Shri Laxmanbhai Bhathibhai Desai, Ahmedabad V. The Income Tax Officer, Ward-9(4), Ahmedabad

ITA 1209/AHD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0149 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KETAN H SHAH
• Keywords: Capital asset; Benefit of exemption
• Section: 143(3); 54B; 54F; 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ ITA NO. 1209/AHD/2014 / ASSESSMENT YEAR : 2009-10 SHRI LAXMANBHAI B. DESAI, 903, SAPPHIRE COMPLEX, CG ROAD, NAVRANGPURA, AHMEDABAD-380009 PAN : AATPD 0975 E VS ITO, WARD 9 (4), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI KETAN H. SHAH, AR REVENUE BY : SHRI PRASOON KABRA, SR DR / DATE OF HEARING : 17/10/2016 / DATE OF PRONOUNCEMENT: 28/10/2016 / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XX, AHMEDABAD DATED 07.03.2014 FOR AY 2009-10. 2. THE SOLITARY GROUND RAISED BY THE ASSESSEE READ S AS UNDER:- IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING DISALLO WANCE OF EXEMPTION OF CAPITAL GAIN U/S 54B. IN VIEW OF THE FACTS AND CIR CUMSTANCES AS WELL AS IN VIEW OF THE SUBMISSION DATED 5 TH DEC 2013, HE OUGHT TO HAVE ALLOWED THE CLAIM. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A TRANSPORTER BY PROFESSION. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON WAS FILED ON 15.02.2010 DECLARING TOTAL INCOME AT RS.3,28,050/-. THE CASE OF ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') WAS FRAMED VIDE ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 2 ORDER DATED 02.12.2011. WHILE FRAMING THE ASSESSME NT, THE ASSESSING OFFICER MADE DISALLOWANCE U/S 54B OF THE ACT, AMOUN TING TO RS.20,70,000/-, DUE TO THE REASON THAT THE ASSESSEE HAS PURCHASED T HE AGRICULTURAL LAND FOR AVAILING THE BENEFIT OF SECTION 54B(1) BEFORE TRANS FERRING HIS AGRICULTURAL LAND ON WHICH HE HAS EARNED CAPITAL GAIN. 4. AGGRIEVED BY THE AFORESAID ORDER OF THE LD. AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO, AFT ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CONFIRMED THE ACTION O F THE ASSESSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVI NG AS UNDER:- 4.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSION MADE BY THE APPELLANT. IN THE AFORESAID GROUNDS THE APPELLANT H AD CHALLENGED THE DISALLOWANCE OF THE EXEMPTION CLAIMED BY THE APPELL ANT ON THE CAPITAL GAINS AMOUNTING TO RS.20,70,000/- IN VIEW OF THE PROVISIO NS OF SECTION 54B OF I.T. ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E APPELLANT CLAIMED THAT THE APPELLANT HAS SOLD A PROPERTY AND HE GOT ITS SH ARE OF CONSIDERATION AT RS.36,66,668/- VIDE SALE DEED DTD. 20.9.2008. OUT O F THE CAPITAL GAIN ARISED ON THE SALE OF THE AFORESAID IMMOVABLE PROPERTY THE APPELLANT CLAIMED THE EXEMPTION OF CAPITAL GAIN U/S.54B OF I.T. ACT STATI NG THAT THE INVESTMENT OF RS.31,05,000/- HAS BEEN MADE IN THE AGRICULTURAL LA ND ALONGWITH OTHER THREE PERSONS VIDE PURCHASE DEED DT. 14.8.2008. SO THE AO HAS NOTICED THAT THE INVESTMENT IN THE NEW ASSET ON WHICH EXEMPTION U/S. 54B HAS BEEN CLAIMED WAS PURCHASED ON 14.8.2008 WHILE THE SALE HAS BEEN MADE BY THE APPELLANT ON 20.9.2008 WHICH MEANS WHEN THERE WAS NO CAPITAL GAI N ARISED IN THE HANDS OF THE APPELLANT ON THE DATE OF THE INVESTMENT IN NEW ASSET THEN IN THAT CASE HE COULD NOT CLAIM THE EXEMPTION OF THE INVESTMENT MAD E IN SUCH NEW INVESTMENTS. AS PER THE PROVISIONS OF SECTION 54B O F I.T. ACT THE EXEMPTION COULD ONLY BE CLAIMED WHEN THE NEW INVESTMENT IS MA DE WITHIN A PERIOD OF 2 YEARS AFTER THE DATE OF THE TRANSFER OF THE IMMOVAB LE PROPERTY OF WHICH CAPITAL GAIN SOUGHT TO BE CLAIMED AS EXEMPTION U/S.54B OF I .T. ACT. SO, AS PER THE WORDINGS OF THE SECTION 54B THE ELIGIBILITY FOR THE EXEMPTION BECOMES ONLY WHEN THE INVESTMENT IN THE NEW ASSET IS MADE AFTER THE DATE OF THE SALE OF THE CAPITAL ASSET. IN THE INSTANT CASE, THE INVESTMENT IN THE NEW ASSET IS PRIOR TO THE DATE OF TRANSFER OF THE CAPITAL ASSET AND HENCE THE APPELLANT WAS NOT ELIGIBLE FOR THE EXEMPTION. 4.4. ON THE OTHER SIDE, THE APPELLANT HAS CONTENDED THAT HE HAS RECEIVED THE SALE CONSIDERATION IN ADVANCE/EARNEST MONEY WHICH H AS BEEN UTILIZED FOR PURCHASE OF NEW PROPERTY ON 14.8.2008. HE HAS SUBMI TTED THAT BEFORE THE DATE OF DEED OF THE NEW ASSET I.E. 14.8.2008 HE REC EIVED HIS SHARE OF CONSIDERATION AS UNDER:- ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 3 DATE AMOUNT 5.8.2008 RS.5,00,000/- 5.8.2008 RS.3, 00,000/- 6.8.2008 RS.5,00,000/- 7.8.2008 RS.3,00,000/- TOTAL RS. 16,00,000/- APPELLANT'S CONTENTION THAT HE HAS RECEIVED THE ADV ANCE PAYMENTS OF THE CONSIDERATION OF THE SOLD PROPERTY WHICH WAS IN VESTED IN THE NEW ASSET IS NOT VERIFIABLE FOR WANT OF COPY OF THE DEED OF THE PURCHASES OF THE NEW ASSET AS THE DETAILS OF THE DATE OF PAYMENTS MADE BY THE APP ELLANT TO THE PARTY FROM WHOM THE NEW ASSET PURCHASED ARE NOT FURNISHED BY T HE APPELLANT. IN FACT NEW ASSET CLAIMED TO HAVE BEEN PURCHASED IN CONSIDE RATION OF RS.31,05,000/- BUT THE DATES OF THE PAYMENTS TO THE SELLER PARTY O F THE NEW ASSET HAVE NOT BEEN PROVIDED AND IN ABSENCE OF THE SAME HENCE THE CLAIM OF THE APPELLANT IS NOT VERIFIABLE. FURTHER, ASSUMING BUT NOT ADMITTING THAT THE ADVANCE PAYMENTS RECEIVED IN RESPECT OF THE SOLD PROPERTY W AS UTILIZED FOR THE PURPOSE 01 PURCHASES OF THE NEW ASSET IS ALSO NOT FULLY COR RECT FOR THE REASON THAT THE INVESTMENT IN THE NEW PROPERTY HAS BEEN MADE AT RS. 31,05,000/- WHILE THE ADVANCE PAYMENT AGAINST THE SOLD PROPERTY WAS RECEI VED ONLY TO TUNE OF RS.16 LAKHS. SO IT IS NOT THE CASE WHEREIN THE ENTI RE PAYMENT FOR NEW ASSET WAS MADE ONLY OUT OF THE ADVANCES RECEIVED TOWARDS SALE CONSIDERATION OF THE SOLD PROPERTY. HENCE, EVEN IF ASSESSEE'S LOGIC IS T O BE ACCEPTED THEN ALSO THE APPELLANT IS ELIGIBLE FOR THE EXEMPTION IN THE PROP OSITION TO THE EXTENT OF THE INVESTMENT OF RS.16 LAKHS OUT O RS.31.05 LAKHS ONL Y BUT IN THAT CASE ALSO IT HAS TO BE SEEN WHETHER THE PAYMENT FOR THE NEW ASSE T BY THE APPELLANT HAS BEEN MADE ONLY AFTER RECEIPT OF THE ADVANCES I.E. F ROM 5.8.2008 ONWARDS TO THE DATE OF AGREEMENT I.E. 14.8.2008. SINCE NO DETAILS OF THE PAYMENTS TO THE SELLER PARTIES OF THE NEW ASSET ARE AVAILABLE AND MORE PAR TICULARLY THE VIOLATION OF THE PROVISIONS OF LAW THAT THE INVESTMENT SHOULD BE WITHIN TWO YEARS AFTER THE DATE OF THE TRANSFER OF THE OLD ASSET THE ASSESSEE IS NOT ENTITLED TO GET ANY EXEMPTION UNDER THE PROVISIONS OF SECTION 54B OF I. T. ACT. THE CASE LAW RELIED UPON BY THE APPELLANT ARE NOT APPLICABLE OVE R THE FACTS OF THE CASE AND HENCE CANNOT BE FOLLOWED IN THE PRESENT CASE. THUS, THE ACTION OF THE A.O. IS JUSTIFIED AND THE SAME IS CONFIRMED. THUS, THIS GRO UND OF APPEAL IS DISMISSED. 5. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASS ESSEE IS NOW IN APPEAL BEFORE US. 6. THE COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS AS WERE MADE BEFORE THE LD.CIT(A) AND SUBMITTED THAT THE PRESENT ISSUE IS COVERED BY THE ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 4 DECISION OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT, BANGALORE VS. K. RAMACHANDRA RAO (56 TAXMANN.COM 163). ON THE OTHER HAND, LD. SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND RELIED ON THE DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CAS E OF HUMAYUN SULEMAN MERCHANT VS. CHIEF CIT (73 TAXMANN.COM 2). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW AS WELL AS THE DECISIONS RELIED UPON BY BOTH THE PARTIES. WE FIND THAT IN THIS CASE THE SOLITARY ISSUE RAISED BY THE ASSESSEE IS COVERED BY THE JUDGMENT OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. K. R AMACHANDRA RAO (SUPRA). IN THAT CASE, IT IS HELD THAT EXEMPTION IN THE CASE OF INVESTMENT IN RESIDENTIAL HOUSE WAS GIVEN IN FAVOUR OF ASSESSEE BECAUSE ALL I NVESTMENTS MADE UNDER CONSTRUCTION OF RESIDENTIAL HOUSE WITHIN A STIPULAT ED PERIOD AND EXEMPTION WAS DULY GIVEN. ON THE OTHER HAND, LD. SR.DR CITED A JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HUMAYUN SULEMAN ME RCHANT VS. CCIT(SUPRA), WHICH IS CONTRARY TO THE DECISION OF H ONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. K.RAMACHANDRA RAO(SUPR A), BUT IT IS WELL SETTLED LAW HELD BY THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. VEGETABLE PRODUCTS LTD. REPORTED IN (1973) AIR 927, 1973 SCR (3) 448 THAT WHERE THERE IS CONTRARY FINDINGS OF DIFFERENT TWO HIGH COURTS AND IN THE ABSENCE OF DIRECT CITATION OF HONBLE JURISDICTIONAL HIGH COUR T, THEN BENEFIT OF CITATION WHICH IS IN FAVOUR OF ASSESSEE TO BE APPLIED. WE THEREFORE REPRODUCE THE RELEVANT PORTION OF THE AFORESAID JUDGMENTS HEREUND ER:- PORTION OF JUDGMENT OF HONBLE HIGH COURT OF KARNA TAKA - IN THE CASE OF CIT VS. K. RAMACHANDRA RAO SECTION 54(F) DEALS WITH CAPITAL GAINS ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT ON HOUSE. SECTION 54F(1) PROVIDES, 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 ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 5 ASSET, NOT BEING A RESIDENTIAL HOUSE AND THE ASSESS EE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRA NSFER TOOK PLACE, PURCHASED OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONS TRUCTED A RESIDENTIAL HOUSE, THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE SAID PROVI SION. THIS IS SUBJECT TO THE PROVISIONS OF SUB-SECTION (4). SUB- SECTION (4) STIPULATES IF THE AMOUNT OF NET CONSIDE RATION WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE O F THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH TRA NSFER OF THE ORIGINAL ASSET TOOK PLACE OR WHICH IS NOT UTILIZED BY HIM FOR THE PURCHASE OR CONSTRUC TION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTI ON 139 SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN IN ANY CAS E NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SECTION 139(1) IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS SPECI FIED AND UTILIZED IN ACCORDANCE WITH ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE FRAMED IN THIS BEHALF. SUB- SECTION (4) IS ATTRACTED ONLY TO A CASE WHERE THE S ALE CONSIDERATION IS NOT UTILIZED EITHER FOR PURCHASE OR FOR CONSTRUCTION OF A RESIDENTIAL HOUSE. IT HAS NO APPLICATION TO A CA SE WHERE THE ASSESSEE INVESTS THE SALE CONSIDERATIO N DERIVED FROM THE TRANSFER EITHER IN PURCHASING THE PROPERTY OR C ONSTRUCTING THE RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54F(1). THE PROVISO TO SECTION 54F PUTS AN EMBARGO ON THE A PPLICATION OF SECTION 54F TO CASES WHICH ARE MENTIONED IN THE SAID PROVISO. THAT IS TO BE ELIGIBLE FOR THE BENEFIT UNDER SECTION 54F(1) THE ASSESSEE SHOULD NOT BE OWN ING MORE THAN ONE RESIDENTIAL HOUSE OTH ER THAN THE NEW ASSET ACQUIRED OR HE SHOULD NOT PUR CHASE ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF O NE YEAR AFTER THE DATE OF TRANSFER OF RESIDENTIAL ASSET OR CONSTRUCTS ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TR ANSFER OF THE RESIDENTIAL ASSET. IN THE ENTIRE SCHEME THERE IS NO PROHIBITION FOR TH E ASSESSEE PUTTING UP CONSTRUCTION OUT OF SALE CONSTRUCTION RECEIVED BY SUCH TRANSFER OF A SITE WHICH IS OWNED BY HIM AS IS CLEAR F ROM THE LANGUAGE USED. IT IS OPEN FOR THE ASSESSEE TO PUT UP A RESIDENTIAL CONSTRUCTION OR TO PURCHASE A RESIDENTIAL HOUSE. IT IS NOT THE REQUIREMENT OF LAW THAT HE SHOULD PURCHASE A RESIDENTIAL SITE AND THEN PUT-UP CONSTRUCTION. THEREFORE, IN THE INS TANT CASE ADMITTEDLY THE ASSESSEE HAS PURCHASED A V ACANT SITE ON 31-3-2001. HE SOLD THE ORIGINAL ASSET ON 27-8- 2003 ON WHICH DATE HE ALREADY OWNED A SITE. IN FACT EVEN BEFORE SALE OF THE ORIGI NAL ASSET HE HAD STARTED CONSTRUCTION ON SUCH SITE BY AVAILING L OAN FROM THE BANK. IN TERMS OF SECTION 54F(1) ALL INVESTMENTS MADE IN THE CONSTRUCTION OF THE RESIDENTIAL HOUSE OF THE SAID SITE WITHIN A PERIOD OF ONE YEAR PRIOR TO 27-8- 2003 WOULD BE ELIGIBLE FOR EXEMPTION UNDER SECTION 54F(1). SIMILARLY ALL INVESTMENTS IN THE SAID CONSTRUCTION AFTER 27-8- 2003 WITHIN A PERIOD OF THREE YEARS THERE FROM IS A LSO ELIGIBLE FOR EXEMPTION. THEREFORE, THE ARGUMENT THAT SUCH INVESTMENT IN PUT TING UP A RESIDENTIAL CONSTRUCTION CANNOT BE MADE ON A SITE OWNED BY HIM TO BE ELIGIBLE FO R EXEMPTION IS ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 6 WITHOUT ANY SUBSTANCE. BOTH THE APPELLATE AUTHORITI ES HAVE RIGHTLY EXTENDED THE BENEFIT TO THE ASSESSEE AND THERE IS NO ERROR COMMI TTED BY THEM WHICH CALLS FOR INTERFERENCE. AS IS CLEAR FROM SUB- SECTION (4) IN THE EVENT OF THE ASSESSEE NOT INVEST ING 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 BENEFI T OF SECTION 54F, THEN HE SHOULD DEPOSIT THE SAID C APITAL GAINS IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT. I N OTHER WORDS IF HE WANTS TO CLAIM EXEMPTION FROM PAYMENT OF INCOME TAX BY RETAI NING THE CASH, THEN THE SAID AMOUNT IS TO BE IN VESTED IN THE SAID ACCOUNT. IF THE INTENTION IS NOT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE OF TH E PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THE REIN, 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 THEREF ORE, HE IS NOT ENTITLED TO THE BENEFIT EVEN THOUGH HE HAS INVESTED THE MONEY IN CO NSTRUCTION IS ALSO NOT CORRECT.[PARA 4] FOR THE AFORESAID REASO NS BOTH THE SUBSTANTIAL QUESTIONS OF LAW ARE ANSWER ED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE REFORE, ALL THE FOUR APPEALS ARE DISMISSED.[PARA 5] PORTION OF THE JUDGEMENT OF HONBLE HIGH COURT OF B OMBAY - IN THE CASE OF HYMAYUN SULEMAN MERCHANT V/S CCIT ___________________________________________________ ________ SECTION 54F IS PART OF CHAPTER IV WHICH INTER ALIA PROVIDES FOR COMPUTATION OF TOTAL INCOME AND FOR THAT PURPOSE, SETS OUT THE VARIOUS H EADS OF INCOME. PART E OF CHAPTER VI DEALS WITH THE HEAD OF INCOME VIZ. CAPITAL GAINS. IT PROVIDES FOR COMPUTATION OF CA PITAL GAINS AND ALSO FOR EXEMPTION AVAILABLE THEREU NDER. SECTION 54F INTRODUCED INTO THE ACT WITH EFFECT FROM 1-4- 1983 BY THE FINANCE ACT, 1982 PROVIDES EXEMPTION FROM CAPITAL GAIN ON TRANSFER OF ANY LONG- TERM CAPITAL ASSET IN CASE THE SAME IS INVESTED IN A RESIDENTIAL HOUSE. HOWEVER, SECTION WHEN INTRODUC ED PROVIDED THAT ANY CAPITAL GAIN ARISING FROM TRANSFE R OF LONG TERM CAPITAL ASSET WOULD NOT BE CHARGEABLE TO CAPITAL GAINS TAX, IF TH E SAME WERE UTILIZED FOR PURCHASE OF AN HOUSING ACCOMMODATION WITHIN A YEAR BEFORE OR AFTER THE DATE ON WHICH THE TRANSFER OF AN CAPITAL ASSET TOOK PLACE OR WAS USED FOR CONSTRUCTION OF A RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF THE CAPITAL ASSET.[PARA 6(E)] THUS, SECTION 54F AS INCOR PORATED MADE AVAILABLE THE BENEFIT OF EXEMPTION TO PURCHASE A HOUSE WITHIN ONE YEAR (AMENDED TO TWO YE ARS) OR CONSTRUCT A RESIDENTIAL HOUSE WITHIN A PERIOD OF 3 YEARS FROM THE DATE ON W HICH CAPITAL ASSET HAS BEEN SOLD. HOWEVER, WHILE IMPLEMENTING SECTION 5 4F, IT WAS NOTICED THAT AT TIMES ASSESSMENTS WERE COMPLETED PRIOR TO THE EXPIRY OF A BOVE PERIOD OF TWO/THREE YEARS FROM THE DATE OF SALE OF THE CAPITAL ASSET AND THE ASSESSEE HAD NOT UTILIZED THE ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 7 AMOUNT WITHIN THE PRESCRIBED PERIOD PROVIDED IN SEC TION 54F. THIS WOULD LEAD TO ASSESSMENT ORDERS BEING RECTIFIED BY APPROPRIATE OR DERS,TO DETERMINE THE AVAILABILITY OF BENEFIT OF EXEMPTION UNDER SECTION 54F.[PARA 6(F)] THIS LED TO THE INTRODUCTION OF SUB- SECTION (4) TO SECTION 54F BY THE FINANCE ACT, 1987 WITH EFFECT FROM 1-4-1988. BESIDES INTRODUCING SUB- SECTION (4) TO SECTION 54F THE FINANCE ACT, 1978, ALSO AMENDED SUB- SECTION (1) OF SECTION 54F TO MAKE IT SUBJECT TO PROVISION OF SUB-SECTION (4) THEREOF.[PA RA 6(G)] AS THE INSTANT CASE IS FOR ASSESSMENT YEAR 1996- 97, IT IS THE AMENDED PROVISION WHICH APPLIES. THEREFORE, NOW SECTION 54F(1) WHICH GRANTS EXEMPTION FROM CAPITAL GAIN TAX WHERE A FLAT IS PURCHASED EITHER WITHIN ON E YEAR PRIOR TO THE SALE OF CAPITAL ASSET OR WITHIN 2 YEARS AFTER THE DATE OF SALE OF THE CAPITAL ASSET OR WHERE A RESIDENTIAL HOUSE IS CONSTRUCTED WITHIN 3 YEARS FRO M THE DATE OF SALE OF THE CAPITAL ASSET, IS NOW SUBJECT TO THE PROVISIONS OF SECTION 54F(4). THUS, WHERE THE CONSIDERATION RECEIVED ON SALE OF CAPITAL ASSET IS NOT APPR OPRIATED (WHERE PURCHASE WAS EARLIER THAN SALE) OR UTILIZED (WHERE PURCHASE IS AFTER THE SALE) THEN THE SAME WOULD BE SUBJECT TO THE CHARGE OF CAPITAL GAIN TAX, UNLESS THE UNUTILIZED AMOUNTS ARE DEPOSITED IN SPECIFIED BANK ACCOUNT AS NOTIFIED IN TERMS OF S ECTION 54F(4). THE EXEMPTION WOULD BE AVAILABLE TO THE UNUTILIZED AMOU NTS ONLY IF THE MANDATE OF SUB- SECTION (4) OF SECTION 54F IS COMPLIED WITH. FURTHE R THE PROVISO TO SUB- SECTION (4) OF SECTION 54F, SAFEGUARDS THE REVENUE WHERE THE ASSES SEE HAD NOT INVES TED THE AMOUNTS CHARGEABLE TO CAPITAL GAINS WITHIN THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 54F. THIS BY PROVIDING THAT IN SUCH CASES, CAPITAL GAIN UNDER SECTION 45 WOULD BE CHARGED ON THE UNUTILIZED AMOUNT AS INC OME OF THE PREVIOUS YEAR IN WHI CH THE PERIOD OF THREE YEARS FROM THE DATE OF TRANS FER OF THE CAPITAL ASSET EXPIRES. [PARA 6(H)] ON THE BASIS OF THE ABOVE BROAD ANALYSIS, THE FACTS OF THE INSTANT CASE NEED TO BE ANALYSED. THE SALE OF CAPITAL ASSET TOOK PLACE ON 2 9-4-1995 FOR A CONSI DERATION OF RS.85.33 LAKHS. THE AGREEMENT FOR PURCHASE OF CONST RUCTION OF FLAT FOR CONSIDERATION OF RS.69.90 LAKHS WAS ENTERED INTO BY THE ASSESSEE ON 16-7- 1996. AN AMOUNT OF RS.35 LAKHS WERE UTILIZED BY THE ASSESSEE IN PURCHA SE OF FLAT BEFORE THE RETURN O F INCOME WAS FILED ON 4-11- 1996 UNDER SECTION 139. HOWEVER, THE MANDATE UNDER SUB- SECTION (4) OF SECTION 54F IS THAT THE AMOUNT NOT U TILIZED TOWARDS THE PURCHASE OF THE FLAT HAS TO BE DEPOSITED BEFORE THE DUE DATE OF FILING RETURN OF INCOME UNDER SECTION 1 39(1) IN THE SPECIFIED BANK ACCOUNT. IN THIS CASE A DMITTEDLY THE ENTIRE AMOUNT OF CAPITAL GAINS ON SALE OF ASSET WHICH IS N OT UTILIZED HAS NOT BEEN DEPOSITED IN A SPECIFIED BANK ACCOUNT BEFORE DUE DATE OF FILI NG OF RETURN UNDER SECTION 139(1). THEREFORE, W HERE THE AMOUNTS OF CAPITAL GAINS IS UTILIZED BEFOR E FILING OF THE RETURN OF INCOME IN PURCHASE/CONSTRUCTION OF A RESIDENTIAL HOUSE, THEN THE BENEFIT OF EXEMPTION UNDER SECTION 54F IS AVAILABLE. IT IS AN UNDISPUTED POSITION THAT EXCEPT RS.35 LAKHS, THE BAL ANCE OF THE AMOUNTS SUBJECT TO CAPITAL GAINS TAX HA S NOT BEEN UTILIZED BEFORE DATE OF FURNISHING OF RETURN OF INC OME, I.E., 4-11- 1996 UNDER SECTION 139.THEREFORE, ON PLAIN INTERPRETATION OF SECTION 5 4F, IT APPEARS THAT THE IMPUGNED ORDER OF THE TRIBUNAL CANNOT BE FAULTED. [PARA 6(I) ] ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 8 THE MANDATE OF SECTION 54F(4) IS CLEAR THAT AMOUNT WHICH HAS NOT BEEN UTILIZED IN CONSTRUCTION AND/OR PURCHASE OF PROPERTY BEFORE FIL ING THE RETURN OF INCOME, MUST NECESSARILY BE DEPOSITED IN AN ACCOUNT DULY NOTIFIE D BY TH E CENTRAL GOVERNMENT, SO AS TO BE EXEMPTED. [PARA 6(O)] FURTHER, SECTION 54F(4) SPECIFICALLY PROVIDES THAT THE AMOUNTS WHICH HAVE NOT BEEN INVESTED EITHER IN PURCHASE/CONSTRUCTION OF HOUSE H AVE TO BE DEPOSITED IN THE SPECIFIED ACCOUNTS BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 139(1). [PARA 6(P)] IT IS A SETTLED POSITION IN LAW THAT NO OCCASION TO GIVE A BENEFICIAL CONSTRUCTION TO A STATUTE CAN ARISE WHEN THERE IS NO AMBIGUITY IN THE PROVISION OF LAW WHICH IS SUBJECT TO INTER PRETATION. THUS, IN THE FACE OF THE CLEAR WORDS OF THE STATUTE THE INTENT OF PARTIES AND/OR BENEFICIAL CONSTRUCTION IS IRRELEVANT. IN THE INSTANT FACTS THE PROVISION OF SECTION 54F(4) ARE VERY CLEAR. THERE I S NO AMBIGUITY. THUS, THERE IS NO OCCASION TO APP LY LIBERAL/BENEFICIAL CONSTRUCTION WHILE INTERPRETI NG THE SECTION AS CONTENDED BY THE ASSESSEE.[PARA 6(S)] AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE WORD 'APPROPRIATION' USED IN SECTION 54F(4) WOULD ALSO APPLY IN THE INSTANT CASE WHERE THE CA PITAL ASSET HAS BEEN SOLD AND SALE PROCEEDS ARE EARMARKED TO BE INVESTED IN CONSTRUCTION OF HOUSE. A PLAIN READING OF SECTION 54F(4) MILITATES AGAINST I T. AS POINTED OUT BY THE REVENUE, SECTION 54F(4) DEALS WITH TWO CLASSES OF CASES, ONE WHERE PURCHASE OF NEW RESIDENTIAL HOUSE IS WITHIN A PERIOD OF ONE YEAR BE FORE THE DATE ON WHICH CAPITAL ASSET IS SOLD BY ASSESSEE AND SECOND CLASS OF CASES WHERE THE AMOUNT SUBJECTED TO CAPITAL GAINS ARE UTILIZED FOR PURCHASE/CONSTRUCTIN G A FLAT, POST THE SALE OF THE CAPITA L ASSET. IN THE INSTANT FACTS WE ARE CONCERNED WITH THE SECOND CLASS, I.E., PURCHASE POST THE SALE OF THE CAPITAL ASSET.[PARA 6 (T)] THE PARLIAMENT HAS USED THE WORD 'APPROPRIATED' IN THE FIRST CLASS OF CASES, I.E., WHERE PROPERTY HAS ALREADY BEEN PURCHASED PRIOR TO THE SALE OF CAPITAL ASSET AND THE AMOUNT RECEIVED ON SALE OF CAPITAL ASSET IS APPROPR IATED TOWARDS CONSIDERATION WHICH HAS BEEN PAID FOR PURCHASE OF THE FLAT. THE INSTANT CAS E IS CONCERNED WITH THE PURCHASE/CONSTRUCTION OF RESIDENTIAL HOUSING, AFTER THE SALE OF CAPITAL ASSET. THIS REQUIRES THE AMOUNT WHICH IS TO BE SUBJECTED TO CAP ITAL GAIN HAS TO BE UTILIZED BEFORE THE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 139 BY THE ASSESSEE. SECTION 54F(4) ITSELF CLEARLY STATES THAT THE AMOUNT NOT UT ILIZED IN PURCHASE/CONSTRUCTION OF FLAT/HOUSE SHOULD BE DEPOSITED IN THE SPECIFIED BAN K NOTIFIED BY THE GOVERNMENT. THUS THE PLAIN L ANGUAGE EMPLOYED IN SECTION 54F(4) MAKES A CLEAR DI STINCTION BETWEEN CASES OF APPROPRIATION (PURCHASE PRIOR TO S ALE OF CAPITAL ASSET) AND UTILIZATION (PURCHASE/CONSTRUCTION AFTER THE SALE O F CAPITAL ASSET). THEREFORE THE WORD 'APPROPRIATED' WOULD HAVE NO A PPLICATION IN CASES OF PURCHASE/CONSTRUCTION OF A HOUSE AFTER THE SALE OF CAPITAL ASSET WHICH IS OF CONCERN IN THE INSTANT CASE.[PARA 6(U)] IN THE INSTANT CASE, THE RETURN OF INCOME IS ADMITT EDLY FILED ON 4-11- 1996. IN TERMS OF SECTION 54F(4) INTERPRETED BY THE GAUHATI HIGH C OURT IN CIT V.RAJESH KUMAR ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 9 JALAN [2006] 286 ITR 274/157 TAXMAN 398 THE AMOUNT SUBJECT TO CAPITAL GAIN ON SALE OF THE CAPITAL ASSET FOR PURPOSE OF EXEMPTION, HAS TO BE UTILIZED BEFORE THE DATE OF FILING OF RETURN OF INCOME. IN INSTANT CASE 4-11 - 1996 IS THE DATE OF FILING THE RETURN OF INCOME. IT IS NOT DISPUTED THAT ON 4-11- 1996 WHEN THE RETURN OF INCOME WAS FILED, THE ENTIRE AMOUNT WHICH WAS SUBJECT TO C APITAL GAIN TAX HAD NOT BEEN UTILIZED FOR THE PURPOSE OF CONSTRUCTION OF NEW HOU SE NOR WERE THE UNUTILIZED AMOUNTS DEPOSITED IN THE NOTIFIED BANK ACCOUNTS IN TERMS OF SECT ION 54F(4) BEFORE FILING THE RETURN OF INCOME. IT IS ALSO TO BE NOTED THAT, THE ASSESSING OFFICER HAD TAKEN INTO ACCOUNT ALL AMOUNTS UTILIZED FOR CONSTRU CTION OF A HOUSE BEFORE FILING THE RETURN OF INCOME ON 4-11-1996 FOR EXTENDING THE BEN EFIT OF EXEMPTION UNDER SECTION 54F. THEREFORE, IN THE INSTANT FACTS, THE D ECISION OF THE GAUHATI HIGH COURT IN RAJESH KUMAR JALAN'S (SUPRA) WOULD NOT APPLY SO AS TO HOLD THAT THE ASSE SSEE HAD COMPLIED WITH SECTION 54F(4). [PARA 6(W)] IN VIEW OF THE ABOVE, THE APPELLA TE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSING OFFICER HAD RIGHTLY COMPUTED THE DEDUCTIO N UNDER SECTION 54F, RESTRICTING THE INVESTMENT IN THE NEW ASSET AT RS.3 5 LAKHS AND, THUS, RESTRICTING THE EXEMPTION UNDER SECTION 54F PROPORTIONATELY TO THE AMOUNT INVESTED. [PARA 6(X)] IN THE ABOVE VIEW, THE APPEAL IS DISMISSED. [PARA 7 ] PORTION OF THE JUDGEMENT OF HONBLE APEX COURT - IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. WE MUST FIRST DETERMINE WHAT IS THE MEANING OF THE EXPRESSION THE AMOUNT OF THE TAX, IF ANY, PAYABLE BY HIM IN 271 (1) (A) (I), DO ES IT MEAN THE AMOUNT OF TAX ASSESSED UNDER S. 143 OR THE AMOUNT OF TAX PAYABLE UNDER S. 156. THE WORD ASSESSED IS A TERM OFTEN USED IN TAXATION LAWS. I T IS USED IN SEVERAL PROVISIONS IN THE ACT. QUANTIFICATION OF THE TAX PAYABLE IS ALWAY S REFERRED TO IN THE ACT AS A TAX ASSESSED. A TAX PAYABLE IS, NOT THE SAME THING AS TAX ASSESSED. THE TAX PAYABLE IS THAT AMOUNT FOR WHICH A DEMAND NOTICE IS ISSUED UND ER S. 156. IN DETERMINING THE TAX PAYABLE, THE TAX ALREADY PAID HAS TO BE DEDUCTE D. HENCE THERE CAN BE NO DOUBT THAT THE EXPRESSION THE AMOUNT OF THE TAX, IF ANY, PAYABLE BY HIM REFERRED TO IN THE FIRST PART OF S. 271 (1) (A) (I) REFERS TO THE TAX PAYABLE UNDER A DEMAND NOTICE. WE NEXT COME TO THE QUESTION WHAT IS THE MEANING TO TI C ATTACHED TO THE WORDS THE TAX FOUND IN THE LATTER PART OF THAT PROVISION. IT MAY BE NOTED THAT THE EX-PRESSION USED IS NOT TAX BUT THE TAX. THE DEFINITE ARTICLE T HE MUST HAVE REFERENCE TO SOMETHING SAID EARLIER. IT CAN ONLY REFER TO THE TA X, IF ANY, PAYABLE BY THE ASSESSEE MENTIONED IN THE FIRST PART OF S. 271 (1) (A) (I). IT IS TRUE THE EXPRESSION TAX IS DEFINED IN S. 2(43) THUS : TAX IN RELATION TO THE ASSESSMENT YEAR COMMENCI NG ON THE 1ST DAY OF APRIL, 1965 AND ANY SUBSEQUENT ASSESSMENT YEAR MEAN S INCOME- TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT. AND IN RELATION TO ANY OTHER ASSESSMENT YEAR INCOME-TAX AND SUPER-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT PRIOR TO THE AFORESAID DATE. ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 10 BUT THE DIFFICULTY IN THIS CASE IS, AS MENTIONED CA RRIER THE EXPRESSION USED IS NOT TAX BUT THE TAX. THAT EXPRESSION CAN BE REASONA BLY UNDERSTOOD AS REFERRING TO THE EXPRESSION EARLIER USED IN THE PROVISION NAMELY THE AMOUNT OF THE TAX, IF ANY PAYABLE BY THE ASSESSEE. AT ANY RATE, THE PROVISIO N IN QUESTION IS CAPABLE OF MORE THAN ONE REASONABLE INTERPRETATION . TWO HIGH COURTS NAMELY CALCUTTA AND MYSORE HAVE TAKEN THE VIEW THAT THE EXPRESSION THE TAX I N S. 271(1) (A) (I) REFERS TO THE TAX, IF ANY, PAYABLE (BY THE ASSESSEE) MENTIONED I N THE EARLIER PART-OF THE SECTION. IT IS TRUE THAT LAHORE AND DELHI HIGH COURTS HAVE TAKE N A DIFFERENT VIEW. BUT THE VIEW TAKEN BY THE CALCUTTA AND MYSORE HI,-,IT COURTS CAN NOT BE SAID TO BE UNTENABLE VIEW. HENCE, PARTICULARLY IN VIEW OF THE FACT THAT WE ARE INTERPRETING, NOT MERELY A TAXING PROVISION BUT A PENALTY PROVISION AS WELL, T HE INTERPRETATION PLACED BY THE CALCUTTA AND MYSORE HIGH COURTS CANNOT BE REJECTED. . FURTHER AS SEEN EARLIER, THE CONSEQUENCES OF ACCEPTING THE INTERPRETATION PLACED BY THE REVENUE MAY LEAD TO HARSH RESULTS. FOR THE REASONS MENTIONED ABOVE, THI S APPEAL IS DISMISSED WITH, COSTS. 7.1. WE ALSO FIND FORCE IN THE SUBMISSION OF THE AS SESSEE THAT SECTION 54B CANNOT BE DENIED MERELY ON THE GROUND THAT NEW PROP ERTY PURCHASED BEFORE THE DATE OF SALE OF OLD PROPERTY, PARTICULARLY WHER E THERE IS NEXUS BETWEEN THE ADVANCE RECEIVED AND THE PAYMENT MADE FOR PURCH ASE OF NEW PROPERTY. RELIANCE IS PLACED ON FOLLOWING JUDGMENTS:- (I) 26 ITD 1 (-AND) - IAC VS. JAYANTILAL CHIMANLAL-HUF, WHEREIN WITH REFERENCE TO SEC.54E REGARDING INVESTMENT IN R URAL BOND, IT WAS HELD THAT IT IS SUFFICIENT IF SALE PROCEED IS I NVESTED IN A RURAL BOND. (II) 81 ITD 545 (MUM) - BOMBAY HOUSING CORPORATION VS. D CIT, IN REFERENCE TO SEC.54E, IT WAS HELD THAT EVEN IF THE ASSESSEE BORROWS REQUIRED FUNDS AND SATISFIES CONDITION RELATING TO INVESTMENT IN SPECIFIED ASSETS, HE SHOULD BE ENTITLED TO GET EXEM PTION. IN THE CASE ON HAND, THE ASSESSEE HAS INVESTED ADVANCE RECEIVED / EARNEST MONEY IN A NEW LAND PURCHASE ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 11 (III) 282 ITR 211 (AT)(MUM) - MRS. PRERNA P. SHAH VS. ITO , IT WAS HELD THAT IT IS NOT NECESSARY THAT SAME SALE CONSIDERATI ON TO BE INVESTED IN NEW RESIDENTIAL PROPERTY. (IV) 299 ITR 210 (ALL) - CIT VS. LATE JANARDAN DASS, IT WAS HELD THAT ASSESSEE HAS RECEIVED THE INITIAL COMPENSATION EARL IER AND THEN INVESTED, THEREFORE, HE IS ENTITLED TO CLAIM 54B. (V) 41 ITD 368 (PUNE) - RAMESH NARHARI JAKHADI VS. ITO - IT WAS HELD THAT INVESTMENT MADE PRIOR TO THE DATE OF TRANSFER OUT OF EARNEST MONEY OR ADVANCE AMOUNT RECEIVED WOULD ALSO BE ELIG IBLE FOR THE CLAIM. 7.2 AS THE HONBLE APEX COURT HAS HELD IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD.(SUPRA) AS WELL AS SUPPORTED BY SEVERA L DECISIONS OF SUPERIOR COURT THAT WHERE THERE ARE TWO DIFFERENT DECISIONS HAVE BEEN TAKEN BY THE DIFFERENT HIGH COURT AND THERE IS NO DIRECT JUDGMEN T OF JURISDICTIONAL HIGH COURT ON THE SUBJECT MATTER, THEN WHICHEVER JUDGMEN T IS IN FAVOUR OF THE ASSESSEE, SHALL APPLY. THEREFORE KEEPING IN VIEW THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN THE MATTER OF CIT V S. K. RAMACHANDRA RAO (SUPRA), WE SET ASIDE THE ORDER OF THE LD.CIT(A) A ND DIRECT THE AO TO DELETE THE DISALLOWANCE MADE U/S. 54B OF THE ACT, AMOUNTIN G TO RS.20,70,000/-. THUS, THE GROUND OF ASSESSEES APPEAL IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 28 TH OCTOBER, 2016 AT AHMEDABAD. SD/- SD/- PRAMOD KUMAR (ACCOUNTANT MEMBER) MAHAVIR PRASAD (JUDICIAL MEMBER) AHMEDABAD; DATED 28/10/2016 *BIJU T. ITA NO. 1209/AHD/2014 SHRI LAXMANBHAI B. DESAI VS. ITO AY : 2009-10 12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD