ITO, JODHPUR V. Sh. Dinesh kumar Gupta, JODHPUR

ITA 83/JODH/2013

• Counselvise Citation: 8323314 RSA 2013
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 18-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R H GOHEL
• Keywords: Capital asset
• Section: 54F; 54; 6; 139

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 83/JODH/2013 (A.Y. 2009-10) THE ITO VS SHRI DINESH KUMAR GUPTA WARD 3(2) 447, MILKMAN COLONY JODHPUR. PAL ROAD, JODHPUR PAN N O. AAQPG 2644 M [APPELLANT] [RESPONDENT] ASSESSEE BY : SHRI RAJENDRA JAIN DEPARTMENT BY : SHRI R.H. GOHEL DATE OF HEARING : 30/07/2013. DATE OF PRONOUNCEMENT : 30/08/2013. O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL BY THE REVENUE FOR A.Y. 2009-10 IS DIR ECTED AGAINST THE ORDER OF LD. CIT(A), JODHPUR DATED 10/12/2012. 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE DERIVED HIS INCOME FROM SHARE OF PROFIT, DEALING IN COMMODI TY EXCHANGE & CAPITAL GAINS. HE FILED HIS RETURN OF INCOME FOR A Y 2009-10 ON 31-12- 2009 DECLARING TOTAL INCOME OF RS. 3,91,910/-. THE ASSESSEE IS ALSO PARTNER IN M/S. AGARWAL INDUSTRIES, JODHPUR AND M/S . AGARWAL UDHYOG. ON VERIFICATION OF THE DETAILS FURNISHED, THE ASSES SING OFFICER NOTICED THAT DURING THE FY 2008-09 RELEVANT TO AY 2009-10, THE ASSESSEE HAS SOLD A PLOT WHICH WAS ACQUIRED IN THE FY 1998-99 FO R RS. 4,25,000/- (COST OF THE PLOT RS. 3,66,000/- + REGISTRATION CHA RGES RS. 59,000/-) FOR SALE CONSIDERATION OF RS. 40 LACS. THE LONG TERM CA PITAL GAINS AROSE TO THE TUNE OF RS. 32,95,299/- AFTER DUE INDEXATION. T HE ASSESSEE HAS CLAIMED EXEMPTION U/S 54F ON THE ALLEGED CONSTRUCTI ON OF A HOUSE AT A-309, SHASTRI NAGAR, JODHPUR. IT WAS SUBMITTED BY THE ASSESSEE THAT THE OLD HOUSE AT A -309, SHASTRI NAGAR, JODHP UR WAS PURCHASED IN FINANCIAL YEAR 2003-04 AT A TOTAL COST OF RS. 23,50 ,000/- AND IN FINANCIAL YEAR 2005-06 THIS OLD HOUSE WAS FULLY DEM OLISHED AND CONSTRUCTION OF NEW HOUSE THEREON WAS STARTED. IT W AS FURTHER SUBMITTED THAT THE NEW RESIDENTIAL HOUSE WAS BUILT WITH HOUSING LOAN OBTAINED FROM PNB BANK, JODHPUR IN JOINT NAME OF TH E ASSESSEE AND HIS WIFE FOR RS. 29,00,000/-. THE ASSESSING OFFICER FUR THER STATED THAT THE ABOVE OLD HOUSE WAS PURCHASED THROUGH REGISTERED DE ED EXECUTED ON 3 19-6-2003 AND THERE WAS A ROOM IN THE UNDERGROUND A ND FOUR ROOMS, ONE KITCHEN, A VERANDAH, TWO BATHROOMS, TWO TOILETS , ONE GARAGE ETC. THE TOTAL AREA OF THE PLOT AND AREA OF HOUSE CONSTR UCTED ON IT WAS 3480 SQ. FT. AND 2000 SQ. FT. RESPECTIVELY. THE ASSESSIN G OFFICER FURTHER STATED THAT THE ASSESSES OWNED A READY BUILT HOUSE IN JOINT NAME WITH HIS WIFE ON THE DATE OF SALE OF PLOT AND THE CAPITA L GAIN AROSE ON THE SALE OF PLOT WAS CLAIMED TO HAVE BEEN UTILIZED IN T HE CONSTRUCTION OF THE HOUSE WHICH WAS ALREADY CONSTRUCTED AND READY B UILT. HE , THEREFORE, WAS OF THE OPINION THAT CLAIM OF EXEMPT ION U/S 54 OF I.T, ACT, 1961 WAS NOT TENABLE AS THE CONDITIONS LAID DO WN IN SECTION 54 HAVE NOT BEEN FULFILLED BY THE ASSESSEE. 2.1 THE ASSESSING OFFICER RELIED ON THE PROVISION O F SEC. 54F AND IT IS CONCLUDED THAT SUB-SEC (1) OF SEC. 54F SHOULD BE RE AD ALONG WITH SUB- SEC(4). IT CANNOT BE READ IN ISOLATION BECAUSE THE BENEFIT OF SEC. 54F IS TO BE ALLOWED ONLY SUBJECT TO THE PROVISION OF SUB- SEC, (4) OF THE SAID SECTION. THIS SECTION ALLOWS THE BENEFIT OF EXEMPTI ON TO THE INDIVIDUAL OR AN HUF IN WHICH CASE THE CAPITAL GAIN ARISES FRO M TRANSFER OF ANY LONG TERM CAPITAL ASSET NOT BEING A RESIDENTIAL HOU SE AND ASSESSEE HAS WITHIN ONE YEAR OF PERIOD BEFORE OR TWO YEAR AFTER THE DATE OF ON WHICH THE TRANSFER IS TOOK PLACE, PURCHASED OR HAS WITHIN A PERIOD OF THREE 4 YEARS AFTER THAT DATE CONSTRUCT A RESIDENTIAL HOUSE , THE CAPITAL GAIN SHALL BE DEALT IN ACCORDANCE WITH PROVISION LAID DO WN IN THIS SECTION. SUB SEC (4) FURTHER STATES THAT THE AMOUNT OF THE N ET CONSIDERATION WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS T HE PURCHASES OF NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON W HICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE OR WHICH IS NOT UT ILIZED WITH HIM FOR PURCHASE OF CONSTRUCTION OF THE NEW ASSET BEFORE TH E DATE OF THE FILING OF THE RETURN U/S 139 SHALL BE DEPOSITED BY HIM BEF ORE FURNISHING SUCH RETURN IN AN ACCOUNT IN ANY BANK OR ANY INSTITUTION AS MAY BE SPECIFIED BY THE CENTRAL GOVERNMENT. ACCORDING TO THE ASSESS ING OFFICER, IN THE INSTANT CASE, TO AVAIL THE STATUTORY BENEFIT OF SEC . 54F OF THE I. T. ACT, 1961 THE ASSESSEE SHOULD HAVE WITHIN A PERIOD OF ON E YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIOD OF 3 YEARS AFTER THE DATE CONST RUCTED A RESIDENTIAL HOUSE. THE CLAIM OF THE ASSESSEE WAS NOT FOUND TENA BLE BY STATING THAT THE ASSESSEE ALREADY OWNED A RESIDENTIAL HOUSE IN T HE JOINT NAME OF HIS WIFE AND ALSO PURCHASE OF THE SAID HOUSE WAS ALSO B EYOND THE TIME LIMIT PRESCRIBED U/S SEC. 54F. THE ASSESSEE ALSO FA ILED TO CONSTRUCT A RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS AF TER THE DATE OF TRANSFER OF THE ORIGINAL ASSETS. 5 2.2 FURTHER BY CITING VARIOUS JUDICIAL DECISIONS, T HE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DE DUCTION/EXEMPTION U/S 54 AND DENIED ACCORDINGLY BY ADDING THE SUM OF LTCG. DURING THE COURSE OF THE APPELLATE PROCEEDING, THE ASSESSEE FI LED WRITTEN SUBMISSIONS WHEREIN IT WAS CONTENDED THAT THE ASSES SING OFFICER ERRED IN WITHDRAWING THE EXEMPTION WORTH RS. 32,95,299/- CLAIMED BY THE ASSESSEE U/S 54 F OF THE I. T. ACT, 1961. IT WAS FU RTHER SUBMITTED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING, THE ASSESSEE HAD ALREADY FILED DETAILS AND SUBMISSION IN SUPPORT OF HIS CLAIM, WHICH WERE IGNORED BY THE ASSESSING OFFICER. AGAINST THE ASSES SING OFFICER'S OBSERVATION THAT THE INVESTMENT HAS NOT BEEN MADE O UT OF THE PROCEEDS OF THE ORIGINAL ASSETS, IT WAS SUBMITTED B EFORE THE ASSESSING OFFICER THAT NOWHERE IN SEC. 54F IT HAS BEEN STATED THAT INVESTMENT IN NEW ASSETS HAS TO BE NECESSARILY MADE OUT OF THE SA LE PROCEEDS OF THE TRANSFERRED PROPERTY ONLY AND IT IS CLEAR FROM OPTI ON PROVIDED IN SECTION TO INVEST WITHIN A PERIOD OF ONE YEAR BEFOR E THE DATE OF TRANSFER TAKES PLACES. FURTHER, IT WAS SUBMITTED BE FORE THE ASSESSING OFFICER THAT REGARDING COMPLETION OF CONSTRUCTION H OUSE THAT THE NEW RESIDENTIAL HOUSE WAS UNDER CONSTRUCTION AT TIME I. E. SALE OF ORIGINAL ASSET AND THE INVESTMENT THEREIN CONTINUED RIGHT UP TO SEPTEMBER, 2009, THIS FACT FULFILLED THE CONDITION LAID DOWN I N SEC. 54F THAT 6 INVESTMENT IN CONSTRUCTION OF NEW RESIDENTIAL HOUSE SHOULD BE COMPLETED WITHIN THREE YEARS FROM THE SALE OF ORIGI NAL ASSETS. THE ASSESSEE ALSO CITED VARIOUS DECISIONS IN FAVOUR OF HIS CONTENTION AND IT WAS CLAIMED THAT THE ASSESSEE HAS RIGHTLY CLAIMED E XEMPTION U/S 54F. IT WAS ALSO SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE NEW RESIDENTIAL HOUSE WAS BUILT WITH HOUSING LOAN TAKEN FROM PNB, JODHPUR AND THE ASSESSEE BEGAN RESIDING IN THE NEW HOUSE TO WARDS THE END OF FINANCIAL YEAR 2008-09. IT WAS ALSO SUBMITTED BEFOR E THE ASSESSING OFFICER THAT SAID NEW HOUSE WAS PURCHASED IN FINANC IAL YEAR 2003-04 AT A COST OF RS. 23,50,000/- AND THERE WERE NO INVESTM ENT NOR ANY ADDITION OR ALTERNATION TILL 2004-05; THAT ONLY IN FINANCIAL YEAR 2005-06 AFTER GETTING AND OBTAINING FRESH APPROVAL ON 27-10 -2005, THE ASSESSEE STARTED CONSTRUCTION WORK AT PLOT NO A-307, SHASTRI NAGAR, JODHPUR AFTER DEMOLISHING WHOLE OLD HOUSE BUILDING WITH THE LOAN FROM PNB. THE DETAILS OF EXPENSES INCURRED, HOUSING LOAN INTE REST CERTIFICATE FROM PNB AND OTHER RELEVANT DETAILS WERE ALSO SUBMITTED BY THE ASSESSEE. IT IS CLAIMED BY THE APPELLANT THAT THE ASSESSEE RIGHT LY CLAIMED EXEMPTION U/S 54F BUT MAINLY ON THE GROUND THAT THE ASSESSES HAD PURCHASED A READY BUILT HOUSE IN THE YEAR 2003-04 R EJECTED HIS CLAIM WHEREAS FACT IS THAT THE ASSESSEE ACTUALLY DEMOLISH ED SAID OLD HOUSE DURING THE YEAR 2005-06 AND CONSTRUCTION OF NEW HOU SE WAS MADE AT 7 THAT PLACE. THE ASSESSEE RECEIVED ADVANCE FROM THE POTENTIAL BUYER OF PLOT IN THE MONTH OF FEBRUARY-MARCH, 2008 AGGREGATI NG TO RS. 24 LACS THAT THEREAFTER THE REGISTRATION OF TITLE DOCUMENTS IN FAVOUR OF BUYER OF PLOT WAS MADE AND POSSESSION WAS HANDED OVER TO HIM IN APRIL, 2008. IT WAS CONTENDED BY THE APPELLANT THAT THE ASSESSIN G OFFICER FAILED ON THE TEST OF LEGALITY AS WELL AS ON FACTS. 2.3 DURING THE APPELLATE PROCEEDING ALSO, THE APPEL LANT REITERATED ALL THE FACTS REGARDING CONSTRUCTION OF NEW HOUSE THAT SAID HOUSE WAS FULLY DEMOLISHED AND CONSTRUCTION WAS STARTED AFRESH IN T HE YEAR 2005-06 AFTER GETTING THE MAP APPROVAL BY THE LOCAL AUTHORI TY. THE HOUSE PURCHASED IN 2003-04 WAS NO MORE IN EXISTENCE AFTER THE SAID DEMOLITION AND THE NEW HOUSE WITH AN ALTOGETHER DIF FERENT MAP CONSTRUCTED AT THAT PLACE CAN NEITHER BE TERMED AS OLD HOUSE OR EXTENSION/ RENOVATION OF AN ALREADY EXISTING HOUSE. THE PHYSICAL EXISTENCE OF NEW HOUSE ALONG WITH SUPPORTING EVIDEN CES SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDING PROVE TH AT IT WAS A COMPLETELY NEW HOUSE AND HAS NO RESEMBLANCE OR CONN ECTION WITH THE CONSTRUCTION WORK OF OLD HOUSE. THIS DISPROVES THE ASSESSING OFFICER'S OBSERVATION THAT THE ASSESSEE OWNED A READY HOUSE O N THE DATE OF SALE OF PLOT. IT IS FURTHER SUBMITTED THAT IT IS NOT AT ALL NECESSARY THAT THE 8 INVESTMENT IN NEW ASSET SHOULD BE NECESSARILY MADE OUT OF THE SALE PROCEEDS OF ORIGINAL ASSET AND THEREFORE, IMPOSITIO N OF SUCH A PRESUMPTIVE PRE-CONDITION IS NEITHER JUSTIFIED NOR WARRANTED BY THE STATUE. SO THE ASSESSING OFFICER'S OBSERVATION THAT INVESTMENT IN RESIDENTIAL HOUSE HAS NOT BEEN MADE OUT OF SALE PRO CEEDS OF PLOT HAS NO RELEVANCE TO DECIDE WHETHER THE ASSESSEE IS ELIG IBLE FOR DEDUCTION U/S 54F BECAUSE SEC. 54F NOWHERE SAYS THAT INVESTME NT IN NEW ASSET HAS TO BE MADE OUT OF THE SALE CONSIDERATION OF ORI GINAL ASSET; THAT CONSTRUCTION WORK CONTINUED TILL FINANCIAL YEAR 200 8-09. IN THIS CASE, THE ASSESSEE OPTED FOR INVESTMENT IN CONSTRUCTION O F NEW HOUSE AND THE CONSTRUCTION OF NEW HOUSE COMPLETED WITHIN A PE RIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSETS AND THE DATE OF COMMENCEMENT OF CONSTRUCTION IS OF NO RELEVANCE AT ALL. IN THE SUPPORT OF HIS CONTENTION, THE APPELLANT RELIED VARIOUS JUD ICIAL DECISIONS. IN VIEW OF ABOVE, THE ESSENCE OF THE APPELLANT'S SUBMI SSION IS THAT THE APPELLANT'S CLAIM FOR DEDUCTION U/S 54F IS ALLOWABL E IN VIEW OF THE FACT THAT THE CAPITAL GAIN ARISING FROM THE SALE OF ORIG INAL ASSET WAS INVESTED IN THE CONSTRUCTION OF NEW RESIDENTIAL HOUSE AS CON STRUCTION WAS CARRIED TILL THE END OF FINANCIAL YEAR 2008-09 WHIC H IS AS PER THE REQUIREMENT OF SEC. 54F THAT INVESTMENT IN CONSTRUC TION OF NEW RESIDENTIAL HOUSE SHOULD BE COMPLETED WITHIN A PERI OD OF THREE YEARS 9 FROM THE DATE OF TRANSFER OF ORIGINAL ASSETS. THE APPELLANT ALSO FURNISHED COPIES OF COMPUTATION OF INCOME, COPIES O F ORDER OF LOCAL AUTHORITY APPROVING THE MAP AND SUPPORTING DOCUMENT S, COPIES OF DOCUMENTS EVIDENCING GRANT OF HOUSING LOAN BY PNB H OUSING FINANCE LIMITED FOR CONSTRUCTION OF NEW RESIDENTIAL HOUSE. ALL THESE ALONG WITH WRITTEN SUBMISSION WERE SENT TO THE ASSESSING OFFIC ER FOR REMAND REPORT. IN THE REMAND REPORT, THE ASSESSING OFFICER MAINLY RELIED ON THE FACTS AND FINDING GIVEN IN THE ASSESSMENT ORDER . AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A). 3. WE HAVE CONSIDERED THE FACTS OF THE CASE. WE HAV E GONE THROUGH THE ASSESSMENT ORDER OF THE ASSESSING OFFICER AND S UBMISSION OF THE APPELLANT AND FIND THAT DURING THE F.Y. 2008-09 RELEVANT TO AY 2009-10, THE APPELLANT HAS SOLD A PLOT FOR SALE CONSIDERATION OF RS. 40 LACS WHICH WAS ACQUIRED IN THE FY 1998-99 AND CLAIMED EXEMPTION U/S 54F ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF A HOUSE AT A- 309, SHASTRI NAGAR, JODHPUR. THE ASSESSING OFFICER DENIED THE EXEMPTION U/'S 54F FOR THE REASON THAT THE APPELLAN T OWNED A READY BUILT HOUSE ON THE DATE OF SALE OF ORIGINAL ASS ET. IT WAS CLAIMED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER TH AT THE OLD HOUSE WAS TOTALLY DEMOLISHED AND A NEW HOUSE AS PER MAP A PPROVED FROM LOCAL AUTHORITY WAS CONSTRUCTED AND CONTINUED TILL FINANC IAL YEAR 2008-09 10 AND ONLY IN APRIL 2008 THE OF OLD ASSET WAS HANDED OVER. SO IT WAS CLAIMED BEFORE THE ASSESSING OFFICER THAT APPELLANT FULFILLED THE CONDITION LAID DOWN IN SEC. 54F. HOWEVER, THE ASSES SING OFFICER DENIED THE EXEMPTION CLAIMED BY THE APPELLANT. 4. AFTER CONSIDERING THE RIVAL SUBMISSION, THE LD. CIT(A) HELD AS UNDER: DURING THE COURSE OF THE APPELLATE PROCEEDING, THE APPELLANT RELIED ON SUBMISSION MADE BEFORE THE ASSE SSING OFFICER AND ALSO TRIED TO JUSTIFY HIS CLAIM THAT TH E APPELLANT IS ELIGIBLE FOR DEDUCTION/ EXEMPTION U/S 54F. IT IS SUBMITTED BY THE APPELLANT THAT THE PLOT WAS PURCHA SED IN FINANCIAL YEAR 1998-99 FOR RS. 4.25 LACS. THE SAME PLOT WAS SOLD IN FINANCIAL YEAR 2008-09 FOR RS. 40 LACS AND CLAIMED LONG TERM CAPITAL GAIN RS. 32.95 AS AGAINST THE CON STRUCTION OF NEW HOUSE. THE APPELLANT HAS STATED THAT THE ASS ESSEE PURCHASED OLD HOUSE IN F.Y. 2003-04 AND SAME WAS DEMOLISHED IN F.Y. 2005-06 AND CONSTRUCTION WORK CONTINUED TILL FINANCIAL YEAR 2008-09. IT IS THE C ONTENTION OF THE APPELLANT THAT PROVISION OF SEC. 54F NOWHERE STATES THAT THE INVESTMENT IN NEW ASSETS HAS TO BE NECESSA RILY MADE OUT OF THE SALE PROCEEDS OF THE TRANSFERRED PR OPERTY. THE BASIC CONDITION IS THAT INVESTMENT IN CONSTRUCT ION OF NEW RESIDENTIAL HOUSE SHOULD BE COMPLETED WITHIN TH REE YEARS FROM THE SALE OF ORIGINAL ASSETS, WHICH IN TH E INSTANT CASE FULFILLED BY THE APPELLANT. 11 FROM ABOVE, I FIND THAT THE APPELLANT IS ELIGIBLE F OR EXEMPTION U/S 54F. SECTION 54F PROVIDES THAT ' (1) SUBJECT TO THE PROVISION OF SUB-SECTION (4), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED F AMILY], THE CAPITA! GAIN ARISES FROM THE TRANSFER OF ANY LO NG-TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREA FTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AN D THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR [TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TOOK PL ACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROV ISIONS OF THIS SECTION, THAT IS TO SAY, -.' SO FROM THE PROVISION OF SEC. 54F IT IS CLEAR THAT SALE PROCEEDS OF ORIGINAL ASSET SHOULD BE USED FOR PURCH ASING A HOUSE IN TWO YEAR AND CONSTRUCT A HOUSE WITHIN THRE E YEARS. IN THE INSTANT CASE THE APPELLANT'S CLAIM IS THAT HE CONSTRUCTED A HOUSE WITHIN 3 YEAR FROM THE DATE OF TRANSFER OF ORIGINAL ASSET TOOK PLACE. THE ASSESSIN G OFFICER WAS OF THE VIEW THAT THIS WAS ALREADY READY BUILT H OUSE. THE APPELLANT HAS SUBMITTED THAT DURING THE COURSE OF THE APPELLATE PROCEEDING THAT IN FINANCIAL YEAR 2005-06 AFTER THE GETTING THE APPROVAL FROM THE LOCAL AUTHORITY, THE OLD HOUSE WAS DEMOLISHED AND A NEW CONSTRUCTION WORK WA S STARTED AS PER THE APPROVED MAP. THE APPELLANT ALSO FURNISHED THE COPY OF THE MAP, APPROVAL LETTER DATE D 28- 12 10-2005 FROM UIT, LOAN CERTIFICATE FROM PNB. THESE DOCUMENTS WERE SENT TO THE ASSESSING OFFICER FOR RE MAND REPORT. IN THE REPORT, THE ASSESSING OFFICER HAS NO T GIVEN ANY SPECIFIC COMMENT ON THE ABOVE DOCUMENTS BUT ONL Y REITERATED THE FACTS AND FINDING GIVEN IN THE ASSES SMENT ORDER. I FIND THAT TO BE ELIGIBLE FOR EXEMPTION U/S 54F ONE CONDITION IS THAT A NEW HOUSE IS REQUIRED TO BE CON STRUCTED WITHIN 3 YEAR FROM THE DATE OF SALE OF OLD ASSET. I N THIS CASE, THE APPELLANT HAD STARTED THE CONSTRUCTION WO RK IN FINANCIAL YEAR 2005-06 AFTER GETTING THE APPROVAL F ROM THE UIT, WHICH PROVES THE FACT THAT HE ACTUALLY DEMOLIS HED WHOLE OLD BUILDING AND THEN STARTED TO CONSTRUCT A NEW HOUSE BUILDING AS PER MAP. THIS CONSTRUCTION WORK W AS CARRIED TILL THE FINANCIAL YEAR 2008-09. FURTHER I FIND THAT THE APPELLANT HAS OBTAINED A LOAN FROM PNB IN FOUR INSTALLMENTS AND AFTER EACH INSTALLMENT THE BANK HA S GIVEN CERTIFICATE FOR RELEASE OF EACH LOAN INSTALLMENT. S O, THIS IS TOTALLY AGAINST THE ASSESSING OFFICER'S FINDING THA T THERE WAS A READY BUILT HOUSE ON THE DATE OF SALE OF ORIG INAL ASSET. THE APPELLANT SOLD HIS PLOT IN THE YEAR UNDE R CONSIDERATION AND CLAIMED EXEMPTION ON THE LONG TER M CAPITAL GAIN AROSE ON THE SALE OF THIS PLOT AGAINST THE CONSTRUCTION OF NEW HOUSE AT A - 309, SHASTRI NAGAR , JODHPUR, WHICH WAS ALREADY IN CONSTRUCTION WHEN THE PLOT WAS SOLD. FURTHER I FIND THAT IN SECTION 54F IT IS ONLY STATED THAT A NEW HOUSE SHOULD BE CONSTRUCTED WITHIN THREE YEAR AND NOWHERE COMMENCEMENT OF DATE OF CONSTRUCTION WO RK IS MENTIONED. ON THIS ISSUE, THE HON'BLE ALLAHABAD HIGH 13 COURT IN THE CASE OF CIT VS. H. K. KAPOOR (DECB) TH ROUGH LR HAS HELD THAT EXEMPTION ON CAPITAL GAIN U/S 54 COUL D BJ3 ALLOWED NOTWITHSTANDING THE FACT THAT THE CONSTRUCT ION OF THE NEW HOUSE HAD BEGUN BEFORE THE SALE OF OLD HOUS E. IN THE INSTANT CASE ALSO, THE CONSTRUCTION OF NEW HOUS E HAD BEGUN BEFORE THE SALE OF OLD HOUSE. DURING THE COURSE OF THE REMAND PROCEEDING, THE ASS ESSING OFFICER RAISED ISSUE OF APPROPRIATION OR SAY SUB SE C. (4) OF SEC. 54F. IN THIS REGARD, I FIND THAT NOWHERE IN SE C 54F, IT IS MENTIONED THAT FOR PURCHASE OF NEW RESIDENTIAL HOUS E, SAME AMOUNT I.E. ACTUAL SALE CONSIDERATION SHOULD B E APPROPRIATED. IF THIS CONTENTION OF THE ASSESSING Q FFLGGR IS ACCEPTED THEN, THE LEGISLATURE'S INTENTION THAT THE ONE CAN PURCHASE A RESIDENTIAL BEFORE THE TRANSFER OF LONG TERM REMAIN NO MORE IN EXISTENCE. SO THIS CONTENTION OF THE ASSESSING OFFICER CANNOT BE ACCEPTED. UNDER THE FAC TS OF THE CASE, THE INTENTION OF THE ASSESSEE IS RELEVANT . IN THE INSTANT CASE THE CONSTRUCTION OF NEW HOUSE WAS ACTU ALLY STARTED BEFORE THE SALE OF PLOT BY TAKING LOAN FROM PNB, BANK AND COMPLETED WITHIN THE THREE YEAR FROM THE D ATE OF SALE OF PLOT. THE HON'BLE MADRAS HIGH COURT, IN THE CASE OF CIT VS. R. SRINIVASAN HAS HELD THAT FOR CLAIMING EX EMPTION FROM CAPITAL GAIN U/S 54F, THERE IS NO CONDITION TH AT THE INVESTMENT IN THE NEW ASSET SHOULD BE FROM THE SALE CONSIDERATION OF THE ORIGINAL ASSET AS THE PROVISIO N OF SEC. 54F PROVIDES AN OPTION TO THE ASSESSEE TO INVEST EV EN WITHIN A PERIOD OF ONE YEAR BEFORE THE DATE OF TRAN SFER OF 14 THE ORIGINAL ASSET. IN THE CASE OF BOMBAY HOUSING CORPORATION REPORTED IN 76 TTJ (MUM) 25 THE HON'BLE TRIBUNAL HELD THAT EVEN IF ASSESSEE BORROWS REQUIRE D FUNDS AND SATISFIES THE CONDITIONS RELATING TO INVESTMENT IN SPECIFIED ASSET, HE IS ENTITLED TO. EXEMPTION. THER E IS NO NEED FOR CLAIMING EXEMPTION U/S 54 THAT THE SAME AM OUNT OF SALE CONSIDERATION SHOULD BE UTILIZED FOR PURCHA SING THE PROPERTY AND EVEN BORROWED FUNDS CAN BE UTILIZED FO R THAT PURPOSE. THE HON'BLE KERALA HIGH IN THE CASE OF K. C. GOPALA N REPORTED IN 162 CTR 566 HELD THAT ASSESSEE HAS TO C ONSTRUCT OR PURCHASE A NEW HOUSE PROPERTY FOR HIS OWN RESIDE NCE IN ORDER TO GET BENEFIT OF SECTION 54 LAW DOES NOT INS IST THAT SALE CONSIDERATION OBTAINED BY THE ASSESSEE ITSELF SHOULD BE UTILIZED TO EXEMPTION U/S 54 EVEN THOUGH FOR THE CONSTRUCTION OF NEW HOUSE, THE AMOUNT THAT WAS RECE IVED BY WAY OF SALE OF HIS OLD PROPERTY AS SUCH WAS NOT UTILIZED. 4.3.6. 'O IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT THE ASSESSING OFFICER'S MAIN OBJECTION FOR REJECTING TH E CLAIM OF THE APPELLANT WAS THAT THE APPELLANT OWNED READY BUILT HOUSE WITH HIS WIFE. FROM THE FACTS DISCUSSED ABOVE , IT IS CLEAR THAT THE APPELLANT HAS DEMOLISHED THE OLD HOU SE BUILDING AND CONSTRUCTED A NEW HOUSE AS APPROVED PL AN WITHIN 3 YEARS FROM THE SALE OF PLOT. THEREFORE, I HOLD THAT THE ASSESSEE HAS RIGHTLY CLAIMED THE EXEMPTION U/S 54F OF THE I. T. ACT, 1961 WHEREAS THE ASSESSING OFFICER W AS NOT JUSTIFIED IN NOT GRANTING DEDUCTION U/S 54F AMOUNTI NG TO 15 RS. 32,95,299/- IN RELATION TO INVESTMENT IN CONSTR UCTION OF RESIDENTIAL HOUSE. THE ADDITION MADE IS HEREBY DEL ETED. THE GROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED, THE REVENUE IS IN APPEAL AND HAS COME IN APPEAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. BOTH THE PARTIES HA VE REITERATED THEIR ORIGINAL ARGUMENTS. AFTER CONSIDERING THE RIVAL SU BMISSIONS IN THE LIGHT OF OBTAINING FACTS OF THE CASE, WE HAVE FOUND THAT DURING F.Y. 2008-09, THE ASSESSEE HAD SOLD THIS PLOT FOR CONSIDERATION O F RS. 40 LAKHS. THIS PLOT WAS ACQUIRED BY THE ASSESSEE IN THE F.Y. 1998- 99. THE ASSESSEE GOT THE HOUSE CONSTRUCTION AT SHASTRI NAGAR, JODHPU R AFTER COMPLETELY RAZING THE OLD HOUSE. THERE IS NO DISPUTE ABOUT TH E ABOVE FACTS. AS PER SECTION 54F(4), THE MAIN REQUISITE CONDITIONS A RE THAT THE INVESTMENT IN CONSTRUCTION OF ANY RESIDENTIAL HOUSE SHOULD BE MADE WITHIN THREE YEARS FROM THE DATE OF SALE OF ORIGIN AL ASSETS. AS PER SUB- SECTION 4 OF SECTION 54F, IF THE CAPITAL GAIN ARISI NG FROM TRANSFER OF ANY LONG TERM CAPITAL ASSET, NOT BEING A RESIDENT IAL HOUSE, IS SOLD WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF SAL E OF ORIGINAL ASSET, THE ASSESSEE IS FREE TO CONSTRUCT A HOUSE WITHIN T HREE YEARS FROM THE DATE OF SALE OF ORIGINAL ASSET. IT IS NOTI CED THAT IN A.Y. 2005- 16 06, AFTER GETTING APPROVAL FROM THE LOCAL AUTHORITY , THE OLD HOUSE WAS DEMOLISHED AND NEW CONSTRUCTION WAS STARTED AS PER APPROVED MAP. COPY OF MAP WAS PRODUCED ALONGWITH APPROVAL LETTER OBTAINED FROM UIT AND LOAN CERTIFICATE FROM PNB. 7. THE LD. CIT(A) HAS SENT THESE DOCUMENTS FOR GETT ING REPORT OF THE A.O. AND THE A.O., IN HIS REMAND REPORT, HAS NOT GI VEN ANY SPECIFIC COMMENTS ON THESE DOCUMENTS BUT HAS ONLY REITERATED THE FACTS AND FINDINGS GIVEN IN HIS ORDER. IN THIS CASE, THE ASS ESSEE HAD STARTED CONSTRUCTION WORK IN F.Y. 2005-06 AFTER GETTING APP ROVAL OF THE UIT WHICH PROVES THE FACT THAT THE ASSESSEE ACTUALLY D EMOLISHED THE ENTIRE BUILDING AND THEREAFTER STARTED CONSTRUCTION WORK. HOWEVER, THE ASSESSEE OBTAINED LOAN FROM PNB IN FOUR INSTALLMENT S AND AFTER EACH INSTALLMENT, THE BANK GAVE CERTIFICATE FOR RELEASE OF EACH LOAN INSTALLMENT. THUS THE THEORY OF BUILT HOUSE ALREAD Y EXISTING IN SUPPORT IS RULED OUT. THE ASSESSEE HAD SOLD DURING THE YEA R UNDER CONSIDERATION A PLOT AND HAS CLAIMED EXEMPTION ON T HE LONG TERM CAPITAL GAINS ARISING OUT OF SALE OF THIS PLOT AGAI NST THE CONSTRUCTION OF NEW HOUSE AT SHASTRI NAGAR, JODHPUR. THE MAIN OBJE CTION FOR REJECTION OF THIS CLAIM BY THE A.O. IS THAT THE ASSESSEE OWNE D READY BUILT HOUSE IN HIS NAME AND JOINT NAME OF HIS WIFE BUT IT IS A FACT THAT THE ASSESSEE 17 DEMOLISHED THE HOUSE BUILDING AND GOT NEW HOUSE CON STRUCTED AS PER APPROVED PLAN WITHIN THREE YEARS FROM THE DATE OF S ALE OF THAT PLOT. THUS, IN OUR CONSIDERED OPINION ALSO, THE ASSESSEE IS ENTITLED FOR THIS BENEFIT U/S 54F OF THE ACT. THIS HOUSE PURCHASED I N F.Y. 2003-04 WAS NOT IN EXISTENCE AFTER THE DEMOLISHION. THUS WE CA N SAFELY SAY THAT THE NEW HOUSE WAS CONSTRUCTED BY THE ASSESSEE WITHI N THE PERMITTED PERIOD OF THREE YEARS. 8. ONE MORE ISSUE CROPPED UP DURING THE HEARING OF THIS CASE THAT THE ASSESSEE HAS SPENT AN HEFTY AMOUNT IN CONSTRUCT ION OF THIS HOUSE AFTER TAKING LOAN FROM THE BANK. THIS ISSUE HAS NO T BEEN PICKED UP NEITHER BY THE A.O. NOR THE LD. CIT(A). UNDER THE PROVISIONS OF SECTION 54F IT IS NOT PREREQUISITE CONDITION THAT THE SAME AMOUNT SHOULD BE SPENT AFTER TAKING LOAN FROM THE SCHEDULED BANK, PA RTICULARLY, WHEN NO FACT HAS TO COME FROM RECORD AS TO HOW MUCH AMOUNT WAS ACTUALLY SPENT IN THIS CONSTRUCTION. THEREFORE, THE AMOUNT TAKEN AS LOAN FROM THE BANK AND THE CAPITAL GAIN AMOUNT INVESTED IN TH E CONSTRUCTION OF THE HOUSE, WILL NOT DETER OR DEBAR THE ASSESSEE FRO M CLAIMING CAPITAL GAIN AS EXEMPT U/S 54F OF THE ACT. IT IS ENOUGH IF IT IS FOUND THAT CAPITAL GAIN HAS BEEN INVESTED IN CONSTRUCTION OF N EW HOUSE. THE CASE, ALL ALONG, OF THE ASSESSEE HAS BEEN THAT THE ENTIRE CAPITAL GAIN WAS 18 SPENT IN CONSTRUCTION OF THE HOUSE WITHIN THE PERMI TTED TIME. ACCORDINGLY, IN OUR CONSIDERED OPINION, THE LD. CIT (A) HAS CORRECTLY ALLOWED THIS CLAIM. 9. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2013. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH AUGUST, 2013. VL/ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT BY ORDER 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR