No denial of sec. 54 relief just because construction wasn't completed in 3 years

Facts:

a) The assessee sold his property and invested capital gains amount in purchase of new property. Capital gain was appropriated within a period of 3 years from the sale of the property.

b) The possession of the new property was handed over to the assessee after 3 years when the construction of the new property got completed.

c) Assessing Officer (AO) disallowed capital gain exemption as the construction of residential property was not completed within 3 years from the transfer of residential capital asset

d) On appeal, CIT (Appeals) upheld the disallowance. Aggrieved-assessee filed the instant appeal before the Tribunal.

The Tribunal held in favour of assessee as under:

1) It was held in by the Karnataka High Court in the case of CIT v. Smt. B.S. Shantha kumari [2015] 60 taxmann.com 74/233 Taxman 347 that completion of construction within three years was necessary and not mandatory to claim section 54 exemption.

2) In the instant case, assessee had already appropriated the capital gains for the purpose of construction of residential unit. However, construction was not completed within the stipulated period. Therefore, liberal interpretation was to be considered while granting exemption under section 54, as it was beneficial provision.

3) Since assessee over and above satisfied the conditions laid down by section 54 and demonstrated his intention to invest the capital gains in residential house he was entitled to exemption under section 54. - [2017] 82 taxmann.com 284 (Chennai - Trib.)