Smt. Padma Rajagopalan, Bangalore V. Income Tax Officer, Ward - 3(3)(5), Bangalore

ITA 629/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4652 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-09-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 01-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Keywords: Capital asset; Principle of natural justice; Question of law; Tax effect; Capital Gains
• Section: 54; 54F; 142(1); 234B; 251; 143(2); 13; 20

Judgement Text

N THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI. B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.629/BANG/2019 ASSESSMENT YEAR : 2015 16 PADMA RAJAGOPALAN, FLAT NO.2A, RUKMINI APARTMENTS, NO.1, ANNAMAYA BLOCK, SHESHADRIPURAM, BENGALURU-560 020. PAN ALUPP 2532 K VS. THE INCOME TAX OFFICER, WARD-3(3)(5), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI PRASHANTH G.S, C.A RESPONDENT BY : SHRI PRIYADARSHI MISHRA, JCIT (DR) DATE OF HEARING : 17-09-2020 DATE OF PRONOUNCEMENT : 20-09-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAIN ST ORDER DATED 07/02/2019 PASSED BY LD.CIT(A)-3, BANGALORE FOR ASS ESSMENT YEAR 2015-16 ON FOLLOWING GROUNDS OF APPEAL: PAGE 2 OF 17 ITA NO.629/BANG/2019 SL NO. GROUNDS OF APPEAL TAX EFFECT IN RUPEES 1 A) THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THESE ARE AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. B) THE APPELLANT DENIES HERSELF LIABLE TO BE ASSESS ED ON A TOTAL INCOME RS.49,29,292/- AS AGAINST RS.5,19,220/- RETURNED BY THE APPELLANT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 DENIAL OF EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT IN RESPECT OF AMOUNT OF RS.65,00,000/- INVESTED IN RESIDENTIAL PROPERTY A) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN DISALLOWING THE EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT ON THE AMOUNT INVESTED OF RS.65,00,000/- IN RESIDENTIAL PROPERTY UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE LEARNED CIT(A) ERRED IN STATING THAT EXEMPT ION UNDER SECTION 54F OF THE ACT CANNOT BE CLAIMED ON T HE AMOUNT INVESTED IN RESIDENTIAL PROPERTY PRIOR TO TH E DATE OF SALE OF ORIGINAL ASSET ON THE FACTS AND CIRCUMSTANCES OF THE CASE. C) THE ACTION OF THE LEARNED CIT(A) IN DISALLOWING THE EXEMPTION CLAIMED UNDER SECTION 54F IN RESPECT OF T HE INVESTMENT MADE IN RESIDENTIAL PROPERTY PRIOR TO TH E DATE OF SALE OF ORIGINAL ASSET IS AGAINST THE PRINC IPLES LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE DECISION OF CIT VS. J. R. SUBRAMANYA BHAT REPORTED IN 165 ITR 571 ON THE FACTS OF THE CASE. D) THE AUTHORITIES BELOW OUGHT TO HAVE PROVIDED THE EXEMPTION UNDER SECTION 54F OF THE ACT AMOUNTING TO RS.9,08,474/- PAGE 3 OF 17 ITA NO.629/BANG/2019 RS.44,10,070/- ON THE FACTS OF THE CASE E) THE AUTHORITIES BELOW FAILED TO APPRECIATE. THAT EXEMPTION CLAIMED WIDER SECTION 54F OF THE ACT CANNOT BE DENIED MERELY ON THE GROUND OF DELAY IN CONSTRUCTION OF RESIDENTIAL PROPERTY BY THE BUILDER WITHIN STIPULATED PERIOD ON THE FACTS OF THE CASE. F) THE AUTHORITIES BELOW OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT HAS PAID SUBSTANTIAL SUM OF MONEY FOR ACQUISITION OF PROPERTY AND THE DELAY IN COMPLETION OF THE RESIDENTIAL PROPERTY BY THE BUILD ER IS BEYOND CONTROL OF THE ASSESSEE ON THE FACTS OF THE CASE. 3 A) THE APPELLANT DENIES HERSELF LIABLE TO BE LEVI ED INTEREST UNDER SECTIONS 234B AND 234D OF THE ACT AN D FURTHER THE COMPUTATION OF INTEREST WAS NOT PROVIDE D TO THE APPELLANT AS REGARD TO THE RATE, PERIOD AND METHOD OF CALCULATION OF INTEREST UNDER THE FACTS A ND CIRCUMSTANCES OF THE CASE. THE APPELLANT EXPRESSLY URGES THAT THE PERIOD OF LEVY OF INTEREST IS NOT IN ACCORDANCE WITH SECTIONS 234B AND 234D OF THE ACT. B) WITHOUT PREJUDICE, THE INTEREST LEVIED UNDER SEC TIONS 234B AND 234D OF THE ACT REQUIRES TO BE WAIVED OFF UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. RS.2,74,536/- 4 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 5 IN VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY B E URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF JUSTICE AND EQUITY. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS AN INDIVIDUAL AND FILED RETURN OF IN COME FOR YEAR UNDER CONSIDERATION ON 31/08/2015 DECLARING TOTAL I NCOME OF RS.5,19,220/-. RETURN WAS PROCESSED UNDER SECTION 1 43(1) OF THE ACT, AND CASE WAS SELECTED FOR SCRUTINY. SUBSEQUEN TLY, NOTICE UNDER SECTION 143(2) OF THE ACT AND 142(1) OF THE A CT, WAS ISSUED PAGE 4 OF 17 ITA NO.629/BANG/2019 TO ASSESSEE, IN RESPONSE TO WHICH, REPRESENTATIVES OF ASSESSEE APPEARED BEFORE LD.AO AND FILED VARIOUS DETAILS AS CALLED FOR. 3. ON PERUSAL OF DETAILS, LD.AO NOTED THAT, ASSESSE E HAD ENTERED INTO A MEMORANDUM OF UNDERSTANDING DATED 19/09/2013 WITH NILACHALA VENTURES PVT.LTD. FOR PUR CHASE OF RESIDENTIAL HOUSE FOR TOTAL CONSIDERATION OF RS.1,6 0,00,000/-. LD.AO ON VERIFICATION FOUND THAT, CONSTRUCTION WAS NOT COMPLETED EVEN AFTER COMPLETION OF 3 YEARS. 4. LD.AO ALSO NOTED THAT, ASSESSEE VIDE SALE DEED D ATED 30/07/2014 SOLD VACANT SITE BEARING 432 FORMED BY H MT EMPLOYEES CO-OPERATIVE HOUSE BUILDING SOCIETY LTD., BANGALORE, AT NARASIPURA LAYOUT, FOR CONSIDERATION OF RS.1,28 ,40,000/-. LD.AO NOTED THAT POSSESSION OF THE PROPERTY WAS NOT TAKEN BY ASSESSEE AND REGISTERED SALE DEED WAS NOT EXECUTED IN FAVOUR OF ASSESSEE. LD.AO THUS CAME TO THE CONCLUSION THAT, C ONDITIONS FOR CLAIMING EXEMPTION UNDER SECTION 54F DID NOT STAND SATISFIED. 5. HE ACCORDINGLY, DISALLOWED CLAIM OF ASSESSEE AND MADE ADDITIONS AMOUNTING TO RS.87,92,748/-, THAT WAS CLA IMED AS EXEMPTION BY ASSESSEE. 6. AGGRIEVED BY ADDITION MADE, ASSESSEE PREFERRED A PPEAL BEFORE LD.CIT(A). 7. LD.CIT(A) ALLOWED EXEMPTION CLAIMED BY ASSESSEE UNDER SECTION 54F TO THE EXTENT OF RS.64,00,000/- THAT WA S DEPOSITED INTO CAPITAL GAINS ACCOUNT SCHEME MAINTAINED WITH I NDIAN OVERSEAS BANK AND STATE BANK OF INDIA. HOWEVER HE D ISALLOWED EXEMPTION CLAIMED AMOUNTING TO RS.65,00,000/- IN RE SPECT OF PAGE 5 OF 17 ITA NO.629/BANG/2019 INVESTMENT MADE IN RESIDENTIAL PROPERTY BY HOLDING THAT, INVESTMENT IN RESIDENTIAL PROPERTY WAS MADE PRIOR T O DATE OF SALE OF ORIGINAL ASSET, AND CONSTRUCTION OF RESIDENTIAL PROPERTY WAS NOT COMPLETED WITHIN STIPULATED TIME. LD.CIT(A), DENIED DEDUCTION U/S.54F BY OBSERVING AS UNDER: 4.8 THUS AFTER DISCUSSING A PLETHORA OF' DECISIONS ON THE ISSUE AND FOLLOWING DECISION OF KARNATAKA HIGH COURT IN THE CASE JR SUBRAMANYA BHAT [1987]165 ITR 571, THE ASSESSEE WA S ALLOWED DEDUCTION U/S 54F OF THE ACT, HOWEVER THE AMOUNT OF DEDUCT ION, WAS RESTRICTED TO THE INVESTMENT MADE BY ASSESSEC IN TH E CONSTRUCTION OF NEW PROPERTY, AFTER THE DATE OF SALE OF ORIGINAL AS SET. THUS THE ABOVE DECISION OF JTAT IS SQUARELY APPLICABLE TO THE CASE OF APPELLANT.. 4.9 THE RELIANCE OF THE APPELLANT ON THE DECISIONS IN THE CASES OF COMMISSIONER 0/ INCOME-LAX V. SAMBANDAM UDAYKUMAR [ 2012] 19 TAXMANN.COM 17 (KAR) AND PRINCIPAL COMMISSIONER OF INCOME-TAX, BANGALORE V. C. GOPALASWANY [2017] 81 TAXMANN.COM 78 (KARNATAKA) IS FOUND TO BE MISPLACED AS THE SAID DECISIONS WERE NOT ON THE ISSUE O INVESTMENT IN CONSTRUCTION PRIOR TO SALE OF THE ORI GINAL ASSET. FURTHER, IN THE CASE OF COMMISSIONER OF CUSTOMS (IMPORT), MU MBAI VS M/S DILIP KUMAR AND COMPANY & 0R IN CIVIL APPEAL NO. 3 327 OF 2007, DT JULY 30, 2018.(2018-. TI0L-302-SC-CUS-CB) WHILE DI SCUSSING THE ISSUE OF INTERPRETATION OF EXEMPTION PROVISIONS, TH E CONSTITUTION BENCH OF TILE HON'BLE SUPREME COURT HELD THAT A PROVISION GIVING BENEFIT TO THE ASSESSEE NEEDS TO BE INTERPRETED STRICTLY AND I N CASE THERE IS AN AMBIGUITY IN THE PROVISION, WHICH IS SUBJECT TO STR ICT INTERPRETATION, THE BENEFIT OF SUCH AMBIGUITY CANNOT BE CLAIMED BY THE ASSESSEE AND IT MUST BE INTERPRETED IN FAVOUR OF THE REVENUE. WHILE DOING SO THE SC OVERRULED THE RATIO LAID DOWN IN THE DECISION IN TH E CASE OF' SUN. EXPORT CORPORATION, BOMBAY V. COLLECTOR OF CUSTOMS, BOMBAY , (1997)6 SCC564 AND UPHELD THE RATIO LAID DOWN IN MANGALORE CHEMICALS & FERTILIZERS LTD. VS. DY. COMMISSIONER OF COMMERCIAL TAXES, (1992) SUPP. 1 SCC 21 , WHICH HAD ALREADY BEEN APPROVED BY A THREE JUDGE BENCH IN NOVOPAN INDIA LTD. V. COLLECTOR OF CENTRA L EXCISE AND CUSTOMS, 1994 SUPP (3) SC'C 606. IN THIS CASE THE T HREE JUDGE I3CNCH HAD HELD AS FOLLOWS : WE ARE, HOWEVER OF THE OPINION THAT, ON PRINCIPLE, THE DECISION OF THIS COURT IN MANGALORE CHEMICALS AND IN UNION O F INDIA V. WOOD PAPERS, REFERRED TO THEREIN REPRESENTS THE C ORRECT VIEW OF IAW. THE PRINCIPLE THAT IN CASE OF AMBIGUITY, A T AXING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF THE ASSESSEE ASS UMING THAT THE SAID PRINCIPLE IS GOOD AND SOUND DOES NOT APP LY TO THE CONSTRUCTION OF AN EXCEPTION OR AN EXEMPTING PROVIS ION, THEY PAGE 6 OF 17 ITA NO.629/BANG/2019 HAVE TO BE CONSTRUED STRICTLY. A PERSON INVOICING AN EXCEPTION OR AN EXEMPTION PROVISION TO RELIEVE HIM OF THE TAX L IABILITY MUST ESTABLISH CLEARLY THAT HE IS COVERED BY THE SAID P ROVISION. IN CASE OF DOUBT OR AMBIGUITY, BENEFIT OF IT MUST GO TO THE STATE 4.10 SO IN VIEW OF THE ABOVE BINDING DECISION OF TH E HONBLE SUPREME COURT, THE EXEMPTION PROVISION NEEDS TO BE INTERPRE TED STRICTLY AND IN CASE OF DOUBT THE BENEFIT WOULD GO TO THE REVENUE, SO THE ACTION OF THE AO IN DISALLOWING EXEMPTION UNDER SECTION 54F OF T HE ACT IN RELATION TO INVESTMENT IN CONSTRUCTION TO THE EXTENT OF RS 6 5,00,000/- IS UPHELD, ALTHOUGH FOR THE REASONS AS DISCUSSED SUPRA. 8. AGGRIEVED BY ORDER OF LD.CIT(A), ASSESSEE IS IN APPEAL BEFORE US NOW. 9. AT THE OUTSET, LD.AR SUBMITTED THAT, LD.CIT(A) R EMANDED TO LD.AO VIDE LETTER DATED 08/01/2019, FOR VERIFICATIO N WHETHER, AMOUNT OF RS.64 LACS, WAS DEPOSITED BY ASSESSEE IN CAPITAL GAINS ACCOUNT SCHEME. 10. IN RESPONSE TO THE SAME, LD.AO FILED REPORT VID E LETTER DATED 24/01/2019, WHEREIN CATEGORICALLY IT IS MENTIONED T HAT ASSESSEE IS ELIGIBLE TO CLAIM EXEMPTION UNDER SECTION 54F OF THE TOTAL SALE CONSIDERATION FOR YEAR UNDER CONSIDERATION. HE REFE RRED TO PARA 4.3 OF ORDER BY LD.CIT(A), WHEREIN RELEVANT PORTION OF REMAND REPORT IS REPRODUCED, THAT READS AS UNDER: 4.3 IN RESPONSE TO THE SAME THE AO SENT HER REPORT VIDE LETTER DATED 24.01.2019 THE SAME IS REPRODUC ED AS FOLLOWS: WITH REFERENCE TO THE ABOVE, THE REPORT IS SUBMITT ED AS FOLLOWS - AS VERIFIED FROM THE ASESSEE'S BANK ACCOUNT STATEM ENT, THE ASSESSEE, MR.PADMA RAJAGOPALAN HAS MADE PAYMENTS TO M/S. NILACHALA VENTURES PVT. LTD., D URING THE F.Y.2013-14 AS UNDER :- DATE AMOUNT 19/08/2013 RS . 1,00,000 14/09/2013 RS.30,00,000 PAGE 7 OF 17 ITA NO.629/BANG/2019 16/12/2013 RS.34,00,000 TOTAL RS.65,00,000 THE SALE CONSIDERATION IS RS.1,28,00,000/-. THE ASSESSEE HAS KEPT RS.64,00,000/- IN THE CAPITAL GAI N ACCOUNT SCHEME. THE ASSESSEE HAS UTILISED THE A PAR T OF NET CONSIDERATION BY INVESTING IN THE NEW ASSET AND THE UNUTILISED AMOUNT HAS BEEN KEPT IN CAPITAL GAIN ACC OUNT SCHEME BEFORE THE DUE DATE OF FILING OF RETURN OF I NCOME FOR A.Y.2015-16. HENCE, THE ASSESSEE IS ELIGIBLE TO CLAIM EXEMPTION U/S. 54F FOR THE A.Y.2015-16. 