Mr. Manjit Singh, Chandigarh V. ITO, Chandigarh

ITA 716/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5243 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 25-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Capital asset; Period of limitation
• Section: 54F; 54; 12; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.716/CHD/2017 (ASSESSMENT YEAR: 2013-14) MR. MANJIT SINGH VS. THE ITO PLOT NO. 25/7, INDUSTRIAL AREA WARD 1(2) PHASE-2, CHANDIGARH CHANDIGARH PAN: AIOPS1331G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PARIKSHIT AGGARWAL REVENUE BY : : SHRI MANJIT SINGH DATE OF HEARING : 08.11.2017 DATE OF PRONOUNCEMENT : 05.02.2018 ORDER PER ANNAPURNA GUPTA, A.M. : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INC OME TAX (APPEALS)-1, CHANDIGARH DATED 06. 03. 2017. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE HAD SOLD 50% SHARE IN HIS HOUSE NO. 779, SECTOR 22 CHANDIGARH ON 07.11.2012 FOR RS.57,50,000 /- AND EARNED LONG-TERM CAPITAL GAINS OF RS.53,68,084/ -. THE ASSESSEE SOUGHT EXEMPTION OF THE CAPITAL GAINS U/S 54 OF THE ACT, BY SHOWING THAT THE FUNDS WERE INVES TED IN FLAT NO. 906, IN MARVEL CERISE APARTMENTS IN PUNE. THE ASSESSING OFFICER DENIED THE EXEMPTION STATING THA T IT WAS A CASE OF PURCHASE OF FLAT SINCE THE ASSESSEE H AD PURCHASED IT FROM HIS DAUGHTER AND THE AGREEMENT OF PURCHASE WAS BETWEEN THE ASSESSEE AND DAUGHTER AND 2 NOT THE BUILDER, AND THE SAID FLAT HAD BEEN PURCHAS ED BEYOND THE SPECIFIED PERIOD OF 2 YEARS FROM THE DAT E OF SALE OF ORIGINAL ASSET SINCE THE REGISTERED DEED FO R THE NEW ASSET WAS DATED 24-12-2014, WHILE THE ORIGINAL ASSET WAS SOLD ON 07-11-12. 3. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(APPEAL), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE FACTS OF THE CASE NARROWED DOWN TH E POINTS OF DISPUTE TO: A) WHETHER THE NEW FLAT ACQUIRED SHOULD BE TAKEN AS PURCHASE OR CONSTRUCTION? B) WHETHER THE DATE OF ACQUISITION OF NEW FLAT BE TAKEN AS 24.12.2014 BEING THE DATE OF DEED OF TRANSFER/ASSIGNMENT AND WHAT WAS THE PERIOD WITHIN WHICH THE INVESTMENT IN NEW FLAT/ HOUSE COULD HAVE BEEN MADE? 4. THEREAFTER AFTER CONSIDERING THE PROVISIONS OF SECTION 54 OF THE ACT AND ON EXAMINING THE AGREEMEN T BETWEEN THE BUILDER AND THE DAUGHTER OF THE ASSESSE E, THE MOU BETWEEN THE DAUGHTER AND ASSESSEE, AND THE DEED OF TRANSFER/ ASSIGNMENT AND THE PAYMENT PATTE RN , THE CIT( APPEAL) HELD THAT IT WAS A CASE OF CONSTRU CTION OF THE RESIDENTIAL HOUSE AND THE ASSESSEE WAS ENTITLED TO EXEMPTION WITH RESPECT TO INVESTMENT MADE IN CONSTRUCTION 3 YEARS AFTER THE DATE OF SALE. HE TH EREAFTER HELD THAT ALL INVESTMENTS MADE IN THE CONSTRUCTION OF THE NEW ASSET OR BY WAY OF DEPOSIT IN ANY BANK/INSTITUT ION OR IN ANY SCHEME SPECIFIED OR NOTIFIED BY THE GOVERNME NT 3 BEFORE 31. 07. 2013, I.E. THE DUE DATE OF FILING OF RETURN UNDER SECTION 139(1) WAS ELIGIBLE FOR DEDUCTION UND ER SECTION 54 OF THE ACT. THE LD. CIT(APPEAL) ON PERUS ING THE DETAILS OF INVESTMENTS MADE BY THE ASSESSEE FOUND T HAT OUT OF THE TOTAL INVESTMENT MADE BY THE ASSESSEE OF RS. 75,11,862/- ONLY RS.30,37,745/- HAD BEEN INVESTED A FTER THE DATE OF SALE OF ORIGINAL ASSET AND THE BALANCE OF RS. 44,74,117/- WAS MADE BEFORE THE DATE OF SALE. HE THEREFORE HELD THAT THE SUM OF RS. 44, 74,117/- COU LD NOT BE ALLOWED AS DEDUCTION. OUT OF THE REMAINING RS.30,37,745/- THE CIT(APPEAL) FOUND THAT ONLY RS. 8,06,045/-WAS INVESTED IN CONSTRUCTION AFTER THE DA TE OF TRANSFER OF THE ORIGINAL ASSET UP TO THE DATE OF FI LING OF RETURN OF INCOME, I.E. 31/07/2013, WHILE THE REMAIN ING AMOUNT WAS INVESTED AFTER THE DUE DATE OF FILING OF RETURN. HE THEREFORE RESTRICTED THE DEDUCTION UNDER SECTION 54 TO RS. 8,06,045/- CONFIRMING THE DENIAL OF DEDUCTION OF THE BALANCE OF RS.45,62,039/-. 5. AGGRIEVED BY THE SAME THE ASSESSEE HAS COME UP I N APPEAL BEFORE AS RAISING THE FOLLOWING EFFECTIVE GR OUNDS: 1. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) IN APPEAL NO. 264/15-16 DATED 06.03.2017 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF SECTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) WAS UNJUSTIFIED IN NOT ALLOWING COMPLETE DEDUCTION CLAIMED U/S 54 OUT OF LONG TERM CAPITAL GAIN ARISING FROM SALE OF A RESIDENTIAL HOUSE AND THEREBY PARTLY CONFIRMING THE ACTION OF LD. AO IN RESPECT OF NOT ALLOWING DEDUCTION U/S 54 ON 4 FOLLOWING ITEMS : 1) AGGREGATE PAYMENTS OF RS. 19,51,950/- MADE TO BUILDER FOR A RESIDENTIAL FLAT DURING THE PERIOD OF MORE THAN 1 YEAR BUT LESS THAN 2 YEARS PRIOR TO THE DATE OF SALE OF RESIDENTIAL HOUSE FROM WHICH TAXABLE LONG CAPITAL GAIN AROSE. 1) AGGREGATE PAYMENTS OF RS. 25,22,166/- MADE TO BUILDER FOR A RESIDENTIAL FLAT DURING THE PERIOD OF 1 YEAR PRIOR TO THE DATE OF SALE OF RESIDENTIAL HOUSE. 2.3 AMOUNT OF RS. 2,00,000/- DEPOSITED IN CAPITAL GAIN SCHEME ACCOUNT ON 27.09.2013 AND SUBSEQUENTLY UTILIZED FOR PAYMENT TO BUILDER FOR A RESIDENTIAL FLAT, BY ERRONEOUSLY INTERPRETING THAT THE AMOUNT IN CAPITAL GAIN SCHEME ACCOUNT SHOULD HAVE BEEN DEPOSITED BEFORE THE DUE DATE OF FILING OFLTRU/S 139(1) AND NOT U/S 139(4). 6. AT THE OUTSET LD.COUNSEL FOR THE ASSESSEE POINTE D OUT THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THE ITAT IN THE CASE OF THE ASSESSEES WIFE WHO WAS THE OWNE R OF THE REMAINING 50% SHARE OF THE ORIGINAL ASSET SOLD IN ITA NO. 717/CHANDIGARH/2017 VIDE THEIR ORDER DATED 28.9.2017. COPY OF THE ORDER WAS PLACED BEFORE US. 7. LD. DR FAIRLY ADMITTED THAT THE ISSUE HAD BEEN DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE. LD. DR HOWEVER RELIED ON THE ORDER OF THE CIT( APPEAL) 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE ORDER O F THE ITAT REFERRED TO BEFORE US . 9. THE SOLE ISSUE TO BE DECIDED BEFORE US IS VIS A VIS THE CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT ON ACCOUNT OF INVESTMENT MADE IN A NEW HOUSE FROM THE CAPITAL GAINS EARNED BY THE ASSESSEE. THE FACT THAT THE 5 CAPITAL GAIN EARNED BY THE ASSESSEE AMOUNTED TO RS.53,68,084/- AND THE FACT THAT THE ASSESSEE WAS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 54 ON ACC OUNT OF INVESTMENT MADE IN A NEW FLAT IS NOT DISPUTED. T HE FINDINGS OF THE LD. CIT(APPEAL) THAT THE INVESTMENT MADE IN THE NEW FLAT TANTAMOUNTED TO CONSTRUCTION HAS NO T BEEN DISPUTED BY THE REVENUE IN APPEAL BEFORE US. T HE ONLY ISSUE FOR CONSIDERATION IS WHETHER THE INVESTM ENT MADE IN CONSTRUCTION OF THE NEW HOUSE PRIOR TO THE DATE OF SALE OF THE ORIGINAL ASSET AND THE INVESTMENT MA DE AFTER THE DUE DATE OF FILING OF RETURN OF INCOME AS SPECIFIED UNDER SECTION 139(1) OF THE ACT, IS ELIGI BLE FOR DEDUCTION UNDER SECTION 54 OF THE ACT. THE DETAILS OF THE INVESTMENT MADE IN THE CONSTRUCTION OF THE NEW HOUS E AS REPRODUCED IN THE ORDER OF THE CIT(A)IS AS UNDER: PERIOD AMOUNT(IN RS.) TIMING OF PAYMENTS PRIOR TO 07.11.2012 19,51,950/- EARLIER THEN 1 YEAR (BY DAUGHTER) 07.11.2011 TOO 07.11.2012 16,69,969/- 1 YEAR BEFORE DATE OF SALE (BY DAUGHTER) -DO- 8,52,197/- 1 YEAR BEFORE DATE OF SALE (BY APPELLANT) 07.11.2012 TO 30.10.2014 2,68,892/- AFTER DATE OF SALE (BY DAUGHTER) -DO- 22,84,153/- AFTER DATE OF SALE (BY APPELLANT) DECEMBER, 2014 4,84,700/- AFTER DATE OF SALE (BY APPELLANT) TOTAL 75,11,862/- 10. IT IS AN ADMITTED AND ACCEPTED FACT THAT THE F LAT WAS BOOKED BY THE ASSESSEES DAUGHTER AND INITIAL PAYMENTS MADE BY HER, ON BEHALF OF THE ASSESSEE, HE R FATHER, WHICH WAS LATER TRANSFERRED IN THE NAME OF THE ASSESSEE VIDE DEED OF TRANSFER/ASSIGNMENT DATED 24- 12- 2014.ALSO IT IS AN UNDISPUTED FACT ON RECORD THAT T HE 6 ASSESSEE HAD RETURNED MONEY TO HIS DAUGHTER BY 18- 11- 2014. FURTHER, OUT OF THE ABOVE INVESTMENT, THE AMO UNT INVESTED IN THE CONSTRUCTION OF THE NEW HOUSE PRIOR TO THE DATE OF SALE OF ORIGINAL ASSET AMOUNTED TO RS. 44,74,117/-.THE ASSESSEE HAS CONTENDED THAT OUT OF THE SAME, RS.19,51,950/- WAS INVESTED DURING THE PERIOD OF MORE THAN 1 YEAR BUT LESS THAN 2 YEARS PRIOR TO THE DATE OF SALE OF ORIGINAL ASSET ,WHILE THE BALANCE RS.25,22,166/- WAS INVESTED DURING THE PERIOD OF 1 YEAR PRIOR TO THE DATE OF SALE OF RESIDENTIAL HOUSE. THE REVENUE HAS NOT DISPUTED THE AFORESAID FACTS. DEDUC TION U/S 54 HAS BEEN DENIED ON THE SAME SINCE AS PER THE REVENUE IT IS ONLY INVESTMENT MADE AFTER THE SALE O F THE ORIGINAL ASSET WHICH IS ALLOWED AS PER THE SECTION. 11. FURTHER, THE INVESTMENT MADE IN THE NEW ASSET A FTER THE DUE DATE OF FILING OF RETURN, I.E. 31.07.2013 A MOUNTED TO RS.22,31,700/- AND THE SAME HAS BEEN DENIED F OR THE REASON THAT THE INVESTMENTS IN THE NEW HOUSE HA D TO BE MADE UP TO THE DUE DATE SPECIFIED UNDER SECTION 139(1) OF THE ACT, I.E. 31/07/2013. 12. WE HAVE ALSO GONE THROUGH THE ORDER OF MRS PARAMJEET KAUR (SUPRA) WHICH WAS REFERRED TO BY TH E LD. COUNSEL FOR THE ASSESSEE BEFORE US AND WE FIND THAT THE ISSUE IN THAT CASE WAS ALSO IDENTICAL. AS POINTED O UT BY LD.COUNSEL FOR THE ASSESSEE, THE ASSESSEE IN THAT C ASE WAS CO-OWNER OF THE HOUSE BEING OWNER OF 50% SHARE AND HAD SHOWN IDENTICAL CAPITAL GAINS EARNED FROM THE S AME, 7 OF RS.53,68,084/-. THE ASSESSEE IN THAT CASE HAD AL SO BEEN DENIED DEDUCTION UNDER SECTION 54 ON THE INVESTMENTS MADE IN THE CONSTRUCTION OF NEW HOUSE P RIOR TO THE DATE OF SALE OF ORIGINAL ASSET AND THE INVES TMENT MADE AFTER THE DUE DATE OF FILING OF RETURN OF INCO ME AS SPECIFIED IN SECTION 139 (1) OF THE ACT. THE ITAT I N THE SAID CASE HAD ALLOWED BOTH THE DEDUCTIONS CLAIMED BY THE ASSESSEE HOLDING THAT THE SECTION DOES NOT PLAC E ANY CONDITION ON THE DATE OF COMMENCEMENT OF CONSTRUCTI ON OF THE NEW HOUSE AND ONLY SPECIFIES THE PERIOD WITH IN WHICH THE CONSTRUCTION SHOULD BE COMPLETED FROM THE DATE OF SALE OF ORIGINAL ASSET I.E 3 YEARS. RELYING UPON SEVERAL DECISIONS OF THE HIGH COURT, THE TRIBUNAL H ELD THAT EVEN INVESTMENT MADE IN CONSTRUCTION OF NEW HO USE PRIOR TO THE DATE OF SALE OF ORIGINAL ASSET WAS ELI GIBLE FOR DEDUCTION UNDER SECTION 54. THE RELEVANT FINDINGS O F THE ITAT AT PARA 18 TO 21 OF THE ORDER IS AS UNDER: 18. THE MAIN ARGUMENT OF THE LD. COUNSEL FOR ASSESSEE HAS BEEN THAT HAVING ACCEPTED THE FACT THAT THE AMO UNT INVESTED IN NEW FLAT BY VIRTUE OF AGREEMENT ENTERED INTO WITH THE BUILDER TANTAMOUNTED TO CONSTRUCTION OF THE RESIDENTIAL HOUSE, THE ONLY LIMITATION PRESCRIBED BY SECTION 54 OF THE ACT WAS THAT THE CONSTRUCTION OUG HT TO HAVE BEEN COMPLETED WITHIN A PERIOD OF THREE YEARS AN D THE SAID SECTION DID NOT PRESCRIBE ANY CONDITION VI S-A-VIS THE COMMENCEMENT OF CONSTRUCTION. THE LD. COUNSEL FOR ASSESSEE HAS RELIED UPON SEVERAL CASE LAWS IN THIS REGARD. 