Judgment:
1. This is an appeal preferred by the revenue and is directed against the order of the CIT(A) dated 26-11-1995 for assessment year 1993-94.
The only issue involved in this appeal is against the deletion or addition of Rs. 1,30,330 made by the Assessing Officer on account of capita! gain holding that the assessee is entitled for deduction under section 54F.2. The brief facts of the case are that the assessee had sold 150 shares of C.J. Ltd. in June 1992 which were purchased by him prior to the year 1981 and sold for a consideration of Rs. 2,07,375 and the assessee claimed exemption under the provisions of section 54F on account of the amount invested by the assessee upto 15th October, 1992 towards construction of residential premises at Mawal Village. The details of amount invested towards the construction of said residential premises as recorded in Assessment Order at page 2 are re-produced below: (i) Estimated expenditure on insurance and taxes on motor cars depreciation as well as expenditure on salaries, bonus, etc. of drivers (ii) Expenditure on motor cars relating to scienlific research and claimed under section 35.
The Assessing Officer disallowed the exemption claimed by the assessee under the provisions of Section 54-F by giving the reason that the investment made in the new constructed house is prior to the receipt of sale proceeds. His observations while disallowing the claim of the assessee are as under :- "That the assessee is not entitled for exemption under section 54F, in respect of the investments made in the new constructed house prior to the receipt of sale proceeds is also clear from provisions of Section 54F itself which reads as under:- The words 'within a period of one year before or two years after the date on which transfer took place purchased or has within a period of 3 years after that date constructed..." Clearly indicate that the flow of investments in the construction of new house must start after the sale proceeds of the old assets and that the investments are to be completed within the specified period for the purpose of exemption under section 54F." The assessee had also produced before the Assessing Officer a certificate from one Shri J.B. Irani dated 5th August, 1992 certifying that new residential house at Khandala stood completed in all respects on the date of certificate. The certificate is re-produced below; - "This is to certify that for that the construction of Residential Premises at Plot No. 6 Rustic Highlanded near Khandala for Ms. Arban N. Palia and others is now complete in all respects. The cost of structure is around Rs. 11,00,000 (Rupees Eleven Lakhs only)." (Copy of the certificate specifically required by the Bench was filed by the assessee on 27-1-2000 and is placed oh file).
(1) that the shares were sold on 17-6-1992 for consideration of Rs. 2,07,375.
(2) that from 11-11-1988 to 8-5-1991 the assessee had invested Rs. 2,72,500 in the construction of new residential premises.
(3) that after the investment of Rs. 2,72,500 there are only two entries of total Rs. 18,240 shown by the assessee as invested in the new residential house i.e. Rs. 5,000 on 6th April. 1992 and Rs. 13,240.20 on 15th October, 1992.
3. Before us the learned DR contended that the conditions laid down under the provisions of section 54F have not been complied with, as such the assessee was not entitled to exemption under section 54F to the tune of Rs. 1,30,330 as computed and added by the Assessing Officer in the Assessment Order. To support this contention he has drawn our attention that the assessee has not invested the amount in the new residential house within one year prior to the sale of shares. In other words no new investment in new residential house was made by the assessee from 17-6-1991 to 17-6-1992 as this fact is apparent from the detail of investment made by the assessee, the detail of which is given at page 2 of the Assessment Order. He further contended that in any case the assessee was entitled for the investment made in the new residential house on 15-10-1992 for which the exemption has already been granted by the Assessing Officer in his Assessment Order. He further contended that the CIT(A) has wrongly interpreted the Section 54F and also wrongly applied the decision of Karnataka High Court in the case of CIT v. J.R. Subramanya Bhat [1987] 165 ITR 571. The facts of the Karnataka High Court are different and has no application in the present facts of the case. In the said case the building was sold by the assessee in February, 1977 and the assessee had started the construction of new house in March, 1976. Thus, the facts do not favour the facts of the assessee's case. He has further drawn our attention towards the language of Section 54F in which he contended that it is clearly mentioned that the assessee is under an obligation to purchase the new residential house within a period of one year before or two years after the dale on which the transfer look place or within a period of three years or after that date constructed a residential house. In the present case the assessee has not invested any amount within one year before the dale of transfer of the shares. Thus, he was not entitled to any exemption under the provisions of Section 54F.4. On the other hand, the authorised representative appearing on behalf of the assessee contended that it is not necessary that the same amount which has been received as sale consideration of shares be invested in the new residential house. He further contended that the main thing to be seen is that when the new house is complete it is immaterial that when the assessee started to construct the new residential house. To support this contention he relied on the following decisions : Thus, he contended that in view of these citations and clear position of law the Assessing Officer had wrongly denied the exemption under section 54F to the assessee and CIT(A) after appreciating the facts and law was right in granting the relief to the assessee. Thus, it is contended before us by the AR that the order of the CIT(A) may be maintained and appeal of the revenue be dismissed.
5. We have heard and considered the rival submissions. We have also carefully perused records before us and also carefully gone through the citations relied upon by the learned authorised representative. In the light of facts mentioned in the above part of this decision it is clear that no investment in the new residential house constructed by the assessee was made within one year prior to the sale of shares i.e.
within a period of 17th June, 1991 to 17th June, 1992. Now coming to the contention of the assessee that the material point had to be determined is when the new house is completed and it was completed only after the sale of the said shares and in view of the ratio of decision mentioned and relied upon the assessee was entitled to get the exemption under section 54F. Thus, it is necessary to go through the judgments relied upon by the AR. In the case of Smt. Beena. K. Jain (supra). The facts were that the assessee sold office premises in July 1987 which resulted in long term capital gain. Prior to the sale the assessee entered into an agreement for purchase of a residential flat in September 1985 which agreement was registered on 27th October, 1985.
The construction of the flat was finally completed in July, 1988 and the assessee had paid the consideration on July 29, 1988 and was put into possession of the flat on July 30, 1988. The assessee claimed benefit of Exemption under section 54F and the said exemption was denied to the assessee by the department on account of agreement for the purchase of new flat was entered into more than one year prior to the sale and the Tribunal while granting the benefit under section 54F to the assessee held that the relevant date in this connection was July 29, 1988 when the assessee paid the full consideration and the flat became ready for occupation and obtained possession of the flat. The Hon'ble High Court upheld the view of the Tribunal and had decided the case in favour of the assessee while dismissing the application of the department. The ratio of this judgment does not favour to the facts of the assessee, rather it is going against as in the case of the assessee the date of investment (or expenditure in new house) was not within one year prior to the sale of shares and whatever he invested after the sale of said share, the Assessing Officer had already granted the exemption in that respect.
6. The ratio in the case of J.R. Subramanya Bhat (supra) is also not applicable to the facts of the case as the asset was sold by the assessee in February, 1977 and in March, 1976 he had commenced the construction of new house which was completed in March, 1977. Thus, the assessee was held to be entitled for grant of exemption under section 54F. So all the events in this case were within the parameters of Section 54F. In the present case the investment made by the assessee is not within the period of one year prior to the original asset. Thus, the ratio of this decision is also not applicable to the facts of the case. Now coming to the case of V.M Dujodwala (supra) the facts of this case apparently seems to favour the contention of the assessee, but careful study thereof reveal that the facts are distinguishable as in the said case the assessee had sold a flat at Marine Drive, Bombay as per agreement dated 12lh March, 1980, possession for which was given on I5th May, 1980 to the Buyer. An amount of Rs. 2,06,000 was treated by the Assessing Officer as long term capital gain. The assessee claimed exemption under section 54 on the strength that he had purchased another flat vide agreement dated 22-10-1977 for which the details of payments were as under:29-12-1977 Letter from Builder agreeing to transfer from name of K.K. Gopaldas to the name of the assessee In this case it was not within the control of the assessee to get the possession from the Builder from whom the flat was purchased and the assessee thus was under the impression that as he got the possession of the said fiat on 13th May, 1980 he is entitled to benefit of exemption under section 54 of the IT Act. In the present case as it is seen from the facts that entire investment in the new asset was made from 11-1-1988 to 8-5-1991, meagre sums were shown to be invested in the new asset of Rs. 5,000 on 6th April, 1992 and a sum of Rs. 13,240.20 on 15th October, 1992. A certificate was also obtained from Architecture on 5th August, 1992 that the new asset is complete. The plain reading of certificate will suggest that the certificate in itself is vague as it does not specify the date of completion of the said house. AH these exercises seem to have been made to come within the purview of section 54F as this is not a case where the assessee could be prevented by virtue of the things not in the control of the assessee to get the possession of the new asset or to show that incomplete. It is observed from the facts that the assessee's said house was complete by 8th May, 1991 and the amount shown to be expended on 6th April, 1992 and 15th October, 1992 as well as the certificate obtained from the Architecture were the exercises of the assessee to come within the four corners of Section 54F. We are unable to understand that how a house stated to be incomplete as on 8-5-1991 where the substantial investment of Rs. 2,72,500 was made become complete with a meagre amount of Rs. 5,000 expended by the assessee on 16-4-1992 and a certificate was issued by the Architecture on 5-8-1992 that the said house is complete. This also shows that it is concocted exercise of the assessee to come within the preview of section 54F otherwise the house was complete on 8-5-1991 that is much before one year prior to the sale of original asset. In the circumstances, it is observed that as the conditions laid down under section 54F arc not fully complied as the assessee has not made the required investment in the new asset within one year prior to the sale of original asset assessee was not entitled to exemption under section 54F. Thus, the CIT(A) was wrong in directing the Assessing Officer to grant exemption to the assessee under section 54F. Thus, order of the Assessing Officer in respect of addition made by him amounting to Rs. 1,30,330 in respect of long term capital gain is maintained and the order of the CIT(A) is set aside.