The order of the Bench was delivered by
P. Madhavi Devi (Judicial Member)- This appeal is filed by the Revenue against the order of the learned Commissioner of Income-tax (Appeals)-IV, Hyderabad, dated July 25, 2014, for the assessment year 2009-10 while the cross-objection is filed by the assessee in support of the learned Commissioner of Income-tax (Appeals) order.
2. The brief facts of the case are that the assessee, an individual, filed his return of income for the assessment year 2009-10 on July 31, 2009, admitting total income of Rs. 10,08,400. The income comprises salary and income from other sources and also long-term capital gains on sale of a residential house. The assessee claimed the long-term capital gain as exempt under section 54 of the Income-tax Act, 1961, on the ground that he has utilised the same for purchase/construction of an independent house. During the assessment proceedings under section 143(3) of the Income-tax Act, the Assessing Officer observed that the assessee has entered into a development agreement with M/s. Sai Venkateswara Estates, Hyderabad, for construction of an independent house in a gated community in the said land but the construction of the said house was not completed within the stipulated period. He, therefore, disallowed the exemption under section 54 of the Income-tax Act. Aggrieved, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) who allowed the same by following the judgment of the hon'ble Karnataka High Court in the case of Sambandham Udaykumar and also the decision of the co-ordinate Bench of this Tribunal in the case of Narasimha Raju Rudra Raju v. Asst. CIT in I. T. A. No. 234/Hyd/2012 dated April 26, 2013 [2013] 26 ITR (Trib) 681 (Hyd). Aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the Revenue is in appeal before us and in support of the order of the learned Commissioner of Income-tax (Appeals) and also raising an alternative ground that even if the capital gains is not allowable in the relevant assessment year under section 54 of the Income-tax Act, the same is taxable at the end of the third year, the assessee is in cross-objection before us.
3. At the time of hearing, the learned Departmental representative relied on the order of the Assessing Officer while learned counsel for the assessee supported the order of the learned Commissioner of Income-tax (Appeals). Learned counsel for the assessee has also filed before us various decisions by which the issue is covered. He has also relied upon the judgment of the hon'ble Supreme Court in the case of Fibre Boards (P.) Ltd. v. CIT [2015] 376 ITR 596 (SC).
4. Having regard to the rival contentions and material on record, we find that in the case of the assessee, the assessee has utilised the entire capital gains within the period of one year but due to certain circumstances beyond the control of the assessee, the construction of the house could not be completed within the specified period. The facts and circumstances before us are similar to the case before the co-ordinate Bench of this Tribunal in the caseof Narasimha Raju Rudra Raju v. Asst. CIT [2013] 26 ITR (Trib) 681 (Hyd) wherein the Tribunal has held as under (page 688) :
"11. . . . We agree with the contention of the learned authorised representative that the provisions contained under section 54F being a beneficial provision has to be construed liberally. In various judicial precedents as also in the decision cited before us by the learned authorised representative, it has been held that the condition prece dent for claiming benefit under section 54F is the capital gain realised from the sale of capital asset should have been parted with by the assessee and invested either in purchasing a residential house or in constructing a residential house. If the assessee has invested the money in construction of 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 stipulated that would not disentitle the assessee from claiming the benefit under section 54F of the Act. Once the assessee demonstrates that the consideration received on transfer has been invested either in purchasing a residential house or in constructing a residential house even though the transactions are not complete in all respects and as required under the law, that would not disentitle the assessee from availing of the benefit under section 54F of the Act. Even investment made in purchasing a plot of land for the purpose of construction of a residential house has been held to be an investment satisfying the conditions of section 54F of the Act. Though there cannot be any dispute with regard to the abovesaid proposition of law, the assessee is required to prove the actual date of investment and the amount invested towards purchase/construction of the residential house with supporting evidence."
5. The hon'ble Supreme Court in the case of Fibre Boards (P.) Ltd. v. CIT [2015] 376 ITR 596 (SC) has held as under (page 621) :
"38. We are of the view that the aforesaid construction of section 54G would render nugatory a vital part of the said section so far as the assessee is concerned. Under sub-section (1), the assessee is given a period of three years after the date on which the transfer takes place to purchase new machinery or plant and acquire building or land or construct building for the purpose of his business in the said area. If the High Court is right, the assessee has to purchase and/or acquire machinery, plant, land and building within the same assessment year in which the transfer takes place. Further, the High Court has missed the key words 'not utilised' in sub-section (2) which would show that it is enough that the capital gain made by the assessee should only be 'utilised' by him in the assessment year in question for all or any of the purposes aforesaid, that is towards purchase and acquisition of plant and machinery, and land and building. Advances paid for the purpose of purchase and/or acquisition of the aforesaid assets would certainly amount to utilisation by the assessee of the capital gains made by him for the purpose of purchasing and/or acquiring the aforesaid assets. We find, therefore, that on this ground also, the assessee is liable to succeed. The appeals are, accordingly, allowed and the judgment of the High Court is set aside."
6. Since the facts in the present case are on record and it is not disputed by the authorities below that the assessee has invested the amount of capital gain for construction of a residential house within the specified period, we do not see any reason to interfere with the order of the learned Commissioner of Income-tax (Appeals) which is inconsonance with the precedents on the issue.
7. In the result, the appeal of the Revenue and the cross-objection of the assessee are dismissed.
The order pronounced in the open court on January 20, 2016.