Case Law Details

Case Name : Shri Shrawankumar G. Jain Vs ITO (ITAT Ahmedabad)
Appeal Number : IT Appeal No. 695 (Ahd.) of 2016
Date of Judgement/Order : 03/10/2018
Related Assessment Year : 2011-12
Courts : All ITAT (6005) ITAT Ahmedabad (413)

Shri Shrawankumar G. Jain Vs ITO (ITAT Ahmedabad)

Conclusion: Assessee was entitled to claim exemption under section 54F on gain earned on the sale of factory shed as factory shed inherently being long-term capital asset as per the provision of Section 2(42A) even if sale of factory shed was subject to short-term capital gain on the basis of deeming provision as specified under section 50.

Held: Assessee had sold its factory shed and shown income earned thereon as short term capital gain u/s 50. AO denied assessee’s  claim of exemption under section 54F as exemption  was available if it was long term capital assets however, factory shed was subject to depreciation u/s 32 therefore, the gain earned on the sale of such factory shed was liable to be taxed u/s 50 being short term capital gain. Assessee submitted that factory shed was a long term capital assets as per the provision of section 2(42A) but by virtue of the provision Section 50, the gain earned on such assets was being short term capital gain. AO disregarded the contention of assessee by observing that exemption u/s 54F was available only in the case of long term capital gain and once, the gain had been held as short term, the same could not be subject to exemption under section 54F.  Also, assessee failed to deposit the net consideration received by him in the capital gain account scheme as mandated u/s 54F. It was held  capital gain income earned by assessee on the sale of depreciable assets being factory shed was eligible for exemption u/s 54F as it was long term capital assets as per the provision of Section 2(42A). There was no dispute the net consideration was utilized by assessee before filing the income tax return within the due date as specified under section 139(4). Therefore, assessee was eligible for exemption under section 54F, though he failed to deposit the net consideration in the capital gain account scheme within the time specified under section 139(1).

FULL TEXT OF THE ITAT JUDGEMENT

The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)–5, Vadodara [CIT(A) in short] vide appeal no.CAB/5-162/2014-15 dated 01.12.2015 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961(here-in-after referred to as “the Act”) dated 28.02.2014 relevant to Assessment Year (AY) 2011-12.

2. The grounds of appeal raised by the assessee are as under:-

“1. The ld.CIT(A) erred in confirming the addition of short term capital gain of Rs.50.69 lacs on account of income on sale of factory shed.

2. The CIT(A) has erred in confirming the addition of business income of Rs.0.67 lacs.

The appellant reserves its right to add, amend alter or modify any of the grounds stated hereinabove either before or at the time of hearing.”

3. Ground No.2 is not pressed by the assessee. Therefore, same is dismissed as not pressed.

4. The only grievance of the assessee is that ld CIT(A) erred in holding the gain of Rs. 50.69 earned on sale of factory shed as short term capital gain.

5. Briefly stated facts are that the assessee is an individual and running its proprietor ship business under the name and style of Makarana Marbles. The assessee has shown his income under the head salary, other sources and capital gain. The assessee has discontinued his business from the year under consideration. Accordingly, the assessee has sold its factory shed located at 988/2 GIDC Estate Makarpura for Rs. 53,75,000/- on 13-04-2010. The assessee has claimed depreciation on such factory shed. Accordingly, the income earned thereon for Rs. 49,21,367/- was shown as short term capital gain u/s 50 of the Act.

5.1 However, the assessee in its return of income has claimed exemption u/s 54F of the Act against the short term capital gain as discussed above.

5.2 As per the AO, the exemption is available to the assessee u/s 54F of the Act, if it is long term capital assets. The impugned factory shed was subject to depreciation u/s 32 of the Act therefore, the gain earned on the sale of such factory shed was liable to be taxed u/s 50 of the Act being short term capital gain. Accordingly, the assessee was called upon to explain the exemption claimed u/s 54F of the Act. The assessee in compliance to it submitted that the impugned factory shed is a long term capital assets as per the provision of section 2(42A) of the Act. But by virtue of the provision Section 50 of the Act, the gain earned on such assets was being short term capital gain. Actually, the period of holding of factory shed was exceeding more than 36 months therefore, the profit earned on the sale of such factory shade was eligible for exemption u/s 54F of the Act.

5.3 However, the AO disregarded the contention of the assessee by observing that the exemption u/s 54F of the Act is available only in the case of long term capital gain. Once, the gain has been held as short term by virtue of the provision of Section 50 of the Act the same cannot be subject to exemption under section 54F of the Act. The AO also observed the object for enacting the provision of Section 50 of the Act was to avoid the multiple benefits claimed by the assessee. Therefore, the assessee was not eligible for exemption u/s 54F of the Act.

 5.4 Besides above, the AO without prejudice to the facts mentioned above also observed that the assessee has violated the provision of section 54F(4) of the Act as he failed to deposit the amount of net sale consideration in the capital gain account scheme. Therefore, the assessee cannot be allowed exemption u/s 54F of the Act. Accordingly, the AO disallowed the exemption claimed by the assessee for Rs. 50,69,260/- and added to the total income of the assessee.

6. Aggrieved, assessee preferred an appeal to ld CIT(A). The assessee before us ld CIT(A) submitted that the provision of Section 50 of the Act provides the manner of calculating the capital gain in respect of depreciable assets. The provision of Section 50 of the Act does not deny the benefit as provided u/s 54F of the Act. Both the Sections i.e. 54F and 50 of the Act are independent to each other and therefore no reference can be made to any of the section while applying the provision of either Section in the given facts and circumstances.

6.1 It is undisputed fact that the factory shed is a depreciable assets and its period of holding exceeds more than 3 years. Therefore, the same is long term capital assets within the meaning of Section 2(42A) of the Act.

6.2 It is a fact on record the assessee has not deposited the amount of net consideration received by him on the sale of factory shed in capital gain scheme within the time specified u/s 139(1) of the Act. But the assessee has utilized the money in the construction of residential house within the time as specified u/s 139(4) of the Act. Therefore, the assessee was not liable to deposit the amount in capital gain account. The assessee in respect of his claim relied on the judgment of Gauhati High Court in the case of CIT vs. Rajesh Kumar Jalan reported in 157 taxman 398.

6.3 However, the ld CIT(A) disregarded the contentions of the assessee and confirmed the order of the AO by observing as under:

“5.3 I have carefully considered the facts and circumstances of the case, the observations of the Assessing Officer, assessee ‘s submissions, material available on record and the judicial pronouncements on the subject. The issue in this case is whether the Capital Gains arising out of transfer of a depreciable asset which was used for the purposes of the business of the assessee, is STCG or LTCG and if it is STCG, whether the provisions of section 54F will be applicable to the gains arising from such transfer. There is no dispute that the assessee had sold a factory shed during the year, which was used by the assessee for the purposes of his business and on which he had regularly claimed depreciation. Since the consideration received on transfer of this asset exceeded the written down value of the block of assets at the beginning of the previous year, the excess or the gain resulting from such transfer was to be treated as Short Term Capital Gain in terms of the provisions of section 50 of the Income-tax Act, which reads as under;

“[Special provision for computation of capital gains in case of depreciable assets.

50. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications :—

(1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely:—

(i) expenditure incurred wholly and exclusively in connection with such transfer or transfers;

(ii) the written down value of the block of assets at the beginning of the previous year; and

(iii) the actual cost of any asset falling within the block of assets acquired during the previous year,

such excess shall be deemed to be the capital gains arising from  the transfer of short-term capital assets;

(2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assesses during the previous year and the income received or  accruing as a result of such transfer or transfers shall be  deemed to be the capital gains arising from the transfer of  short-term capital assets.1″ (Emphasis supplied)

In view of the unambiguous and clear provisions of section 50 of the Act, there is no doubt that the gains from the transfer of the factory shed are to be treated as STCG.

5.4 Now, coming to the issue of allowability of exemption u/s 54F on this STCG, arising as a result of transfer of the factory shed, in view of express provisions of section 54F(1), it is clear that the benefits of the benevolent provisions of section 54F are only available to LTCG and not to STCG, despite assertions to otherwise by the assessee. The relevant portions of-section 54F are extracted below for ready reference-

“54F. (1) [Subject to the provisions of sub-section (4), where, In the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset,.,

The provisions of section 54F(1) clearly indicate that the benefits are only available to the cases where the capital gain arises from transfer of Long Term Capital Asset leading to LTCG. By virtue of the provisions of section 50 of the Act, the gains on transfer of factory shed in this particular case is treated as STCG and therefore, the transferred asset becomes Short Term Capital Asset. It is a settled principle of law that the specific provisions always over-ride general provisions. The provisions of section 50 are specific provisions to deal with transfer of an asset forming part of the block of assets, on which the benefit of depreciation has already been allowed to the assessee. The provisions of section 50 over-ride the provisions of section 2(42A) of the Act, which defines a “Short Term Capital Asset” and by virtue of these provisions, even an asset which is held for more than thirty six months and was otherwise eligible to be termed as Long Term Capital Asset, is treated as Short, Term Capital Asset, if the same formed part of a block of assets in respect of which depreciation was allowed as per the provisions of the Act. This is exactly what has happened in the case of the assessee. The transferred assets (factory shed) formed part of a block of assets in respect of which depreciation was regularly allowed as per the provisions of the Act and by virtue of section 50 of the Act, the same was to be treated as Short Term Capital Asset, even though the same was held for more than thirty six months. Since the transferred asset was Short Term Capital Asset, the benefits of section 54F, which are available only to LTCG arising from the transfer of a Long Term Capital Asset, are not available to the assessee. The facts of the cases cited by the assessee in this regard are different from the case at hand, therefore, the same are not applicable to the present case. In view of this, his claim of exemption of Rs. 49,21,367/- u/s 54F of the Act is not sustainable in law. Consequently, the order of the Assessing Officer denying assessee’s claim of exemption of Rs. 49,21,367/- u/s 54F to the assessee on transfer of the factory shed, is upheld. The assessee fails on this ground of appeal.”

6.4 Being aggrieved by the order of ld CIT(A) assessee is in second appeal before us.

7. The ld AR before us submitted that the conditions specified u/s 54 of the Act for claiming the exemption in respect of long term capital gain has been duly fulfilled. The period of holding factory shed exceeds more than 36 months. Therefore it is a long term capital assets by virtue of the provision of Section 2(42A) of the Act. The ld. AR before us reiterated the submissions as made before the ld CIT(A). The ld AR in support of his claim relied on the judgment of Hon’ble Jurisdictional High Court in the case of DCIT vs. Himalaya Machinery Pvt. Ltd. reported in 29 taxmann.com 380.

7.1 The ld AR also submitted that the amount of net consideration was utilized before the due date of income tax return filing as specified u/s 139(4) of the act. The ld AR in support of his claim relied on the order of  this Tribunal in the case of Ashok Kapasiawala vs. ITO in ITA No.2692/Ahd/2014 vide order dated 10th September 2015.

 7.2 The ld. AR also submitted that there was another assets being land which was sold by the assessee during the year under consideration and the assessee failed to utilize the net consideration received on the sale of such assets before the due date of filing of income tax return as specified u/s 139(1) of the Act. But the same was utilized before filing the income tax return as specified u/s 139(4) of the Act. But the ld CIT(A) did not make any disallowance in respect of such sale of land. But the ld CIT(A) has made the disallowance in respect of sale of factory shed therefore it is clear that the ld CIT(A) has taken contrary decision in respect of sale of factory shed and the land.

8. On the other hand, the ld. DR submitted that if exemption is allowed to the assessee u/s 54F of the Act in respect of depreciable assets then it will amount to double deduction to the assessee. The legislature never intended to extend double benefit to the assessee, firstly on account of depreciation secondly, on account of exemption u/s 54F of the Act.

 8.1 The ld. DR also submitted that the assessee failed to deposit the net consideration in the capital gain account as specified under section 54F of the Act. Therefore, the benefit of exemption u/s 54F of the Act cannot be extended to the assessee. The ld. DR vehemently supported the order of authorities below.

9. We have heard the rival contentions and perused the materials available on record. The issue in the instant case relates to the exemption claimed by the assessee within the prescribed time limit u/s 54F of the Act in respect of depreciable assets. The AO has made the disallowance on account of two reasons as discussed below:

i. Exemption is in Section 54F of the Act is available only on sale of long term capital assets. Whereas, in the instant case, the assessee has sold depreciable assets which is treated as short term capital gain by virtue of the provision of Section 50 of the Ac.

ii. Without prejudice to the above, the assessee is also not eligible for exemption under section 54F of the Act as he failed to deposit the net consideration received by him in the capital gain account scheme as mandated u/s 54F of the Act.

9.1 The view taken by the AO was subsequently confirmed by the ld CIT(A).

9.2 It is undisputed fact that the period of holding of factory shed was exceeding more than 36 months and on the same assets the depreciation was claimed by the assessee. Thus, the gain arose on sale of such depreciable assets was held as short term by virtue of the provision of Section 50 of the Act. At this juncture, we find a relevant to reproduce the Section 2(42A) of the Act, which is reads as under:

“(42A) [“short-term capital asset” means a capital asset held by an assessee for not more than [thirty-six] months immediately preceding the date of its transfer”

9.3 Similarly, we find important and relevant to reproduce the provision of Section 54F of the Act, which reads as under:

[Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.

54F. (1) [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date [constructed, one residential house in India] (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—

(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ;

(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX[(4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme76 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset.”

9.4 Similarly, we also find to reproduce the provision of Section 50 of the Act, which is reads as under:

50. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets24 in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections  48 and 49 shall be subject to the following modifications :—

(1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely :—

(i) expenditure incurred wholly and exclusively in connection with such transfer or transfers;

(ii) the written down value of the block of assets at the beginning of the previous year; and

(iii) the actual cost of any asset falling within the block of assets acquired during the previous year,

such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets;”

9.5 From the combined reading of the above provision, we note that all the provisions of the Section as discussed above are mutually exclusive to each other. There is no mention Under Section 50 of the Act referring to the provision of section 54F of the Act and vice versa. Therefore, we are of the view that the provision of one section does not exclude the provision of other section. Therefore, both the provision in our considered view should be applied in the instant case independently. The assessee has claimed deduction u/s 54F of the Act because of the fact that the factory shed was long term capital assets and there is nothing mention under the provision of Section 54F of the Act for depreciable assets. Thus, we are of the view that the sale of factory shed is subject to short term capital gain on the basis of deeming provision as specified u/s 50 of the Act. Thus, inherently the factory shed being long term capital assets is eligible for deduction u/s 54F of the Act. In holding so, we find supports and guidance from the judgment of Jurisdictional High Court in the case of Himalaya Machinery Pvt. Ltd (supra) wherein it was held as under:

“12. It would thus emerge that in case not falling under section 50 of the Act for computation of capital gains in case of transfer of the asset, mode of computation and the cost of acquisition of asset would be worked out by applying the provisions as contained in Section 48 and Section 49 respectively. However, in case of transfer of capital asset, forming part of block of assets in respect of which depreciation has been allowed, mode of computation and cost of acquisition shall be as per modifications provided in Section 50 of the Act. Thus, Special provision made for computation of capital assets in respect of which depreciation has been allowed, is confined for the purpose of Section 50 in relation to Section 48 and Section 49 only.

13. With this background, we may take notice of Section 54EC of the Act. Section 54EC pertains to Capital gain not to be charged on investment in certain bonds, relevant portion of which are as under:-

54EC. (1) Whether the capital gain arises from the transfer of a long-term capital asset (the capital asset to transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this Section, that is to say –

(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under Section 45;

(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, though much of a capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long term specified asset bears to the whole of the capital gain, shall not be charged under section 45 :

Section 54EC thus provides for exemption from payment of capital gain subject to condition made therein be satisfied. Ld. Counsel for the Revenue would refer to the beginning words of sub-section (1) of Section 54EC which refer to capital gain arising from the transfer of a long-term capital asset and would contend that by virtue of Section 50 of the Act, such exemption would not be available in the cases of transfer of assets on which depreciation has been allowed.

14. We are afraid that such an interpretation would not be warranted. It is true that under section 54EC of the Act, exemption would be made available in case of transfer of long term capital assets. However, once such condition is fulfilled, by virtue of the fact that asset was such on which the depreciation was allowed and therefore, computation would be done as provided u/s. 50 of the Act by applying modifications in Section 48 and Section 49 would not change the nature of capital asset or availability of exemption specified under Section 54EC of the Act.”

9.6 From the above judgment, we note that it was passed with the reference to the provision of Section 54EC of the Act whereas the issue in the instant case relates to the provision of section 54F of the Act. But in our considered the principles laid down in the above case can be applied to the facts on hand. Therefore, respectfully following the same, we hold that the capital gain income earned by the assessee on the sale of depreciable assets being factory shed is eligible for exemption u/s 54F of the Act as it is long term capital assets as per the provision of Section 2(42A) of the Act. Thus, we have no hesitation in deleting the addition made by the AO by disallowing the exemption available to the assessee. Similarly, we also note that there is no dispute the net consideration was utilized by the assessee before filing the income tax return within the due date as specified under section 139(4) of the Act. Therefore, in our considered view the assessee is eligible for exemption under section 54F of the Act, though he failed to deposit the net consideration in the capital gain account scheme within the time specified under section 139(1) of the Act. In this connection, we placed our reliance on the order of this Tribunal in the case of Ashok Kapasiawala (supra) wherein, it was held as under:

“6.1. A combined reading of section 54F(1) and 54F(4) of the Act, it is evident that the assessee would be entitled for exemption/deduction u/s.54F of the Act in the event he purchases new asset within one year from the date of transfer of original asset or the amount is utilized before the date of furnishing the return u/s.139 of the Act. In a case it is not utilized for the purpose of aforesaid and the period aforementioned section 54F(4) mandates the assessee to deposit such amount before due date of filing of return u/s.139(1) of the Act. Therefore, there is no ambiguity in the provision so far deposit of the unutilized amount is concerned, it has to be deposited in a specified capital gain account before the due date of filing of return u/d.193(1) of the Act. The question which is required to be examined whether the assessee has utilized the amount before the time limit prescribed for such purpose or if not whether the amount was deposited in the manner prescribed u/s.54F(4). In the present case, the undisputed facts are that the original asset was transferred on and the new asset was purchased on 05/10/2009. The assessee had not filed income-tax return u/s.139(1) so that matter u/s.139 of the Act. It was only in response to notice u/s.148 of the act dated 27/03/2012 the assessee filed return on 3 0/04/2012. The contention of the assessee is that the amount was utilized before due date of filing of return. As per assessee, the period as prescribed under section 54F(4) for deposit in the capital gain account should be reckoned from the due date of filing of return u/s.139(4) of the Act. In support of this contention, ld.counsel for the assessee relied on the judgement of Hon’ble Punjab & Haryana High Court rendered in the case of CIT vs. Jagtar Singh Chawla and judgement of Hon’ble Karnataka High Court rendered in the case of CIT vs. K. Ramachandra  Rao. The Hon’ble High Court of Punjab & Haryana held as under:-

“In the case of Fathima Bai vs. ITO, ITA No.435 of 2004 it was held that the extended due date u/s. 139(4) would be 31.3.1990. The assessee did not file the return within the extended due date. However, the assessee had utilized the entire capital gains by purchase of a house property within the stipulated period of section 54(2) i.e., before the extended due date for return u/s 139. The assessee technically may have defaulted in not filing the return u/s 139(4). But, however, utilized the capital gains for purchase of property before the extended due date u/s 139(4). The contentior of the revenue that the deposit in the scheme should have been made before the initial due date and not the extended due date was held to be an untenable contention. In the present case, the assessee had proved the payment of substantial amount of sale consideration for purchase of a residential property on or before 31.3.2008, that was within extended period of limitation of filing of return. Only a sum of Rs.24 lacs was paid out of total sale consideration on 23.4.2008, though possession was delivered to the assessee on execution of the power of attorney on 30.3 .2008. Since the assessee, has acquired a residential house before the end of the next FY in which sale had taken place, therefore, the assessee is not liable to pay any capital gain. Such was the view taker by the ITAT. In view of the above, no merit was found in the appeal.”

6.2. The Hon’ble Karnataka High Court in the case of CIT vs.  K.Ramachandra Rao (supra) answered the question in favour of assessee i.e. when the assessee had invested the entire sale consideration in construction of a residential house within the three years from the date of transfer. Could he be denied exemption under section 54 F on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed u/s.139(1) of the Act. The Hon ‘ble High Court of Karnataka High Court held as under:-

“As it clear from Sub-section (4) in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in Section 54F(1), if the assessee wants the benefit of Section 54F, then he should deposit the said capital gains in an account which is duly notified by the Central Government. In other words if he want of claim exemption from payment of income tax by retaining the cash, then the said amount is to be invested in the said account. If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein, then Section 54F(4) is not at all attracted and therefore the contention that the assessee has not deposited the amount in the Bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct.”

6.3. In the present case, the assessee purchased new asset on 05/10/2009 and had transferred the original asset on 8/01/2008. As per Section 54F (1) of the Act, the exemption would be available if the assessee purchased the residential house within two years after the date when transfer took place. As per the judgment of Hon ‘ble Karnataka High Court, the provisions of section 54F(4) would not be attracted in the event if the assessee has purchased or constructed the residential house within the period prescribed under section 54(1) of the Act. In the case in hand, there is no dispute with regard to the fact that the assessee had purchased within two years [the period prescribed u/s.54(F(1)] a new asset on 05/10/2009 from the date of transfer of the original asset. The Revenue has not cited or placed on record any contrary judgment by the Hon’ble Jurisdictional High Court or Hon’ble Supreme Court. Therefore, respectfully following the ratio laid down by the Hon’ble Karnataka High Court in the case of CIT vs K.Ramachandra  Rao (supra), we hereby set aside the impugned order and direct the AO to re-compute the assessed income after granting the benefit of section  54F of the Act to the assessee.”

9.7 The facts of the above case are identical to the facts of the case in hand. Therefore, the issue is squarely covered in favour of assessee by virtue of the judgments as discussed above. Therefore, we have no hesitation in reversing the order of lower authorities. Hence, the ground of appeal of the assessee is allowed.

10. In the result, appeal of the assessee is allowed.

This Order pronounced in Open Court on 03/10/2018 

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