11. LD.AR ALSO SUBMITTED THAT, DECISION REFERRED TO AND RELIED BY LD.CIT(A) HAS BEEN DEALT WITH, AND CONSIDERED, BY HONBLE MADRAS HIGH COURT IN CASE OF MS.MOTURI LUXMI VS ITO IN ITA NO.181 OF 2019 BY ORDER DATED 17/08/2020. LD.AR FURTHER SUBMITTED THAT, HONBLE MADRAS HIGH COURT FURTHER REFERRED TO DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS K RAMACHANDRA RAO, REPORTED IN (2015) 277 CTR 522 AND CIT VS JR SUBRAMANYA BHAT REPORTED IN (1987) 165 ITR 571, WHEREIN IDENTICAL SITUATIONS WERE CONSIDERED. 12. HE REFERRED TO PAGES 65 TO 81, 82 TO 87 AND 28- 29 OF CASELAW COMPILATION PAPER BOOK I AND II, WHEREIN, THESE DEC ISIONS ARE PLACED. 13. ON THE CONTRARY, LD.SR.DR SUBMITTED THAT, ISSUE NEEDS TO BE RE-VERIFIED BY LD.CIT(A), IN LIGHT OF DECISION BY HONBLE MADRAS HIGH COURT , SINCE IT WAS NOT AVAILABLE AT THE TIME OF DISPOSA L OF APPEAL BY HIM. HE THEREFORE SUBMITTED THAT, APPEAL BE REMANDED TO LD.CIT(A) FOR VERIFICATION OF FACTS. 14. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. PAGE 8 OF 17 ITA NO.629/BANG/2019 15. IT IS UNDISPUTED THAT, ASSESSEE INVESTED ENTIR E AMOUNT OF RS.1,28,00,000/-, PARTLY IN CAPITAL GAIN ACCOUNT SC HEME AND PARTLY IN CONSTRUCTION OF RESIDENTIAL PROPERTY WITH IN PRESCRIBED TIME PERIOD. THERE IS NO DISPUTE REGARDING THE AMOU NT DEPOSITED IN CAPITAL GAINS ACCOUNT SCHEME. THE AUTHORITIES BE LOW ALLEGES THAT, SUM OF RS.65 LACS INVESTED IN CONSTRUCTION O F RESIDENTIAL PROPERTY CANNOT BE ALLOWED TO ASSESSEE, SINCE PROP ERTY COULD NOT BE CONSTRUCTED WITHIN PERIOD OF 3 YEARS. THERE IS N O FINDING BY AUTHORITIES BELOW THAT, DELAY IN CONSTRUCTION WAS A TTRIBUTABLE TO ASSESSEE BUT WAS BEYOND THE CONTROL OF ASSESSEE SIN CE THE CONSTRUCTION WAS CARRIED OUT BY THE BUILDER. 16. ASSESSEE IN THE SYNOPSIS FILED BEFORE THIS TRIBUNAL GAVE DETAILS OF DATE WISE PAYMENTS, MADE TO THE BUILDER FOR ACQUISITION OF PROPERTY AS UNDER: A) PAYMENTS MADE PRIOR TO SALE OF ORIGINAL ASSET DATE AMOUNT (RS.) 21.08.2013 1,00,000/ - 13.09.2013 30,00,000/- 04.12.2013 19,00,000/- 16.12.2013 15,00,000/- TOTAL (A) 65,00,000/- B) PAYMENTS MADE AFTER THE SALE OF ORIGINAL ASSET DATE AMOUNT (RS.) 24.08.2015 5,83,000/- 08.12.2017 18,31,500/- 03.05.2018 23,76,000/- 04.04.2019 24,75,000/ - 05.07.2019 10,00,000/ - 05.07.2019 24,69,500/- TOTAL (B) 1,07,35,000/- TOTAL PAYMENTS (A+B) 1,72,35,000/- PAGE 9 OF 17 ITA NO.629/BANG/2019 16. IN DECISION RELIED BY LD.AR IN CASE OF MS.MOTURI LUXMI VS ITO (SUPRA), DECISIONS REFERRED BY LD.CIT(A) WAS CONSIDERED BY HONBLE MADRAS HIGH COURT . SUBSTANTIAL QUESTION OF LAW THAT AROSE BEFORE HONBLE MADRAS HIGH COURT WAS AS UNDER: WHETHER, FOR PURPOSE OF SECTION 54 OF THE INCOME T AX ACT, THE ADVANCE PAYMENT MADE BY ASSESSEE FOR THE PURCHASE O F RESIDENTIAL FLAT WOULD CONSTITUTE A PART OF PURCHAS E OR NOT, WHEN SUCH ADVANCE IS MADE TO THE SELLER OF FLAT PRI OR TO THE DATE OF SALE OF CAPITAL ASSET IN QUESTION? 17. WHILE CONSIDERING AFORESAID QUESTION FRAMED BY HONBLE COURT , WE NOTE THAT DECISIONS RELIED BY LD.CIT(A) HAS BE EN REFERRED AS UNDER :- 7. IN FACT, THE ARGUMENT OF THE REVENUE IN THE SAID CASE IS IDENTICAL TO THAT OF THE ARGUMENT MADE BY MRS.R.HEMALATHA, LEARN ED STANDING COUNSEL APPEARING FOR THE REVENUE IN THE CASE ON HA ND. SHE HA5 ARGUED THAT THE LANGUAGE OF SECTION 54(1) OF THE AC T IS VERY CLEAR AND THAT THIS BEING A BENEFIT GIVEN TO THE ASSESSEE, IT REQUIRES A STRICT INTERPRETATION. IN THIS REGARD, SHE HAS REFERRED TO THE DECISION IN THE CASE OF COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI VS . DILIP KUMAR & CO. AND ORS [REPORTED IN (2018) 9 SCC 1] THE HON'BL E FIRST BENCH CONSIDERED THE SAID ARGUMENT IN THE SAID JUDGMENT A ND HELD IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTIONS OF THE DECIS ION OF THE HON'BLE FIRST BENCH OF THIS COURT IN THE CASE OF C.ARYAMA S UNDARAM ARE AS HEREUNDER : '14. UNDER SECTION 54(1) OF THE SAID ACT, THE CAPIT AL GAIN ARISING FROM TRANSFER OF A RESIDENTIAL HOUSE IS NOT TO BE CHARGE D TO INCOME TAX AS INCOME OF THE PREVIOUS YEAR, IF THE ASSESSEE HAS WI THIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF TRANSFER OF THAT RESIDENTIAL HOUSE PURCHASED ANOTHER RESIDENTIAL HOUSE IN INDIA OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER CO NSTRUCTED A RESIDENTIAL HOUSE IN INDIA AND IF THE AMOUNT OF THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED IS EQUAL TO OR LESS THAN T HE AMOUNT OF CAPITAL GAIN. 15. IT IS A WELL SETTLED PRINCIPLE OF CONSTRUCTION AND INTERPRETATION OF STATUTES THAT STATUTORY PROVISIONS SHOULD, TO THE E XTENT FEASIBLE, BE INTERPRETED AND/OR CONSTRUED IN ACCORDANCE WITH PLA IN MEANING OF THE LANGUAGE USED IN THOSE PROVISIONS. PAGE 10 OF 17 ITA NO.629/BANG/2019 16. ON A PLAIN READING OF SECTION 54W OF THE SAID A CT, THE TRANSFER OF A LONG TERM ASSET, WHICH WOULD INCLUDE A RESIDENTIAL HOUSE, WOULD BE CHARGEABLE TO INCOME TAX AS A CAPITAL GAIN, EXCEPT IN CIRCUMSTANCES SPECIFIED IN THE SAID SECTION. 17. IT IS NOT NECESSARY FOR THIS COURT TO GO INTO T HE QUESTION OF MODE AND METHOD OF COMPUTATION OF CAPITAL GAIN AS THERE IS N O DISPUTE IN THIS REGARD, WHICH REQUIRES ADJUDICATION IN THIS APPEAL. 18. THE QUESTION IS, WHETHER ANY PART OF THE CAPITA L GAIN FROM TRANSFER OF THE RESIDENTIAL HOUSE IS EXEMPT FROM THE CAPITAL GAIN TAX AND IF SO TO WHAT EXTENT? 19. THE CONDITIONS PRECEDENT FOR EXEMPTION OF CAPIT AL GAIN FROM BEING CHARGED TO INCOME TAX ARE: (I)THE ASSESSEE SHOULD HAVE PURCHASED A RESIDENTIAL HOUSE IN INDIA EITHER ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF TRANSFER OF THE RESIDENTIAL HOUSE WHICH RESULTED IN CAPITAL GAIN OR ALTERNATIVELY CONSTRUCTED A NEW RESIDENTIAL HOUSE IN INDIA WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE RESIDENT IAL PROPERTY WHICH RESULTED IN THE CAPITAL GAIN. (II)IF THE AMOUNT OF CAPITAL GAIN IS GREATER THAN T HE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED, THE DIFFERENCE B ETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET I S TO BE CHARGED UNDER SECT/ON 45 AS THE INCOME OF THE PREVIOUS YEAR. (III)IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW RESIDENTIAL HOUSE, THE CAPITAL GAIN SHALL N OT BE CHARGED UNDER SECTION 45. 20. WHAT HAS TO BE ADJUSTED AND/OR SET OFF AGAINST THE CAPITAL GAIN IS, THE COST OF THE RESIDENTIAL HOUSE THAT IS PURCHASED OR CONSTRUCTED. SECTION 54(1) OF THE SAID ACT IS SPECIFIC AND CLEAR . IT IS THE COST OF THE NEW RESIDENTIAL HOUSE AND NOT JUST THE COST OF CONS TRUCTION OF THE NEW RESIDENTIAL HOUSE, WHICH IS TO BE ADJUSTED. THE COS T OF THE NEW RESIDENTIAL HOUSE WOULD NECESSARILY INCLUDE THE COS T OF THE LAND, THE COST OF MATERIALS USED IN THE CONSTRUCTION, THE COS T OF LABOUR AND ANY OTHER COST RELATABLE TO THE ACQUISITION AND/OR CONS TRUCTION OF THE RESIDENTIAL HOUSE. 21. A READING OF SECTION 54(1) MAKES IT AMPLY CLEAR THAT CAPITAL GAIN IS TO BE ADJUSTED AGAINST THE COST OF NEW RESIDENTIAL HOUSE. THE CONDITION PRECEDENT FOR SUCH ADJUSTMENT IS THAT THE NEW RESID ENTIAL HOUSE SHOULD HAVE BEEN PURCHASED WITHIN ONE YEAR BEFORE OR TWO Y EARS AFTER THE TRANSFER OF THE RESIDENTIAL HOUSE, WHICH RESULTED I N THE CAPITAL GAIN OR ALTERNATIVELY, A NEW RESIDENTIAL HOUSE HAS BEEN CON STRUCTED IN INDIA, WITHIN THREE YEARS FROM THE DATE OF THE TRANSFER, W HICH RESULTED IN THE CAPITAL GAIN. THE SAID SECTION DOES NOT EXCLUDE THE COST OF LAND FROM THE COST OF RESIDENTIAL HOUSE. 22. IT IS AXIOMATIC THAT SECTION 54(1) OF THE SAID ACT DOES NOT CONTEMPLATE THAT THE SAME MONEY RECEIVED FROM THE S ALE OF A PAGE 11 OF 17 ITA NO.629/BANG/2019 RESIDENTIAL HOUSE SHOULD BE USED IN THE ACQUISITION OF NEW RESIDENTIAL HOUSE. HAD IT BEEN THE INTENTION OF THE LEGISLATURE THAT THE VERY SAME MONEY THAT HAD BEEN RECEIVED AS CONSIDERATION FOR T RANSFER OF A RESIDENTIAL HOUSE SHOULD BE USED FOR ACQUISITION OF THE NEW ASSET, SECTION 54(I) WOULD NOT HAVE ALLOWED ADJUSTMENT AND /OR EXEMPTION IN RESPECT OF PROPERTY PURCHASED ONE YEAR PRIOR TO THE TRANSFER, WHICH GAVE RISE TO THE CAPITAL GAIN OR MAY BE IN THE ALTERNATI VE HAVE EXPRESSLY MADE THE EXEMPTION IN CASE OF PRIOR PURCHASE, SUBJE CT TO PURCHASE FROM ANY ADVANCE THAT MIGHT HAVE BEEN RECEIVED FOR THE T RANSFER OF THE RESIDENTIAL HOUSE WHICH RESULTED IN THE CAPITAL GAI N. 23. AT THE COST OF REPETITION, IT REITERATED THAT EXEMPTION OF CAPITAL GAIN FROM BEING CHARGED TO INCOME TAX AS INCOME OF THE P REVIOUS YEAR IS ATTRACTED WHEN ANOTHER RESIDENTIAL HOUSE HAS BEEN P URCHASED WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DA TE OF TRANSFER OR HAS BEEN CONSTRUCTED WITHIN A PERIOD OF THREE YEARS AFT ER THE DATE OF TRANSFER OF THE RESIDENTIAL HOUSE. IT IS NOT IN DIS PUTE THAT THE NEW RESIDENTIAL HOUSE HAS BEEN CONSTRUCTED WITHIN THE T IME STIPULATED IN SECTION 54(1) OF THE SAID ACT. IT IS NOT A REQUISIT E OF SECTION 54 THAT CONSTRUCTION COULD NOT HAVE COMMENCED PRIOR TO THE DATE OF TRANSFER OF THE ASSET RESULTING IN CAPITAL GAIN. IF THE AMOUNT OF CAPITAL GAIN IS GREATER THAN THE COST OF THE NEW HOUSE, THE DIFFERE NCE BETWEEN THE AMOUNT OF CAPITAL GAIN AND THE COST OF THE NEW ASSE T IS TO BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR . IF THE AMOUNT OF CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF T HE NEW RESIDENTIAL HOUSE, INCLUDING THE LAND ON WHICH THE RESIDENTIAL HOUSE IS CONSTRUCTED, THE CAPITAL GAIN IS NOT TO BE CHARGED UNDER SECTION 45 OF THE SAID ACT.' 16. FROM THE ABOVE, IT IS DEAR THAT THE INTENTION OF THE LEGISLATURE WAS TO EITHER PURCHASE BEFORE OR AFTER THE DATE OF SALE AND THE WORD 'PURCHASED OR 'CONSTRUCTED' USED IN THE NOTES ON CL AUSES AMPLY MAKES THE INTENTION CLEAR. IN THE LIGHT OF THE ABOVE DISC USSIONS, WE HOLD THAT THE SUBSTANTIAL QUESTION OF LAW IS REQUIRED TO BE A NSWERED IN FAVOUR OF THE ASSESSEE. 18. WE ALSO REFER TO FULL BENCH DECISION OF HONBLE SUPREME COURT IN CASE OF COMMISSIONER OF CUSTOMS (IMPORT) VS. M/S DILIP KUMAR & SONS & ORS. (SUPRA). THIS DECISION WAS RELIED BY LD. CIT(A) TO DENY EXEMPTION CLAIMED BY ASSESSEE U/S 54 F. ON CAREFUL STUDY OF DECISION BY HONBLE SUPEME COURT WE NOTE THAT, RATIO HAS BEEN EXPRESSLY MENTIONED IN PARA 27 AS UN DER: 27. NOW COMING TO THE OTHER ASPEC T, AS WE PRESENTLY DISCUSS, EVEN WITH REGARD TO EXEMPTION CLAUSES OR PAGE 12 OF 17 ITA NO.629/BANG/2019 EXEMPTION NOTIFICATIONS ISSUED UNDER A TAXING STATUTE, THIS COURT IN SOME CASES HAS TAKEN THE VIEW THAT T HE AMBIGUITY IN AN EXEMPTION NOTIFICATION SHOULD BE CONST RUED IN FAVOUR OF THE SUBJECT. IN SUBSEQUENT CASES, THIS COURT DILUTED THE PRINCIPLE SAYING THAT MANDATORY REQUIREMENTS OF EXE MPTION CLAUSE SHOULD BE INTERPRETED STRICTLY AND THE DIRE CTORY CONDITIONS OF SUCH EXEMPTION NOTIFICATION CAN BE CONDONED IF THER E IS SUFFICIENT COMPLIANCE WITH THE MAIN REQUIREMENTS. T HIS, HOWEVER, DID NOT IN ANY MANNER TINKER WITH THE VIEW TH AT AN AMBIGUOUS EXEMPTION CLAUSE SHOULD BE INTERPRETED FAVOURING TH E REVENUE. HERE AGAIN THIS COURT APPLIED DIFFERENT TESTS WHEN CON SIDERING THE AMBIGUITY OF THE EXEMPTION NOTIFICATION WHICH REQUI RES STRICT CONSTRUCTION AND AFTER DOING SO AT THE STAGE OF APPLYING THE NOTIFICATION, IT CAME TO THE CONCLU SION THAT ONE HAS TO CONSIDER LIBERALLY. 19. HONBLE COURT ON CONSIDERING CATENA OF DECISIONS OBSERVED AS UNDER:- 46.THE ABOVE DECISION, WHICH IS ALSO A DECISION OF TWO JUDGE BENCH OF THIS COURT, FOR THE FIRST TIME TOOK A VIEW THAT LIBERAL AND STRICT CONSTRUCTION OF EXEMPTION PROVISIONS ARE TO BE INVOKED AT DIFFERENT STAGES OF INTERPRETING IT. THE QUESTION WHETHER A S UBJECT FALLS IN THE OR IN THE EXEMPTION CLAUSE, HAS TO BE STRICTLY CONSTRUED. WHEN ONCE THE AMBIGUITY OR DOUBT IS RESOLVED BY INTERPRETING THE APPLICABIL ITY OF EXEMPTION CLAUSE STRICTLY, THE COURT MAY CONSTRUE THE NOTIFIC ATION BY GIVING FULL PLAY BESTOWING WIDER AND LIBERAL CONSTRUCTION. THE RATIO OF PARLE EXPORTS CASE (SUPRA) DEDUCED AS FOLLOWS: DO NOT EXTEND OR WIDEN THE AMBIT AT STAGE OF APPLI CABILITY. BUT ONCE THAT HURDLE IS CROSSED, CONSTRUE IT LIBERALLY. 47. WE DO NOT FIND ANY STRONG AND COMPELLING REASON S TO DIFFER, TAKING A CONTRA VIEW, FROM THIS. WE RESPECTFULLY RECORD OUR CONCURRENCE TO THIS VIEW WHICH HAS BEEN SUBSEQUENTLY, ELABORATED BY THE CONSTITUTION BENCH IN HARI CHAND CASE(SUPRA). 20. HONBLE COURT THUS SUMMARISED THEIR OBSERVATION AS UNDER:- 52.TO SUM UP, WE ANSWER THE REFERENCE HOLDING AS U NDER: 1) EXEMPTION NOTIFICATION SHOULD BE INTERPRETED STR ICTLY; THE BURDEN OF PROVING APPLICABILITY WOULD BE ON THE ASSESSEE TO SHOW THAT HIS CASE COMES WITHIN THE PARAMETERS OF THE EXEMPTION CLAUSE OR EXEMPTION NOTIFICATION. (2) WHEN THERE IS AMBIGUITY IN EXEMPTIO N NOTIFICATION WHICH IS SUBJECT TO STRICT INTERPRETATION, THE BENEFIT OF SU CH AMBIGUITY CANNOT BE CANNOT BE CLAIMED BY THE SUBJECT/ASSESSEE AND IT MU ST BE INTERPRETED INFAVOUR OF THE REVENUE. (3) THE RATIO IN SUN EXPORT CASE (SUPRA) IS NOTCORR ECT AND ALL THE DECISIO PAGE 13 OF 17 ITA NO.629/BANG/2019 NS WHICH TOOK SIMILAR VIEW AS IN SUN EXPORT CASE (S UPRA) STANDS OVER- RULED. 21. NOW COMING TO THE DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF C ARYAMA SUNDARAM (SUPRA) RELIED IN CASE OF M/S MOTURI LAXMI VS. ITO (SUPRA). HONBLE COURT FIRST ANALYSED THE CONDITIONS ASSESSEE FULFILLED TO ENTER EXEMPTION CLAUSE AND TH EREAFTER APPLICABILITY WAS LIBERALLY INTERPRETED. 22. SIMILAR IS THE ANALYSIS BY HONBLE MADRAS HIGH COURT IN OTHER DECISIONS REFERRED TO IN M/S MOTURI LAXMI VS. ITO (SUPRA). HONBLE DELHI HIGH COURT IN CASE OF CIT VS. BHARTI MISHRA REPORTED IN (2014) 41 TAXMANN.COM 50, DECISIONS OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS J.R SUBRAMNYA BHAT REPORTED IN (1986) 28 TAXMAN 578 AND CIT VS. K RAMACHANDRA RAO REPORTED IN (2015) 56 TAXMANN.COM 163, ALL PRINCIPALLY ALLOWED EXEMPTION U/S 54/54F, ONLY ON SUBSTANTIAL SATISFACTION OF REQ UIRED CONDITIONS THEREIN. HONBLE KARNATAKA HIGH COURT AND HONBLE MADRAS HIGH COURT IN DECISIONS RELIED BY LD.AR WIDELY INTERPRETED THE PROVISION, CONSEQUENT TO STRICT SAT ISFACTION OF CONDITIONS THEREIN. 23. IN PRESENT FACTS, ASSESSEE MADE INVESTMENT IN U NDER CONSTRUCTED RESIDENTIAL PROPERTY DURING F.Y 2013-14 . DURING F.Y 2014-15 SHE SOLD VACANT LAND FOR RS.1.28 CRORES. A SSESSEE THUS CLAIMED PAYMENT MADE TO THE BUILDER FOR PURPOSES OF CONSTRUCTION OF RESIDENTIAL HOUSE AMOUNTING TO RS.6 5,00,000/- OUT OF CAPITAL GAINS EARNED FROM SALE OF VACANT LAN D. AS PER SEC. 54(1) ASSESSEE HAS TO WITHIN A PERIOD OF ONE YEAR B EFORE, OR TWO YEARS AFTER THE DATE ON WHICH SUCH TRANSFER TOOK PL ACE, PAGE 14 OF 17 ITA NO.629/BANG/2019 PURCHASED, OR HAS WITHIN A PERIOD THREE YEARS AFTE R THAT DATE, CONSTRUCTED A RESIDENTIAL HOUSE IN INDIA THEN, CAPI TAL GAIN WILL BE COMPUTED AS PER (I) OR (II) OF SUB SECTION 1 OF SEC . 54. IN THE PRESENT FACTS ASSESEE FULFILS THE REQUIREMENT OF I NVESTING THE SALE PROCEEDS IN NEW RESIDENTIAL PROPERTY REQUIREMENT E MPHASISED BY HONBLE SUPREME COURT IN CASE OF M/S DILIP KUMAR (SUPRA) STANDS FULFILLED BY ASSESSEE AS PER SEC. 54(1). TH IS HAS NOT BEEN OBJECTED BY REVENUE. THE REASON WHY THE CLAIM WAS REJECTION IS, NON COMPLETION OF CONSTRUCTION WITHIN THE PERIOD ST IPULATED UNDER ACT. 24. IT IS PERTINENT TO NOTE THAT, THERE IS NO STRI CT REQUIREMENT REGARDING COMPLETION OF CONSTRUCTION UNDER SECTION 54F(1) TO BE ENTITLED FOR AVAILING EXEMPTION. THE PASSPORT TO DE RIVE BENEFIT UNDER SEC.54F(1) IS INVESTMENT IN CONSTRUCTION OF PROPERTY WITHIN THE PERIOD REQUIRED U/S 54(1)F OR TO INVEST IN RESI DENTIAL PROPERTY WITHIN THE STIPULATED TIME FOR ENABLING DEDUCTION U NDER SECTION 5 4F OF THE ACT. HONBLE KARNATAKA HIGH COURT IN DECISION OF CIT VS.SAMBANDAM UDAYKUMAR REPORTED IN 251 CTR 371 TOOK THE VIEW THAT, UNDER PROVISIONS OF SECTION 54F OF THE ACT, THE CONDITION PRECEDED IS THAT, CAPITAL GAINS REALISED FROM SALE OF CAPITAL ASSET SHOULD HAVE BEEN PARTED BY ASSESSEE A ND INVESTED OR CONSTRUCTED A RESIDENTIAL HOUSE, AS THE CASE MAY BE. HONBLE COURT ALSO OBSERVED THAT, THE ESSENCE OF THE PURPOSE OF SECTION 54F, IS WHETHER, THE ASSESSEE WHO RECEIVED THE CAPI TAL GAIN HAS INVESTED IN A HOUSE. ONCE IT IS DEMONSTRATED THAT T HE CONSIDERATION RECEIVED ON TRANSFER OF CAPITAL ASSET HAS BEEN PAGE 15 OF 17 ITA NO.629/BANG/2019 INVESTED IN OR CONSTRUCTION OF RESIDENTIAL HOUSE, E VEN THOUGH THE CONSTRUCTION IS NOT COMPLETE IN ALL RESPECT AS REQU IRED UNDER LAW, ASSESSEE CANNOT BE DENIED BENEFIT UNDER SECTION 54F . FURTHER ON A PLAIN READING OF DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. SAMBANDAM (SUPRA) REVEALS THAT, THERE IS NO PARTICULAR STAGE OF COMPLETION OF CONSTRUCTION, THA T IS CONTEMPLATED. LD. AR SUBMITTED THAT, THE CONSTRUCT ION WAS LATER ON COMPLETED AND THE SALE DEED WAS REGISTERED IN FA VOUR OF ASSESSEE ON 05/07/2019 IN RESPECT OF TRANSFER OF OW NERSHIP OF RESIDENTIAL PROPERTY. THERE IS NOTHING PLACED BY RE VENUE ON RECORD TO DEMONSTRATE ANY OTHER VIOLATION IN SUPPOR T OF THEIR ARGUMENTS. 25. IN PRESENT FACTS WE ARE OF THE VIEW THAT ASSESS EE HAS SUBSTANTIALLY FULFILLED ALL NECESSARY CONDITIONS TO BE ENTITLED FOR LIBERAL INTERPRETATION OF SEC.54F. IN OUR VIEW, F. B DECISION RELIED BY LD.SR.DR AND LD.CIT(A) OF HONBLE SUPREME COURT IN CASE OF M/S DILIP KUMAR (SUPRA) NEEDS TO BE APPLIED AFTER ANALYSING THE FACTS IN EACH CASE. IN OUR OPINION, IN PRESENT FAC TS DECISION BY HONBLE SUPREME COURT SUPPORT THE CASE OF ASSESSEE. 26. RESPECTFULLY APPLYING RATION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. SAMBANDAM (SUPRA ), WE HOLD THAT ASSESSE IS ELIGIBLE FOR EXEMPTION OF RS.65 LAKHS U/ S 54F. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH OCT, 2020 SD/- SD/- (B. R. BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 20 TH OCT, 2020. PAGE 16 OF 17 ITA NO.629/BANG/2019 /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 17 OF 17 ITA NO.629/BANG/2019 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -10-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -10-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -10-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -10-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -10-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -10-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -10-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS