VISHAL DUTT, NAVI MUMBAI V. ITO WD 22(3)(4), NAVI MUMBAI

ITA 878/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3317 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJEEV KASHYAPDR
• Assessee Lawyers: NEELESH BAJAJ
• Keywords: Capital asset; Question of law
• Section: 143(3); 54F; 54; 139

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 878 /MUM/2014 ( / ASSESSMENT YEAR : 2008-09) VISHAL DUTT, 205, B-WING, BIG SPLASH, SECTOR 17,VASHI, NAVI MUMBAI 400703. / V. INCOME TAX OFFICER, WARD 22(3)(4), 3 RD FLOOR, TOWER NO. 6, VASHI RAILWAY STATION, NAVI MUMBAI 400 703. ./ PAN : AAGPD 1553 M ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI NEELESH BAJAJ REVENUE BY : SHRI SANJEEV KASHYAP-(DR) / DATE OF HEARING : 30-12-2015 / DATE OF PRONOUNCEMENT : 16-03-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 8 78/MUM/2014, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 29-11-20 13 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 33, MUMBAI (H EREINAFTER CALLED THE CIT(A)), THE SAID APPEAL BEFORE THE CIT(A) ARISING FROM THE ASSESSMENT ORDER DATED 27.12.2010 PASSED BY THE LEARNED ASSESSING OF FICER (HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT ,1961 (H EREINAFTER CALLED THE ACT) FOR THE ASSESSMENT YEAR 2008-09. 2. THE GROUND RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL READS AS UNDER:- ITA 878/MUM/2014 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HERE-IN-AFTER REFERRED TO AS LD. CIT (APPEALS)] WAS NOT JUSTIFIED AND GROSSLY ERRED I N CONFIRMING THE ACTION OF THE A.O. AND DENYING THE CLAIM OF THE APPELL ANT U/ S 54F BY HOLDING THAT SUCH EXEMPTION U/ S 54F IS AVAILABLE FOR ONLY ONE RESIDENTIAL HOUSE PURCHASED OR CONSTRUCTED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN DENYING THE CLAIM OF THE APPELLANT U/S 54F AMOUNTING TO RS. 62,60,601/- IN RESPECT OF RESIDENTIAL HOUSE CONSTRUCTED AT PARSIK HILL PROPERTY ON THE CONTENTION THAT THE SAID PROPERTY WAS NOT IN A HABITABLE CONDITION. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN CONFIRMING THE ACTION OF THE A.O. IN ASSESSING THE AGRICULTURAL INCOME EARNED BY THE APPELLANT AMOUNTING TO RS. 1,82,390/-, AS INCOME UNDE R THE HEAD 'INCOME FROM OTHER SOURCES'. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS AND LONG TERM CAPITAL GAINS ON SALE OF PLOTS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS BEF ORE THE AO U/S 143(3) READ WITH SECTION 143(2) OF THE ACT, IT WAS OBSERVE D BY THE A.O. THAT ASSESSEE HAS SOLD TWO LANDED PROPERTIES VIZ. 1) NEVALI LAND AND 2) PALIDEVAD LAND FOR A CONSIDERATION OF RS.42,51,000/- AND RS.45,00,000/- RESPECTIVELY AND EARNED LONG TERM CAPITAL GAINS OF RS.40,13,551/- AND RS. 2 3,72,109/- RESPECTIVELY. THE ASSESSEE HAS CLAIMED BENEFIT U/S. 54F OF THE AC T IN RESPECT OF THE WHOLE LONG TERM CAPITAL GAINS AND HAS FILED THE DETAILS O F INVESTMENT MADE IN NEW RESIDENTIAL PROPERTIES IN SUPPORT OF CLAIMING THE B ENEFIT U/S 54F OF THE ACT. ON PERUSAL OF THE DETAILS, IT WAS OBSERVED BY THE A O THAT OUT OF THE NET SALE CONSIDERATION RECEIVED BY THE ASSESSEE FROM THE SAL E OF TWO PLOTS OF LAND, THE ASSESSEE HAS CLAIMED TO HAVE INVESTED RS. 62,60,601 / ON CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE AT PARSIK HILL,BELAPUR AND MA DE INVESTMENT OF RS. 25,79,278/- IN ANOTHER RESIDENTIAL FLAT AT NRI COMP LEX, NERUL. THUS, THE ASSESSEE HAS UTILIZED THE NET CONSIDERATION FOR INV ESTMENT IN TWO RESIDENTIAL PROPERTIES. THE ASSESSEE STATED BEFORE THE AO DURIN G THE COURSE OF THE ITA 878/MUM/2014 3 ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE ACT THAT DURING THE PREVIOUS YEAR, THE ASSESSEE HAS SOLD TWO PLOTS OF LAND AND INVESTED IN TWO RESIDENTIAL PROPERTIES AND THE ASSE SSEE DOES NOT HAVE A THIRD RESIDENTIAL PROPERTY. THE ASSESSEE STATED THAT IF A T ALL THE BENEFIT U/S 54F OF THE ACT IS TO BE ALLOWED ONLY FOR ONE PROPERTY, THE SAME MAY BE ALLOWED IN RESPECT OF RESIDENTIAL HOUSE PROPERTY CONSTRUCTED A T PARSIK HILLS,BELAPUR. THE A.O. OBSERVED THAT THE PROVISIONS U/S. 54F OF THE A CT PROVIDES FOR INVESTMENT OF SALE PROCEEDS IN PURCHASE OR CONSTRUCTION OF 'A RESIDENTIAL HOUSE', THEREFORE, THE BENEFIT U/S 54F OF THE ACT IS AVAILA BLE FOR ONLY ONE RESIDENTIAL HOUSE PURCHASED OR CONSTRUCTED AND HENCE BENEFIT U/ S 54F OF THE ACT IS ALLOWED ONLY IN RESPECT OF ONE RESIDENTIAL HOUSE. T HUS THE A.O. ALLOWED BENEFIT U/S 54F OF THE ACT IN RESPECT OF ONE RESIDENTIAL PR OPERTY I.E. THE RESIDENTIAL HOUSE CONSTRUCTED AT PARSIK HILLS,BELAPUR WHEREBY T HE CAPITAL GAIN BENEFIT U/S 54F OF THE ACT WAS WORKED OUT BY THE AO AT RS. 45,24,618/- COMPUTED PROPORTIONATELY BASED ON NET CONSIDERATION INVESTED IN THE PARSIK HILLS RESIDENTIAL PROPERTY AT BELAPUR AND THE BALANCE LON G TERM CAPITAL GAINS OF RS.18,61,041/- WAS BROUGHT TO TAX VIDE ASSESSMENT O RDERS DATED 27.12.2010 PASSED BY THE AO U/S 143(3) OF THE ACT. 4.AGGRIEVED BY THE ORDERS OF A.O. DATED 27.12.2010 PASSED U/S 143(3) OF THE ACT, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CI T(A). 5. THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE T HE CIT(A) AS WERE MADE BEFORE THE A.O. AND SUBMITTED THAT THE ASSESSEE HAD INVESTED A SUM OF RS.62,60,601/- ON CONSTRUCTION OF NEW RESIDENTIAL H OUSE AT PARSIK HILL,BELAPUR AND ALSO MADE AN INVESTMENT OF RS.25,7 9,278/- IN ANOTHER RESIDENTIAL FLAT AT N.R.L COMPLEX, NERUL AND, THUS, HE UTILIZED THE NET CONSIDERATION FOR INVESTMENT IN TWO RESIDENTIAL PRO PERTIES. THE ASSESSEE SUBMITTED THAT THE A.O. WRONGLY INTERPRETED THAT BE NEFIT U/S 54F OF THE ACT IS AVAILABLE FOR ONE RESIDENTIAL HOUSE WHEREBY THE AO ERRONEOUSLY ALLOWED ITA 878/MUM/2014 4 DEDUCTION FOR ONLY ONE RESIDENTIAL HOUSE , WHEREAS SECTION 54F OF THE ACT USES A TERM A RESIDENTIAL HOUSE WHICH COULD BE EQUIVAL ENT TO WORD ANY: IN HIS SUPPORT THE ASSESSEE RELIED UPON THE FOLLOWING JUDI CIAL DECISIONS:- I) CIT V. SMT. K.G. RUKUMINIAMMA, (2011)196 TAXMAN 87 (KAR) II) CIT V. GITA DUGGAL (2013)30 TAXMANN.COM 230 (DELHI HC ) III) K.G. VYAS, 16 ITD 195(BOM-TRIB) IV) SHIV NARAYAN CHOUDHARI, (1981)108 ITR 104 (ALL) V) B.B. SARKAR, 132 ITR 150 (CAL) VI) COL. H.H. SIR HARINDER SINGH, 83 ITR 416 VII) FULWANTI C. RATHOD V. ITO, MUMBAI TRIBUNAL. THE CIT(A) OBSERVED THAT THE ASSESSEE IS CLAIMING B ENEFIT U/S 54F OF THE ACT IN RESPECT OF TWO INDEPENDENT RESIDENTIAL HOUSE SITUAT ED AT DIFFERENT LOCATIONS, ONE IS IN PARSIK HILLS AT BELAPUR AND THE OTHER IS AT N.R.I. COMPLEX, NERUL, NAVI MUMBAI. THE CIT(A) REFERRED TO THE DECISION O F SPECIAL BENCH OF THE MUMBAI-TRIBUNAL IN THE CASE OF ITO V. SUSHILA M. JH AVERI(2007) 107 ITD 327(MUM-TRIB) WHEREBY THE SPECIAL BENCH OF MUMBAI-T RIBUNAL OBSERVED THAT THE TAX-PAYER HAD PURCHASED TWO RESIDENTIAL HOUSES AGAINST SALE CONSIDERATION OF ONE RESIDENTIAL FLAT AT GULISTAN' SITUATED AT BHULABHAI DESAI ROAD, MUMBAI. ONE RESIDENTIAL PROPERTY WAS AT VARUN APARTMENTS AT VERSOVA AND THE OTHER PROPERTY WAS AT ERLYN APARTMENTS, BAN DRA, AND IT WAS HELD BY THE SPECIAL BENCH OF THE MUMBAI-TRIBUNAL IN THE AFO REMENTIONED CASE THAT THE TAX-PAYER IS ENTITLED TO GET EXEMPTION ONLY IN RESPECT OF ONE RESIDENTIAL HOUSE OF HER CHOICE. THEREFORE, THE CIT(A) HELD THA T THE DECISION OF SPECIAL BENCH OF MUMBAI-TRIBUNAL IS FULLY APPLICABLE TO THE PRESENT CASE AND THE ASSESSEE IN THE INSTANT APPEAL CAN AVAIL BENEFIT U/ S 54F OF THE ACT IN RESPECT OF ONE RESIDENTIAL HOUSE PROPERTY ONLY. THE CIT(A) ALSO RELIED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PAWAN ARYA V. CIT, 49 DTR 123 WHICH UPHELD THE VIEW OF SPECIAL BENCH OF M UMBAI TRIBUNAL IN THE ITA 878/MUM/2014 5 CASE OF SUSHILA M. JHAVERI(SUPRA). THE CIT(A) HELD THAT THE RELIANCE OF THE ASSESSEE IN THE CASE OF CIT V. SMT. K.G. RUKUMINIAM MA 196 TAXMAN 87 (KAR) WOULD ALSO NOT COME TO HIS RESCUE AS IN THAT CASE T HE ASSESSEE HAD FOUR RESIDENTIAL UNITS, BUT ALL OF THEM WERE IN THE SAME BUILDING ACQUIRED IN PURSUANCE OF A DEVELOPMENT AGREEMENT. IN THE CASE O F SHIV NARAYAN CHOUDHARI V. CWT 108 ITR 104, THE HONBLE HIGH COUR T HELD THAT WHERE A HOUSE CONSISTED OF MORE THAN ONE SELF CONTAINED DWE LLING UNIT AND IF THERE IS A UNITY OF STRUCTURE, MERE FACT THAT SUCH SELF CONTAI NED DWELLING UNITS WERE OCCUPIED BY DIFFERENT PERSONS, WILL NOT MAKE THAT H OUSE, INTO SEVERAL HOUSES. THUS, THE REASONING BEHIND THE HIGH COURT'S JUDGMEN T WAS THE UNITY OF STRUCTURE. IN THE CASE OF K.G. VYAS V. ITO 16 ITD 1 95 (BOM), THE MUMBAI- TRIBUNAL ALLOWED EXEMPTION IN RESPECT OF INVESTMENT S IN FOUR FLATS WHERE THE TAX-PAYER PURCHASED FOUR FLATS IN SAME BUILDING; TW O FLATS WERE ON 1ST FLOOR AND ONE FLAT EACH ON 2ND AND 3RD FLOOR AND THE TAX- PAYER WAS LIVING IN THESE FLATS WITH HIS BIG FAMILY WITH A COMMON KITCHEN AND COMMON RATION CARD, THUS, THE REASONING BEHIND TRIBUNAL'S DECISION WAS COMMON USE OF SEVERAL FLATS. IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE C IT(A), THE ASSESSEE WAS ASKED TO FURNISH THE APPROPRIATE EVIDENCES THAT RES IDENTIAL HOUSE PROPERTY AT PARSIK HILL , BELAPUR CONSTRUCTED BY HIM WAS IN LIV ABLE CONDITION. THE ASSESSEE SUBMITTED THAT MERELY BECAUSE THE CONSTRUC TION WAS NOT COMPLETE IN ALL RESPECT AND IT WAS NOT IN A FIT CONDITION TO BE OCCUPIED WITHIN THE PERIOD STIPULATED WOULD NOT DISENTITLE HIM FOR CLAIMING TH E BENEFIT U/S. 54F OF THE ACT. IT IS ALSO SUBMITTED THAT ONCE THE ASSESSEE DE MONSTRATES THAT THE CONSIDERATION RECEIVED ON TRANSFER HAS BEEN INVESTE D EVEN THOUGH THE TRANSACTIONS ARE NOT COMPLETE IN ALL RESPECT AND AS REQUIRED BY LAW THAT WOULD NOT DISENTITLE THE ASSESSEE FROM AVAILING BENEFITS U/S 54F OF THE ACT. IN SUPPORT OF ASSESSEES CONTENTION, HE RELIED ON THE DECISION OF THE HYDERABAD TRIBUNAL IN THE CASE OF NARASIMHA RAJU RUDRA RAJU V . ACIT (2013) 35 ITA 878/MUM/2014 6 TAXMANN.COM 90(HYD. TRIB.) AND ALSO DECISIONS OF HO NBLE KARNATKA HIGH COURT IN THE CASE OF CIT V. SRI SAMBANDAM UDAYKUMAR (2012) 19 TAXMANN.COM 17(KAR.HC), DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF BALRAJ V. CIT (2002) 123 TAXMAN 290(DEL.HC) AND CIT V. T.N. ARAVINDA REDDY (1979) 120 ITR 46 (SC). IT WAS THE CONTENTION OF TH E ASSESSEE THAT THE COURTS HAVE TAKEN LIBERAL INTERPRETATION THAT THE CONSTRUC TION MAY NOT BE COMPLETED IN ALL RESPECTS AND THE RESIDENTIAL PROPERTY MAY NO T BE USEABLE BUT STILL BENEFIT U/S 54F OF THE ACT IS AVAILABLE BEING BENEF ICIAL PROVISIONS. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, B Y RELYING UPON THE DECISION OF MUMBAI-TRIBUNAL IN THE CASE OF SALIM FAZELBHOY V S. DCIT, 291 ITR 169 WHEREBY IT WAS HELD THAT INHABITABLE PREMISES CANNO T BE EQUATED WITH THE RESIDENTIAL HOUSE AND HENCE THE CLAIM OF THE ASSESS EE FOR BENEFIT U/S 54F OF THE ACT WAS REJECTED AS THE ASSESSEE WITH RESPECT T O INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE AT PARSIK HILL, B ELAPUR WAS NOT ABLE TO BRING ON RECORD AND FURNISH THE DETAILS AS TO THE IMPUGNE D PROPERTY BEING IN LIVABLE CONDITION AND THE ASSESSEE WAS NOT ABLE TO FURNISH ANY EVIDENCE WITH REGARD TO BASIC AMENITIES LIKE PLACE FOR COOKING/KITCHEN/T OILET, BATHROOM, APPROACH ROAD WITHIN THE PLOT ETC. AND HENCE, THE CIT(A) DIR ECTED THE A.O. TO ALLOW THE BENEFIT U/S 54F OF THE ACT FOR INVESTMENT OF RS. 25 ,79,278/- IN A RESIDENTIAL FLAT AT NRI COMPLEX, NERUL INSTEAD OF RESIDENTIAL H OUSE AT PARSIK HILL, BELAPUR, VIDE ORDERS DATED 29-11-2013. 6.AGGRIEVED BY THE ORDERS DATED 29-11-2013 OF THE C IT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS BEEN DENIED BENEFIT U/S 54F OF THE ACT WITH RESPECT TO O NE RESIDENTIAL HOUSE. THE ASSESSEE HAD MADE INVESTMENT IN RESIDENTIAL HOUSE P ROPERTY AT PARSIK HILLS, BELAPUR AS WELL AS NRI COMPLEX, NERUL WHILE TWO LAN DED PROPERTIES VIZ. MERALI LAND AND PALIDEVAD LAND WERE SOLD. THE A.O. HAD AL LOWED BENEFIT U/S 54F OF ITA 878/MUM/2014 7 THE ACT WITH RESPECT TO INVESTMENT MADE IN THE CONS TRUCTION OF NEW RESIDENTIAL HOUSE AT PARSIK HILLS, BELAPUR WHILE DENIED THE BEN EFIT U/S 54F OF THE ACT WITH RESPECT TO INVESTMENT MADE IN NRI COMPLEX, NER UL. ON THE OTHER HAND, THE CIT(A) HAS ALLOWED THE BENEFIT U/S 54F OF THE A CT WITH RESPECT TO THE INVESTMENT MADE BY THE ASSESSEE IN NRI COMPLEX, NER UL WHILE DENIED BENEFIT U/S 54F OF THE ACT WITH RESPECT TO THE INVESTMENT M ADE IN CONSTRUCTION OF RESIDENTIAL HOUSE AT PARSIK HILLS, BELAPUR ON THE G ROUND THAT CONSTRUCTION IS NOT YET COMPLETED. THE ASSESSEE SUBMITTED THAT BEF ORE THE SALE OF TWO PROPERTIES, THE ASSESSEE DID NOT OWN ANY RESIDENTIA L HOUSE. THE ASSESSEES CONTENTION THAT CONSTRUCTION OF PARSIK HILLS, BELAP UR WERE COMPLETED WITHIN THREE YEARS AS REQUIRED U/S 54F OF THE ACT AND IN N OVEMBER, 2007, THE SECOND RESIDENTIAL PROPERTY AT NRI COMPLEX, NERUL WAS PURC HASED. THE ASSESSEE STATED BEFORE US THAT THE HE DID NOT OWN ANY OTHER RESIDENTIAL PROPERTY PRIOR TO ACQUISITION OF THE AFORE-STATED TWO NEW RESIDENT IAL PROPERTIES. THE ASSESSEE ALSO REITERATED THE SUBMISSIONS AS WAS MADE BEFORE THE AUTHORITIES BELOW AND THE SAME ARE NOT REPEATED FOR THE SAKE OF BREVITY. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS: I) RAJESH KESHAV PILLAI V. ITO( MUMBAI-TRIBUNAL IN ITA NO.6661/M/2009. II) CIT V. DR R BALAJI (HONBLE HIGH COURT OF KARNATKA IN ITA NO 109/2013) III) CIT V. LATE KHOOBCHAND M MAKHIJA (HONBLE HIGH COUR T OF KARNATKA IN ITA NO. 496 OF 2007) 8. THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD INCLUDING CASE LAWS RELIED UPON BY BOTH THE PARTIES. WE HAVE OBSERVED ITA 878/MUM/2014 8 THAT THE ASSESSEE SOLD TWO LANDED PROPERTIES VIZ. M ERALI LAND AND PALIDEVAD LAND FOR A TOTAL CONSIDERATION OF RS. 42,51,000/- A ND RS. 45,00,000/- RESPECTIVELY AND EARNED CAPITAL GAIN OF RS. 40,13,5 51/- AND RS. 23,72,109/- RESPECTIVELY. THE ASSESSEE HAS MADE INVESTMENT OF R S.62,60,601/- IN THE CONSTRUCTION OF RESIDENTIAL HOUSE AT PARSIK HILLS, BELAPUR AND INVESTMENT OF RS. 25,79,278/- IN THE RESIDENTIAL FLAT AT NRI COMP LEX, NERUL. THE ASSESSEE HAS CLAIMED BENEFIT U/S 54F OF THE ACT IN RESPECT O F THE ENTIRE LONG TERM CAPITAL GAINS EARNED BY HIM ON THE SALE OF BOTH THE PLOTS OF LAND. HOWEVER, THE REVENUE HAS ALLOWED BENEFIT U/S 54F OF THE ACT WITH RESPECT TO ONE PROPERTY ON THE GROUND THAT SECTION 54F OF THE ACT CONTEMPLATES PURCHASE OR CONSTRUCTION OF ONE RESIDENTIAL HOUSE , HENCE, BENE FIT U/S 54F OF THE ACT CAN BE ALLOWED FOR ONLY ONE RESIDENTIAL HOUSE. THE AO ALLOWED THE BENEFIT U/S 54F OF THE ACT AMOUNTING TO RS.45,24,618/- WITH RESPECT TO THE INVESTMENT OF THE ASSESSEE IN CONSTRUCTION OF NEW RESIDENTIAL HOUSE A T PARSIK HILLS AT BELAPUR WHILE THE CIT(A) ALLOWED BENEFIT U/S 54F OF THE ACT AMOUNTING TO RS.25,79,278/- WITH RESPECT OF INVESTMENT OF THE AS SESSEE IN RESIDENTIAL FLAT AT NRI COMPLEX AT NERUL INSTEAD OF ALLOWING BENEFIT U/ S 54F OF THE ACT WITH RESPECT TO INVESTMENT OF THE ASSESSEE IN NEW RESIDE NTIAL HOUSE AT PARSIK HILLS, BELAPUR ON THE GROUNDS THAT THE NEW RESIDENTIAL HOU SE AT PARSIK HILLS, BELAPUR IS NOT IN A LIVABLE CONDITION. THE ASSESSEE , ON THE OTHER HAND, CONTENDED THAT HE IS ENTITLED FOR BENEFIT U/S 54F O F THE ACT ON BOTH THE NEW RESIDENTIAL PROPERTIES AND THE LAW PROVIDES THAT TH E ASSESSEE CAN INVEST IN ANY NUMBER OF PROPERTIES. THE ASSESSEE ALSO DREW OUR A TTENTION TO AMENDMENT MADE IN THE SECTION 54F OF THE ACT BY THE FINANCE A CT, 2014 W.E.F. 01-04- 2015 , WHEREBY THE WORD A HAS BEEN SUBSTITUTED WI TH THE WORD ONE RESIDENTIAL HOUSE. THE ASSESSEE RELIED UPON VARIOUS CASE LAWS. WE HAVE OBSERVED THAT THE CASE LAWS RELIED BY THE ASSESSEE WHEREBY ALLOWING INVESTMENTS IN MORE THAN ONE RESIDENTIAL FLAT/HOUSE RELATE TO THE BENEFIT AVAILED BY THE TAX-PAYER U/S 54 OF THE ACT AND NOT TO SECTION 54F OF THE ACT. ON CAREFUL PERUSAL OF SECTION 54F OF THE ACT VIS-- VIS SECTION 54 OF THE ACT ITA 878/MUM/2014 9 REVEALS THAT THERE ARE MARKED DIFFERENCE BETWEEN TH E REQUIREMENTS STIPULATED UNDER BOTH THE AFORE-STATED SECTIONS FOR AVAILING B ENEFIT. WE HAVE ANALYSED SECTION 54 AND 54F OF THE ACT AND OBSERVED THAT THE RE ARE MARKED DIFFERENCES IN BOTH THE SECTIONS 54 AND 54F OF THE ACT , WHEREB Y SECTION 54F OF THE ACT STIPULATES ADDITIONAL CONDITIONS TO BE MET FOR AVAI LING THE EXEMPTION , WHICH INTER-ALIA, PROVIDES AS UNDER AND THESE CONDITIONS ARE NOT EXISTING IN SECTION 54 OF THE ACT: A) INVESTING NET CONSIDERATION ON TRANSFER OF CAPIT AL ASSET IN ACQUIRING OR CONSTRUCTING NEW ASSET INSTEAD OF INVESTING CAPITAL GAINS. B) THE TAX-PAYER SHOULD NOT OWN MORE THAN ONE RESID ENTIAL HOUSE , OTHER THAN NEW ASSET , ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET OR C) THE TAX-PAYER SHOULD NOT PURCHASE ANY RESIDENTIA L HOUSE, OTHER THAN NEW ASSET , WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET OR D) CONSTRUCTS ANY RESIDENTIAL HOUSE , OTHER THAN TH E NEW ASSET , WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSETS SECTION 54F OF THE ACT IS RE-PRODUCED HEREUNDER: [ CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. 6 54F. (1) 7 [SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHER E, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIV IDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-T ERM CAPITAL ASSET, NOT BEING A 7A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE ITA 878/MUM/2014 10 ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PER IOD OF ONE YEAR BEFORE OR 8 [TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TO OK PLACE 7A PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE 9 [CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA] (HERE AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CA PITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPIT AL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PRO PORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATI ON, SHALL NOT BE CHARGED UNDER SECTION 45 : 10 [PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTIO N SHALL APPLY WHERE (A) THE ASSESSEE, (I) OWNS 7A MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANS FER OF THE ORIGINAL ASSET; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NE W ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TR ANSFER OF THE ORIGINAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER THAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ITA 878/MUM/2014 11 ASSET, IS CHARGEABLE UNDER THE HEAD 'INCOME FROM H OUSE PROPERTY'.] EXPLANATION.FOR THE PURPOSES OF THIS SECTION, 11 [***] 12 [***] ' NET CONSIDERATION', IN RELATION TO THE TRANSFER OF A CAPITAL ASSET, MEANS THE FULL VALUE OF THE CONSIDERATION RE CEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITA L ASSET AS REDUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCL USIVELY IN CONNECTION WITH SUCH TRANSFER. (2) WHERE THE ASSESSEE PURCHASES, WITHIN THE PERIOD OF 13 [TWO YEARS] AFTER THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET, OR CONSTRUCTS, WITHIN THE PERIOD OF THREE YEARS AFTER SUCH DATE, ANY RESIDENT IAL HOUSE, THE INCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FRO M HOUSE PROPERTY', OTHER THAN THE NEW ASSET, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDE R SECTION 45 ON THE BASIS OF THE COST OF SUCH NEW ASSET AS PROVIDED IN CLAUSE (A), OR, AS THE CASE MAY BE, CLAUSE (B), OF SUB-SECTION (1), SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER THE HEAD 'CAPI TAL GAINS' RELATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOU S YEAR IN WHICH SUCH RESIDENTIAL HOUSE IS PURCHASED OR CONSTRUCTED. (3) WHERE THE NEW ASSET IS TRANSFERRED WITHIN A PER IOD OF THREE YEARS FROM THE DATE OF ITS PURCHASE OR, AS THE CASE MAY BE, IT S CONSTRUCTION, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF SUCH NEW ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAU SE (B), OF SUB-SECTION (1) SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER THE H EAD 'CAPITAL GAINS' RELATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOU S YEAR IN WHICH SUCH NEW ASSET IS TRANSFERRED.] ITA 878/MUM/2014 12 14 [(4) THE AMOUNT OF THE NET CONSIDERATION WHICH IS N OT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE O RIGINAL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURC HASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RET URN OF INCOME UNDER SECTION 139 , SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LAT ER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHI NG THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 ] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME 15 WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RET URN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT ; AND, FOR THE PURPOSES OF SUB- SECTION (1), THE AMOUNT, IF ANY, ALREADY UTILISED B Y THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW 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 SUB-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONST RUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THE N, (I) THE AMOUNT BY WHICH (A) THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFE R OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF THE NEW ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAUSE (B ) OF SUB-SECTION (1), EXCEEDS (B) THE AMOUNT THAT WOULD NOT HAVE BEEN SO CHARGED HAD THE AMOUNT ACTUALLY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB- SECTION (1) BEEN THE COST OF ITA 878/MUM/2014 13 THE NEW ASSET, SHALL BE CHARGED UNDER SECTION 45 AS INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRA NSFER OF THE ORIGINAL ASSET EXPIRES ; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW THE UNUT ILISED AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. EXPLANATION. 16 [OMITTED BY THE FINANCE ACT, 1992, W.E.F. 1-4-1993. ]] AS IS OBSERVED FROM THE PERUSAL OF THE PROVISIONS OF SECTION 54F OF THE ACT THAT THERE EXISTS ADDITIONAL CONDITIONS IN SECTION 54F OF THE ACT FOR AVAILING BENEFIT SUCH AS THAT THE TAX-PAYER SHOULD NOT OWN M ORE THAN ONE RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET PURCHASE/CONSTRUCTED ON THE DATE OF TRANSFER OF ORIGINAL ASSET , THAT THE TAX-PAYER WILL NOT PUR CHASE ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF ONE YEA R AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET OR CONSTRUCT ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET AND ANY SUCH CONDITIONS DOES NOT EXIST IN SEC TION 54 OF THE ACT FOR AVAILING THE BENEFIT. THUS, IT IS CLEAR THAT ASSES SEE SHALL BE ENTITLED FOR BENEFIT U/S 54F OF THE ACT WITH RESPECT TO ONLY ONE RESIDEN TIAL HOUSE PROPERTY AND IF THE ASSESSEE PURCHASE OR CONSTRUCT ANOTHER RESIDENT IAL HOUSE APART FROM NEW ASSET, INCOME OF WHICH IS CHARGEABLE TO TAX UNDER T HE HEAD INCOME FROM HOUSE PROPERTY , THEN ON ACQUISITION/PURCHASE OF THE ANOTHER RESIDENTIAL HOUSE WITHIN TIME STIPULATED UNDER THE PROVISIONS O F SECTION 54F OF THE ACT, THE BENEFIT EARLIER SO GRANTED SHALL STAND WITHDRAW N AS PER PROVISIONS OF SECTION 54F(2) OF THE ACT AND THE CAPITAL GAIN ARIS ING FROM TRANSFER OF THE ORIGINAL ASSET NOT CHARGED TO CAPITAL GAINS U/S 45 OF THE ACT ON THE BASIS OF COST OF SUCH NEW ASSET AS PROVIDED UNDER CLAUSE (A) OR (B) OF SECTION 54F(1) OF THE ACT SHALL BE DEEMED TO BE THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS RELATING TO LONG-TERM CAPITAL ASSET OF PREVI OUS YEAR IN WHICH SUCH NEW ITA 878/MUM/2014 14 ASSET IS TRANSFERRED. HENCE, THE ASSESSEE WILL BE E NTITLED FOR BENEFIT U/S 54F OF THE ACT WITH RESPECT TO INVESTMENT IN ONLY ONE RESI DENTIAL HOUSE PROPERTY AT PARSIK HILLS, BELAPUR AS THE SAID RESIDENTIAL HOUS E PROPERTY IS COMPLETED AT LATER POINT OF TIME VIS--VIS ACQUISITION OF THE RE SIDENTIAL FLAT AT NRI COMPLEX, NERUL IN NOVEMBER 2007 AND THE PROVISIONS OF SECTIO N 54F(2) OF THE ACT WILL GET INVOKED AND BE APPLICABLE WITH RESPECT TO RESID ENTIAL FLAT AT NRI COMPLEX, NERUL BEING ACQUIRED IN NOVEMBER 2007 I.E. PRIOR TO COMPLETION OF INVESTMENT IN RESIDENTIAL HOUSE PROPERTY AT PARSIK HILLS, BELA PUR, AND THE INVESTMENT OF RS.62,60,601/- IN CONSTRUCTION OF RESIDENTIAL HOUSE PROPERTY AT PARSIK HILLS, BELAPUR SHALL BE ENTITLED FOR BENEFIT U/S 54F OF TH E ACT AS THE ASSESSEE HAS SOLD TWO PLOTS OF LAND AND THE AO HAS RIGHTLY ALLOW ED THE EXEMPTION U/S 54F OF THE ACT WITH RESPECT OF INVESTMENT OF RS.62,60,6 01/- MADE BY THE ASSESSEE IN THE CONSTRUCTION OF THE RESIDENTIAL HOUSE PROPER TY AT PARSIK HILLS , BELAPUR. WITH RESPECT TO THE DECISION OF THE CIT(A) WHEREBY HE DENIED THE BENEFIT U/S 54F OF THE ACT OF THE INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE PROPERTY AT PARSIK HILLS, BELAPUR ON THE GROUND THA T THE PROPERTY WAS NOT IN LIVABLE CONDITION TO OCCUPY OWING TO NON-PRODUCTION OF EVIDENCE WITH REGARD TO BASIC AMENITIES LIKE PLACE FOR COOKING/KITCHEN/TOIL ET, BATHROOM, APPROACH ROAD WITHIN THE PLOT ETC. AND NON PRODUCTION OF EVI DENCES REGARDING ANY ELECTRICITY OR TELEPHONE OR TAP WATER CONNECTION HA VING BEEN GRANTED TO THE STRUCTURE AT PARSIK HILL, BELAPUR, CONSIDERING THE FACT THAT THE ASSESSEE HAS MADE INVESTMENT IN THE PROPERTY BEING CONSTRUCTION OF NEW RESIDENTIAL HOUSE AT PARSIK HILL, BELAPUR AND INVESTED AN AMOUNT OF R S. 62,60,601/- ON CONSTRUCTION OF A NEW RESIDENTIAL HOUSE AT PARSIK H ILLS AND SECTION 54F OF THE ACT BEING A BENEFICIAL PROVISION OF PROMOTING THE C ONSTRUCTION OF RESIDENTIAL HOUSES , THE PROVISIONS OF SECTION 54F OF THE ACT A RE TO BE LIBERALLY CONSTRUED FOR ACHIEVING THE PURPOSE FOR WHICH IT WAS INCORPO RATED IN THE STATUTE. THE INTENTION OF THE LEGISLATURE WAS TO ENCOURAGE INVES TMENTS IN THE ACQUISITION OF A RESIDENTIAL HOUSE AND COMPLETION OF CONSTRUCTION OR OCCUPATION IS NOT THE ITA 878/MUM/2014 15 REQUIREMENT OF LAW. THE WORDS USED IN THE SECTION A RE 'PURCHASED' OR 'CONSTRUCTED'. FOR SUCH PURPOSE, THE CAPITAL GAIN R EALIZED SHOULD HAVE BEEN INVESTED IN A RESIDENTIAL HOUSE. THE CONDITION PREC EDENT FOR CLAIMING BENEFIT UNDER THE SAID PROVISION IS THE CAPITAL GAIN REALIZ ED FROM SALE OF CAPITAL ASSET SHOULD HAVE BEEN PARTED BY THE ASSESSEE AND INVESTE D EITHER IN PURCHASING A RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE. THUS, BENEFIT U/S 54F OF THE ACT CANNOT BE DENIED TO THE ASSESSEE DURING THE YEAR ENDING MARCH, 2008 MERELY BECAUSE THE ASSESSEE HAS NOT YET COMPLE TED THE ENTIRE RESIDENTIAL HOUSE AT PARSIK HILLS, BELAPUR WHILE THE ASSESSEE C AN COMPLETE THE HOUSE WITH A STIPULATED PERIOD OF THREE YEARS FROM THE DA TE OF TRANSFER OF ORIGINAL ASSET, THE DEDUCTION CANNOT BE DENIED MERELY ON THE GROUND THAT CONSTRUCTION IS NOT COMPLETED . OUR DECISION IS FORTIFIED BY THE DECISION OF HYDERABAD- TRIBUNAL IN THE CASE OF NARSIMHA RAJU RUDRA RAJU V. ACIT (2013) 35 TAXMANN.COM 90(HYD. TRIB.) , DECISIONS OF HONBLE K ARNATKA HIGH COURT IN THE CASE OF CIT V. SRI SAMBANDAM UDAYKUMAR (2012) 19 TA XMANN.COM 17(KAR.HC) AND DECISION OF HONBLE KARNATAKA HIGH C OURT IN THE CASE OF CIT V. B S SHANTAKUMARI (2015) 60 TAXMANN.COM 74(KAR.). THE RELEVANT EXTRACT FROM THE DECISION OF HONBLE KARNATKA HIGH COURT IN THE CASE OF MR SAMBANDAM UDAYKUMAR (SUPRA) ARE REPRODUCED HEREUNDE R: 9. SECTION 54F OF THE ACT PROVIDES FOR EXEMPTION FROM PAYMENT OF CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS IN CASE THE CONSIDERATION FOR TRANSFER IS INVESTED IN ACQUIRING THE RESIDENTIAL HOUSE. IT READS AS UNDER: 54F. CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL AS SETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE.(1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HI NDU UNDIVIDED FAMILY , THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL A SSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGI NAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DA TE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE CONSTRUCTED, A RESIDENTIAL ITA 878/MUM/2014 16 HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY,- (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN T HE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHAL L NOT BE CHARGED UNDER SECTION 45; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO TH E NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY WHERE (A) THE ASSESSEE,- (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THA N THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN TH E NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASS ET; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL AS SET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER T HAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS C HARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY.' EXPLANATION : FOR THE PURPOSES OF THIS SECTION, 'NE T CONSIDERATION', IN RELATION TO THE TRANSFER OF A CAPITAL ASSET, MEANS THE FULL VALUE O F THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS REDUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRAN SFER. 10. A READING OF THE AFORESAID PROVISION MAKES IT VERY CLEAR THAT IF A CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSET, N OT BEING A RESIDENTIAL HOUSE AND THE ASSESSEE HAS WITHIN THE PERIOD OF ONE YEAR BEFORE O R TWO YEARS AFTER THE DATE ON WHICH TRANSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIO D OF THREE YEARS AFTER THAT DATE ITA 878/MUM/2014 17 CONSTRUCTED A RESIDENTIAL HOUSE, IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET THE WHOLE SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 OF THE ACT. HOWEVER, IF TH E COST OF THE NEW ASSET IS LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO BE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION SHALL NOT BE CHARGED UNDER SECTIO N 45 OF THE ACT. 11. SECTION 45 OF THE ACT MAKES IT VERY CLEAR THAT ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOU S YEAR SHALL, SAVE OR OTHERWISE PROVIDED IN SECTIONS 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G AND 54H IS CHARGEABLE TO INCOME TAX UNDER THE HEAD 'CAPITAL GAINS' AND SHALL BE DEE MED TO BE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. THE AFORESAID SEC TIONS WHICH FORM PART OF SECTION 54 OF THE ACT ARE CASES WHERE CAPITAL GAIN ON TRANSFER OF CAPITAL ASSET NOT TO BE CHARGED IN THOSE CASES. SECTION 54F OF THE ACT IS A BENEFICIAL PROVISION OF PROMOTING THE CONSTRUCTION OF RESIDENTIAL HOUSE. THEREFORE, THE SAID PROVISION HAS TO BE CONSTRUED LIBERALLY FOR ACHIEVING THE PURPOSE FOR WHICH IT WAS INCORPORATED IN THE STATUTE. THE INTENTION OF THE LEGISLATURE WAS TO ENCOURAGE INVESTMENTS IN THE ACQ UISITION OF A RESIDENTIAL HOUSE AND COMPLETION OF CONSTRUCTION OR OCCUPATION IS NOT THE REQUIREMENT OF LAW. THE WORDS USED IN THE SECTION ARE 'PURCHASED' OR 'CONSTRUCTED'. FO R SUCH PURPOSE, THE CAPITAL GAIN REALIZED SHOULD HAVE BEEN INVESTED IN A RESIDENTIAL HOUSE. T HE CONDITION PRECEDENT FOR CLAIMING BENEFIT UNDER THE SAID PREVISION IS THE CAPITAL GAI N REALIZED FROM SALE OF CAPITAL ASSET SHOULD HAVE BEEN PARTED BY THE ASSESSEE AND INVESTE D EITHER IN PURCHASING A RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE. IF AF TER MAKING THE ENTIRE PAYMENT, MERELY BECAUSE A REGISTERED SALE DEED HAD NOT BEEN EXECUTE D AND REGISTERED IN FAVOUR OF THE ASSESSEE BEFORE THE PERIOD STIPULATED, HE CANNOT BE DENIED THE BENEFIT OF SECTION 54F OF THE ACT. SIMILARLY, IF HE HAS INVESTED THE MONEY IN CONSTRUC TION OF A RESIDENTIAL HOUSE, MERELY BECAUSE THE CONSTRUCTION WAS NOT COMPLETE IN ALL RESPECTS AND IT WAS NOT IN A FIT CONDITION TO BE OCCUPIED WITHIN THE PERIOD STIPULAT ED, THAT WOULD NOT DISENTITLE THE ASSESSEE FROM CLAIMING THE BENEFIT UNDER SECTION 54 F OF THE ACT. THE ESSENCE OF THE SAID PROVISION IS WHETHER THE ASSESSEE WHO RECEIVED CAPI TAL GAINS HAS INVESTED IN A ITA 878/MUM/2014 18 RESIDENTIAL HOUSE. ONCE IT IS DEMONSTRATED THAT THE CONSIDERATION RECEIVED ON TRANSFER HAS BEEN INVESTED EITHER IN PURCHASING A RESIDENTIA L HOUSE OR IN CONSTRUCTION OF A RESIDENTIAL HOUSE EVEN THOUGH THE TRANSACTIONS ARE NOT COMPLETE IN ALL RESPECTS AND AS REQUITED UNDER THE LAW, THAT WOULD NOT DISENTITLE T HE ASSESSEE FROM THE SAID BENEFIT. 12. IN FACT, MADRAS HIGH COURT HAD AN OCCASION TO CONS IDER THIS ASPECT IN THE CASE OF CIT V. SARDARMAL KOTHARI [2008] 302 ITR 286 WHERE IT HAS BEEN HELD AS UNDER: '4. THE REQUIREMENT OF THE PROVISION IS THAT THE AS SESSEE, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER, HAS TO CONSTRUCT A RESI DENTIAL HOUSE IN ORDER TO BECOME ELIGIBLE FOR EXEMPTION. IN THE CASES ON HAND, IT IS NOT IN D ISPUTE THAT THE ASSESSEES HAVE PURCHASED THE LANDS BY INVESTING THE CAPITAL GAIN AND THEY HA VE ALSO CONSTRUCTED RESIDENTIAL HOUSES. IN ORDER TO ESTABLISH THE SAME, THE ASSESSEES SUBMI TTED BEFORE THE CIT(A) SEVERAL MATERIAL EVIDENCES, VIZ., INVITATION CARD PRINTED FOR THE HO USE WARMING CEREMONY TO BE HELD ON 12TH JULY, 2003. THE ASSESSEES HAVE ALSO PRODUCED THE CO MPLETION CERTIFICATES FROM THE MUNICIPAL AUTHORITY ON 30TH JAN., 2004. ON THE BASI S OF THE ABOVE DOCUMENTS, THE CIT(A) CONCLUDED THAT THE REQUIREMENT OF THE STATUTORY PRO VISION HAS BEEN COMPLIED WITH BY THE ASSESSEES AND THAT WAS RECONFIRMED BY THE TRIBUNAL IN THE ORDERS IMPUGNED.' 13. THE SAID JUDGMENT OF THE MADRAS HIGH COURT HAS BEE N AFFIRMED BY THE APEX COURT AND THE APPEAL WAS DISMISSED AT THE STAGE OF PRELIMINAR Y HEARING IN CC NOS.3953-3954/2009 DECIDED ON 6.4.2009. 14. IN THE INSTANT CASE, THE MATERIAL ON RECORD DISCLO SES THAT THE ASSESSEE HAD INVESTED RS. 2,16,61,670/- AS ON 31.10.2006 WITHIN TWELVE MONTHS FROM THE DATE OF REALIZATION OF SALE PROCEEDS OF SHARES. THE DEVELOPER ACKNOWLEDGING THE SAID AMOUNT HAS GIVEN PARTICULARS OF THE STAGE OF CONSTRUCTION. ACCORDING TO HIM, ONLY M INOR FITTINGS LIKE WINDOW SHUTTERS AND SOME ELECTRICAL WORK WERE REQUIRED TO BE MADE. IN F ACT, THE REPORT OF THE INQUIRY CONDUCTED BY THE DEPARTMENT ALSO DISCLOSES THE FLOORING WORK, ELECTRICAL WORK, FITTING OF DOOR AND WINDOW SHUTTERS WERE STILL PENDING. THE ASSESSEE HA S PRODUCED BEFORE THE AUTHORITIES THE REGISTERED SALE DEED DATED 7.11.2009 SHOWING THE TR ANSFER OF THE PROPERTY IN HIS FAVOUR. ITA 878/MUM/2014 19 THE SAID DOCUMENT DISCLOSES MARBLE TILES FLOORING H AS BEEN DONE, ELECTRICITY, WATER AND SANITARY CONNECTIONS HAVE BEEN GIVEN, WOOD USED IS TEAK IN RESPECT OF DOORS AND WINDOWS. THE ASSESSEE HAS BEEN PUT IN POSSESSION OF THE PROP ERTY AND HE IS IN OCCUPATION. THEREFORE , THE ASSESSEE HAS INVESTED THE SALE CONSIDERATION I N ACQUIRING A RESIDENTIAL PREMISES AND HAS TAKEN POSSESSION OF THE RESIDENTIA L BUILDING AND IS LIVING IN THE SAID PREMISES. THE OBJECT OF ENACTING SECTION 54 OF THE ACT I.E., TO ENCOURAGE INVESTMENT IN A RESIDENTIAL BUILDING IS COMPLETELY FULFILLED. 15. IN THAT VIEW OF THE MATTER, THE TRIBUNAL WAS JUSTI FIED IN EXTENDING THE BENEFIT OF SECTION 54F OF THE ACT TO THE ASSESSEE AND THE SAID ORDER D OES NOT SUFFER FROM ANY INFIRMITY WHICH CALLS FOR INTERFERENCE. 16. THEREFORE, THE SUBSTANTIAL QUESTION OF LAW IS ANSW ERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THUS, IN OUR CONSIDERED VIEW, THE ASSESSEE SHALL BE ENTITLED FOR BENEFIT U/S 54F OF THE ACT WITH RESPECT TO INVESTMENT OF RS.62, 60,601/- MADE BY THE ASSESSEE IN CONSTRUCTION OF RESIDENTIAL HOUSE PROPE RTY AT PARSIL HILLS,BELAPUR AMOUNTING TO RS.45,24,618/- AS ALLOWED BY THE AO AN D WE SET ASIDE THE ORDERS OF THE CIT(A) IN THIS REGARD AND RESTORE THE ORDERS OF THE AO. WE ORDER ACCORDINGLY. 10. IN THE NEXT GROUND OF APPEAL, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE CIT(A) IN CONFIRMING THE ACTION OF THE A.O. IN ASSESSING THE AGRICULTURAL INCOME EARNED BY THE ASSESSEE AMOUNTING TO RS. 1,89 ,548/- AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE A.O. NOT ICED THAT THE ASSESSEE HAS SHOWN AGRICULTURAL INCOME OF RS. 1,89,548/- BUT THE ASSESSEE DID NOT PRODUCE ANY POSITIVE PROOF SHOWING THAT THE ASSESSE E HAS RECEIVED THE AGRICULTURAL INCOME OF RS. 1,89,548/- DURING THE YE AR. MOREOVER, THE ASSESSEE COULD NOT PRODUCE ANY PROOF REGARDING THE BASIC ACTIVITIES SUCH AS ITA 878/MUM/2014 20 PLOUGHING, WEEDING, HARVESTING ETC CARRIED OUT TO C LAIM AGRICULTURAL INCOME, HENCE, THE A.O. TREATED THE SAID INCOME OF RS.1,89, 548/- AS INCOME FROM OTHER SOURCES INSTEAD OF TREATING THE SAME AS AGRIC ULTURAL INCOME , VIDE ASSESSMENT ORDER DATED 27.12.2010 PASSED BY THE AO U/S 143(3) OF THE ACT. 11. AGGRIEVED BY THE ORDERS DATED 27.12.2010 PASSED BY THE A.O. U/S 143(3) OF THE ACT, THE ASSESSEE PREFERRED FIRST APPEAL BEF ORE THE CIT(A). 12. THE CIT(A) BY FOLLOWING THE DECISION OF HIS PR EDECESSOR FOR THE ASSESSMENT YEAR 2007-08 IN ASSESSEES OWN CASE CONFIRMED THE A DDITION MADE BY THE A.O. VIDE ORDERS DATED 29-11-2013. THE CIT(A) WHILE ADJU DICATING APPEAL FOR ASSESSMENT YEAR 2007-08 HAD HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, T HE SUBMISSIONS OF THE APPELLANT AND ASSESSMENT ORDER. IT IS NOT IN DISPUT E THAT ASSESSEE IS THE OWNER OF AGRICULTURAL LAND. THE CONTENTION THA T THE A.O. HAS RAISED THAT THE APPELLANT HAS NOT PRODUCED ANY EVIDENC E TO SHOW THAT THE INCOME EARNED IS OUT OF AGRICULTURE ACTIVITY. AT THE TIME OF APPELLATE PROCEEDINGS, THE APPELLANT HAS ONCE AGAIN NOT PRODUCED ANY SUBSTANTIATING DOCUMENTS TO SHOW THAT ON THE AGRICULTURAL LAND HE IS CARRYING AGRICULTURE OPERATION. NO EVIDENCE HAS BEE N PRODUCED TO SHOW THAT ANY EXPENSE IS INCURRED BY HIM ON PROCUREMENT OF SEEDS OR LABOUR OR WATER FOR CARRYING OUT THE AGRICULTURE OPERATIONS CLAIMED BY HIM. NO CERTIFICATE FROM REVENUE AUTHORITY, IE. TAHSILDAR IS FILED TO CORROBORATE THE FACT THAT THE ASSESSEE IS EARNING INCOME FROM ITS AGRICULTURE LAND. IN ABSENCE OF ANY SUBSTANTIATING DOCUMENTS PRODUCED BY THE APPELLANT TO SHOW THAT THE INCOME EARNED IS OUT OF AGRICULTURE ACT IVITY, THE ORDER OF THE A.O. IS UPHELD IN TREATING THE INCOME OF RS. 1, 82,390/ AS INCOME FROM OTHER SOURCES. GROUND IS DISMISSED.' AS THE FACTS REMAINED SAME AND UNCHANGED IN THE IMP UGNED ASSESSMENT YEAR AS COMPARED TO PRECEDING YEARS AS PER THE CIT(A), THE CIT(A) , THEREFORE , UPHELD THE ACTION OF THE AO IN TREATING THE INCOME OF RS.1,89,548/- AS INCOME FROM OTHER SOURCES INSTEAD OF AGRICULTURE INCOME VIDE ORDERS DATED 29-11-2013. ITA 878/MUM/2014 21 13. AGGRIEVED BY THE ORDERS DATED 29-11-2013 OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 14. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE OWN A SMALL AGRICULTURAL LAND WHICH IS GIVEN TO THE CARET AKER WHO DO AGRICULTURAL WORK AND IN TURN GIVE RENT TO THE ASSESSEE. IT IS A SMALL PIECE OF LAND AND THE INCOME EARNED IS ONLY RS. 2 LACS (APPROX.) . IN THE ASSESSMENT YEAR 2005-06, THE TRIBUNAL IN ITA NO. 6614/MUM/2009 HAS SET ASIDE AND RESTORED THE MATTER TO THE FILE OF THE A.O. AND IT IS STATED BEF ORE US BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE A.O. IN HIS FURTHER PROCEEDIN GS PURSUANT TO MUMBAI- TRIBUNAL DIRECTIONS IN SECOND ROUND OF LITIGATION, AGAIN HELD THE SAID INCOME TO BE INCOME FROM OTHER SOURCES IN THE ASSESSMENT ORDER FRAMED PURSUANT TO THE ORDERS OF THE MUMBAI-TRIBUNAL AND THE ASSESSEE IN THE SECOND ROUND OF LITIGATION HAS NOT CHALLENGED THE SAID ASSESSMENT O RDER OF THE A.O. BEFORE THE APPELLATE AUTHORITIES. THE LD. D.R. SUBMITTED THAT THE ASSESSE HAS NOT CHALLENGED THE FINDINGS OF THE A.O. FOR THE ASSESSM ENT YEAR 2005-06 WHEREBY THE A.O. DID NOT ALLOW THE SAID INCOME AS AGRICULTU RAL INCOME, HENCE, THE SAID FINDING HAS BECOME FINAL. THE LD. DR STATED THAT TH E SAID INCOME CANNOT BE CONSIDERED AS AGRICULTURAL INCOME AS NO EVIDENCE HA S BEEN PRODUCED BY THE ASSESSEE TO SHOW THAT ON THE SAID AGRICULTURAL LAND , THE ASSESSEE IS CARRYING OUT AGRICULTURAL OPERATIONS DIRECTLY OR THROUGH CAR E-TAKER. NO CERTIFICATE FROM THE REVENUE AUTHORITIES TO CORROBORATE THAT THE ASS ESSEE IS EARNING AGRICULTURAL INCOME FROM ITS AGRICULTURAL LAND HAS BEEN FILED. 15. WE HAVE CONSIDERED THE RIVAL CONTENTION AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE PECULIAR FACT S AND CIRCUMSTANCES OF THE ISSUE, WE ARE OF THE CONSIDERED OPINION THAT THE AS SESSEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE EVEN IN THIS SECOND ROUND OF LITIGATION WITH RESPECT TO THE AGRICULTURAL OPERATIONS BEING ACTUALLY CARRIED OUT AT THE AGRICULTURAL LAND ITA 878/MUM/2014 22 OWNED BY THE ASSESSEE. NO DETAILS REGARDING PROCUR EMENT OF SEEDS OR LABOUR OR WATER FOR CARRYING OUT THE AGRICULTURAL OPERATIO NS HAS BEEN PRODUCED BY THE ASSESSEE EVEN IN THE SECOND ROUND OF LITIGATION . NO DETAILS WERE PRODUCED WITH RESPECT TO THE CROP CULTIVATED OR PRODUCED FRO M THE AGRICULTURAL LAND EVEN BY THE CARETAKER. THE TRIBUNAL IN ITA NO. 6614 /MUM/2009 HAS SET- ASIDE AND RESTORED THE MATTER TO THE FILE OF THE A. O. FOR DE-NOVO DETERMINATION OF THE MATTER AND IT IS STATED BEFORE US BY THE LD COUNSEL OF THE ASSESSEE THAT THE A.O. IN COMPLIANCE TO THE DIRECTION OF THE MUMB AI-TRIBUNAL IN SECOND ROUND OF LITIGATION HAS OBSERVED THAT THE ASSESSEE ONCE AGAIN FAILED TO BRING ON RECORD ANY EVIDENCE/PROOF TO SUBSTANTIATE HIS CL AIM THAT THE LAND HAS BEEN ACTUALLY UTILIZED FOR AGRICULTURAL OPERATIONS. IN VIEW OF THE ABOVE AND KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT IN THE ABSENCE OF ANY COGENT M ATERIAL/EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE WITH RESPECT TO THE ACTU AL CARRYING ON THE AGRICULTURAL ACTIVITY IN THE SAID LAND STATED TO BE AGRICULTURE LAND, THE SAID INCOME OF RS.1,89,548/-CANNOT BE ASSESSED TO TAX AS AGRICULTURAL INCOME AND THE SAME SHALL BE CHARGED TO TAX AS INCOME FRO M OTHER SOURCES , HENCE THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DIS MISSED AND THE FINDINGS OF THE AUTHORITIES BELOW ARE CONFIRMED. WE ORDER ACCOR DINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA N0. 878/MUM/2014 FOR THE ASSESSMENT YEAR 2008-09 IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2016. # $% &' 16-03-2016 ( ) SD/- SD/- (SANJAY GARG) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED [ ITA 878/MUM/2014 23 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI F BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI