Sri. Sambandam Udaykumar, Bangalore v. DCIT, Bangalore

ITA 634/BANG/2010 | 2006-2007
Pronouncement Date: 21-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 63421114 RSA 2010
Bench Bangalore
Appeal Number ITA 634/BANG/2010
Duration Of Justice 8 month(s) 15 day(s)
Appellant Sri. Sambandam Udaykumar, Bangalore
Respondent DCIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 21-01-2011
Date Of Final Hearing 17-01-2011
Next Hearing Date 17-01-2011
Assessment Year 2006-2007
Appeal Filed On 06-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO. 634/BANG/2010 ASSESSMENT YEAR : 2006-07 SRI SAMBANDAM UDAYKUMAR NO.35 M.G. ROAD BANGALORE 560 001. : APPELLANT VS. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1) BANGALORE. : RESPONDENT APPELLANT BY : SHRI S. PARTHASARATHI ADVOCATE RESPONDENT BY : SMT. SWATHI S. PATIL CIT-II(DR) O R D E R PER GEORGE GEORGE K. JUDICIAL MEMBER THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER PASSED BY THE CIT (A)-I BANGALORE IN IT A NO: 92/DC- 1(1)/A-I/08-09 DATED: 15.2.2010 FOR THE ASSESSMENT YEAR 2006-07 . 2. THE ASSESSEE AN INDIVIDUAL IN HIS GROUNDS OF APPEAL HAD RAISED EIGHT GROUNDS . ON A PERUSAL IT WAS NOTICED THAT GROUND NOS: 6 ITA NO.634/BANG/2010 PAGE 2 OF 15 7 AND 8 BEING GENERAL AND NO EXPLICIT ISSUES INVOLVED THE Y HAVE OBVIOUSLY BECOME NON-CONSEQUENTIAL. GROUND NO.5 IS NOT MAINTAINABLE AS CHARGING OF INTEREST U/S 234B AND 234C OF THE AC T IS MANDATORY AND CONSEQUENTIAL IN NATURE AND ACCORDINGLY IT IS DIS MISSED. IN THE REMAINING GROUNDS OF COURSE THE CRUX OF THE ISSUE IS CONFINED TO THE EFFECT THAT THE CIT (A) WAS NOT JUSTIFIED IN DISALLOWING THE E XEMPTION CLAIM OF RS.2.16 CRORES U/S 54F OF THE ACT. 3. BRIEFLY STATED DURING THE YEAR UNDER DISPUTE THE ASSESSEE HAD SOLD SHARES OF AXESS TECHNOLOGIES INDI A PVT. LTD. FOR RS.4.18 CRORES AND ACCORDING TO THE ASSESSEE A PA RT OF THE SALE PROCEED WAS INVESTED IN PURCHASE OF A HOUSE PROPERT Y TO THE EXTENT OF RS.2.16 CRORES AND ACCORDINGLY CLAIMED THE SAME A S EXEMPTION U/S 54F OF THE ACT. HOWEVER THE AO ON THE BASIS OF THE R EPORT OF HIS INSPECTOR THAT THE CONSTRUCTION OF THE BUILDING WAS NOT COMPLETE EVEN AFTER AN ELAPSE OF THREE YEARS ETC. TOOK A VIEW TH AT THE ASSESSEE HAD NEITHER PURCHASED THE PROPERTY WITHIN TWO YEARS NOR CONSTRUCTED WITHIN THREE YEARS AFTER THE DATE OF TRANSFER OF TH E ASSET ON WHICH CAPITAL GAIN WAS DERIVED AND ACCORDINGLY DENIED T HE EXEMPTION CLAIM U/S 54F OF THE ACT BRUSHING ASIDE THE RELIANCE PL ACED BY THE ASSESSEE ON THE FINDING OF THE HONBLE TRIBUNAL MADRAS BENC H REPORTED IN 59 ITD 94 AS WELL AS BOARDS CIRCULAR NOS: 471/15.10 .1986 AND 672/16.12.1993 (SIC) 16.3.1993. 4. AGGRIEVED THE ASSESSEE CHALLENGED THE STAND OF THE AO ON THE ISSUE BEFORE THE CIT (A). TAKING INTO ACCOU NT THE ELABORATE CONTENTIONS PUT-FORTH BY THE ASSESSEE AND ALSO DIST INGUISHING THE CASE LAWS ON WHICH THE ASSESSEE HAD PLACED STRONG CONFID ENCE THE LD. CIT ITA NO.634/BANG/2010 PAGE 3 OF 15 (A) TOOK A DIVERGENT VIEW BY CITING THE HONBLE JUR ISDICTIONAL HIGH COURTS RULING IN THE CASE OF DCIT V. YELLAMMA DASA PPA HOSPITAL (2007) 290 ITR 353 (KAR) WHEREIN THE HONBLE COURT HAD OBS ERVED THAT THE TRIBUNAL WAS NOT CORRECT IN HOLDING THAT THE ASSESS EE WAS ENTITLED FOR THE CLAIM OF DEPRECIATION WHEN THE MACHINERIES WERE KEPT READY FOR USE ALTHOUGH NOT USED DURING THE RELEVANT ACCOUNTI NG YEAR AND APPLYING THE SAME ANALOGY THE CIT (A) TOOK A STAND THAT THE IMPUGNED HOUSE NOT EVEN FIT TO BE CALLED A HOUSE NOT TO SPE AK OF A RESIDENTIAL HOUSE HAD NEITHER BEEN PURCHASED OR CONSTRUCTED IN THE TRUE SENSE OF THE TERM AND HENCE CANNOT BE ELIGIBLE DESIGNATING IT AS NEW ASSET S O AS TO ENABLE THE APPELLANT ENTITLED FOR EXEMPTION U/S 54F OF THE I.T. ACT.. 5. AGITATED THE ASSESSEE HAS COME UP WITH THE PRE SENT APPEAL. DURING THE COURSE OF HEARING THE LENGTHY AND FORCEFUL SUBMISSIONS PUT-FORTH BY THE LD. A.R ARE SUMMARIZED AS UNDER: - DURING THE YEAR UNDER DISPUTE THE ASSESSEE HAD SOL D SHARES OF AXESS TECHNOLOGIES INDIA PVT. LTD. FOR A CONSIDERAT ION OF RS.4 18 08 725/- AND WITH A VIEW TO CLAIM EXEMPTION U/S 54F INVESTED A SUM OF RS.2.16 CORES ON A RESIDENTIAL PR OPERTY FOR WHICH HE HAD ENTERED INTO AN AGREEMENT TO SELL DT.27.1.2006 WITH THE DEVELOPER ADARSH GROUP - FOR THE PURCHASE OF A RESIDENTIAL HOUSE AND PAID AN ADVANCE OF RS.1.14 CRORES VIDE CHEQUE NO.096345 DT.27.1.2006; - THAT THE CAPITAL GAINS ON ACCOUNT OF TRANSFER OF SH ARES WAS RECEIVED BY THE ASSESSEE ON 28.11.2005; ITA NO.634/BANG/2010 PAGE 4 OF 15 - THAT THE ASSESSEE HAD NOT ONLY PAID THE ENTIRE NET CONSIDERATION OF RS.2.16 CRORES BY STRETCHING OVER FOUR INSTALLME NTS BY OCTOBER 2006 . I.E. WITHIN 12 MONTHS FROM THE DATE OF REALIZATION OF CAPITAL GAINS; - THE ASSESSEE HAD INVESTED THE ENTIRE NET CONSIDERAT ION WITHIN THE STIPULATED PERIOD AND IN FACT CONSTRUCTED TH E ENTIRE RESIDENTIAL PROPERTY EXCEPT SOME FINISHING TO MAKE IT FOR OCCUPATION; THAT AS THE ASSESSEE HAD SUBSTANTIALLY COMPLETED ALL THE WORK OF CONSTRUCTION AND ALSO INVESTED THE ENTI RE NET CONSIDERATION IN ALL PRACTICAL PURPOSES HE HAD CO MPLIED WITH THE CONDITIONS STIPULATED IN S.54F; - THOUGH THE ASSESSEE MADE THE ACTUAL PAYMENT TO THE TUNE OF RS.2.66 CRORES TOWARDS THE CONSTRUCTION OF THE PROP ERTY TO THE BUILDERS THE CLAIM FOR EXEMPTION WAS RESTRICTED TO RS.2.16 CRORES ONLY WHICH WAS SHOWN AS INVESTMENT IN THE RE SIDENTIAL HOUSE PROPERTY IN HIS BOOKS OF ACCOUNT - CASE LAWS RELIES ON: MRS. SEETHA SUBRAMANIAN V. ACIT (1996) 59 ITD 94 (M AD); CIT V. SARDARMAL KOTHARI (2008) 302 ITR 286 (MAD); ASST. COLLECTOR OF CENTRAL EXCISE V. DUNLOP INDIA L TD. AND OTHERS 154 ITR 172 (SC) 5.1. ON THE OTHER HAND THE LD. D R HAD VO CIFEROUSLY SUPPORTED THE STAND OF THE AO TO THE EFFECT THAT THE CONSTRUC TION OF THE RESIDENTIAL PROPERTY WAS NOT COMPLETED EVEN AFTER E LAPSE OF THREE YEARS FROM THE DATE OF TRANSFER OF THE SHARES ON WH ICH THE CAPITAL GAIN WAS DERIVED; THAT THE ASSESSEE HAD NEITHER PUR CHASED THE PROPERTY WITHIN THE PERIOD OF TWO YEARS NOR CONSTRU CTED THE SAME ITA NO.634/BANG/2010 PAGE 5 OF 15 WITHIN THE PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ASSET AND AS SUCH THE ASSESSEES CASE DIDNT FALL WITHIN THE PURVIEW OF S.54F OF THE ACT SO AS TO CLAIM THE EXEMPTION. TO BUTTRESS HER ARGUMENT THE LD. D R DREW SUPPORT FROM THE FINDING OF THE LD. CIT (A) WHO HAD SUSTAINED THE ACTION OF THE AO IN DISAL LOWING THE ASSESSEES CLAIM FOR EXEMPTION. TO SUM UP IT WAS EARNESTLY PLEADED THAT THE STAND OF THE AUTHORITIES BELOW BE SUBSTANT IATED. 6. WE HAVE SCRUPULOUSLY CONSIDERED THE RIV AL SUBMISSIONS ATTENTIVELY PERUSED THE RELEVANT CASE RECORDS AND A LSO THE JUDICIAL PRECEDENTS ON WHICH THE ASSESSEE HAD PLACED STOUT C ONFIDENCE. 6.1. IT WAS A FACT THAT THE ASSESSEE HA D RECEIVED RS.4.18 CRORES BEING SALE PROCEEDS OF SHARES OF AXESS TECHNOLOGIES INDIA PVT. LTD. AND A SUM OF RS.1.23 CRORES AS CONCEDED BY THE AO WAS PAID AS ON 31.3.2006 TOWARDS THE COST OF INVESTMENT IN A HOUSE PROPERTY. TO THIS EXTENT THERE WAS NO DISPUTE AT ALL. 6.2 THE DETAILS OF PAYMENTS MADE FOR PU RCHASE/CONSTRUCTION OF HOUSE PROPERTY (PAYMENTS TO ADARSH DEVELOPERS & AKA RSH INFOTECH AND INFRASTRUCTURE) ARE AS FOLLOWS:- ADARSH DEVELOPERS DATE RECEIPT # AMOUNT PAID 23-JAN-06 3487 11 484 550.00 18-MAY-06 1058 2 873 340.00 28-OCT-06 4905 2 923 340.00 31-OCT-06 4942 2 923 340.00 9-NOV-09 1192 2 111 655.00 9-NOV.09 1193 100 000.00 ITA NO.634/BANG/2010 PAGE 6 OF 15 AKARSH INFOTECH & INFRASTRUCTURE DATE RECEIPT # AMOUNT PAID 23-JAN-06 258 8 41 500.00 18-MAY-06 073 2 14 200.00 28-OCT-06 295 2 14 200.00 31-OCT-06 297 2 14 200.00 6-NOV-07 126 24 49 052.00 9-NOV-09 1193 2 88 345.00 ADARSH DEVELOPERS = RS.2 24 16 225.00 AKARSH INFOTECH = RS. 42 21 497.00 TOTAL AMOUNT PAID = RS.2 66 37 722.00 EXEMPTION CLAIMED U/S 54F FOR PAYMENTS MADE TO (ADA RSH DEVELOPERS & AKARSH INFOTECH & INFRASTRUCTURE) :- DATE OF PAYMENT RECEIPT NO. CHEQUE NO. AMOUNT PAID 23.01.2006 34787 096345 1 14 84 550/- 18.05.2006 1058 470489 28 73 340/- 28.10.2006 4905 470503 29 23 340/- 31.10.2006 4942 470505 29 23 340/- TOTAL 2 02 04 570/- DATE OF PAYMENT RECEIPT NO. CHEQUE NO. AMOUNT PAID 23.01.2006 258 96346 8 41 500/-- 18.05.2006 73 470490 2 14 200/- 28.10.2006 1295 470504 2 14 200/- 31.10.2006 1294 470506 2 14 200/- TOTAL 14 84 100/- 6.3 HOWEVER THE BONE OF CONTENTION OF THE REVENUE WAS THAT THE ASSESSEE HAD NEITHER PURCHASED NOR CONSTRUCTED THE PROPERTY WITHIN THE TIME FRAME AS STIPULATED IN THE PROVISIONS OF S .54F OF THE ACT AND THUS THE ASSESSEE WAS DISENTITLED TO SEEK EXEMPTIO N FOR THE INVESTMENT IN THE RESIDENTIAL PROPERTY. FURTHER T HE AO HAD REFUSED TO TAKE NOTE OF THE FINDING OF THE HONBLE TRIBUNAL MADRAS BENCH IN THE CASE OF MRS. SEETHA SUBRAMANIAN V. ACIT CITED S UPRA ACCORDING TO ITA NO.634/BANG/2010 PAGE 7 OF 15 HIM THE SAID FINDING OF THE HONBLE TRIBUNAL WAS T O EXTEND THE PROVISIONS IN GENERAL TO ALL THE INDIVIDUALS CONTRA RY TO THE SPECIFIC PROVISIONS OF THE ACT AND THE CIRCULARS OF THE CBDT . 6.4. WHEN THE ASSESSEE ON AN APPEAL HA D SPECIFICALLY DREW THE ATTENTION OF THE LD. CIT(A) TO THE RULING OF THE H ONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. SARDARMAL KOTHARI CITE D SUPRA THE LD. CIT (A) IN STEAD OF ANALYZING THE PROS AND CONS OF THE ISSUE DEALT WITH BY THE HONBLE COURT STRANGELY WENT AHEAD IN ADDING THAT I OBSERVE THAT THE RATIO OF SARDARMAL DECISION IS NOT BINDING IN K ARNATAKA. SECONDLY WITH DUE REGARDS HUMBLY I POINT OUT THAT I DO NOT SUBSCRIBE TO THE POINT OF LAW ENUNCIATED BY THE HONOURABLE MADRAS HI GH COURT. 6.5. TO PUT THE RECORD STRAIGHT WE WOUL D LIKE TO RECALL THE WELL DESERVED OBSERVATIONS OF THE HONBLE HIGHEST JUDICI ARY OF THE LAND IN THE CASE OF ASST. COLLECTOR OF CENTRAL EXCISE V. DU NLOP INDIA LTD. AND OTHERS 154 ITR 172 (SC) THAT - WE DESIRE TO ADD AND AS WAS SAID IN CASSELL AND CO. LTD. V. BROOME [1972] AC 1027 (HL) WE HOPE IT WILL NEVER BE NECESSARY FOR US TO SAY SO AGAIN THAT ' IN THE HIERARCHICAL SYSTEM OF COURTS ' WHICH EXISTS IN OUR COUNTRY ' IT IS NECESSARY FOR EACH LOWER TIER ' INCLUDING THE HIGH COURT 'TO ACCEPT LOYALLY THE DECISIONS OF THE HIGHER TIERS'. IT IS INEVITABLE IN A HIERARCHICAL SYSTEM OF COURTS THAT THERE ARE DECISIONS OF THE SUPREME APPELLATE TRIBUNAL WHICH DO NOT ATTRACT THE UNANIMOUS APPROVAL OF ALL MEMBERS OF THE JUDICIARY...... BUT THE JUDICIAL SYSTEM ONLY WORKS IF SOME ONE IS ALLOWED T O HAVE THE LAST WORD AND THAT LAST WORD ONCE SPOKEN IS LOYALLY ACCEPTED (SEE OBSERVATIONS OF LORD HAILSHAM AND LORD DIPLOCK IN BROOME V. CASSELL). ITA NO.634/BANG/2010 PAGE 8 OF 15 THE BETTER WISDOM OF THE COURT BELOW MUST YIELD TO THE HIGHER WISDOM OF THE COURT ABOVE. THAT IS THE STRENGTH OF THE HIERARCHICAL JUDICIAL SYSTEM. I N CASSELL V. BROOME [1972] AC 1027 COMMENTING ON THE COURT OF APPEAL'S COMMENT THAT ROOKES V. BARNARD [1964] AC 1129 WAS RENDERED PER INCURIAM LORD DIPLOCK OBSERVED (P. 1131). THE COURT OF APPEAL FOUND THEMSELVES ABLE TO DISREGARD THE DECISION OF THIS HOUSE IN ROOKES V. BARNARD BY APPLYING TO IT THE LABEL PER INCURIAM. THAT LABEL IS RELEVANT ONLY TO THE RIGHT OF AN APPELLATE COURT TO DECLINE TO FOLLOW ONE OF ITS OWN PREVIOUS DECISIONS NOT TO ITS RIGHT TO DISREGARD A DECISION OF A HIGHER APPELLATE COURT OR TO THE RIGH T OF A JUDGE OF THE HIGH COURT TO DISREGARD A DECISION OF THE COURT OF APPEAL.' WE SHALL LEAVE THE ISSUE AT IT . 6.6. REVERTING BACK TO THE ISSUE ON HAND THE HONBLE TRIBUNAL MADRAS BENCH IN THE CASE OF MRS. SEETHA SUBRAMANIA N CITED SUPRA HAD AN OCCASION TO DEAL WITH A SIMILAR ISSUE TO THA T OF THE CASE ON HAND. AFTER DELIBERATING THE ISSUE IN DEPTH IT WAS PLEAS ED TO OBSERVE THAT 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE MATERIAL ON RECORD IT IS CLEAR THAT THE ASSESSEE CLAIMED THA T THE SALE PROCEEDS OF THE CAPITAL ASSET WAS INVESTED IN THE CONSTRUCTION OF A RESIDENTIAL HOUSE AND IN FACT THE ENTIRE CONSIDERATION WAS INVESTED WITHIN THE STIPULATED PERIOD OF THREE YEARS AS PER THE PROVISIONS OF SECTION 54F. THEREFORE THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER THE SAID PROVISION. THIS WAS ACCEPTED BY THE ASSESSING OFFICER. THE CIT INITIATED ACTION UNDER SECTION 263 ON THE GROUND THAT THE CONSTRUCTION OF THE HOUSE WAS NOT COMPLETED WITHIN THE PERIOD OF THREE YEARS. FURTHER THE CIT RELIED UPON THE REPORT OF THE INSPECTOR OF INCOME-TAX WHO HAS STATED THAT STILL CERTAIN WORK IS TO BE COMPLETED SO AS TO MAKE IT FI T ITA NO.634/BANG/2010 PAGE 9 OF 15 FOR OCCUPATION. THE CONTENTION OF THE ASSESSEE WAS THAT THE ENTIRE NET SALE CONSIDERATION WAS INVESTED ON THE CONSTRUCTION OF THE BUILDING EXCLUDING A SUM OF RS.1 03 000 WHICH WAS DEPOSITED IN THE UNITS OF UTI (CAPITAL GAINS SCHEME) WITHIN SIX MONTHS FROM THE DATE OF THE SALE. ACCORDING TO THE ASSESSEE THE ENTIRE NET CONSIDERATION WAS INVESTED IN THE CONSTRUCTION OF THE RESIDENTIAL HOUSE AND THE ENTIRE CONSTRUCTION OF THE STRUCTURE WAS COMPLETED THOUGH A LITTLE MORE WORK IS TO BE COMPLETED SO AS TO MAKE IT FIT FOR OCCUPATION. AS THE ENTIRE NET CONSIDERATION WAS INVESTED IN THE CONSTRUCTION OF THE HOUSE PROPERTY IT SHOULD BE CONSIDERED THAT THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS SPECIFIED UNDER SECTION 54F. BUT HOWEVER THE CIT DID NOT ACCEPT THE ASSESSEE'S PLEA. HE THEREFORE RESTORED THE MATTER TO THE AO FOR FRESH CONSIDERATION OBSERVING THAT THE ASSESSEE HAS NOT COMPLIED WITH THE CONDITIONS ENUMERATED UNDER SECTION 54F. BEFORE THE TRIBUNAL THE CONTENTION OF THE ASSESSEE WAS THAT THE PROVISIONS OF SECTION 54F IS A BENEFICIAL PROVISION FOR PROMOTING THE CONSTRUCTION OF RESIDENTIAL HOUSES. THEREFORE THE SAID PROVISION HAS TO BE CONSTRUED LIBERALLY AND FOR ACHIEVING THE PURPOSE FOR WHICH IT WAS INCORPORATED IN THE STATUTE. IN SUPPORT OF THE SAID CONTENTION THE ASSESSEE RELIED UPON THE DECISION IN THE CASE OF BAJAJ TEMPO LTD. THE ASSESSEE ALSO RELIED UPON CERTAIN CIRCULARS ISSUED BY THE CBDT. ONE OF THE CIRCULARS WAS CIRCULAR NO. 471 DATED 15TH OCTOBER 1986. THIS WAS ISSUED BY THE CBDT CLARIFYING THE POSITION THAT WHERE AN ASSESSEE ACQUIRES A FLAT BY AN ALLOTMENT UNDER THE SELF- FINANCING SCHEME OF THE DELHI DEVELOPMENT AUTHORITY THE ALLOTMENT ITSELF IS SUFFICIENT COMPLIANCE FOR GETTING THE BENEFIT UNDER SECTION 54F EVEN THOUGH THE ASSESSEE HAS NOT PAID ALL THE INSTALMENTS DUE UNDER THE SAID SCHEME. LATER BY ANOTHER CIRCULAR NO. 672 DATED 16TH DECEMBER 1993 THE CBDT HAS ISSUED CLARIFICATION EXTENDING THE SAME BENEFITS FOR ACQUISITION OF HOUSES OR ITA NO.634/BANG/2010 PAGE 10 OF 15 FLATS ON ALLOTMENT UNDER SIMILAR SCHEMES . THEREFORE IT WAS CONTENDED THAT THE INTENTION OF THE LEGISLATURE WAS TO INVEST IN THE ACQUISITION OF A RESIDENTIAL HOUSE AND COMPLETION OF CONSTRUCTION OR OCCUPATION IS NOT REQUIRED . WE FIND FORCE IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE. THE SAID INTENTION IS VERY CLEAR FROM THE TWO CIRCULARS ISSUED BY THE CBDT WHERE IT WAS HELD THAT AN ASSESSEE IS ENTITLED TO THE BENEFIT OF SECTIONS 54 AND 54F IF AN ASSESSEE GETS AN ALLOTMENT UNDER THE SELF- FINANCING SCHEME AND PAYS THE FIRST INSTALMENT OF THE COST OF CONSTRUCTION. FROM THAT IT IS CLEAR THAT IN ORDER TO GET THE BENEFIT UNDER SECTION 54F THE ASSESSEE NEED NOT COMPLETE THE CONSTRUCTION OF THE HOUSE AND OCCUPY THE SAME. ADMITTEDLY IN THE PRESENT CASE THE ASSESSEE HAD INVESTED THE ENTIRE NET CONSIDERATION WITHIN THE STIPULATED PERIOD AND IN FACT HAS EVEN CONSTRUCTED THE ENTIRE RESIDENTIAL PROPERTY EXCEPT SOME FINISHING TO MAKE IT FIT FOR OCCUPATION. AS THE ASSESSEE HAS SUBSTANTIALLY COMPLETED ALL THE WORK OF CONSTRUCTION AND HAS INVESTED THE ENTIRE NET CONSIDERATION IT HAS TO BE INFERRED THAT THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS PROVIDED UNDER SECTION 54F. A SIMILAR CASE WAS CONSIDERED BY THE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF SATISH CHANDRA GUPTA V. ASSESSING OFFICER [1995] 54 ITD 508 AND THIS TRIBUNAL AFTER CONSIDERING THE PROVISIONS OF SECTION 54 AS WELL AS SECTION 55 HELD THAT THE CLAIM CANNOT BE DENIED ON THE GROUND THAT THE CONSTRUCTION OF THE HOUSE STARTED BY THE ASSESSEE WAS NOT COMPLETED WITHIN THE STIPULATED PERIOD OF THREE YEARS AND SOME WORK WAS CARRIED OUT THEREAFTER. THE SAID DECISION ALSO SUPPORTS THE ASSESSEE'S CONTENTION. UNDER THE ABOVE CIRCUMSTANCES ESPECIALLY IN THE LIGHT OF THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES WE HOLD THAT THE CIT WAS NOT JUSTIFIED IN REVISING THE ASSESSMENT OF THE AO. HENCE WE SET ASIDE THE ORDER OF THE CIT AND RESTORE THAT OF THE AO. ITA NO.634/BANG/2010 PAGE 11 OF 15 6.7. MORE STRIKINGLY THE HONBLE MADRAS HIGH COUR T HAD AN OCCASION TO DEAL WITH AN IDENTICAL ISSUE IN THE CAS E OF CIT V. SARDARMAL KOTHARI AND CIT V. SHANTHILAL KOTHARI REPORTED IN 3 02 ITR 286 (MAD). TO BE PRECISE THE ISSUE BEFORE THE HONBLE COURT W AS - WHETHER THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING W HEN THE CONDITIONS LAID DOWN IN SUB-CL. (1) OF S. 54F A ND THE BOARD CIRCULAR NO. 667 DT.18-10-1993 CLEARLY STATE D THAT THE PURCHASE/CONSTRUCTION IS TO BE COMPLETED W ITHIN STIPULATED TIME IS NOT MANDATORY FOR CLAIMING EXEMP TION UNDER THE ACT THEREFORE THE ASSESSEES ARE ENTITLED FOR EXEMPTION UNDER S. 54F OF THE IT ACT? THE ISSUE IN BRIEF WAS THAT TH E ASSESSEES HAVE CLAIMED EXEMPTION OF CAPITAL GAINS U/S. 54F OF THE ACT. THE AO REJECTED THE SAME ON THE GROUND THAT THE CONSTRUCTION WAS NOT CO MPLETED WHEN HE MADE A PERSONAL VISIT. ON AN APPEAL THE CIT (A) AL LOWED THE APPEAL BY HOLDING THAT THE ASSESSEES HAVE INVESTED THE CAPITA L GAINS IN THE LAND AND SUBSTANTIALLY COMPLETED THE CONSTRUCTION. ON A FURTHER APPEAL THE TRIBUNAL HAD CONFIRMED THE ORDER OF THE CIT(A). THE CORRECTNESS OF THE SAID ORDERS WAS CANVASSED BEFORE THE HONBLE CO URT IN THE FOLLOWING MANNER: '1. WHETHER TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSEES WERE ENTITLED FOR EXEMPTION UNDER S. 54F OF THE IT ACT IS VALID? 2. WHETHER THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING WHEN THE CONDITIONS LAID DOWN IN SUB-CL. (1) OF S. 54F AND T HE BOARD CIRCULAR NO. 667 DT. 18-10-1993 CLEARLY STATED THA T THE PURCHASE/CONSTRUCTION IS TO BE COMPLETED WITHIN STI PULATED TIME IS NOT MANDATORY FOR CLAIMING EXEMPTION UNDER THE A CT?' AFTER CONSIDERING THE ISSUE IN DETAIL THE HONBLE COURT WAS PLEASED TO OBSERVE THUS - ITA NO.634/BANG/2010 PAGE 12 OF 15 3. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASS ESSEES HAVE INVESTED THE ENTIRE NET CONSIDERATION OF SALE OF CAPITAL ASSET IN THE LAND ITSELF AND SUBSEQUENTLY T HE ASSESSEES HAVE INVESTED LARGE SUMS OF MONEY IN THE CONSTRUCTION OF THE HOUSE. THE COST OF INVESTMENT I N LAND AND THE COST OF EXPENDITURE TOWARDS THE CONSTRUCTIO N OF THE HOUSES ARE NOT IN DISPUTE. THE ONE AND ONLY GRO UND ON WHICH THE AO HAS NON-SUITED THE ASSESSEES FOR THE C LAIM OF EXEMPTION WAS THAT THE HOUSES HAVE NOT BEEN COMPLETED. THERE REMAINS SOME MORE CONSTRUCTION TO BE MADE. 4. THE REQUIREMENT OF THE PROVISION IS THAT THE ASS ESSEE WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER HAS TO CONSTRUCT A RESIDENTIAL HOUSE IN O RDER TO BECOME ELIGIBLE FOR EXEMPTION. IN THE CASES ON HAND IT IS NOT IN DISPUTE THAT THE ASSESSEES HAVE PURCHASED TH E LANDS BY INVESTING THE CAPITAL GAIN AND THEY HAVE A LSO CONSTRUCTED RESIDENTIAL HOUSES. THE ASSESSEES HAVE ALSO PRODUCED THE COMPLETION CERTIFICATES FROM THE MUNIC IPAL AUTHORITY ON 30TH JAN. 2004. ON THE BASIS OF THE A BOVE DOCUMENTS THE CIT(A) CONCLUDED THAT THE REQUIREMEN T OF THE STATUTORY PROVISION HAS BEEN COMPLIED WITH B Y THE ASSESSEES AND THAT WAS RECONFIRMED BY THE TRIBUNAL IN THE ORDERS IMPUGNED. 5. IN THE SECOND QUESTION OF LAW FORMULATED A REFE RENCE IS MADE TO THE BOARD CIRCULAR NO. 667 DT.18-10-199 3 [(1993) 115 CTR (ST) 1]. ON A READING OF THE CIRCUL AR 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 S. 54F OF THE IT ACT THE CONSTRUCTION SHOULD HAVE BEE N COMPLETED. 6. THE TRIBUNAL HAS ALSO TAKEN NOTE OF ITS OWN EARL IER ORDER IN THE CASE OF MRS. SEETHA SUBRAMANIAN VS. AS STT. CIT (1996) 56 TTJ (MAD) 417 : (1996) 59 ITD 94 (MAD ) WHEREIN THE TRIBUNAL HAS HELD THAT IN ORDER TO GET THE BENEFIT UNDER S. 54F THE ASSESSEE NEED NOT COMPLET E THE CONSTRUCTION OF THE HOUSE AND OCCUPY THE SAME. IT IS ENOUGH IF THE ASSESSEE ESTABLISHES THAT THE ITA NO.634/BANG/2010 PAGE 13 OF 15 ASSESSEE HAD INVESTED THE ENTIRE NET CONSIDERATION WITHIN THE STIPULATED PERIOD . THE SAID VIEW TAKEN CONSISTENTLY BY THE TRIBUNAL HAS BEEN APPLIED IN TH ESE CASES ALSO. THE TRIBUNAL HAS DISTINGUISHED THE DELH I HIGH COURT JUDGMENT IN THE CASE OF D.P. MEHTA VS. CIT (2 001) 168 CTR (DEL) 321 : (2001) 251 ITR 529 (DEL) RELIED ON BY THE REVENUE IN THEIR FAVOUR TO NON SUIT THE ASSE SSEES FOR EXEMPTION. IN OUR VIEW THE TRIBUNAL HAS DISTING UISHED THE SAME RIGHTLY BECAUSE IN THE CITED CASE THERE W AS A FACTUAL FINDING BY THE AUTHORITIES THAT THE ASSESSE E HIMSELF HAS ADMITTED THAT THE CONSTRUCTION PUT UP W AS ONLY A GARAGE AND SERVICE QUARTERS AND IT WAS NOT F IT 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 FA IL AND THE SAME ARE DISMISSED. . 6.7.1. FROM THE ABOVE IT EMERGES THAT (I) THERE WAS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAD INVESTED RS.2 16 61 670/- AS ON 31.10.2006 I.E. WITHIN TWELVE MONTHS FROM THE DATE OF REALIZATION OF SALE PROCEEDS OF SHARES; (II) THE FIRST INSTALLMENT TO THE TUNE OF RS.1.14 CORES WAS PAID ON 27.1.2006 THROUGH A CHEQUE BEARING NO.096345 DATED: 27.1.2006 WHICH HAS NOT ALSO BEEN DISPUTED BY THE REVENUE; (III) AS OBSERVED BY THE HONBLE TRIBUNAL IN THE CASE OF MRS. SEETHA SUBRAMANIAN VS. ASSTT. CIT [(1996) 59 ITD 94 (MAD)] IN ORDER TO GET THE BENEFIT UNDER S. 54F THE ASSESSEE NEED NOT COMPLETE THE CONSTRUCTION OF THE HOUSE AND OCCUPY THE SAME. IT IS ENOUGH IF THE ASSESSEE ESTABLISHES THAT THE ITA NO.634/BANG/2010 PAGE 14 OF 15 ASSESSEE HAD INVESTED THE ENTIRE NET CONSIDERATION WITHIN THE STIPULATED PERIOD. THIS FINDING OF THE HONBLE TRIBUNAL GOT THE SEAL OF APPROVAL FROM THE HONBLE MADRAS HIGH COURT IN THE CASE OF SARDARMAL KOTHARI REFERRED ABOVE ; 6.7.2 IN THE PRESENT CASE THE BUILDER HAS GIVEN A LETTER DETAILING THE PAYMENTS MADE. IN THE SAID LETTER IT ALSO STA TED THAT SUBSTANTIAL CONSTRUCTION WAS COMPLETED AS ON 12.11.08 (3 YEAR P ERIOD FROM THE DATE OF SALE OF SHARE GIVING RISE TO CAPITAL GAIN) AND O NLY MINOR FITTING LIKE WINDOW SHUTTERS AND SOME ELECTRICAL WORK WERE REQUI RED TO BE MADE. IN OTHER WORDS THE VILLAS WERE SUBSTANTIALLY READY AND HABITABLE WITH WATER CONNECTION AND ALSO TEMPORARY ELECTRICAL CONN ECTION. HOWEVER TO SUSTAIN THE STAND OF THE AO THE LD. CIT (A) TOOK S ANCTUARY IN THE RULING OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT V. YELLAMMA DASAPPA HOSPITAL REPORTED IN (2007) 290 IT R 353 (KAR). THE ISSUE BEFORE THE HONBLE COURT WAS THAT WHETHER THE TRIBUNAL WAS CORRECT IN LAW IN HOLDING THAT THE RESPONDENT-ASSES SEE WAS ENTITLED TO CLAIM DEPRECIATION ALLOWANCE AS THE MACHINERY WERE READY FOR USE? DUE CONSIDERATION OF THE ISSUE IN DETAIL THE HONB LE COURT RULED THAT IF THE MACHINERY WAS NOT USED SECTION 32 WAS NOT APPLICABLE AND HENCE THE ASSESSEE CANNOT HAVE ANY BENEFITS IF GRANTED WOULD RESULT IN READING SOMETHING WHICH WAS NOT PRO VIDED IN THE STATUTE IN TERMS OF SECTION 32. WITH DUE RESPECTS WE WOULD L IKE TO POINT OUT THAT THE ISSUE BEFORE THE HONBLE COURT WAS THAT WHETHER THE ASSESSEE WAS ENTITLED TO CLAIM DEPRECIATION WHEN THE MACHINERY W AS NOT PUT TO USE EVEN THOUGH IT WAS READY FOR USE WHEREAS THE ISSUE ON HAND IS ENTIRELY ITA NO.634/BANG/2010 PAGE 15 OF 15 ON A DIFFERENT TRACK WHICH IS CLEARLY DISTINGUISHAB LE ON FACTS OF THE ISSUE AND THUS THE SAID RULING OF THE HONBLE COU RT CANNOT BE CITED HERE TO DEPRIVE THE LEGITIMATE CLAIM OF THE ASSESSE E. 6.8. IN AN OVERALL CONSIDERATION OF THE FACT S AND CIRCUMSTANCES OF THE ISSUE AS DISCUSSED COMPREHENSIVELY IN THE PR ECEDING PARAGRAPHS WE ARE OF THE UNANIMOUS VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DEPRIVING THE EXEMPTION LEGITIMATELY CLAIMED BY THE ASSESSEE U/S 54F OF THE ACT. THE AO IS THEREFORE DIRECTED TO ALLOW THE ASSESSEES CLAIM FOR EXEMPTION U/S 54F OF THE ACT TO THE TUNE OF RS.2 16 61 670/-. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JANUARY 2011. SD/- SD/- (A. MOHAN ALANKAMONY ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED THE 21ST JANUARY 2011. DS/- COPY TO: BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE. 1. APP EL LANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE