K.S.Ramachandran, Coimbatore V. ITO, Coimbatore

ITA 941/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57873 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R MAHADEVAN
• Keywords: Cost of acquisition
• Section: 54F; 54; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO.941/MDS/2011 (ASSESSMENT YEAR : 2007-08 ) SHRI K.S.RAMACHANDRAN SENIOR MANAGER-MARKETING REVATHI EQIPMENT LTD MALUMACHAMPATTI POST POLLACHI MAIN ROAD COIMBATORE 641 021 VS THE INCOME TAX OFFICER SALARY WARD I95) COIMBATORE [PAN AAMPR7946J] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.MAHADEVAN, CA RESPONDENT BY : SHRI SHAJI P. JACOB, ADDL. CIT DATE OF HEARING : 18-01-2012 DATE OF PRONOUNCEMENT : 24-01-2012 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSE, FOR ASSESSMENT YEA R 2007-08, IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A), COIMB ATORE, DATED 24.2.2011. ITA 941/11 :- 2 -: 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSE, AS INDIVIDUAL, FILED HIS RETURN OF INCOME ON 19.7.2007 FOR THE YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF ` 3,77,560/- FROM SALARY RECEIVED BEING EMPLOYEE OF M/S REVATHI EQUIPMENTS L TD. THE ASSESSEE RECEIVED ` 31 LAKHS AS SALE CONSIDERATION FROM HIS FLAT IN CHENNAI [FLAT NO.2, GROUND FLOOR, BLOCK-A, KARPAGAA M APARTMETNS, SRIMAN SRINIVASA IYANGAR ROAD, CHENNAI]. TOTAL TAX ABLE CAPITAL GAINS HAS BEEN ARRIVED AT AS UNDER: COST OF FLAT IN CHENNAI (PURCHASED IN 1984-85) ` 2,40,250 INDEXED COST OF ACQUISITION 240250 X 519/125 9,97,518 SALE CONSIDERATION RECEIVED 31,00,000 LESS: INDEXED COST OF ACQUISITION 9,97,518 TAXABLE CAPITAL GAIN 21,02,482 3. THE ASSESSEE HAS INVESTED OUT OF SALE CONSIDERATIO N IN THE PURCHASE OF A NEW FLAT AT J-2, FIRST FLOOR, SOUTH B LOCK, PATTESWARAR PARK, DR.RAMASAMY LAY OUT, VELANDIPALAYAM, COIMBATO RE, FOR A COST OF ` 21,53,250/-. THE ASSESSEE EXECUTED AGREEMENT FOR THE PURCHASE OF THIS NEW HOUSE ON 22.1.2007 WITH PATTESWARAR CONSTR UCTIONS. BUT THE FLAT WAS COMPLETED IN THE YEAR 2008 ON 29.9.2008. THE PAYMENT FOR THE PURCHASE OF FLAT WAS MADE IN THE FOLLOWING MANN ER: ITA 941/11 :- 3 -: 15.11.2006 ` 1,00,000 18.01.2007 ` 4,00,000 19.03.2007 ` 4,00,000 27.08.2007 ` 7,00,000 18.01.2008 ` 2,60,000 28.07.2008 ` 1,00,000 29.09.2008 ` 1,93,350 TOTAL PAYMENT ` 21,53,250 4. AS PER SECTION 54(2) OF THE INCOME-TAX ACT, 1961 T HE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT APPROPRIATE D BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN O NE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSE T TOOK PLACE, OR WHICH IS NOT UTILIZED BY HIM FOR THE PURCHASE OR CO NSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139, SHALL BE DEPOSITED BY HIM BEFORE FURNI SHING SUCH RETURN (SUCH DEPOSIT BEING MADE IN ANY CASE NOT ALTER THAN THE DUE DATE OF APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISH ING 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 UTI LIZED IN ACCORDANCE WITH ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, B Y NOTIFICATION IN THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND FOR THE P URPOSES OF SUB- SECTION91), THE AMOUNT, IF ANY, ALREADY UTILIZED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO ITA 941/11 :- 4 -: DEPOSITED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET. ACCORDINGLY, AN AMOUNT OF ` 9 LAKH WAS PAID TOWARDS PURCHASE OF A NEW HOUSE BEFORE FILING OF THE RETURN OF INCOME BY THE ASSESSEE BUT HE HAS CLAIMED THE ENTIRE AMOUNT OF ` 21.53 LAKHS U/S 54(2) OF THE ACT. BUT THE ASSESSING OFFICER HAS FOUND THAT ONLY ` 9 LAKHS HAS TO BE TREATED AS EXEMPT UNDER THIS SECTION AND BY TREATIN G THE BALANCE AMOUNT TO BE NOT CHARGEABLE TO EXEMPTION, HE HAS AD DED BACK THIS AMOUNT TO THE ASSESSEES TOTAL INCOME. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE LD.CIT(A), WHO HAS ALSO CONFIRMED THIS ADDITION. NOW THE ASSESSEE IS IN SECOND APPEAL B EFORE US BY RAISING FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) IN HIS APPELLATE ORDER ITA 451-C / 2009-10 DATED 24.02.2011 HAS UPH ELD THE ADDITION MADE BY THE ASSESSING OFFICER WHILE COMPUTING THE I NCOME UNDER THE HEAD CAPITAL GAINS AT ` 12,02,482/-. HE ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN TREATING THE ABOVE SUM AS TAXABLE CAPITAL GAINS. THE ORDER OF THE LEARNED C I T (APPEALS) IS CLEARLY OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND PRINCIP LES OF LAW ESTABLISHED. THE ORDER IS ALSO AGAINST THE INTENT ION OF THE BENEFICIAL PROVISIONS OF SECTION 54. HENCE, THE APPELLATE ORDE R IS ALSO OPPOSED TO THE PRINCIPLES OF JUSTICE. 2. THE LEARNED C I T (APPEALS) OUGHT TO HAVE APPREC IATED THE FACT THAT THE APPELLANT HAD FULFILLED THE REQUIREMENT OF SEC TION 54, SINCE THE CAPITAL GAINS ARISING ON THE SALE OF CHENNAI RESIDE NTIAL FLAT HAS BEEN FULLY AND ACTUALLY UTILIZED IN THE PURCHASE OF A NE W RESIDENTIAL FLAT AT COIMBATORE WHICH IS AN ADMITTED FACT BY THE ASSESS ING OFFICER. HENCE, THE LEARNED CI T (APPEALS) OUGHT TO HAVE HELD THAT THE APPELLANT IS ELIGIBLE FOR THE EXEMPTION OF THE ENTIRE CAPITAL GA INS SINCE THIS AMOUNT HAS BEEN ACTUALLY APPROPRIATED TOWARDS THE NEW RESI DENTIAL HOUSE. ITA 941/11 :- 5 -: 3. THE LEARNED C I T (APPEALS) OUGHT TO HAVE TAKEN INTO CONSIDERATION THE FACT THAT HAVING ENTERED INTO AN AGREEMENT WITH THE BUILDERS ON 22.01.2007 AND HAVING BEEN SPECIFICALLY ALLOTTED A RESIDENTIAL FLAT BEARING NO. J 2, FIRST FLOOR, SOUTH BLOCK, THE APPELLANT HAS ACQU IRED THE RIGHT AND TITLE OVER THE NEW RESIDENTIAL HOUSE. THE LEARNED C I T (APPEALS) FAILED TO CONSIDER THE FACT THAT THE UNDI VIDED SHARE OF THE LAND ON WHICH THE FLAT IS BUILT FOR THE APPELLANT, HAS BEEN ACTUALLY REGISTERED BY A SALE DEED DATED 22.01.2007. FURTHE R, THE APPELLANT HAD MADE PAYMENT IN ADVANCE TO THE BUILDER. TAKING INTO ACCOUNT ALL THESE FACTS INTO CONSIDERATION, THE LEARNED C I T ( APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT HAS M ET THE REQUIREMENT OF SECTION 54, GETTING ENTITLED TO THE DEDUCTION OF ENTIRE CAPITAL GAINS. HAVING AGREED FOR PAYMENTS TO THE BUILDER IN INSTAL MENTS WITHIN THE FINANCIAL YEAR THE BALANCE MONEY HAS TO BE TREATED ONLY AS INSTALMENTS DUE FOR AGREED PURCHASE AND CONSTRUCTION. 4. THE LEARNED C I T (APPEALS) FAILED TO CONSIDER T HE BENEFICIAL BOARD CIRCULAR NO. 471 (F.NO. 207/27/85- 80-IT (ALL) DATE D 15.10.1986 AND CIRCULAR NO. 672 DATED 16.12.1993 WHEREIN IT HAS BE EN STATED THAT THE ALLOTMENT OF FLATS IN THE SCHEME OF ALLOTMENT AND C ONSTRUCTION, SHOULD BE TREATED AS THE CASE OF CONSTRUCTION OF RESIDENTI AL HOUSE. 5. THE LEARNED CIT(APPEALS) HAS ERRED IN STATING TH AT THE APPELLANT HAS NOT DEPOSITED THE UNUTILIZED AMOUNT IN AN ACCOUNT WITH IN PUBLIC SECTOR BANK. THE UNUTILIZED AMOUNT HAS BEEN DEPOSIT ED WITH STATE BANK OF INDIA AND THE AMOUNTS HAVE BEEN WITHDRAWN A ND PAID TO THE BUILDER FROM THE ABOVE BANK ACCOUNT . THE L EA RN E D C I T (APP E ALS) OU G HT TO H A V E S Y M P A TH E TIC AL LY C O N S I DERE D THE FACT THAT A MERE TECHNICAL FAULT I N NOT I NVESTING THE UNUTI L I ZE D C A PI TA L GA I NS O F ` 12,02 , 4 8 2/- I N THE SPECIF I ED BANK ACCOUN T AS PROVIDED FOR UND E R SECTION 54 ( 2 ) , C A NN O T M A K E THE APPELLANT DIS E NTITLED TO THE BENEFIC I A L P R OV I S I ONS OF SECTION 54 . THE C I T ( APPE A LS ) O UG HT TO HAVE CONSI DE R E D THE L E G I S L ATIVE I NTENTION AND S COPE OF SECT I O N 54 . I N AS MUCH AS THE APP E LL A NT M E T THE R EQUIR E M E NT OF S E CTION 54 THE L E ARNED C IT ( APPEA L S ) I S NOT J UST I FIED I N T A KING THE PR E JUDICIAL ST A ND A G A INST THE AP PE LL A NT D E NY I NG THE BENEFIT OF SECTION 54 TO THE APPE LL A NT M E R E L Y F O R TH E F A ILURE T O DEPOS IT T HE UNUT I LIZED AMOUN T IN THE SPECIFIC A C C OUN T . HE SHOULD HAVE APPREC I ATED THE FACT THAT THE APPELLANT HAD DEPOSITED THE AMO U NT I N A BA N K ACCOUNT AND HAS BEEN MAKING PAYMENTS TO THE BUILDER AT VARIOUS STAGES OF CONSTRUCTION A S A ND W H EN R EQUIRED . ITA 941/11 :- 6 -: 6 . TH E L E ARN E D C I T ( A PP E AL S ) H A S F A IL E D TO C O NSID E R TH E F O LL OW IN G F A V OU R A BLE J U DICI A L DEC I SIONS WHICH ARE R ENDERED ON THE I SSUE GIVING A FAVOURA B L E I NTERPR E TATION . THE L EA RN E D C I T ( APPEAL S ) OUGHT TO H AVE FOLLOWED THE J UDGM E NT OF TH E SE JUD I C I AL F O RUMS . I) N I PU N MEHROTR A VS ASS I S T AN T COMMISS I ONER OF I NCOME - TA X, CI RC LE 14 (2) , BANGALORE- REPOR T ED I N (2008) 1 10 I TO 520 (BANG ) I I) COMMISSI O N E R O F I NCOME- TAX VS RAJ ES H K U M A R J A L A N - R EPOR T ED IN (2 00 6) 157 TAXM A NN 398 ( GAUHATI) III ) J AGA NN A TH S IN G H LO DH A VS ITO (14 8 T A X MAN N 1) I TAT J OD H P UR BEN CH I V) MAC KHALEELI VS DY CLT (48 ITO 191) - MADRAS T R IBUNAL 7 . FOR THESE OR A N Y O TH E R G R OUN D S TH A T M A Y BE AD DU CED A T THE HE A RIN G OF TH E APP EA L , I T I S PRAYED THA T THE HON ' BLE TRIBUNA L M A Y BE PL E A SE D TO DEL E T E THE A D D ITI O N M A D E BY T H E CIT(APPE A LS) UNDER THE HEAD CAP I TA L G A I NS AMOUNTIN G TO ` 12,02 , 482/- AND H O LD TH A T TH E ENTIRE C A PIT A L GA INS I S EX E MPT UNDE R SECT I O N 54 AND R ENDE R J USTICE TO THE APPELLANT . 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. AS PER TH E LD. A.R, SHRI R.MAHADEVAN, THE ASSESSEE HAS GOT ACTUALLY CONSTRU CTED A RESIDENTIAL HOUSE BY UTILIZING THE CAPITAL GAINS AROSE FROM THE SALE OF EARLIER HOUSE WITHIN THE PERIOD PERMITTED U/S 139 OF THE ACT. I T WAS ARGUED THAT THE BENEFICIAL PROVISIONS LIKE SECTION 54 OF THE ACT HA VE TO BE LIBERALLY INTERPRETED IN FAVOUR OF THE ASSESSEE AFTER SEEING THE INTENTION OF THE LEGISLATURE EMBEDDED IN THIS PROVISION WHICH ORDAIN ED UTILIZATION OF CAPITAL GAINS PROCEEDS IN THE RESIDENTIAL HOUSE ONL Y WITHIN THE TIME ITA 941/11 :- 7 -: PROVIDED U/S 139. ACCORDING TO THE LD. A.R, THE D EPARTMENT IS TRYING TO READ THE PROVISIONS OF SECTION 54(2) WITH REFERE NCE TO SECTION 139(1) OF THE ACT IN ORDER TO RESTRICT THE RELIEF ADMISSIB LE TO HIM. THE LD. A.R HAS RELIED ON VARIOUS DECISIONS AND HAS ALSO FILED WRITTEN SUBMISSIONS. ON THE OTHER HAND, THE LD. DR HAS CONTROVERTED THES E SUBMISSIONS OF THE LD. A.R BY STATING THAT WHAT IS REFERRED IN SEC TION 54(2) IS SUB- SECTION(1) OF SECTION 139 UPTO WHICH THE REQUISITE INVESTMENT HAS TO BE MADE AND NOT OTHERWISE. HE HAS FURTHER ARGUED THAT THE ASSESSEE HAD ONLY ENTERED INTO AN AGREEMENT WITH THE BUILDER /PROMOTER AND HAS NOT GOT THE HOUSE REGISTERED AND THE ASSESSEE HAD NOT TAKEN POSSESSION. AFTER CONSIDERING THE RIVAL SUBMISSION S, WE HAVE FOUND THAT ON IDENTICAL FACTS, THE CHENNAI BENCH HAS REND ERED A DECISION IN THE CASE OF SHRI MADHUVAN PRASAD IN I.T.A.NO. 2485/ MDS/2004, FOR ASSESSMENT YEAR 1996-97, ORDER DATED 17.10.2005. I N THAT CASE, UNDER IDENTICAL FACTS, IT HAS BEEN HELD THAT THE CL AIM OF THE ASSESSEE IS ALLOWABLE. PARAGRAPHS 8 & 9 OF THE ORDER ARE RELEV ANT AND ARE BEING EXTRACTED HEREIN BELOW: 8. ON THE MERITS OR THE CASE, WE HAVE GONE THROUG H THE ORDERS OF THE TRIBUNAL CITED BY THE LEARNED AR. IN THE CASE REPOR TED IN 85 TTJ 173, THE ASSESSEE HAD ADVANCED A SUM OF ` 2 LAKHS FOR THE PURCHASE OF THE HOUSE AND THE ADVANCE WAS RECEIVED BACK BY THE SINCE THE TRANSACTION DID NOT MATERIALIZE. THE ASSESSEE IN THIS CASE HAD SOLD THE PROPERTY ON 4 TH JANUARY 1995 AND ADVANCED A SUM OF ` 2 LAKHS ON 16 TH APRIL 1995 FOR PURCHASE OF ITA 941/11 :- 8 -: THE HOUSE. THE ADVANCE WAS RECEIVED BACK ON 17 TH DECEMBER 1995 AND THE ASSESSE AGAIN ENTERED INTO A FRESH AGREEMENT ON 6 TLL JANUARY 1996 FOR PURCHASE OF A FLAT AND TOOK POSSESSION THEREOF ON 30 TH MARCH, 1996 AFTER PAYING THE CONSIDERATION OF ` 4,01,000/-. IN THIS CASE, THOUGH THE ASSESSING OFFICER DENIED THE EXEMPTION U/S.54F ON THE GROUND THAT THE ASSESSEE FAILED TO PURCHASE ANOTHER HOUSE BEFORE FILING THE RETURN U/S . 139( 1) AND ALSO FAILED TO DEPOSIT THE AMOUNT IN THE CAPITAL GAINS ACCOUNT, THE TRIBUNAL HELD THAT THE EXEMPTION WAS ALLOWABLE SINCE THE INTENTION OF THE ASSESSEE FROM THE VERY BEGINNING WAS TO PURCHASE A RESIDENTIAL HOUSE AND HE HAS DONE SO WITHIN TWO YEARS FROM THE SALE OF THE PLOT. THE TRIBUNAL OBSERVED THAT THE INTENTION OF THE ACT AS WELL AS THE INTENTION OF THE ASESSEE HAVE TO BE CON SIDERED IN A RIGHT PERSPECTIVE. IN THE CASE REPORTED IN 48 ITD 191, THE ASSESSE REALIZED PROFITS FROM TRANSFER OF A LAND, W HICH WAS DEPOSITED IN THE HOUSING DIVISION OF ITS CONSTRUCTI ON BUSINESS FOR THE PURPOSE OF BUILDING ANOTHER RESIDENTIAL BUILDIN G. THE TRIBUNAL HELD THAT THIS AMOUNTED TO UTILIZATION OF FUNDS FOR THE PURPOSE OF HIS OWN RESIDENTIAL HOUSE AND THAT SINCE THE AMOUNT WAS IN FACT UTILIZED FOR CONSTRUCTION OF A RESIDENTIAL HOUSE, T HE EXEMPTION WAS ALLOWABLE. IN THIS CASE, THE TRIBUNAL OBSERVED THA T THE PURPOSE OF SECTION 54F(2) REQUIRING THE DEPOSIT OF UNUTILIZED FUND IS NOT FOR DEPRIVING THE ASSESSE OF THE USE OF FUNDS BUT ONLY FOR AVOIDING THE RECTIFICATION OF THE ASSESSMENT BY BRINGING TO TAX THE AMOUNT, WHICH HAD BEEN EARLIER CLAIMED AS EXEMPT BY REASON OF REINVESTMENT. WE FIND THAT THE BOARD HAS IN ITS CI RCULAR NO.495 DATED 22 ND SEPTEMBER 1987 AT PARAGRAPHS 26.1 AND 26.2 STATED THAT THIS IS THE PURPOSE OF BRINGING IN THE AMENDME NTS IN SECTIONS 54, 54B, 54D AND 54F REQUIRING INVESTMENT IN A CAPI TAL GAINS ACCOUNT SCHEME. 9. IN THE INSTANT CASE THE APPELLANT HAS APPARENTL Y SATISFIED THE ULTIMATE OBJECTIVE OF THE SECTION BY INVESTING IN A RESIDENTIAL HOUSE BY WAY OF CONSTRUCTION WITHIN THE TIME ALLOWE D U/S 54. WHAT THE APPELLANT HAS FAILED TO DO IS TO MAKE AN I NVESTMENT IN THE CAPITAL GAINS ACCOUNT SCHEME AS REQUIRED U/S 54 (2) WITHIN THE TIME ALLOWED FOR FURNISHING THE RETURN U/S 139( 1). THIS THE APPELLANT CONTENDS IS ONLY A TECHNICAL BREACH. THE APPELLANT APPARENTLY INTENDED TO INVEST IN A RESIDENTIAL HOUS E WHICH IS OBVIOUS FROM THE FACT THAT HE ACQUIRED THE LAND WIT HIN A SHORT TIME AFTER THE END OF THE PREVIOUS YEAR AND BEFORE THE T IME ALLOWED FOR FILING THE RETURN AND COMMENCED CONSTRUCTION LATER ON THE SAID LAND WHICH WAS COMPLETED WITHIN THE TIME ALLOWED U/ S 54(1). THESE ACTS OF THE APPELLANT CLEARLY GO TO SHOW THAT THE APPELLANT ALWAYS INTENDED TO INVEST IN A RESIDENTIAL HOUSE BY WAY OF CONSTRUCTION. IT THEREFORE APPEARS THAT THE FAILUR E TO INVEST IN THE CAPITAL GAIN ACCOUNT SCHEME IS ONLY A TECHNICAL DEF AULT WHICH ITA 941/11 :- 9 -: GIVEN THE CIRCUMSTANCES AND THE PECULIAR FACTS SHOU LD NOT BE EXTENDED TO SUCH AN EXTENT AS TO DENY THE EXEMPTION U/S 54 WHEN THE ULTIMATE PURPOSE OF THE PROVISION IS ACHIE VED. TO HOLD THAT THE EXEMPTION SHOULD BE FORFEITED FOR A TECHNI CAL BREACH DOES NOT APPEAR TO BE THE CORRECT PROPOSITION PARTI CULARLY SINCE THE APPELLANT PLEADS THAT HE WAS NOT AWARE OF THE R EQUIREMENT OT INVEST IN THE CAPITAL GAINS ACCOUNT SCHEME AND ALSO STATES THAT HIS OBJECTIVE WAS TO INVEST IN A RESIDENTIAL HOUSE WHICH IS APPARENT FROM THE FACT THAT HE HAS PURCHASED A LAND AND ALSO CONSTRUCTED A HOUSE THEREON. IT IS ALSO SEEN THAT SECTION 54E (SINCE DELETED) AND SECTIONS 54EC AND 54ED WHICH RE QUIRE INVESTMENT OF THE PROCEEDS IN SPECIFIED ASSETS, SPE CIFICALLY PROVIDES THAT THE EXEMPTION WOULD BE FORFEITED IF T HE SPECIFIED ASSET IS GIVEN AS A SECURITY FOR TAKING LOAN. IN SECTION 54, WE DO NOT FIND ANY SUCH PROVISION AND THEREFORE IN OUR CO NSIDERED VIEW THE PURPOSE OF SECTION 54(2) IS NOT TO DEPRIVE THE ASSESSE OF AN EXEMPTION BUT ONLY TO AVOID RECTIFICATION. THE ULT IMATE OBJECT OF THE SECTION HAVING BEEN SATISFIED NAMELY TO ENCOURA GE CONSTRUCTION OF HOUSES, WE ARE CONVINCED THAT THE U TILIZATION OF THE FUNDS IN CONSTRUCTING A RESIDENTIAL HOUSE SHOUL D BE TREATED AS SUFFICIENT COMPLIANCE OF SECTION 54 AND THEREFORE H OLD THAT THE APPELLANT IS ENTITLED TO THE EXEMPTION U/S 54 EVEN IN RESPECT OF THE AMOUNT INVESTED BY WAY OF CONSTRUCTION OF THE R ESIDENTIAL HOUSE AMOUNTING TO ` 16,40,311/-. BEFORE WE DEPART, WE MAY MENTION THAT THE SUPREME COURT IN MOTILAL PADAMPAT SUGAR MILLS CO. LTD. VS STATE OF UTTAR PRADESH (1979) 118 ITR 3 26 HAS OBSERVED AS FOLLOWS: THAT THERE IS NO PRESUMPTION THAT EVERY PERSON KNOWS THE LAW. IT IS OFTEN SAID THAT EVERY ONE IS PRESUMED TO KNOW THE LAW, BUT THAT IS NOT A CORRECT STATEMENT, THERE IS NO SUCH MAXIM KNOWN TO THE LAW. 6. THEREFORE, BY RESPECTFULLY FOLLOWING THE ABOVE DECI SION, WE ALLOW THIS CLAIM OF THE ASSESSE. ITA 941/11 :- 10 -: 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE ST ANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT O N 24-01-2012. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 24 TH JANUARY, 2012 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR