ACIT 25 (3), MUMBAI V. MOHAN PRABHAKAR BHIDE, MUMBAI

ITA 1043/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 7632 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 25-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Benefit of exemption; Capital Gains
• Section: 143(3); 54F; 13; 22

Judgement Text

ITA NO. 1043/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 1 OF 5 INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH, MUMBAI [CORAM: JUSTICE P.P BHATT (PRESIDENT)] AND PRAMOD KUMAR (VICE PRESIDENT)] ITA NO. 1043/MUM/2019 ASSESSMENT YEAR: 2015 - 16 ASST. COMMISSIONER OF INCOME TAX 25(3) .. APPELLANT MUMBAI VS. MOHAN PRABHAKAR BHIDE .. RESPONDENT 901, CHANDADEVI CHS, NEAR PARLESHWAR TEMPLE, VILE PARLE (E) MUMBAI 400057 [PAN: AACPB5084B] APPEARANCES: BHARAT ANDHLE FOR THE APPELLANT SAURABH BHATT FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING: : DECEMBER 21, 2021 DATE OF P RONOUNCEMENT : MARCH 0 3 , 2021 O R D E R PER PRAMOD KUMAR, VP: 1. THIS APPEAL CHALLENGES, CORRECTNESS OF THE ORDER DATED 22 ND DECEMBER 2018, PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961, FOR THE ASSESSMENT YEAR 2015 - 16. 2. GRIEVANCES RAISED BY THE APPELLANT ASSESSING OFFICER ARE AS FOLLOWS: - 1. 'ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE ASSESSEE FOR DEDUCTION CLAIMED U/S.54F OF THE INCOME TAX A CT, 1961 OF RS.2,38,30,244/ - . 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED BY NOT CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT FULFILLED THE CRITERIA TO AVAIL THE BENEFITS TO CLAIM DEDUCTION U/S.54F OF THE INCOME TAX ACT, 1961' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS BY NOT CONSIDERING THE FACT THAT THE ASSESSEE WAS NOT ELIGIBLE TO CLAIM DEDUCTION U/S.54F OF THE ACT AS THE ASSESSEE HAD ADVANCED AN AMOUNT OF RS. 1,00,00, 000 / - ON ITA NO. 1043/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 2 OF 5 20.04.2012 FOR THE PURCHASE OF THE NEW PROPERTY IN 2012 ONLY. WHEREAS, THE SALE AGREEMENT OF FIVE COMMERCIAL PROPERTIES SOLD BY THE ASSESSEE WAS MADE IN 2014 AND 2015. IT IS CLEAR FROM THE SECTION 54F THAT DEDUCTION U/S. 54F CAN BE CLAIMED EITHER ONE YEAR BEFORE OR TWO Y EARS AFTER THE TRANSFER OF PROPERTY TAKES PLACE. HOWEVER IN THIS CASE THE ASSESSEE MADE SUBSTANTIAL PAYMENT OF RS. 1,00,00,000/ - FOR THE PURCHASE OF PROPERTY AT VILE PARLE(E) IN F.Y 2012 - 13TO ZEE INFRA PROJECTS PVT. LTD. WHICH IS CONTRARY TO THE PROVISIONS OF SECTION 54F.' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE USED THE PROVISIONS OF SECTION 54F OF THE ACT AS COLOURABLE DEVICE TO CREATE AN EYEWASH IN THE EYES OF LAW AND TAKE ADVANTAGE OF THE LOOPHOLES OF ACT BY EXTRAPOLATING THE PROVISIONS AND APPLYING THEM TO ONE'S CASE WHICH GIVES A FAVOURABLE POINT OF VIEW TO ASSESSEE' 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF SCRUT INY ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS. 2,38,30,244/ - UNDER SECTION 54F OF THE ACT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD MADE PAYMENT OF RS. 1,00,00,000/ - ON 20.04.2012 FOR T HE PURCHASE OF NEW PROPERTY AT FLAT N O . 901, CHANDADEVI CHSL, MAHANT ROAD, VILE PARLE (E), MUMBAI, WHEREAS THE SALE OF PROPERTY, IN CONNECTION WITH WHICH 54F DEDUCTION IS CLAIMED, WAS IN 2014 AND 2015. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INVESTMEN T IN QUESTION SHOULD HAVE BEEN MADE, IN TERMS OF THE PROVISIONS OF SECTION 54F WITHIN ONE YEAR BEFORE THE SALE OF PROPERTY OR TWO YEARS AFTER SALE OF PROPERTY. THIS CONDITION, ACC ORDING TO THE ASSESSING OFFICER, WAS NOT SATISFIED, AND, ACCORDINGLY, DEDUCTI ON UNDER SECTION 54F WAS INADMISSIBLE. ACCORDINGLY, HE DISALLOWED THE CLAIM OF 54F DEDUCTION OF RS. 2,38,30,244/ - . AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) WHO UPHELD THE CLAIM OF THE ASSESSEE, AND OBSERVED AS FOLLOWS: - I HAVE GONE THROUGH THE AOS ORDER AND THE APPELLANTS FACTUAL AND LEGAL SUBMISSION. THE FACT OF THE CASE IS THAT THE APPELLANT HAS SOLD FIVE COMMERCIAL PROPERTIES AND HAS INVESTED THE SAME IN ONE RESIDENTIAL PROPERTY AND HAS CLAIMED EXEMPTION U/S. 54F. TH E AO HAS DENIED THE EXEMPTION STATING THAT PAYMENTS FOR ACQUISITION OF THE HOUSE FELL BEYOND PERIOD OF 1 YEAR PRIOR OR WITHIN 2 YEARS AFTER DATE OF TRANSFER SINCE THE PAYMENTS TOWARDS PROPERTY BEGAN AS EARLY AS IN 2012. AS PER THE AO'S CONTENTION, ACCORDIN G TO THE PROVISIONS OF SECTION, 54F, DEDUCTION CAN BE CLAIMED EITHER ONE YEAR BEFORE OR TWO YEARS AFTER THE TRANSFER OF PROPERTY TAKES PLACE. HOWEVER, IN THE PRESENT CASE, SUBSTANTIAL PAYMENT FOR THE NEW RESIDENTIAL PROPERTY WAS FIRST MADE IN FY 2012 - 13 WH EREAS THE PAYMENT ON SALE OF MULTIPL E PROPERTIES WAS RECEIVED BY THE APPELLANT IN FY 2014 - 15. HENCE, THE DEDUCTION CLAIMED B Y THE APPELLANT IS CONTRARY TO THE PROVISIONS OF SECTION 54F AND IS BEING DISALLOWED. THE ASSESSED INCOME WAS COMPUTED BY DISALLOW ING THE DEDUCTION CLAIMED UNDER SECTIO N 54F AS PER FOLLOWING OBSERVATIONS MADE IN THE ASSESSMENT ORDER: '...HENCE, IT IS CLEAR THAT THO ASSESSE E HAD INTENDED TO BUY THE NEW PROPERTY IN 2012 ONLY FOR WHICH SUBSTANTIAL PAYMENT WAS ALSO MADE. THEREFORE IN VI EW OF THE ABOVE STATED FACTS, AN ADDITION OF RS. 2,38,30,244/ - ON ACCOUNT OF DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 54F IS BEING MADE TO THE TOTAL INCOME OF THE ASSESSE..' ITA NO. 1043/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 3 OF 5 AFTER HEARING BOTH THE PARTIES, THE PERTINENT QUESTION IS WHAT SHALL BE CO NSIDERED AS THE DA TE OF PURCHASE OF THE NEW PROPERTY? I.E. THE DATE OF AGREEMENT OR THE DATE OF OCCUPATI ON CERTIFICATE OR THE DATE OF POSSESSION. AS PER SECTION 54F OF THE INCOME - TAX ACT, 1961, IT PROVIDED THAT: 'SUBJECT TO THE PROVISIONS OF SUB - SECTION (4), WHERE, IN THE CASE OF AN ASSESSES 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), A ND THE ASSESSES 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 REF ERRED 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....' IT HAS B EEN HELD IN THE CASE OF CIT VS. SMT. BEENA K JAIN 217 ITR 363 (BOM) ITA NO 2896/MUM/2014, THE HON'B LE TRIBUNAL HAS HELD THAT THE RELEVANT DATE IN T HIS CONNECTION IS, WHEN THE PETITIONER HAS PAID THE FULL CONSIDERATION AMOUNT ON THE FLAT BECOMING READY FOR OCCUPATION AND OBTAINED POSSESSION OF THE FLAT. THIS HAS BEEN TAKEN BY THE TRIBUNAL AS THE DATE OF PURCHASE. THE HON'BLE TRIBUNAL HAS LOOKED AT THE SUBSTANCE OF THE TRANSACTION AND COME TO THE CONCLUSION THAT THE PURCHASE WAS SUBSTANTIALLY EFFECTED WHEN THE AGREEMENT OF PURCHASE WAS CARRIED OUT OR COMPLETED BY PAYMENT OF FULL CONSIDERATIO N, AND HANDING OVER OF POSSESSION OF THE FLAT. FURTHER, THE APPELLANT HAS ALSO QUOTED SOME LEGAL DECISIONS WHERE THE GIST IS THAT THE DATE OF POSSESSION OR THE DATE OF OCCUPATION SHOULD BE CONSIDERED AS THE DATE OF TRANSFER FOR CLAIM U/S 54F. NOW, IT IS E STABLISHED BY THE APPELLANT THAT THE DIFFERENT DATES AS PER THE DOCUMENTS ARE : DATE OF AGREEMENT 22.07.2015 DATE OF OCCUPATION CERTIFICATE 09.04.2015 DATE OF POSSESSION 22.07.2015 THE DATE OF PURCHASE MUST BE TAKEN WHEN THE POSSESSION WAS RECEIVED BY THE APPELLANT. FURTHER, IN THE CASE THE APPELLANT THE AGREEMENT FOR PURCHASE OF NEW PROPERTY IS EXECUTED IN JULY 2015 WHICH DATE ALSO FALLS WITHIN THE PERIOD OF 2 YEARS AS PROVIDED IN S ECTION 54F OF THE ACT. AS PER THE DOCUMENTS, THE DATE OF SALE OF COMMERCIAL PREMISES WAS AUGUST 2014 AND MARCH 2015. EVEN IF EITHER OF THE ABOVE DATES ARE CONSIDERED, THE CONDITION OF PURCHASE OF NEW PROPERTY WITHIN TWO YEARS FROM DATE OF TRANSFER IS SATIS FIED. THE AO HAS ERRED IN CONSIDERING THE DATE OF PAYMENT FOR DETERMINING ALLOWABILITY OF DEDUCTION UNDER SECTION 54F. THE RELEVANT DATE SHOULD BE DATE OF ACTUAL PURCHASE I.E. EXECUTION OF AGREEMENT COUPLED WITH DATE OF POSSESSION. ITA NO. 1043/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 4 OF 5 THE SAME FALLS WITHIN TH E STATUTORILY PRESCRIBED TIME LIMIT AND HENCE, DEDUCTION IS TO BE ALLOWED UNDER SECTION 54F. ACCORDINGLY, ON THE BASIS OF FACTS AND LEGAL DECISIONS, THIS GROUND IS ALLOWED. 4. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT( A) AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. WE FIND THAT THE ISSUE IN APPEAL IS SQUARELY COVERED BY HONB LE JURISDICTIONAL HIGH COURTS JUDGMENT IN THE CASE OF CIT VS BEENA K JAIN [(1996) 217 ITR 363 (BOM)] WHEREIN THEIR L ORDSHIPS HAVE OBSERVED AS FOLLOWS: - THE ASSESSEE WHO IS THE RESPONDENT BEFORE US HAD SOLD OFFICE PREMISES ON 23 - 7 - 1987 WHICH RESULTED IN LONG - TERM CAPITAL GAINS OF RS. 24,05,050. PRIOR TO THE SALE SHE HAD ENTERED INTO AN AGREEMENT FOR PURCHASE OF A RESIDENTIAL FLAT WHICH AGREEMENT WAS DATED 4 - 9 - 1985. TH E AGREEMENT WAS FOR PURCHASE OF A FLAT FOR THE TOTAL CONSIDERATION OF RS. 12,26,751. ON THE DATE OF AGREEMENT OF SALE THE ASSESSEE PAID A SUM OF RS. 1,35,000 AS EARNEST MONEY. THIS AGREEMENT WAS REGISTERED ON 27 - 10 - 1985. THE CONSTRUCTION OF THE FLAT WAS FI NALLY COMPLETED IN JULY 1988. THE ASSESSEE PAID THE CONSIDERATION AMOUNT OF RS. 10,44,375 PLUS RS. 47,376 ON 29 - 7 - 1988 AND SHE WAS PUT IN POSSESSION OF THE SAID FLAT ON 30 - 7 - 1988. THE ASSESSEE CLAIMED THE BENEFIT OF EXEMPTION UNDER SECTION 54F OF THE INCOM E - TAX ACT, 1961 ('THE ACT'). SHE HAS ACCORDINGLY BEEN GRANTED BY THE TRIBUNAL EXEMPTION OF RS. 11,04,423 UNDER SECTION 54F. THE DEPARTMENT HAS MADE THIS APPLICATION UNDER SECTION 256(2) OF THE ACT FOR RAISING THE FOLLOWING QUESTION : 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN ALLOWING EXEMPTION OF RS. 11,04,423 UNDER SECTION 54F OF THE INCOME - TAX ACT, 1961 CONSIDERING THE DATE OF POSSESSION OF THE NEW RESIDENTIAL PREMISES INSTEAD OF DATE OF SALE AGREEMENT AND DATE OF REGISTRATION ?' 2. UNDER SECTION 54F IN THE CASE OF AN ASSESSEE IF ANY CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG - TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE D ATE OF WHICH THE TRANSFER TOOK PLACE PURCHASED A RESIDENTIAL HOUSE, THE CAPITAL GAIN SHALL BE DEALT WITH AS PROVIDED IN THAT SECTION. AS PER THE SECTION CERTAIN EXEMPTION HAS TO BE ALLOWED IN RESPECT OF THE CAPITAL GAINS TO BE CALCULATED AS SET OUT THEREIN . THE DEPARTMENT CONTENDS THAT THE ASSESSEE DID NOT PURCHASE THE RESIDENTIAL HOUSE EITHER ONE YEAR PRIOR TO OR TWO YEARS AFTER THE SALE OF THE CAPITAL ASSET WHICH RESULTED IN LONG - TERM CAPITAL GAINS. ACCORDING TO THE DEPARTMENT, THE AGREEMENT FOR PURCHASE OF THE NEW FLAT WAS ENTERED INTO MORE THAN ONE YEAR PRIOR TO THE SALE. HENCE, THE PETITIONER IS NOT ENTITLED TO THE BENEFIT UNDER SECTION 54F. IN OUR VIEW THE TRIBUNAL HAS RIGHTLY NEGATIVED THIS CONTENTION AND HAS HELD THAT THE NEW RESIDENTIAL HOUSE HAD BE EN PURCHASED BY THE ITA NO. 1043/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 5 OF 5 ASSESSEE WITHIN TWO YEARS AFTER THE SALE OF THE CAPITAL ASSET WHICH RESULTED IN LONG - TERM CAPITAL GAINS. THE TRIBUNAL HAS HELD THAT THE RELEVANT DATE IN THIS CONNECTION IS 29 - 7 - 1988 WHEN THE PETITIONER PAID THE FULL CONSIDERATION AMOUNT ON THE FLAT BECOMING READY FOR OCCUPATION AND OBTAINED POSSESSION OF THE FLAT. THIS HAS BEEN TAKEN BY THE TRIBUNAL AS THE DATE OF PURCHASE. THE TRIBUNAL HAS LOOKED AT THE SUBSTANCE OF THE TRANSACTION AND CAME TO THE CONCLUSION THAT PURCHASE WAS SUBSTANTIA LLY EFFECTED WHEN THE AGREEMENT OF PURCHASE WAS CARRIED OUT OR COMPLETED BY PAYMENT OF FULL CONSIDERATION ON 29 - 7 - 1988 AND HANDING OVER OF POSSESSION OF THE FLAT ON THE NEXT DAY. 7. CLEARLY, THEREFORE, THE DATE RELEVANT FOR DETERMINING THE PURCHASE OF PROPERTY IS THE DATE ON WHICH FULL CONSIDERATION IS PAID AND POSSESSION IS TAKEN. THERE IS NO DISPUTE THAT THIS DATE IS 22.07.2015 WHICH FALLS WITHIN A PERIOD OF TWO YEARS FROM THE DATE ON WHICH RELATED PROPERTY IS SOLD. THE ASSESSING OFFICER HAS, HOWEVER, PROCEEDED TO ADOPT THE DATE ON WHICH INITIAL PAYMENT OF RS. 1,00,00,000/ - IS MADE. THE APPROACH SO ADOPTED BY THE ASSESSING OFFICER IS EX FACIE INCORRECT AND CONTRARY TO LAW AND DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BEENA K JAIN (SUPRA). 8. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE WELL REASONED CONCLUSIONS ARRIVED BY THE LEARNED C IT(A) AND DECLINE TO INTERFERE IN THE MATTER. 9. IN THE RESULT THE APPEAL IS DISMISSED . PRONOUNCED IN THE OPEN COURT TODAY ON THE 0 3 R D MARCH, 2021. S D / - S D / - JUSTICE P.P BHATT PRAMOD KUMAR (PRESIDENT) (VICE PRESIDENT) MUMBAI, DATED THE 0 3 R D DAY OF MARCH 2021. COPIES TO: (1) THE APPLICANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI