The DCIT, Circle-15, Ahmedabad V. Shri Radhakant M.Tripathy, Ahmedabad

ITA 136/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73003 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 19-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: G C PIPARA
• Keywords: Source of fund; Cost of acquisition
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M & SHRI ANIL CHATURVED I, A.M.) I.T. A. NO. 136/AHD/2011 (ASSESSMENT YEAR: 2007-08) DCIT, CIRCLE-15 AHMEDABAD V/S SHRI RADHAKANT M. TRIPATHY SECTION-3, BUNGLOW NO. 1 KALHAR, BUNGLOWS, NR. SHILAJ VILLAGE, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAUPT 2715 K APPELLANT BY : SHRI J.P. JHANGID, SR. D.R . RESPONDENT BY : SHRI G.C. PIPARA ( )/ ORDER DATE OF HEARING : 14-02-2014 DATE OF PRONOUNCEMENT : 21 -02-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-XIV, AHMEDABAD DATED 07.10.2010 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM CAP ITAL GAINS AND OTHER SOURCES. ASSESSEE FILED HIS RETURN OF INCOME FOR A. Y. 07-08 ON 10.04.2007 DECLARING TOTAL INCOME AT RS. NIL WHICH WAS SUBSEQU ENTLY REVISED ON 18.04.2009 WITH INCOME OF RS. 17,57,310/-. THE CAS E WAS SELECTED FOR ITA NO 136/AHD/2011 . A.Y. 2007-0 8 2 SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U NDER SECTION 143(3) VIDE ORDER DATED 24.11.2009 AND THE TOTAL INCOME WAS DET ERMINED AT RS. 31,28,020/-. AGGRIEVED BY THE ORDER OF A.O., ASSESS EE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 07.10.2010 G RANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US AND THE EFFECTIVE GROUND RAISED BY THE REVENUE:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE IN ALLOWING THE DEDUCTIO N U/S 54F OF THE ACT OF RS. 13,70,715/-. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O . NOTICED THAT ASSESSEE HAD SOLD A PLOT OF LAND SITUATED AT JAYENDRA PARK H OUSING SOCIETY ON 26.03.2007 FOR RS. 60 LAC. OUT OF THE CAPITAL GAIN EARNED OF RS. 44,99,597/- ON SALE OF THE AFORESAID LAND, ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 54F FOR AN AMOUNT OF RS. 27,02,268/-ON ACCOUNT OF I NVESTMENT IN CONSTRUCTION OF NEW RESIDENTIAL PROPERTY BEING PURCHASE OF LAND AND CONSTRUCTION OF HOUSE. ON THE BASIS OF DETAILS FURNISHED, A.O. ALSO NOTICE D THAT ASSESSEE HAD MADE AGGREGATE PAYMENT OF RS. 34.50 LACS TOWARDS MADE IN VESTMENT IN NEW RESIDENTIAL PROPERTY FROM 27.03.2006 TO 24.06.2007, A.O. NOTICED THAT ASSESSEE HAD STARTED CONSTRUCTION OF NEW RESIDENTIA L PROPERTY BEFORE THE DATE OF TRANSFER OF AFORESAID LAND (I.E. 26.03.2007) AND THAT THE PAYMENT OF RS. 17.5 LACS TOWARDS THE PURCHASER ON NEW PROPERTY WAS MADE BEFORE THE DATE OF TRANSFER OF PROPERTY ON WHICH CAPITAL GAIN WAS CLAIMED. THUS ACCORDING TO THE A.O., THE AMOUNT INVESTED PRIOR TO THE DATE OF SALE OF ORIGINAL ASSET WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 54F AND TH EREFORE THE AMOUNT INVESTED IN PURCHASE OF NEW PROPERTY WAS DISALLOWED AND ADDED BACK TO THE TOTAL TAXABLE CAPITAL GAIN. A.O. WAS FURTHER OF THE VIEW THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER 54F ONLY FOR THE BALAN CE OF RS. 17.50 LACS. HE ACCORDINGLY COMPUTED THE DEDUCTION UNDER SECTION 54 F AT RS. 13,31,552/- AND THE BALANCE CLAIM OF DEDUCTION OF RS. 13,70,715/- W AS DISALLOWED. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER B EFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- ITA NO 136/AHD/2011 . A.Y. 2007-0 8 3 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND ARG UMENTS OF THE LEARNED A.R. CAREFULLY. THE LEGAL POSITION EMANATING FROM THE DECISIONS CITED BY THE APPELLANT HAVE ALSO BEEN PERUSED. IT IS SEEN THAT DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAD SOLD A PLOT OF LAND SITUATED AT JAYENDRA PARK HOUSING SOCIETY LTD. ON 26/03/2007 FOR RS.60 LACS. AFTER DEDUCTING THE COST OF ACQUISITION AND INDEXED COST OF IMPROVEMENT IN RESPECT OF SUCH PROPERTY, TH E APPELLANT EARNED CAPITAL GAIN FROM SALE OF THE PL OT AMOUNTING TO RS.46,99,597/. OUT OF SUCH CAPITAL GAI N, APPELLANT CLAIMED DEDUCTION U/S.54F OF THE ACT - FOR AN AMOUNT OF RS.27,02,268/- ON ACCOUNT OF INVES TMENT IN CONSTRUCTION OF NEW RESIDENTIAL PROPERTY BEING PURCHASE OF LAND AND CONSTRUCTION OF HOUSE, I N WHICH INVESTMENT IS CLAIMED AT RS.34,50,000/-. ON PERUSAL OF THE PROVISIONS OF SECTION 54F OF THE ACT, IN ORDER TO CLAIM THE SAID DEDUCTION IN RESPEC T OF CAPITAL GAINS ARISING FROM THE TRANSFER OF A RES IDENTIAL PROPERTY, TWO CONDITIONS HAVE BEEN LAID DO WN VIZ. THE ASSESSEE SHOULD EITHER PURCHASE A RESIDENT IAL HOUSE PROPERTY (NEW OR OLD) WITHIN ONE YEAR BEFORE, OR WITHIN 2 YEARS AFTER THE DATE OF TRANSFE R OF THE ORIGINAL ASSET OR CONSTRUCT A RESIDENTIAL HOUSE PROPERTY SUCH THAT THE CONSTRUCTION SHOULD BE COMPL ETED WITHIN 3 YEARS FROM THE DATE OF TRANSFER OF TH E ORIGINAL ASSET. THAT FROM THE ABOVE CONDITIONS MENT IONED IN SECTION 54F OF THE ACT, I FIND THAT IN SO FAR AS CONSTRUCTION OF THE HOUSE PROPERTY IS CONCERNED, THE STRESS LAID DOWN BY THE LEGISLATURE IS ON COMPLETION WITHIN THE PERIOD OF 3 YEARS FROM THE DA TE OF TRANSFER OF THE ORIGINAL ASSET AND THE LEGISLATURE IS SILENT ABOUT THE DATE OF COMMENCEMEN T OF THE CONSTRUCTION OF HOUSE PROPERTY. HAD IT BEE N THE INTENTION OF THE LEGISLATURE TO RESTRICT THE EX EMPTION ONLY TO THE EXTENT OF INVESTMENT MADE AFTER THE DATE OF TRANSFER THE ORIGINAL ASSET, IT WOULD HAVE CATEGORICALLY SPECIFIED IN THE SECTION ITSELF. THE ABSENCE OF SUCH A CONDITION IN THE SECTION IS ITSEL F SUFFICIENT TO CONCLUDE THAT THE DATE OF COMMENCEM ENT OF CONSTRUCTION IS IRRELEVANT. THE CONTENTION OF TH E APPELLANT THAT NOWHERE THE SECTION SPECIFIES THAT THE INVESTMENT IN NEW RESIDENTIAL PROPERTY CANNOT BE MA DE PRIOR TO THE DATE OF TRANSFER OR RECEIPT OF SALE CONSIDERATION AND THAT HAD IT BEEN THE CASE, THE LE GISLATURE WOULD NOT HAVE ALLOWED QUALIFICATION OF NEW INVESTMENT ONE YEAR PRIOR TO THE DATE OF TRANSF ER AS IT IS A MATTER OF COMMON SENSE THAT THE SALE CONSIDERATION WOULD NOT HAVE BEEN RECEIVED BY THAT DATE I.E. PRIOR TO THE DATE OF TRANSFER APPEARS TO BE REASONABLE AND LOGICAL. THE VERY FACT THAT THE LEGI SLATURE HAS ALLOWED INVESTMENT IN NEW PROPERTY ONE YEAR PRIOR TO THE DATE OF TRANSFER ESTABLISHES IN N O UNCERTAIN TERMS THAT IT NEED NOT BE THE SALE CONSIDERATION OUT OF WHICH THE INVESTMENT SHOULD BE MADE FOR QUALIFYING FOR THE SAID DEDUCTION U/S.54F OF THE ACT. THIS INTERPRETATION OF THE PROVISIONS O F SECTION 54F BY VARIOUS COURTS OF LAW IS NOT ONLY LOGICAL BUT BASED ON SOUND PRINCIPLES OF LAW AND AC CORDINGLY IN MY OPINION JUSTIFIES THE CLAIM OF THE APPELLANT. ON GOING THROUGH THE FACTS OF THE APPELL ANT'S CASE, I FIND THAT THE CONDITIONS LAID DOWN IN THE SAID SECTION HAVE BEEN DULY MET WITH IN CASE OF THE APPELLANT. THE NEW RESIDENTIAL HOUSE PROPERTY HAS BEEN PURCHASED WITHIN THE PERIOD SPECIFIED IN THE S ECTION I.E. ONE YEAR PRIOR AND WITHIN 2 YEARS FROM THE DATE OF TRANSFER. ACCORDINGLY, ARGUMENT OF THE LEARNED A.R. THAT THE QUESTION OF DISALLOWANCE OF A NY CAPITAL GAIN ON THE REASONS MENTIONED BY THE A.O. D OES NOT ARISE SINCE THE SAME BEING CONTRARY TO THE LEGAL POSITION AND LEGISLATIVE INTENT HAS SUFFICIEN T FORCE. 5.3 THUS, IT IS IMPLIED THAT WHEN THE LEGISLATURE ITSELF QUALIFIES INVESTMENT IN NEW RESIDENTIAL PROP ERTY ONE YEAR PRIOR TO THE DATE OF TRANSFER FOR THE PURP OSE OF CLAIMING/ DEDUCTION U/S.54F OF THE ACT, THE QUESTION OF RESTRICTING THE EXEMPTION U/S. 54F OF T HE ACT TO THE EXTENT OF INVESTMENT MADE AFTER THE RECEIPT OF SALE CONSIDERATION DOES NOT ARISE AND WO ULD BE CONTRADICTORY TO THE ANALOGY OF CLAUSE (A) A S DISCUSSED HEREINABOVE. IT IS CONTENDED THAT THE SAM E ANALOGY IS APPLICABLE IN CASE OF CLAUSE (B) ABOVE I.E., IN RESPECT OF CONSTRUCTION OF HOUSE. THE FACT THAT DATE OF COMMENCEMENT OF CONSTRUCTION OF NEW RESIDENTIAL HOUSE IS IRRELEVANT ALSO SUPPORTS THE S AID ANALOGY. IT IS FURTHER CONTENDED THAT IT IS ALS O NOT NECESSARY THAT SALE CONSIDERATION HAS TO BE INVESTE D IN CONSTRUCTION OTHERWISE IT WOULD HAVE BEEN SPECIFICALLY MENTIONED IN THE SAID CLAUSE BY THE LE GISLATURE, WHICH OTHERWISE SPEAKS ONLY OF COMPLETIO N OF THE CONSTRUCTION WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF SALE AND NOT COMMENCEMENT OF CONSTRUCTION. THUS, IT IS IMPLIED THAT WHEN THE DAT E OF COMMENCEMENT OF CONSTRUCTION IS NOT RELEVANT AND SPECIFIED IN THE CLAUSE BY THE LEGISLATURE, T HE QUESTION OF RESTRICTING THE EXEMPTION U/S. 54 O F THE ACT TO THE AMOUNT OF INVESTMENT IN CONSTRUCTION DOE S NOT ARISE AND WOULD BE CONTRADICTORY TO THE ANALOGY OF CLAUSE (A) AS DISCUSSED HEREINABOVE. 5.4 IN THE INSTANT CASE, THE SALE DEED OF THE PLOT OF LAND AT JAYENDRA PARK HOUSING SOCIETY LTD. HAS BEEN EXECUTED BY THE APPELLANT ON 26/3/2007. THE RI GHTS/TITLE IN THE SAID PROPERTY .HAVE BEEN ASSIGNED ON 26/3/2007 AND ACCORDINGLY AS PER THE DEFINITION OF THE TRANSFER AS DEFINED U/S.2(47) AND SECTION 45 , CAPITAL GAIN ARISES IN CASE OF THE APPELLANT ONLY O N 26/3/2007 AND THEREFORE, THE DATE OF TRANSFER IS UNDOUBTEDLY 26/3/2007 ONLY. THEREFORE; ANY INVESTME NT DURING THE PERIOD 26/3/2006 TO 26/3/2009 IS ELIGIBLE FOR DEDUCTION U/S.54F. THEREFORE, I AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE PAYME NT ITA NO 136/AHD/2011 . A.Y. 2007-0 8 4 MADE DURING THE PERIOD 27/3/2006 TO 13/10/2006 AGGR EGATING TO RS.17,50,000/- WILL ALSO BE ELIGIBLE FOR DEDUCTION U/S.54F AS THE CONDITION OF ONE YEAR BEFO RE AND TWO YEARS AFTER THE SALE IS DULY COMPLIED WITH. THE CLAIM OF THE APPELLANT ALSO FINDS SUPPORT FROM THE DECISION OF VARIOUS COURTS OF LAW AS CITE D IN HIS WRITTEN SUBMISSIONS FILED BEFORE ME. THE ALL AHABD HIGH COURT IN THE CASE OF CIT VS. H. K. KAPOOR (DEED.) LR HIGH COURT OF ALLAHABAD (1998) 15 0 CTR 128 (ALL) HAS CLEARLY HELD THAT THE 'EXEMPTION ON CAPITAL GAINS UNDER S.54 COULD BE ALL OWED NOTWITHSTANDING THE FACT THAT THE CONSTRUCTION OF THE NEW HOUSE HAD BEGUN BEFORE THE SALE OF THE O LD HOUSE. THE SAID PROPOSITION OF LAW ALSO FINDS SUPPORT IN THE CASE OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. J.R. SUBRAMANYA BHAT (1987) 165 ITR 571 (KAR) WHEREIN INTERALIA IT IS HELD THAT IT WAS IMMATERIAL THAT THE CONSTRUCTION OF THE NEW BUILDING WAS STARTED BEFORE THE SALE OF THE OLD BUI LDING. SIMILARLY, THE ITAT, MUMBAI BENCH IN THE CAS E OF ASSTT. CIT V/S. DR. P.S. PASRICHA (2008) 20 SOT 468 (MUMBAI) HAS HELD THAT 'NOWHERE IT HAS BEEN MENTIONED THAT THE SAME FUNDS MUST BE UTILIZED FOR THE PURCHASE OF NEW RESIDENTIAL HOUSE. THE REQUIREMENT OF LAW IS THAT ASSESSEE SHOULD PURCHASE A RESIDENTIAL HOUSE WITHIN THE SPECIFIED PERIOD AN D SOURCE OF FUND IS QUITE IRRELEVANT'. INTERESTINGLY, THE MUMBAI BENCH IN THE CASE OF MRS. PREM P. SHAH, SANJEEV P. SHAH V/S. ITO ( 2006) 282 ITR (AT) 211 ( MUMBAI) HAS HELD THAT 'EVEN WHERE THE ASSESSEE HAS UTILIZED SALE CONSIDERATION FOR OTHER PURPOSES AND FOR THE PURPOSE OF NEW ASSET ACQUIRED FUNDS FROM OTHER SOURCES, HE IS ENTITLED FOR BENEFIT U/S. 54.' RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE ABOVE DECISIONS AND CONSIDERING THE FACTS OF THE AP PELLANT'S CASE IN TOTALITY, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT IS ELIGIBLE FOR EXEMPTIO N IN RESPECT OF THE AMOUNT OF INVESTMENT IN NEW PROPERTY. THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S.54F IS THUS ALLOWED. THE APPELLANT SUCCEEDS IN THIS GROUND OF APPEAL. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. SUPPORTED THE ORDER OF CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL IS WITH RESPECT TO ALLO WABILITY OF DEDUCTION U/S.54F. WE FIND THAT CIT(A) WHILE ALLOWING THIS DEDUCTION H AS GIVEN A FINDING THAT ASSESSEE HAD EXECUTED SALE DEED FOR SALE OF LAND AT JAYENDRA PARK HOUSING SOCIETY ON 26.03.2007 FOR RS. 60 LACS AND THE TRANS FER AS PER DEFINITION U/S. 2(47) AND SECTION 45 OF THE ACT WAS 26.03.2007. HE HAS FURTHER GIVEN A FINDING THAT THE PAYMENTS AGGREGATING RS. 17.50 LAC S MADE DURING THE PERIOD 27.03.2006 TO 13.10.2006 IS ALSO ELIGIBLE FOR DEDUC TION U/S 54F AS THE CONDITION OF ONE YEAR BEFORE AND TWO YEARS AFTER TH E SALE IS DULY COMPLIED WITH. HE HAS FURTHER NOTED THAT INVESTMENT DURING THE PERIOD 26.03.2006 TO 26.03.2009 IS ELIGIBLE FOR DEDUCTION U/S. 54F. CIT( A) FURTHER RELYING ON THE VARIOUS DECISIONS CITED IN HIS ORDER THEREFORE HELD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER 54F. BEFORE US THE REV ENUE COULD NOT BRING ANY ITA NO 136/AHD/2011 . A.Y. 2007-0 8 5 CONTRARY MATERIAL ON RECORD TO CONTROVERT THE FINDI NGS OF CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 21 - 02 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,A HMEDABAD