY 2016 I.E BEYOND TH REE YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET ON 06-11-12. THE LD. CIT(A) HELD THAT AS A MATTER OF FACT EVEN AFTER THREE YEARS FROM THE DATE OF SALE O F THE ORIGINAL ASSET, THE NEW HOUSE HAD NOT CAME INTO EXISTENCE AND THEREFORE THE ASSESSEE HAD NOT FULFILLED THE CONDITIONS SPECIFIED UNDER SECTION 54 FOR CLAIM ING EXEMPTION UNDER IT. HE 3 THEREFORE, UPHELD THE ORDER OF THE ASSESSING OFFICE R DENYING CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT AMOUNTING TO RS. 62,10, 000/-. 4. BEFORE US LD. COUNSEL FOR THE ASSESSEE REITERATE D THE CONTENTION MADE BEFORE LOWER AUTHORITIES AND STATED THAT IN VIEW OF THE FACT THAT THE SUBSTANTIAL AMOUNT HAD BEEN INVESTED IN PURCHASE OF A NEW FLAT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME AS SPECIFIED UNDER SECTI ON 54 AND THE FLAT HAD BEEN ALLOTTED TO IT ALSO, THE ASSESSEE WAS ELIGIBLE TO C LAIM DEDUCTION UNDER SECTION 54 OF THE ACT. LD. COUNSEL FOR THE ASSESSEE RELIED UPO N A NUMBER OF CASE LAWS IN THIS REGARD, WHICH ARE AS UNDER: 1. SMT. RANJEET SANDHU VS. DCIT [2011] 16 TAXMANN.C OM210 (CHANDIGARH) 2. SMT. USHA VAID VS. ITO [2012] 25 TAXMANN.COM 188 (ASR.) 3. CIT VS. SMT. B.S. SHANTHAKUMARI (2015) 60 TAXMAN N.COM 74 (KARN) 4. KISHORE H. GALAIYA VS. ITO (2012) 150 TTJ 444(MU M) 5. FIBRE BOARDS (P.) LTD. VS. CIT (2015) 376 ITR 59 6 (SC) 6. ITO VS. NARAYANA RAO (2016)46 ITR (TRIB) 178 (HY D) 5. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER O F THE LD. CIT(A) AND STATED THAT SINCE THE ASSESSEE HAD NOT COMPLIED WIT H BASIC CONDITION SPECIFIED UNDER SECTION 54 I.E; PURCHASE OF HOUSE WITHIN TWO YEARS OR CONSTRUCTION OF A HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET, THE ASSESSEE HAD BEEN RIGHTY DENIED DEDUCTION UNDER SEC TION 54 OF THE INCOME TAX ACT, 1961. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, GONE THROUG H THE ORDERS OF THE AUTHORITIES BELOW AND PERUSED THE MATERIAL PLACED O N RECORD BEFORE US. 7. THE ISSUE BEFORE US RELATES TO CLAIM OF DEDUCTIO N UNDER SECTION 54 OF THE INCOME TAX ACT,1961. THE FACT THAT THE ASSESSEE HAD SOLD A RESIDENTIAL HOUSE ON 06-11-12 AND EARNED LONG TERM CAPITAL GAINS THER EON AMOUNTING TO RS.74,33,137/- IS NOT DISPUTED. ALSO NOT IN DISPUTE IS THE FACT THAT THE ASSESSEE HAD INVESTED A SUM OF RS.62,10,000/- ON 15-04-13, I.E; BEFORE THE FILING OF RETURN OF INCOME ON 04/08/2013 FOR PURCHASE OF A RESIDENTIAL HOUSE VIDE AGREEMENT OF THE SAME DATE ENTERED INTO WITH ATS ESTATES PRIVAT E LIMITED, DELHI AND HAD BEEN ALLOTTED APARTMENT NO.6154 15 TH FLOOR TOWER NO.6 ATS GOLF TOWER, MOHALI. IT IS ALSO NOT DISPUTED THAT AS PER CLAUSE 14 OF THE A GREEMENT THE POSSESSION OF THE HOUSE/APARTMENT WAS TO BE DELIVERED WITHIN A PERIOD OF 36 MONTHS FROM THE DATE OF START OF ACTUAL CONSTRUCTION, WITH A GRACE PERIOD OF SIX MONTHS. 8. THE SOLE REASON FOR DENYING EXEMPTION U/S 54 TO THE ASSESSEE IS THAT, THE ASSESSEE HAD NOT COMPLIED WITH THE CONDITION STIPUL ATED IN THE SECTION OF 4 PURCHASE /CONSTRUCTION OF NEW HOUSE WITHIN THE STIP ULATED PERIOD OF TWO AND THREE YEARS RESPECTIVELY SINCE AS PER THE AGREEMENT FOR PURCHASE OF NEW HOUSE/FLAT , THE CONSTRUCTION OF THE SAID HOUSE COU LD NOT HAVE BEEN COMPLETED WITHIN THE SAID PERIOD AND EVEN AS A MATTER OF FAC T HAS NOT BEEN COMPLETED WITHIN THE STIPULATED PERIOD. 9. THE CONTENTION OF THE LD. COUNSEL IS THAT SINCE THE ASSESSEE HAD INVESTED SUBSTANTIAL AMOUNT FOR THE PURCHASE OF THE SAID FLA T AND HAS BEEN ALLOTTED A FLAT, SHE WAS ENTITLED TO EXEMPTION UNDER SECTION 54 EVEN IF THE CONSTRUCTION OF THE SAID FLAT WAS NOT COMPLETED OR WAS NOT POSSIBLE TO BE COMPLETED WITHIN THE PERIOD OF TWO/THREE YEARS FROM THE DATE ON WHICH T HE ASSESSEE HAD EARNED CAPITAL GAIN ON ACCOUNT OF TRANSFER OF ITS ORIGINAL ASSET. 10. LD. DR ON THE OTHER HAND HAS CONTENDED THAT COM PLETION OF CONSTRUCTION WITHIN THREE YEARS OR PURCHASE OF A FLAT WITHIN TWO YEARS IS AN ESSENTIAL CONDITION FOR CLAIMING DEDUCTION UNDER SECTION 54 WHICH BEING NOT POSSIBLE IN THE PRESENT CASE, THE ASSESSEE HAD BEEN RIGHTLY DENIED EXEMPTIO N U/S 54 OF THE ACT. 11. WE FIND MERIT IN THE CONTENTION OF THE LD. COUN SEL FOR THE ASSESSEE. IT HAS BEEN DECIDED IN NUMBER OF CASES THAT FOR THE PURPOS E OF CLAIMING EXEMPTION UNDER SECTION 54, INVESTMENT OF SUBSTANTIAL AMOUNT IN THE NEW ASSET, IS SUFFICIENT COMPLIANCE. IT HAS BEEN HELD BY VARIOUS COURTS THAT IN SUCH CIRCUMSTANCES THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION DESPITE THE FACT THAT THE CONSTRUCTION IS NOT COMPLETED WITHIN THREE YEARS. THIS ISSUE WAS AD DRESSED BY THE DELHI HIGH COURT IN THE CASE OF CIT VS. R.L. SOOD REPORTED IN 245 ITR 727 WHEREIN THE HONBLE HIGH COURT HELD THAT THE ASSESSEE HAVING INVESTED S UBSTANTIAL AMOUNT IN THE PURCHASE OF A NEW ASSET, THUS ACQUIRING SUBSTANTIAL DOMAIN OVER THE NEW FLAT WITHIN THE SPECIFIED PERIOD, THE ASSESSEE COULD BE SAID TO HAVE COMPLIED WITH REQUIREMENT OF SECTION 54 AND MERELY BECAUSE POSSE SSION OF THE FLAT WAS NOT HANDED OVER TO THE ASSESSEE WITHIN THE SPECIFIED PE RIOD THE SAID BENEFIT COULD NOT BE DENIED. THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT AT PARA 6, 7 AND 8 OF THE ORDER ARE AS UNDER: 6. WE MAY NOTE THAT REALIZING THE PRACTICAL DIFFICU LTY FACED BY THE ASSESSEES IN SUCH SITUATIONS, THE CENTRAL BOARD OF DIRECT TAXES ISSUED CIRCULAR NO. 471 (SEE [1986] 162 ITR (ST.) 41), DATED OCTOBER 15, 1986, C LARIFYING THAT WHEN THE DDA ISSUES THE ALLOTMENT LETTER TO AN ALLOTTEE UNDER IT S SELF-FINANCING SCHEME, ON PAYMENT OF THE FIRST INSTALLMENT OF THE COST OF CON STRUCTION, THE ALLOTTEE GETS TITLE TO THE PROPERTY AND SUCH ALLOTMENT SHOULD BE TREATED A S COST OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS. ON THE SAME ANALOGY, THE ASSESSEE HAVING BEEN ALLOTTED THE FLAT ; HE HAVING PAID A SUBSTANTIAL AM OUNT TOWARDS ITS COST WITHIN THE 5 STIPULATED PERIOD OF ONE YEAR, HE CANNOT BE DENIED THE BENEFIT OF THE SAID SECTION BECAUSE THE FLAT PURCHASED BY HIM HAD COME INTO HIS FULL DOMAIN WITHIN THE PERIOD OF ONE YEAR, THOUGH THE SALE DEED IN HIS FAVOUR WAS REGISTERED SUBSEQUENTLY. 7. IN THE LIGHT OF THE SAID CIRCULAR AND KEEPING IN VIEW THE SPIRIT OF SECTION 54 OF THE ACT, WE DECLINE THE REQUEST OF THE REVENUE TO CALL FOR A REFERENCE ON THE PROPOSED QUESTION. 8. CONSEQUENTLY, THE PETITION IS DISMISSED. 11.1 THIS PROPOSITION HAS BEEN REITERATED IN A NUMB ER OF JUDGMENTS REFERRED TO BEFORE US BY THE LD. COUNSEL FOR THE ASSESSEE. IN C ASE OF SMT. RANJEET SANDHU (SUPRA) THE ASSESSEE HAD SOLD HER AGRICULTURAL LAND FOR RS.1.5 CRORES AND OUT OF THE SAME PURCHASED A RESIDENTIAL PLOT AND STARTED C ONSTRUCTION OF A NEW HOUSE AND CLAIMED EXEMPTION U/S 54F.HOWEVER THE SAME WAS DENIED BY THE AO SINCE HE NOTED THAT THE CONSTRUCTION HAD NOT BEEN COMPLET ED. THE CIT(A) CONFIRMED THE ORDER OF THE AO. ON SECOND APPEAL TO THE TRIBUN AL, IT WAS HELD THAT COMPLETION OF CONSTRUCTION WAS NOT AN ESSENTIAL CON DITION FOR CLAIMING EXEMPTION U/S 54,THE THRUST BEING ON INVESTMENT OF THE CONSIDERATION RECEIVED ON SALE OF ASSET IN CONSTRUCTION OF A NEW HOUSE. TH E RELEVANT FINDINGS OF THE ITAT AT PARA 11 OF THE ORDER IS AS UNDER: 11.IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD INVESTED THE FULL SALE CONSIDERATION RECEIVED ON THE SALE OF ORIGINAL ASSE T IN THE PURCHASE OF THE PLOT OF LAND AT GURGAON. THEREAFTER THE ASSESSEE HAD INVEST ED RS. 10,75,000 IN THE CONSTRUCTION OF THE BUILDING. THE CONSTRUCTION WAS IN PROGRESS AND WAS NOT COMPLETE AND IN VIEW THEREOF, THE BENEFIT OF EXEMPT ION CLAIMED UNDER S. 54F OF THE ACT WAS REJECTED BY THE AUTHORITIES BELOW. HOWE VER, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE MADHYA PRADESH HIGH COURT IN TH E CASE OF SMT. SHASHI VARMA VS. CIT (SUPRA), WE FIND THAT THERE IS NO MER IT IN THE PLEA OF THE AUTHORITIES IN DENYING THE EXEMPTION UNDER S. 54F OF THE ACT ON TH E GROUND THAT THE CONSTRUCTION OF THE HOUSE HAS NOT BEEN COMPLETED. T HE REQUIREMENT OF SS. 54 AND 54F OF THE ACT IS FOR THE ASSESSEE TO HAVE EITHER P URCHASED A RESIDENTIAL HOUSE BEING A NEW ASSET WITHIN THE STIPULATED PERIOD OR C ONSTRUCT A RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRA NSFER. THE SECTION DOES NOT PRESCRIBE THE COMPLETION OF THE CONSTRUCTION OF THE RESIDENTIAL HOUSE AND THE THRUST IS ON THE INVESTMENT OF THE NET CONSIDERATIO N RECEIVED ON SALE OF ORIGINAL ASSET AND THE START OF CONSTRUCTION OF A NEW RESIDE NTIAL ASSET (SICHOUSE). IN VIEW THEREOF, WHERE THE ASSESSEE HAD INVESTED THE CONSID ERATION RECEIVED ON SALE OF ORIGINAL ASSET IN THE PURCHASE OF THE PLOT OF LAND AND STARTED CONSTRUCTION THOUGH NOT COMPLETED, THE ASSESSEE HAD COMPLIED WITH THE P ROVISIONS OF S. 54F OF THE ACT AND HENCE WAS ENTITLED TO THE BENEFIT OF EXEMPTION CLAIMED. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF THE BENEFIT OF EXEMPTION CLAIMED UNDE R S. 54F OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS A LLOWED 11.2 THE AMRITSAR BENCH OF THE ITAT ON IDENTICAL SE T OF FACTS IN THE CASE OF SMT. USHA VAID(SUPRA) REITERATED THE ABOVE PROPOSITION H OLDING AS UNDER: WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAD PURCHA SED THE PROPERTY IN 1987. ON VERIFICATION BY THE INSPECTOR, THE BOUNDARY WALL AN D GATE WAS ALSO FOUND, IS ALSO NOT UNDER DISPUTE. THE ASSESSEE HAD CLAIMED VIDE LE TTER DATED 02.06.2008 EXEMPTION UNDER SECTION 54F OF THE ACT DURING THE A SSESSMENT PROCEEDINGS 6 BEFORE THE AO IS ALSO NOT UNDER DISPUTE. THE SALE C ONSIDERATION HAS BEEN INVESTED IN THE CONSTRUCTION OF THE HOUSE HAS BEEN EXPLAINED BY THE ASSESSEE BEFORE BOTH THE AUTHORITIES BELOW. THOUGH HOUSE WAS NOT COMPLET ED BEFORE THE EXPIRY OF THREE YEARS FROM THE SALE OF THE PLOT AT FARIDABAD, BUT THE SAME WAS COMPLETED IMMEDIATELY AFTER FEW DAYS OF THE EXPIRY OF THREE Y EARS. AS PER SECTION 54F, IF THE ASSESSEE BEING AN INDIVIDUAL, THE CAPITAL GAIN WHIC H ARISES FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSET, NOT BEING A RESIDENTIA L HOUSE AND THE ASSESSEE HAD AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PUR CHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESID ENTIAL HOUSE, REFERRED TO AS THE NEW ASSET, THEN THE CAPITAL GAIN IS EXEMPT, IF WHOL E OF THE NET CONSIDERATION OF THE ORIGINAL ASSET IS INVESTED IN THE NEW ASSET I.E . RESIDENTIAL HOUSE. NOW THE QUESTION ARISES IN THE PRESENT CASE WHETHER THE ASS ESSEE HAD FULFILLED THE CONDITIONS UNDER SECTION 54F OR NOT, HAS TO BE PERU SED. IN THE PRESENT CASE, THE ASSESSEE HAD INVESTED THE TOTAL SALE CONSIDERATION (NET CONSIDERATION) WITHIN THREE YEARS AFTER THE TRANSFER OF THE ORIGINAL ASSE T. THE WORDS MENTIONED IN SECTION 54F ARE THAT THE AMOUNT SHOULD BE INVESTED IN THE C ONSTRUCTION OF A RESIDENTIAL HOUSE. THEREFORE, ONCE THE ASSESSEE HAVING BEEN INV ESTED TOTAL SALE CONSIDERATION INTO CONSTRUCTION OF A RESIDENTIAL HO USE, THEN IT IS NOT NECESSARY THAT THE RESIDENTIAL HOUSE SHOULD HAVE BEEN COMPLETED WI THIN THREE YEARS OF THE TRANSFER OF THE ORIGINAL ASSET. THE RESIDENTIAL HOU SE MAY BE COMPLETED EVEN AFTER COMPLETION OF THREE YEARS OF THE TRANSFER OF THE OR IGINAL ASSET. IN SUCH A SITUATION, WHEN A HOUSE IS COMPLETED AFTER EXPIRY OF THREE YEA RS FROM THE TRANSFER OF THE ORIGINAL ASSET, THE ASSESSEE IS ENTITLED TO EXEMPTI ON UNDER SECTION 54F OF THE ACT. THIS VIEW IS SUPPORTED BY THE DECISION OF THE HONB LE MADRAS HIGH COURT IN THE CASE OF CIT VS. SARDAR MAL KUTHARI 302 ITR 286. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS : I) MRS. SEETHA SUBRAMANIAN VS. ACIT 56 TTJ 417 (MAD ) II) SMT. RANJIT SANDHU VS. DCIT 133 TTJ (CHD)(UO) 4 6 (2010). 5.1. THE ASSESSEE HAD SUBMITTED APPLICATION UNDER R ULE 46A ON HAVING COMPLETED THE HOUSE, AFTER THE EXPIRY OF THREE YEAR S FROM THE TRANSFER OF THE ORIGINAL ASSET ALONGWITH ELECTRICITY BILL WHICH WAS NOT ACCEPTED BY THE LD. CIT(A), WHICH IN FACT, COULD NOT BE SUBMITTED BY THE ASSESS EE BEFORE COMPLETION OF THE ASSESSMENT. THE SAME SHOULD HAVE BEEN ACCEPTED BY T HE LD. CIT(A). THEREFORE, AS HELD HEREINABOVE, THE ASSESSEE HAVING SOLD AN AS SET WHICH IS NOT A RESIDENTIAL HOUSE BEING A LONG-TERM CAPITAL ASSET HAD INVESTED THE NET SALE CONSIDERATION INTO THE CONSTRUCTION OF A RESIDENTIAL HOUSE AND TH EREFORE, CLAIM OF THE ASSESSEE U/S 54F IS ALLOWABLE. ACCORDINGLY, ALL OTHER CLAIMS OF THE ASSESSEE ARE ALLOWABLE. THE ADDITION MADE BY THE AO. IS DIRECTED TO BE DELE TED AND THE ORDER OF THE LD. CIT(A) IS REVERSED. THUS, ALL THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 11.3 IN THE CASE OF KISHORE H. GALAIYA (SUPRA) ALSO , ON IDENTICAL FACTS, THE ITAT, MUMBAI BENCH HELD THAT SINCE THE ASSESSEE HAD MADE INVESTMENT WITHIN THE PERIOD OF THREE YEARS, EXEMPTION UNDER SECTION 54 C OULD NOT BE DENIED MERELY BECAUSE POSSESSION HAD NOT BEEN TAKEN WITHIN THREE YEARS. THE RELEVANT FINDINGS OF THE ITAT IN THE CASE OF KISHORE H GALAIYA (SUP RA), AT PARA 6.1 AND 6.2 OF THE ORDER ARE AS UNDER: 6.1 IN THE PRESENT CASE, THE ASSESSEE SOLD THE OLD RESIDENTIAL HOUSE ON 7.3.2006 AND THE LONG TERM CAPITAL GAIN ARISING ON THIS ACCO UNT WAS RS. 9,98,411/-. THE ASSESSEE HAD BOOKED A NEW RESIDENTIAL FLAT WITH THE BUILDER JOINTLY WITH IS WIFE FOR A SUM OF RS. 35,00,000/-. THE ASSESSEE HAD PAID BOOKI NG AMOUNT OF RS. 1,00,000/- TO THE BUILDER BEFORE THE DUE DATE OF FILING OF THE RE TURN OF INCOME U/S 139(1) FOR THE ASSESSMENT YEAR 2006-07 AND THE BALANCE AMOUNT HAD BEEN PAID IN INSTALLMENTS AFTER THE SAID DATE. THE TOTAL AMOUNT PAID BY THE A SSESSEE TO THE BUILDER WAS RS. 14,62,500/- TILL 16.2.2009. IN THE BACK DROP OF THIS FACTUAL POSITION, IT IS REQUI RED TO BE SEEN WHETHER THE ASSESSEE HAD FULFILLED THE COND ITIONS OF SECTION 54 OF THE ACT SO AS TO MAKE HIM ELIGIBLE FOR CLAIM OF EXEMPTION U /S 54 OF THE ACT. THE FIRST CONDITION IS THAT THE CAPITAL GAIN SHOULD HAVE BEEN INVESTED IN THE PURCHASE OF 7 NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF TWO YEARS FROM THE DATE OF TRANSFER OR FOR CONSTRUCTION OF NEW RESIDENTIAL HOUSE WITHIN A PERI OD OF THREE YEARS FROM THE DATE OF TRANSFER. IN THE PRESENT CASE, THE ASSESSEE HAD BOOKED THE NEW F LAT WITH THE BUILDER AND AS PER AGREEMENT, THE ASSESSEE WAS TO M AKE PAYMENT IN INSTALLMENTS AND THE BUILDER WAS TO HANDOVER THE POSSESSION OF T HE FLAT AFTER CONSTRUCTION. IT HAS THEREFORE TO BE CONSIDERED AS A CASE OF CONSTRU CTION OF NEW RESIDENTIAL HOUSE AND NOT PURCHASE OF FLAT. THIS POSITION HAS BEEN CL ARIFIED BY THE CBDT IN CIRCULAR NO.472 DATED 16.12.1993 IN WHICH IT HAS BEEN MADE C LEAR THAT THE EARLIER CIRCULAR NO. 471 DATED 15.10.1986 IN WHICH IT WAS STATED THA T ACQUISITION OF FLAT THROUGH ALLOTMENT BY DDA HAS TO BE TREATED AS A CONSTRUCTIO N OF FLAT WOULD APPLY TO CO- OPERATIVE SOCIETIES AND OTHER INSTITUTIONS. THE BUI LDER WOULD FALL IN THE CATEGORY OF OTHER INSTITUTIONS AS HELD BY MUMBAI BENCH OF TRIBU NAL IN THE CASE SMT. SUNDER KAUR SUJAN SINGH GADH {SUPRA) AND THEREFORE BOOKING OF THE FLAT WITH THE BUILDER HAS TO BE TREATED AS CONSTRUCTION OF FLAT BY THE AS SESSEE. THUS, IN THE PRESENT CASE, THE PERIOD OF THREE YEARS WOULD APPLY FOR CON STRUCTION OF NEW HOUSE FROM THE DATE OF TRANSFER OF THE OLD FLAT. 6.2 THE OLD FLAT HAD BEEN SOLD ON 7.3.2006 AND THER EFORE THE ASSESSEE WAS REQUIRED TO CONSTRUCT A NEW RESIDENTIAL HOUSE BY 6. 3.2009. THE PURPOSE OF SECTION 54 IS TO ALLOW EXEMPTION TO THE ASSESSEE OF LONG TE RM CAPITAL GAIN ARISING FROM SALE OF RESIDENTIAL HOUSE IF THE CAPITAL GAIN IS INVESTE D IN CONSTRUCTION OF NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER AND, THEREFORE, IN CASE, THE ASSESSEE HAD INVESTED THE CAPITAL GAINS I N CONSTRUCTION OF A NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS, T HIS SHOULD BE TREATED AS SUFFICIENT COMPLIANCE OF THE PROVISIONS, OF THE FLAT IT IS NOT NECESSARY THAT THE POSSESSION OF THE FLAT SHOULD ALSO BE TAKEN WITHIN THE PERIOD OF THREE YEARS. THE TAKING OF THE POSSESSION MAY BE D ELAYED BECAUSE OF MANY FACTORS NOT UNDER THE CONTROL OF THE ASSESSEE DUE TO DEFAULT ON THE PART OF THE BUIL DER AND THEREFORE MERELY BECAUSE THE POSSESSION HAD NOT BEEN TAKEN WITHIN TH E PERIOD OF THREE YEARS, THE EXEMPTION CANNOT BE DENIED. THIS ASPECT HAD ALSO BE EN CONSIDERED BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF MRS. HI LLA J.B. WADIA(SUPRA) IN WHICH THE HONBLE HIGH COURT HELD THAT IN CASE THE ASSESS EE ENTERED INTO AN AGREEMENT WITH THE SOCIETY FOR PURCHASE OF FLAT AND PAID ALMO ST THE ENTIRE CONSIDERATION WITHIN A PERIOD OF TWO YEARS, THE ASSESEE WOULD BE ENTITLED TO EXEMPTION UNDER SECTION 54 OF THE ACT. THE HONBLE HIGH COURT ALSO HELD THAT THE MATERIAL TEST WAS THE DOMAIN OVER THE PROPERTY AND THE INVESTMENT AND , THEREFORE, IN CASE, THE ASSESSEE HAD MADE SUBSTANTIAL INVESTMENT WITHIN THE PRESCRIBED PERIOD WHICH ENTITLED THE ASSESSEE TO TAKE POSSESSION OF THE FLA T, THE CLAIM OF THE EXEMPTION U/S 54 HAD TO BE ADMITTED. IN THE PRESENT CASE, WITHIN THE PERIOD OF THREE YEARS, THE ASSESSEE HAD INVESTED RS. 14,62,500/- WHICH WAS MOR E THAN THE AMOUNT OF CAPITAL GAIN IN THE CONSTRUCTION OF NEW RESIDENTIAL HOUSE W ITHIN THE PERIOD OF THREE YEARS AND THE POSSESSION OF THE HOUSE HAD ALSO BEEN ULTIM ATELY TAKEN ON 31/08/2009. THEREFORE, IN OUR VIEW, THE CLAIM OF THE EXEMPTION IN THIS CASE CANNOT BE DENIED ON THE GROUND THAT THE POSSESSION OF THE FLAT HAD N OT BEEN TAKEN WITHIN THE PERIOD OF THREE YEARS. 11.4 THUS IT IS EVIDENT FROM THE ABOVE THAT IF SUBS TANTIAL AMOUNT OF CAPITAL GAIN HAS BEEN INVESTED BY THE ASSESSEE FOR THE PURPOSE O F PURCHASING A NEW HOUSE, EXEMPTION U/S 54 CANNOT BE DENIED FOR THE REASON TH AT CONSTRUCTION WAS NOT COMPLETED WITHIN THREE YEARS OR HOUSE WAS NOT PURCH ASED WITHIN TWO YEARS. IN THE PRESENT CASE THE CAPITAL GAIN EARNED BY THE ASS ESSEE IS RS.74,33,137/- AND THE AMOUNT INVESTED IN THE NEW HOUSE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME FOR THE IMPUGNED YEAR IS RS.62,10,000/-.THU S UNDENIABLY THE ASSESSEE HAS INVESTED SUBSTANTIAL AMOUNT FOR PURCHASING THE NEW ASSET AND FOLLOWING THE DECISIONS OF THE COORDINATE BENCH AND THE HONBLE H IGH COURT, CITED ABOVE, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDU CTION U/S 54 OF THE INCOME TAX ACT,1961. 8 11.5 EVEN OTHERWISE WE FIND THAT SECTION 54 GIVES A WINDOW PERIOD OF THREE YEARS, FROM THE DATE OF TRANSFER OF ORIGINAL ASSET, FOR THE CONSTRUCTION OF A NEW HOUSE AND TWO YEARS FOR PURCHASING A NEW HOUSE. FUR THER AS PER THE SECTION THE AMOUNT UTILIZED FOR THE SAID PURPOSE ALONGWITH THE AMOUNT DEPOSITED IN A SPECIFIED BANK ACCOUNT FOR THE PURPOSE, BEFORE THE DATE OF FILING OF RETURN OF INCOME, IS TREATED AS COST OF CONSTRUCTION OF THE N EW ASSET AND EXEMPTION GRANTED THEREOF. THE FULFILLMENT OF THE CONDITION O F COMPLETION OF CONSTRUCTION OR PURCHASE OF HOUSE IS TO BE LOOKED INTO ONLY IN THE YEAR IN WHICH THE WINDOW PERIOD ENDS AND IF IT IS THEN FOUND THAT THE ASSESS EE HAS NOT CONSTRUCTED/PURCHASED THE HOUSE,TO THE EXTENT THE A MOUNT DEPOSITED IN SPECIFIED BANK ACCOUNT IS NOT UTILIZED FOR THE SAID PURPOSE ,IT IS TREATED AS CAPITAL GAINS OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF T HREE YEARS EXPIRES. THE PROVISIONS OF SECTION 54 ARE REPRODUCED HEREUNDER F OR CLARITY: 54. PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE.- (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, TH E CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET , BEING BUILD INGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLA CE 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 YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SE CTION, 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 (HEREAFTER IN THI S SECTION REFERRED TO AS THE NEW ASSET), THE DIFFERENCE BETWEEN THE AMOUNT OF TH E 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 O F THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF T HREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE 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 UNDER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET AN Y CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURC HASE 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 O NE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE , OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET B EFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139, SHALL BE DE POSITED BY HIM BEFORE FURNISHING SUCH RETURN SUCH DEPOSIT BEING MADE IN A NY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 IN AN A CCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME 11 WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION I N THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSES OF SUB-SECTION (1), THE AMOUN T, IF ANY, ALREADY UTILISED BY THE 9 ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NE W ASSET TOGETHER WITH THE AMOUNT 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 CONSTRUCTION OF THE N EW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THEN, (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 YEAR S 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. THUS CLEARLY, AS PER SECTION 54(2), EXEMPTION TO TH E EXTENT OF AMOUNT UTILIZED FOR CONSTRUCTION IS TO BE GRANTED IN THE YEAR OF TRANSF ER OF ASSET AND THE CONDITION OF COMPLETION OF CONSTRUCTION IS TO BE LOOKED INTO ONL Y AFTER THE WINDOW PERIOD PROVIDED BY THE ACT OF THREE YEARS EXPIRES . THE HO NBLE SUPREME COURT IN THE CASE OF FIBER BOARDS (SUPRA),HAS INTERPRETED IDENTI CALLY WORDED PROVISIONS OF SECTION 54G, WHICH GRANTS EXEMPTION ON ACCOUNT OF INVESTMENT OF CAPITAL GAIN EARNED FROM SALE PROCEED OF INDUSTRIAL UNDERTAKING, IN ANOTHER INDUSTRIAL UNDERTAKING, AND HAS HELD THAT ADVANCE PAID FOR T HE PURPOSE OF ACQUIRING PLANT AND MACHINERY, LAND AND BUILDING WOULD AMOUNT TO UTILIZATION BY ASSESSEE OF CAPITAL GAIN MADE BY HIM FOR THE PURPOSE OF PURC HASING OR ACQUIRING AFORESAID ASSETS. THE HONBLE SUPREME COURT HAS HEL D THAT AS PER SECTION 54G THE ASSESSEE HAS BEEN GIVEN A WINDOW OF THREE YEAR S AFTER THE DATE ON WHICH TRANSFER TAKES PLACE, TO PURCHASE A NEW MACHINERY O R PLANT OR ACQUIRE BUILDING. THE HONBLE SUPREME COURT HAS FURTHER HELD THAT SEC TION 54G(2) STATES THAT AMOUNT WHICH IS NOT UTILIZED FOR THE SAID PURPOSE IS TO BE DENIED EXEMPTION. THE HONBLE SUPREME COURT HELD THAT THE ASSESSEE I S ENTITLED TO AVAIL EXEMPTION UNDER THE SAID SECTION IF IT UTILIZES THE AMOUNT OF CAPITAL GAIN FOR PURCHASE OR ACQUISITION OF NEW PLANT AND MACHINERY AND BUILDING S AND THE SAID CONDITION WOULD BE FULFILLED WHEN ADVANCES ARE PAID FOR THE P URPOSE OF PURCHASE OR ACQUISITION OF ASSETS. THE RELEVANT FINDINGS OF THE APEX COURT IN THE CASE OF FIBRE BOARDS (SUPRA) IS AS UNDER: 36.A READING OF SECTION 54G MAKES IT CLEAR THAT TH E ASSESSEE IS GIVEN A WINDOW OF THREE YEARS AFTER THE DATE ON WHICH TRANSFER HAS TAKEN PLACE TO PURCHASE NEW MACHINERY OR PLANT OR ACQUIRE BUILDING OR LAN D. WE FIND THAT THE HIGH COURT HAS COMPLETELY MISSED THE WINDOW OF THREE YEARS GIV EN TO THE ASSESSEE TO PURCHASE OR ACQUIRE MACHINERY AND BUILDING OR LAND. THIS IS WHY THE EXPRESSION USED IN 54G(2) IS WHICH IS NOT UTILIZED BY HIM FOR ALL OR ANY OF THE PURPOSES AFORESAID.. IT IS CLEAR THAT FOR THE ASSESSMENT Y EAR IN QUESTION ALL THAT IS REQUIRED FOR THE ASSESSEE TO AVAIL OF THE EXEMPTION CONTAINE D IN THE SECTION IS TO UTILIZE THE AMOUNT OF CAPITAL GAINS FOR PURCHASE AND ACQUIS ITION OF NEW MACHINERY OR PLANT AND BUILDING OR LAND. IT IS UNDISPUTED THAT T HE ENTIRE AMOUNT CLAIMED IN THE ASSESSMENT YEAR IN QUESTION HAS BEEN SO UTILIZED FOR PURCHASE AND/OR ACQUISITION OF NEW MACHINERY OR PLANT AND LAND OR B UILDING. 10 37. THE HIGH COURT IS NOT CORRECT WHEN IT STATES:- 31. THE WORD PURCHASE IS NOT DEFINED UNDER THE A CT AND THEREFORE, HAS TO BE CONSTRUED IN THE COMMERCIAL SENSE. IN MANY DICTIONA RIES, THE WORD PURCHASE MEANS THE ACQUISITION OF PROPERTY BY PARTYS OWN AC T AS DISTINGUISHED FROM ACQUISITION BY ACT OF LAW. IN THE CONTEXT IN WHICH THE EXPRESSION ISSUED BY THE LEGISLATURE REQUIRES FIRST TO BE UNDERSTOOD AND INT ERPRETATION THAT SUITS THE CONTEXT REQUIRES TO BE ADOPTED. EXEMPTION OF CAPITAL GAINS UNDER SECTION 54G OF THE ACT CAN BE CLAIMED ON TRANSFER OF ASSETS IN CASES OF SH IFTING OF INDUSTRIAL UNDERTAKING FROM URBAN AREA TO ANY OTHER NON-URBAN AREA. THIS E XEMPTION MAY BE CLAIMED IF THE CAPITAL GAINS ARISING ON TRANSFER OF ANY OF ASS ETS OF EXISTING INDUSTRIAL UNIT IS UTILIZED WITHIN ONE YEAR OR THREE YEARS AFTER THE D ATE ON WHICH THE TRANSFER TOOK PLACE FOR PURCHASE OF NEW MACHINERY OR PLANT FOR TH E PURPOSES OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKING IN THE AREA TO WHICH THE SAID UNDERTAKING IS SHIFTED. THE LEGISLATURE CONSCIOUSLY HAS NOT USED THE EXPRESSION TOWARDS THE PURCHASE OF PLANT AND MACHINERY AS IN SECTION 54(4) OF THE ACT IN CONTRAST TO SECTION 54(2) OF THE ACT WHEREIN THE WORDS TOWARDS IS USED BEFORE THE WORD PURCHASE. THE EXPRESSION PURCHASED USED IN SUB-CLAUSE (A) OF SE CTION 54G OF THE ACT REQUIRES TO BE UNDERSTOOD AS THE DOMAIN AND CONTROL GIVEN TO THE ASSESSEE. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS PA ID ADVANCE AMOUNT FOR ACQUISITION OF LAND, PLANT, BUILDING AND MACHINERY, ETC., WITHIN THE TIME STIPULATED IN THE SECTION, BUT IT IS NOT THE CASE OF THE ASSES SEE THAT AFTER SUCH PAYMENT OF ADVANCE AMOUNT, IT HAS TAKEN POSSESSION OF LAND AND BUILDING, PLANT AND MACHINERY. IN OUR VIEW, IF THE ARGUMENT OF THE LEAR NED SENIOR COUNSEL FOR THE ASSESSEE IS ACCEPTED, IT WOULD DEFEAT THE VERY PURP OSE AND OBJECT OF THE SECTION ITSELF. BY MERELY PAYING SOME AMOUNT BY WAY OF ADVA NCE TOWARDS THE COST OF ACQUISITION OF LAND FOR SHIFTING ITS INDUSTRIAL UNI T FROM URBAN AREA TO NON-URBAN AREA, AN ASSESSEE CANNOT CLAIM EXEMPTION FROM PAYMENT OF TAX ON CAPITAL GAINS. THIS CANNOT BE THE INTENTION OF THE LEGISLATURE AND AN I NTERPRETATION, WHICH WOULD DEFEAT THE VERY PURPOSE, AND THE OBJECT OF THE ACT REQUIRES TO BE AVOIDED. (AT PARA 31 OF THE IMPUGNED JUDGMENT) 38. WE ARE OF THE VIEW THAT THE AFORESAID CONSTRUCT ION OF SECTION 54G WOULD RENDER NUGATORY A VITAL PART OF THE SAID SECTION SO FAR AS THE ASSESSEE IS CONCERNED. UNDER SUB-SECTION (1), THE ASSESSEE IS G IVEN A PERIOD OF THREE YEARS AFTER THE DATE ON WHICH THE TRANSFER TAKES PLACE TO PURCHASE NEW MACHINERY OR PLANT AND ACQUIRE BUILDING OR LAND OR CONSTRUCT BUI LDING FOR THE PURPOSE OF HIS BUSINESS IN THE SAID AREA. IF THE HIGH COURT IS RIG HT, THE ASSESSEE HAS TO PURCHASE AND/OR ACQUIRE MACHINERY, PLANT, LAND AND BUILDING WITHIN THE SAME ASSESSMENT YEAR IN WHICH THE TRANSFER TAKES PLACE. FURTHER, TH E HIGH COURT HAS MISSED THE KEY WORDS NOT UTILIZED IN SUB-SECTION (2) WHICH WOULD SHOW THAT IT IS ENOUGH THAT THE CAPITAL GAIN MADE BY THE ASSESSEE SHOULD ONLY BE U TILIZED BY HIM IN THE ASSESSMENT YEAR IN QUESTION FOR ALL OR ANY OF THE P URPOSES AFORESAID, THAT IS TOWARDS PURCHASE AND ACQUISITION OF PLANT AND MACHI NERY, AND LAND AND BUILDING. ADVANCES PAID FOR THE PURPOSE OF PURCHASE AND/OR ACQUISITION OF THE AFORESAID ASSETS WOULD CERTAINLY AMOUNT TO UTILIZAT ION BY THE ASSESSEE OF THE CAPITAL GAINS MADE BY HIM FOR THE PURPOSE OF PURCHA SING AND/OR ACQUIRING THE AFORESAID ASSETS. WE FIND THEREFORE THAT ON THIS GR OUND ALSO, THE ASSESSEE IS LIABLE TO SUCCEED. THE APPEALS ARE, ACCORDINGLY, ALLOWED A ND THE JUDGMENT OF THE HIGH COURT IS SET ASIDE. 12. IN VIEW OF THE INTERPRETATION GIVEN TO THE WORD UTILIZED USED IN SECTION 54G OF THE ACT BY THE SUPREME COURT AND CONSIDERING THAT THE CONDITION SPECIFIED IN SECTION 54G(2) ARE IDENTICAL TO THAT I N SECTION 54(2) IT IS CLEAR THAT FOR THE PURPOSE OF CLAIMING EXEMPTION UNDER SECTION 54 THE ASSESSEE IS ONLY REQUIRED TO INVEST THE AMOUNT FOR THE PURPOSE OF PU RCHASE OR CONSTRUCTION OF A PROPERTY WITHOUT COMPLETING THE SAME IN THE IMPUGNE D YEAR AND ALL AMOUNT ADVANCED FOR THE SAID PURPOSE WOULD BE TREATED AS B EING UTILIZED FOR THE PURPOSE OF SECTION 54. 11 13. IN VIEW OF THE ABOVE WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION FOR THE AMOUNT INVESTED IN THE PURCHASE O F A NEW ASSET AMOUNTING TO RS. 62,10,000 AND THE AO IS DIRECTED TO GRANT THE S AME. 14. THE ORDER OF THE LD. CIT(A) IS THEREFORE SET AS IDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED IN ABOVE TERMS. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA ) JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED : AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR