Tax Case (Appeals) Nos. 354 and 355 of 2008 and M.P No. 1 of 2008 in T.C.A 355 of 2008
Decided on June 17, 2008
The Judgment of the Court was delivered by
K. Raviraja Pandian, J.:— The relevant assessment year is 2001-02. The assessees, Shri Sardarmal Kothari and Shri Shanthilal Kothari, filed their respective returns of income admitting a total income of Rs. 3,02,593 apart from the agricultural income of Rs. 25,000 each. The assessees have claimed exemption of capital gain tax under section 54F of the Income-tax Act. The Assessing Officer rejected the same on the ground that the construction was not completed when he made a personal visit. Against that order, the assessees preferred appeals before the Commissioner of Income-tax (Appeals) who allowed the appeals by holding that the assessees have invested the capital gains in the land and substantially completed the construction and directed the Assessing Officer to grant the benefit to the assessees. Against that order, the Department preferred appeals before the Income-tax Appellate Tribunal and the Tribunal has confirmed the order of the Commissioner (Appeals) and dismissed the appeals. The correctness of the said orders is now canvassed in these appeals by formulating the following questions of law:
“1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the assessees are entitled for exemption under section 54F of the Income-tax Act is valid?
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding, when the conditions laid down in sub-section (1) of section 54F and the Board Circular No. 667, dated October 18, 1993 ([1993] 204 ITR (St.) 103), clearly stated that the purchase/construction is to be completed within stipulated time is not mandatory for claiming exemption under the Act ?”
2. We have heard the argument of learned counsel for the appellant and perused the materials available on record.
3. There is no dispute about the fact that the assessees have invested the entire net consideration of sale of capital asset in the land itself and subsequently the assessees have invested large sums of money in the construction of the house.
4. The cost of investment in land and the cost of expenditure towards the construction of the houses is not in dispute. The one and only ground on which the Assessing Officer has non-suited the assessees for the claim of exemption was that the houses have not been completed. There remains some more construction to be made.
5. The requirement of the provision is that the assessee, within a period of three years after the date of transfer, has to construct a residential house in order to become eligible for exemption. In the cases on hand, it is not in dispute that the assessees have purchased the lands by investing the capital gain and they have also constructed residential houses. In order to establish the same, the assessees submitted before the Commissioner of Income-tax (Appeals) several material evidence, viz., invitation card printed for the house-warming ceremony to be held on July 12, 2003. The assessees have also produced the completion certificates from the Municipal authority on January 30, 2004. On the basis of the above documents, the Commissioner of Income-tax (Appeals) concluded that the requirement of the statutory provision has been complied with by the assessees and that was reconfirmed by the Tribunal in the orders impugned.
6. In the second question of law formulated, a reference is made to the Board Circular No. 667, dated October 18, 1993 ([1993] 204 ITR (St.) 103). On a reading of the circular, we are of the view that the Circular would not in any way advance the case of the Revenue to come to the conclusion that in order to have the benefit under section 54F of the Income-tax Act, the construction should have been completed.
7. The Tribunal has also taken note of its own earlier order in the case of Mrs. Seetha Subramanian v. Asst. CIT reported in [1996] 59 ITD 94 (Mad), wherein the Tribunal has held that, in order to get the benefit under section 54F, the assessee need not complete the construction of the house and occupy the same. It is enough if the assessee established that the assessee had invested the entire net consideration within the stipulated period. The said view taken consistently by the Tribunal has been applied in these cases also. The Tribunal has distinguished the Delhi High Court judgment in the case of D.P Mehta v. Commissioner Of Income-Tax reported in [2001] 251 ITR 529, relied on by the Revenue in their favour to non-suit the assessees for exemption. In our view, the Tribunal has distinguished the same rightly because in the cited case, there was a factual finding by the authorities that the assessee himself has admitted that the construction put up was only a garage and service quarters and it was not fit enough for occupation of the assessee. That factual finding is totally absent in these cases. There is no material to entertain these appeals. The appeals fail and the same are dismissed. Consequently, connected miscellaneous petition is also dismissed.