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January, 04th 2014

+                  INCOME TAX APPEAL NO. 505/2013

                               Date of decision: 22nd November, 2013

                                                       ..... Appellant
                         Through Mr. N.P. Sahni, Sr. Standing
                         Counsel, Mr. P. Roy Chaudhuri & Mr. Nitin
                         Gulati, Advocates.


                                                     ..... Respondent
                         Through Mr. Prakash Kumar, Advocate.



        This appeal by the Revenue under Section 260A of the Income

 Tax Act, 1961 (Act, for short), deserves dismissal at the admission

 stage itself.

 2.     The Assessing Officer made two additions.    Firstly, benefit

 under Section 54F of the Act was denied and capital gains of

 Rs.51,71, 994/- was brought to tax. The second addition made by the

 Assessing Officer of Rs.19,75,410/- under Section 68 of the Act was

ITA No. 505/2013                                             Page 1 of 5
 deleted by the CIT(Appeals) recording that the said addition was

 entirely unjustified. The Assessing Officer himself in the remand

 report accepted the factual position.

 3.     The assessee, an individual, had sold property No. A-173,

 Kaushambi, Ghaziabad on 5th October, 2006 for Rs.45 lacs. Since the

 stamp duty was paid on circle rates, the assessee had declared capital

 gains of Rs.51,71,994/- as per Section 50C(1).           The said sale

 consideration has not been disturbed or objected to by the Assessing


 4.     The Assessee had purchased a fully built up property measuring

 275 square yards C-7, Anand Vihar, Delhi for Rs.50 lacs on 21st

 December, 2004. The assessee was sanctioned loan of Rs.80,00,000/-

 from a nationalised bank on 15th December, 2004 by mortgaging this


 5.     The Assessing Officer observed that as per Section 54F the

 assessee was required to complete construction of a residential house

 within three years from the date of the sale of the capital asset. The

 Assessing Officer held that there was neither the need for the assessee

 to reconstruct nor renovate the purchased property as it was already

 fully constructed. He referred to the bills produced by the respondent-

 assessee and has recorded that eight bills pertain to period prior to the

 date of purchase, i.e., 21st December, 2004. (30th November, 2004 to

ITA No. 505/2013                                                  Page 2 of 5
 19th December, 2004).

 6.     The Assessing Officer did not disturb or dispute the quantum of

 money spent on construction as declared by the assessee at

 Rs.59,98,451/-. The total amount spent on construction itself, as is

 noticeable, is substantial and even more than the purchase value as

 declared. The loan with mortgage was obtained by the respondent-

 assessee a few days before execution of the sale deed.

7.      The CIT(Appeals) permitted the assessee to adduce additional

evidence and has referred to the remand reports given by the Assessing

Officer.       He specifically recorded the difference in the earlier

construction as per the plan sanctioned by the DDA on 6 th April, 1989

and the new construction. It is evident that the property was initially

constructed way back in 1989.        The first appellate authority has

highlighted the new construction, the area constructed and mentioned

the difference between the old and new construction. The appellate

authority has referred to the notice issued by the Assistant Engineer

(Building), Shahdara (South Zone), Municipal Corporation of Delhi

dated 24th August, 2006 mentioning unauthorised construction,

deviations from sanctioned building plans and that the construction

should be demolished. The first appellate authority relied on certificate

issued by the Architect, who had stated that the earlier structure was

ITA No. 505/2013                                                 Page 3 of 5
demolished and thereafter, new construction was made on the plot.

After examining the factual matrix, the first appellate authority reached

the conclusion that it was a case of new construction after demolition.

The said factual finding has been affirmed by the tribunal. The word

"construction" in Blacks' Law Dictionary, 6th Edition at page 312 has

been defined to mean to build; erect; put together; make ready for use.

The word "construct" is distinguishable from maintaince, which means

to keep up, to keep from change, to preserve. The word "construction"

for the purpose of Section has to be given realistic, practical and a

pragmatic meaning keeping in mind the object and purpose of the

provision. Section 57F is a beneficial provision as an earlier capital

asset, which is sold, is replaced by a new capital asset in form of a

residential house, which should be purchased or constructed within the

time period stipulated.

 8.     We need not examine the contention of the Revenue that cases

 of renovation or even extension are not covered by the term

 "construction" in Section 54F of the Act. The said issue is left open to

 be decided in an appropriate case. In the case at hand, we find that the

 factual finding recorded by the first appellate authority and affirmed

 by the tribunal show that it is a case of "construction" under Section

 54F of the Act.

 9.     Section 54F of the Act requires that construction should be

ITA No. 505/2013                                                 Page 4 of 5
 carried out within a period of three years from the date of sale of the

 capital asset. In the present case, the construction was carried out

 within the outer limit of three years. On this aspect, there is no


11.     The appeal is accordingly dismissed.

                                       SANJIV KHANNA, J.

                                       SANJEEV SACHDEVA, J.
        NOVEMBER 22, 2013

ITA No. 505/2013                                                Page 5 of 5
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