THE HONOURABLE MR. JUSTICE T.S.SIVAGNANAM AND THE HONOURABLE MRS. JUSTICE V.BHAVANI SUBBAROYAN. –in the case of the assessee being an individual, the long term capital gains arising on the transfer of a residential house will be exempt from income tax if the assessee has, within a period of one year before or after that date either purchased or within a period of three years after that date constructed a residential house. For this purpose, the long term capital asset means a capital asset, which is not a short term capital asset.” 16. From the above, it is clear that the intention of the Legislature was to either purchase before or after the date of sale and the word ‘purchased’ or ‘constructed’ used in the Notes on Clauses amply makes the intention clear. In the light of the above discussions, we hold that the substantial question of law is required to be answered in favour of the assessee. 17. In the result, the above tax case appeal is allowed and the substantial question of law is answered in favour of the assessee. No costs.

[9/15, 10:02] Sekarreporter 1: TCA.No.181 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 17.8.2020
CORAM
THE HONOURABLE MR. JUSTICE T.S.SIVAGNANAM
AND
THE HONOURABLE MRS. JUSTICE V.BHAVANI SUBBAROYAN
TAX CASE APPEAL NO.181 OF 2019
(heard through video conferencing)
Ms.Moturi Lakshmi …Appellant
Vs
The Income Tax Officer, Non
Corporate Ward 3(5),
Chennai-34. …Respondent
APPEAL under Section 260A of the Income Tax Act, 1961 against
the order dated 15.3.2018 made in ITA.No.234/Chny/2017 on the file
of the Income Tax Appellate Tribunal, Chennai ‘D’ Bench for the
assessment year 2013-14.
For Appellant : Mr.Ramanakumar
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[9/15, 10:02] Sekarreporter 1: TCA.No.181 of 2019
For Respondent : Mrs.R.Hemalatha, SSC
Judgment was delivered by T.S.SIVAGNANAM,J
This appeal by the assessee filed under Section 260A of the
Income Tax Act, 1961 (for short, the Act) is directed against the order
dated 15.3.2018 made in ITA.No.234/Chny/2017 on the file of the
Income Tax Appellate Tribunal, Chennai ‘D’ Bench (for brevity, the
Tribunal) for the assessment year 2013-14.
2. The appeal has been admitted on 25.2.2019 on the following
substantial question of law :
“Whether, for the purpose of Section 54 of
the Income Tax Act, the advance payment
made by the assessee for the purchase of a
residential flat would constitute a part of
purchase or not, when such advance is made
to the seller of flat prior to the date of sale of
capital asset in question ?”
3. We have heard Mr.Ramanakumar, learned counsel appearing
for the appellant – assessee and Mrs.R.Hemalatha, learned Senior
Standing Counsel appearing for the respondent – Revenue.
4. The facts, which are necessary for answering the substantial
question of law framed for consideration, are as follows :
The assessee, who is an individual, filed her return of income for
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[9/15, 10:03] Sekarreporter 1: TCA.No.181 of 2019
sale of the old building and that he was entitled to the relief under
Section 54F of the Act. The same effect is in the decision of the Punjab
& Haryana High Court in the case of CIT, Faridabad Vs. Shri.Kapil
Kumar Agarwal [reported in (2015) TaxCorp (DT) 62501]
wherein it was held that Section 54F of the Act nowhere
envisages that the sale consideration obtained by the assessee
from the original capital asset is mandatorily required to be
utilized for the purchase or construction of a house property.
14. In the decision of the Kerala High Court in the case of ITO
Vs. K.C.Gopalan [reported in (1999) 107 Taxman 591], a learned
Single Judge held that the wording of Section 54 of the Act would
make it clear that the law does not insist that the sale consideration
obtained by the assessee itself should be utilized for the purchase of
house property. The same effect is in the decision of the Division
Bench of the Allahabad High Court in the case of CIT Vs. H.K.Kapoor
[reported in (1998) 234 ITR 0753].
15. To explain the intention of the Legislature, the learned
counsel for the appellant has referred to the Notes on Clauses of
Finance Bill, 1982 wherein in Clause 11 sought to amend Section 54 of
the Act and it has been stated as follows :
“Sub-Clause (a) seeks to amend Sub-
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[9/15, 10:03] Sekarreporter 1: TCA.No.181 of 2019
Section (1) of Section 54. Under the proposed
amendment, in the case of the assessee being
an individual, the long term capital gains
arising on the transfer of a residential house
will be exempt from income tax if the assessee
has, within a period of one year before or after
that date either purchased or within a period of
three years after that date constructed a
residential house. For this purpose, the long
term capital asset means a capital asset, which
is not a short term capital asset.”
16. From the above, it is clear that the intention of the Legislature
was to either purchase before or after the date of sale and the word
‘purchased’ or ‘constructed’ used in the Notes on Clauses amply makes
the intention clear. In the light of the above discussions, we hold that
the substantial question of law is required to be answered in favour of
the assessee.
17. In the result, the above tax case appeal is allowed and the
substantial question of law is answered in favour of the assessee. No
costs.
17.8.2020
RS
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