18. WE HAVE GONE THROUGH THE DECISIONS RELIED UPON BY THE LD. COUNSEL FOR ASSESSEE AND FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. THE HON'BLE DELHI HIGH COURT IN THE CASE OF BHARATI MISHRA ((SUPRA) HAS CATEGORICALLY HELD THAT THE CONDITION STIPULATED BY SECTION 54F WHICH IS IDENTI CAL TO THAT IN SECTION 54 OF CONSTRUCTING A RESIDENTIAL HOUSE WITHIN THREE YEARS FOR THE PURPOSE OF CLAIMING DEDUCT ION 8 DOES NOT STIPULATE THAT THE CONSTRUCTION MUST HAVE TAKEN PLACE AFTER THE DATE OF SALE OF ORIGINAL OR OLD ASSET. THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT ARE AS UNDER: '12. SECTION 54F(1) IF READ CAREFULLY STATES THAT THE ASSESSEEE BEING AN INDIVIDUAL OR HINDU UNDIVIDED FAMILY, WHO HAD EARNED CAPITAL GAINS FROM TRANSFER OF ANY LONG-TERM CAPITAL NOT BEING A RESIDENTIAL HOUSE COULD CLAIM BENEFIT UNDER THE SAID SECTION PROVIDED, A NY ONE OF THE FOLLOWING THREE CONDITIONS WERE SATISFIED; ( I) THE ASSESSEE HAD WITHIN A PERIOD OF ONE YEAR BEFORE THE SALE, PURCHASED A RESIDENTIAL HOUSE; (II) WITHIN TWO YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL CAP ITAL ASSET, PURCHASED A RESIDENTIAL HOUSE AND (HI) WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF SALE OF THE ORIGINAL ASSET, CONSTRUCTED A RESIDENTIAL HOUSE. 13. FOR THE SATISFACTION OF THE THIRD CONDITION, IT IS NO T STIPULATED OR INDICATED IN THE SECTION THAT THE CONSTRUCTION MUST BEGIN AFTER THE DATE OF SALE OF TH E ORIGINAL/OLD ASSET. THERE IS NO CONDITION OR REASON FO R AMBIGUITY AND CONFUSION WHICH REQUIRES MODERATION OR READING THE WORDS OF THE SAID SUB-SECTION IN A DIFFE RENT MANNER. THE APPREHENSION OF THE REVENUE THAT THE ENTIRE MONEY COLLECTED OR RECEIVED ON TRANSFER OF THE ORIGINAL/CAPITAL ASSET WOULD NOT BE UTILISED IN THE CONSTRUCTION OF THE NEW CAPITAL ASSET, I.E., RESIDENTIAL HOUSE, IS ILL-FOUNDED AND MISCONCEIVED. THE REQUIREMENT OF SUB-SECTION (4) IS THAT IF CONSIDERATION WAS NOT APPROPRIATED TOWARDS THE PURCHASE OF THE NEW ASSET ONE YEAR BEFORE DATE OF TRANSFER OF THE ORIGINAL ASSE T OR IT WAS NOT UTILISED FOR PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FILING OF RETURN UNDER SECTION 139 OF THE ACT, THE BALANCE AMOUNT SHALL BE DEPOSITED IN AN AUTHORIZED BANK ACCOUNT UNDER A SCHEME NOTIFIED BY THE CENTRAL GOVERNMENT. FURTHER, ONLY THE AMOUNT WHICH WAS UTILISED IN CONSTRUCTION O R PURCHASE OF THE NEW ASSET WITHIN THE SPECIFIED TIME FRAME STAND EXEMPT AND NOT THE ENTIRE CONSIDERATION RECEIVED. 14. SECTION 54F IS A BENEFICIAL PROVISION AND IS APPLICABLE TO AN ASSESSEE WHEN THE OLD CAPITAL ASSET IS REPLACED BY A NEW CAPITAL ASSET INFORM OF A RESIDENTIA L HOUSE. ONCE AN ASSESSEE FALLS WITHIN THE AMBIT OF A BENEFICIAL PROVISION, THEN THE SAID PROVISION SHOULD B E LIBERALLY INTERPRETED. THE SUPREME COURT IN CCE VERSUS FAVOURITE INDUSTRIES , (2012) 7 SCC 153 HAS SUCCINCTLY OBSERVED:- '21. FURTHERMORE, THIS COURT IN ASSOCIATED CEMENT COMPANIES LTD. V. STATE OF BIHAR [(2004) 7 SCC 642] , WHILE EXPLAINING THE NATURE OF THE EXEMPTION NOTIFIC ATION AND ALSO THE MANNER IN WHICH IT SHOULD BE INTERPRETED HAS HELD: (SCC P. 648, PARA 12) 9 '12. LITERALLY 'EXEMPTION' IS FREEDOM FROM LIABILITY, T AX OR DUTY. FISCALLY IT MAY ASSUME VARYING SHAPES, SPECIALLY, IN A GROWING ECONOMY. IN FACT, AN EXEMPTION PROVISION IS LIKE AN EXCEPTION AND ON NORMAL PRINCI PLE OF CONSTRUCTION OR INTERPRETATION OF STATUTES IT IS CO NSTRUED STRICTLY EITHER BECAUSE OF LEGISLATIVE INTENTION OR O N ECONOMIC JUSTIFICATION OF INEQUITABLE BURDEN OF PROGRESSIVE APPROACH OFFISCAL PROVISIONS INTENDED TO AUGMENT STATE REVENUE. BUT ONCE EXCEPTION OR EXEMPTION BECOMES APPLICABLE NO RULE OR PRINCIPLE REQUIRES IT TO BE CONSTRUED STRICTLY. TRULY SPEAKING, LIBERAL AND STRICT CONSTRUCTION OF AN EXEMPTION PROV ISION IS TO BE INVOKED AT DIFFERENT STAGES OF INTERPRETIN G IT. WHEN THE QUESTION IS WHETHER A SUBJECT FALLS IN THE NOTIFICATION OR IN THE EXEMPTION CLAUSE THEN IT BEI NG IN THE NATURE OF EXCEPTION IS TO BE CONSTRUED STRICTLY AND AGAINST THE SUBJECT BUT ONCE AMBIGUITY OR DOUBT ABOU T APPLICABILITY IS LIFTED AND THE SUBJECT FALLS IN THE NOTIFICATION THEN FULL PLAY SHOULD BE GIVEN TO IT AND IT CALLS FOR A WIDER AND LIBERAL CONSTRUCTION. (SEE UNION O F INDIA V. WOOD PAPERS LTD. [(1990) 4 SCC 256 : 1990 SCC (TAX) 422] AND MANGALORE CHEMICALS AND FERTILISERS LTD. V. CCT [1992 SUPP (1) SCC 21] TO WHIC H REFERENCE HAS BEEN MADE EARLIER.)' 22. IN G.P. CERAMICS (P) LTD. V. CTT [(2009) 2 SCC 90] , THIS COURT HAS HELD: (SCC PP. 101-02, PARA 29) '29. IT IS NOW A WELL-ESTABLISHED PRINCIPLE OF LAW THA T WHEREAS ELIGIBILITY CRITERIA LAID DOWN IN AN EXEMPTIO N NOTIFICATION ARE REQUIRED TO BE CONSTRUED STRICTLY, ONCE IT IS FOUND THAT THE APPLICANT SATISFIES THE SAME, THE EXEMPTION NOTIFICATION SHOULD BE CONSTRUED LIBERALLY. [SEE CTT V. DSM GROUP OF INDUSTRIES[(2005) 1 SCC 657] (SCC PARA 26); TISCO LTD. V. STATE OF JHARKHAND [(2005) 4 SCC 272] (SCC PARAS 42-45); STATE LEVEL COMMITTEE V. MORGARDSHAMMAR INDIA LTD. [(1996) 1 SCC 108] ; NOVOPAN INDIA LTD. V. CCE & CUSTOMS [1994 SUPP (3) SCC 606) ; A.P. STEEL RE-ROLLING MILL LTD. V. STATE OF KERALA[(2007) 2 SCC 725] AND REIZ ELECTROCONTROLS (P) LTD. V. CCE. [(2006) 6 SCC 213]' 15. IN VIEW OF THE AFORESAID POSITION, WE DO NOT FIND ANY MERIT IN THE PRESENT APPEAL AND THE SAME IS DISMISSED.' 20. SIMILARLY, THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF H.K. KAPOOR (SUPRA) HAS ALSO REITERATED THE SAI D PROPOSITION STATING THAT THE EXEMPTION OF CAPITAL GA IN U/S 54 OF THE ACT CAN BE ALLOWED NOT WITHSTANDING THE FACT THAT THE CONSTRUCTION OF THE NEW HOUSE HAD BEG UN BEFORE THE SALE OF THE OLD HOUSE AGREEING WITH THE PROPOSITION LAID DOWN BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF J.R. SUBRAMANYA BHATT (SUPRA) A S UNDER: '5.THERE IS NO DISPUTE THAT THE BUILDING HAS BEEN 10 CONSTRUCTED WITHIN TWO YEARS FROM THE DATE OF SALE OF THE OLD BUILDING. THE OLD BUILDING WAS SOLD IN FEBRUARY, 1977. THE NEW BUILDING WAS COMPLETED IN MARCH, 1977, THE CONSTRUCTION OF WHICH HAD COMMENCED IN 1976. SEC . 54 OF THE IT ACT SO FAR AS IT IS RELEVANT PROVIDES: 'WHERE A CAPITAL GAIN ARISES FROM THE TRANSFER OF A CAPITAL ASSET TO WHICH THE PROVISIONS OF S. 53 ARE NOT APPLICABLE, BEING BUILDINGS OR LANDS APPURTENANT THER ETO THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', WHICH IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE ON WHICH THE TRANSFER TOOK PLACE, WAS BEING USED BY THE ASSESSEE OR A PARE NT OF HIS MAINLY FOR THE PURPOSES OF HIS OWN OR THE PA RENT'S OWN RESIDENCE, AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THAT DATE PURCHASED, OR HAS WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE CONSTR UCTED, A HOUSE VROPERTY FOR THE PURPOSES OF HIS OWN RESIDE NCE, 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 ACCORDAN CE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY,..' UNDER THIS SECTION, IF THE ASSESSEE HAS WITHIN A PERI OD OF ONE YEAR AFTER THE DATE ON WHICH THE TRANSFER TO OK PLACE PURCHASED OR HAS WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE, THEN , INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-T AX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFE R TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE OTHER PROVISIONS SET OUT IN THE SAID SECTION. THE TR IBUNAL ON AN APPRECIATION OF THE EVIDENCE HAS FIRSTLY FOUND THAT THE BUILDING WAS USED BY THE ASSESSEE MAINLY FOR HIS RESIDENTIAL PURPOSE. TAKING INTO CONSIDERATION THE AR EA OF THE BUILDING UNDER THE OCCUPATION OF THE ASSESSEE , IT HAS STATED THAT THE GROUND FLOOR OCCUPIED BY THE ASSESSEE INCLUDING THE GARAGE WAS 1 ,330 SQ. FT. THE LAND APPURTENANT TO THE GROUND FLOOR EXCLUDING THE LA ND OCCUPIED BY THE HOUSE WAS 4,795 SQ. FT. THAT WAS ALSO HELD TO BE UNDER THE OCCUPATION OF THE ASSESSEE. THIS BUILDING WITH THE LAND HAS BEEN SOLD. IT WAS ONLY THE FIRST FLOOR THAT WAS LET OUT. THE TRIBUNAL TOOK INTO CONSIDERATION THE EXTENT OF THE BUILDING USED MAINLY FOR THE RESIDENTIAL PURPOSE OF THE ASSESSEE AND FOUND THA T THE MAJOR PORTION OF THE BUILDING WAS UNDER THE OCCUPATION OF THE ASSESSEE. THE TRIBUNAL, THEREFORE, CONCLUDED THAT THE FIRST CONDITION PRESCRIBED UNDER S . 54 WAS SATISFIED. THIS FINDING, IT MAY BE SEEN, HAS BEEN ARRIVED AT BY THE TRIBUNAL UPON APPRECIATION OF THE EVIDENCE AND THE FACTUAL ASPECTS OF THE CASE. 6. SO TOO WAS THE NEXT CONCLUSION REACHED BU THE TRIBUNAL. THE DATE OF THE SALE OF THE OLD BUILDING WAS 9TH FEB., 1977. THE COMPLETION OF THE CONSTRUCTION OF T HE NEW BUILDING WAS IN MARCH, 1977, ALTHOUGH THE 11 COMMENCEMENT OF THE CONSTRUCTION STARTED IN 1976. IT IS IMMATERIAL, AS THE TRIBUNAL, IN OUR OPINION, HAS RIGHTLY OBSERVED, ABOUT THE DATE OF COMMENCEMENT OF THE CONSTRUCTION OF THE NEW BUILDING. SINCE THE ASSESSEE HAS CONSTRUCTED THE BUILDING WITHIN TWO UEARS FROM TH E DATE OF SALE OF THE OLD BUILDING, HE WAS ENTITLED TO REL IEF UNDER S. 54 OF THE ACT. ' 21. THE LD. DR HAS NOT BROUGHT ANY CONTRARY DECISIO N TO OUR NOTICE IN THIS REGARD, NOR BROUGHT TO OUR NOTICE ANY DISTINGUISHING FACTS IN THE PRESENT CASE SO AS TO DISTINGUISH THE CASE LAWS RELIED UPON BY THE LD. COU NSEL FOR ASSESSEE. IN VIEW OF THE SAME, WE HOLD THAT THE INVESTMENTS MADE BY THE ASSESSEE IN THE CONSTRUCTIO N OF THE HOUSE PRIOR TO THE SALE OF THE ORIGINAL ASSET IS ALSO ELIGIBLE FOR DEDUCTION U/S 54 OF THE ACT. THUS WE HO LD THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S 5 4 OF THE ACT OF RS. 18,52,650/- AND RS.25,40,389/- INVESTED IN THE CONSTRUCTION OF NEW ASSET PRIOR TO THE SALE OF ORIGINAL ASSET. GROUND NOS. 2.1 AND 2.2 RAISED BY THE ASSESSEE, THEREFORE, STAND ALLOWED. 13. THE ITAT ALSO DEALT WITH THE ISSUE OF INVESTMENT MAD E IN CAPITAL GAINS ACCOUNT SCHEME AFTER THE DUE DATE OF FILING OF RETURN AS SPECIFIED UNDER SECTION 139 (1) AND HELD THAT INVESTMEN TS MADE UP TO THE DATE OF FILING OF DELAYED RETURN AS SPECIFIED UNDE R SECTION 139 (4) WERE TO BE CONSIDERED FOR THE PURPOSE OF SECTIO N 54. THE ITAT THEREFORE ALLOWED THE DEDUCTION CLAIMED BY THE ASSE SSEE SINCE THE ENTIRE INVESTMENTS HAD BEEN MADE UP TO THE D ATE SPECIFIED UNDER SECTION 139 (4) THOUGH AFTER THE DUE DAT E OF FILING OF RETURN OF INCOME UNDER SECTION 139 (1). THE RELEVANT FINDINGS OF THE ITAT AT PARA 22 AND 23 OF THE ORDER ARE AS UNDER: 22. AS FAR THE AMOUNT INVESTED IN THE CAPITAL GAIN ACCOUNT SCHEME, IT IS NOT DISPUTED THAT THE SAID AMOU NT WAS DEPOSITED AFTER THE DUE DATE OF FILING OF THE RE TURN OF INCOME U/S 139(1) OF THE ACT. THE ASSESSMENT YEAR IN THE IMPUGNED CASE BEING ASSESSMENT YEAR 2013-14 THE DATE BY WHICH THE DELAYED RETURN COULD BE FILED U/S 139(4) IS 31.5.2015 I.E. ONE YEAR AFTER THE END OF THE RELEVANT ASSESSMENT YEAR. THE DEPOSIT IN THE CAPITAL GAIN ACCOUNT SCHEME HAS BEEN MADE ON 27.9.2013 WHICH IS WELL BEFORE THE DUE DATE FOR FILING THE RET URN OF INCOME U/S 139(4). THE HON'BLE JURISDICTIONAL HIGH COUR T IN THE CASE OF JAGRITI AGGARWAL (SUPRA), WHILE DEALING WITH AN IDENTICAL ISSUE HELD THAT THOUGH SECTION 54 12 STIPULATES DEPOSIT OF AMOUNT IN THE CAPITAL GAIN ACCOU NT SCHEME BEFORE THE DUE DATE SPECIFIED U/S 139(1), SECTION 139(4) WHICH EXTENDS THE DATE OF FILING OF RE TURN OF INCOME WAS HELD TO BE A PROVISO TO SUB-SECTION (1) OF SECTION 139 OF THE ACT AND NOT AN INDEPEN DENT PROVISION AND THUS THE HON'BLE COURT HELD THAT THE D UE DATE OF FURNISHING OF RETURN OF INCOME AS PER SECTI ON 139(1) WAS TO BE SUBJECTED TO THE EXTENDED PERIOD PROVIDED UNDER SUBSECTION (4) OF SECTION 139 OF THE ACT. THE RELEVANT FINDINGS OF THE HON'BLE COURT ARE AS UNDER: ' 10. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE OPINION THAT SUBS. (4) OF S. 139 OF THE AC T IS, IN FACT, A PROVISO TO SUB-S. (1) OF S. 139 OF THE ACT. SEC. 1 39 OF THE ACT FIXES THE DIFFERENT DATES FOR FILING THE RETURNS FOR DIFFERENT ASSESSEES. IN THE CASE OF ASSESSEE AS THE RESPONDENT, IT IS 31ST DAY OF JULY OF THE ASSESSMENT YEAR IN TERMS OF CL. (C) OF THE EXPLN. 2 TO SUB-S. (L)OFS. 1 39 OF THE ACT, WHEREAS SUB-S. (4) OF S. 139 PROVIDES FOR EXTENSION IN PERIOD OF DUE DATE IN CERTAIN CIRCUMSTANC ES. IT READS AS UNDER: '(4) ANY PERSON WHO HAS NOT FURNISHED A RETURN WITHIN THE TIME ALLOWED TO HIM UNDER SUB-S. (1), OR WITHIN THE TIME ALLOWED UNDER A NOTICE ISSUED UNDER SUB-S. (1) OF S. 142, MAY FURNISH THE RETURN FOR ANY PREVIOUS YEAR AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT WHICHEVER IS EARLIER: PROVIDED THAT WHERE THE RETURN RELATES TO A PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1988 OR ANY EARLIER ASSESSMENT YEAR, THE REFERENCE TO ONE YEAR AFORESAID SHALL BE CONSTRUED AS A REFERENCE TO TWO YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR.' 11. A READING OF THE AFORESAID SUB-SECTION WOULD SHOW THAT IF A PERSON HAS NOT FURNISHED THE RETURN OF TH E PREVIOUS YEAR WITHIN THE TIME ALLOWED UNDER SUB-S. (1) I.E., BEFORE 31ST DAY OF JULY OF THE ASSESSMENT YEAR, TH E ASSESSEE CAN FILE RETURN BEFORE THE EXPIRY OF ONE YEA R FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 12. THE SALE OF THE ASSET HAVING TAKEN PLACE ON 13TH JAN., 2006, FALLING IN THE PREVIOUS (SICASSESSMENT) YEAR 2006-07, THE RETURN COULD BE FILED BEFORE THE END OF RELEVANT ASST. YR. 2007-08 (2006-07) LE. 31ST MARCH, 2007. THUS, SUB-S. (4) OF S. 139 PROVIDES EXTENDED PERIOD OF LIMITATION AS AN EXCEPTION TO SUB-S. (1) OF S. 139 OF THE ACT. SUB-S. (4) IS IN RELATION TO THE TIME ALLOWED TO AN ASSESSEE UNDER SUB-S. (1) TO FILE RETURN. THEREFORE, SUCH PROVISION IS NOT AN INDEPENDENT PROVISION, BUT RELATES TO TIME CONTEMPLATED UNDER SUB -S. (1) OF S. 139. THEREFORE, SUCH SUB-S. (4) HAS TO BE READ 13 ALONG WITH SUB-S. (1). SIMILAR IS THE VIEW TAKEN BY THE DIVISION BENCH OF KARNATAKA AND GAUHATI HIGH COURTS IN FATIMA BAI AND RAJESH KUMAR JALAN CASES (SUPRA) RESPECTIVELY. 13. IN VIEW OF THE ABOVE, WE FIND THAT DUE DATE FOR FURNISHING THE RETURN OF INCOME AS PER S. 139(1) OF THE ACT IS SUBJECT TO THE EXTENDED PERIOD PROVIDED UNDE R SUB-S. (4) OF S. 139 OF THE ACT' 23. IN VIEW OF THE PROPOSITION LAID DOWN BY THE HON' BLE JURISDICTIONAL HIGH COURT IN THIS REGARD WE HOLD THAT THE ASSESSEE IN THE PRESENT CASE HAVING DEPOSITED THE AMOUNT IN THE CAPITAL GAIN SCHEME BEFORE THE DUE DATE SPECIFIED U/S 139(4), WAS ENTITLED TO CLAIM DEDUCTION O F THE SAME U/S 54 OF THE ACT. THUS THE DISALLOWANCE OF DEDUCTION MADE BY THE LD.CIT(APPEALS) TO THE EXTENT OF RS.2 LACS ON THIS ACCOUNT IS DELETED. GROUND NO.2.3 RAISED BY THE ASSESSEE IS, THEREFORE, ALLOWED. 14. THUS THE I.T.A.T. HAS HELD THAT THE ASSESSEE IS ENTIT LED TO EXEMPTION UNDER SECTION 54 ON INVESTMENT MADE IN COST O F NEW HOUSE BOTH PRIOR TO THE DATE OF SALE OF ORIGINAL ASSET A ND TO THE AMOUNT INVESTED IN CAPITAL GAINS ACCOUNT SCHEME UP TO T HE DATE OF FILING OF RETURN UNDER SECTION 139(4) OF THE ACT. 15. IN THE PRESENT CASE BEFORE US ,THE ASSESSEE BY WAY OF ITS GROUNDS OF APPEAL IN GROUND NO.2.1 & 2.2, HAS SOUGHT DE DUCTION U/S 54 ON THE AMOUNT INVESTED IN NEW ASSET PRIOR TO TH E DATE OF SALE OF ORIGINAL ASSET ,TO THE EXTENT OF RS.44,74,117/-, WHICH FOLLOWING THE AFORESAID DECISION OF THE ITAT, WE HOLD THAT THE ASSESSEE IS ENTITLED TO, HAVING MADE THE INVESTMENT WITHIN A REASONABLE PERIOD PRIOR TO THE DATE OF SALE OF ORIGINAL ASSET. GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN GROUND NO.2.1 & 2.2 THEREFORE ARE ALLOWED. 16. FURTHER THE ASSESSEE HAS SOUGHT DEDUCTION U/S 54 ON ACCOUNT OF THE AMOUNT INVESTED IN CAPITAL GAINS ACCOUNT S CHEME ON 27-09-2013, I.E AFTER THE DUE DATE OF FILING OF RETURN AS PER 14 SECTION 139(1) OF THE ACT, BUT BEFORE THE DUE DATE AS PE R SECTION 139(4) OF THE ACT, BEING 31.03.2015 IN THE PRESENT CASE, A ND AMOUNTING TO RS.2,00,000/-. IN THIS REGARD WE FIND THAT TH E FACTS BEFORE US ARE CONTRADICTORY, WITH THE LD.CIT(A) GIVING A FIN DING THAT NO INVESTMENT WAS MADE IN THE CAPITAL GAIN ACCOUNT SCHEM E, WHILE THE ASSESSEE HAS CLAIMED OTHERWISE. WE THEREFORE C ONSIDER IT FIT TO RESTORE THE MATTER BACK TO THE ASSESSING OFFICER T O RE-EXAMINE THE CLAIM OF THE ASSESSEE OF DEDUCTION U/S 54 TO THE EXT ENT OF THE BALANCE AMOUNT OF RS.2,00,000/- AFTER DULY VERIFYING THE FA CTS RELATING TO IT. WE MAY ADD THAT THE ASSESSEE BE GRANT ED DUE OPPORTUNITY OF HEARING AND THE ISSUE THEREAFTER BE DECIDE D IN ACCORDANCE WITH LAW. 17. IN VIEW OF THE ABOVE GROUND NO.2.3 STANDS ALLOWED FOR STATISTICAL PURPOSES. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 05 FEBRUARY, 2018 *RATI*/AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)S 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH