In the present case, the assessee had already appropriated the capital gains for the purpose of construction of residential unit. However, construction was not completed within the stipulated period. In our opinion, liberal interpretation to be considered while granting exemption under section 54 of the Act as it is a beneficial provision. The judgment of Karnataka High Court in the case of CIT v. Smt. V.S. Shantha Kumari in 126 DTR 436(Kar.) wherein held that completion of construction within three years was not mandatory and was necessary was that the construction should be commenced. That cannot be disputed. When the commencement of the construction of the residential unit which is evidenced by construction agreement cited supra and also sale deed cited supra, in our opinion, assessee over and above satisfied the conditions laid down by section 54 of the Act and demonstrated his intention to invest the capital gains in residential house. In our opinion, assessee ought not to have denied the claim of deduction under section 54 of the Act. Accordingly, we are of the opinion that the assessee is entitled for exemption under section 54 of the Act and the same is to be granted.
Full Text of the ITAT Order is as follows:-
