Shri Rajappa Sreenivasa Murthy Chandrashekara, Bangalore V. Assistant Commissioner Of Income Tax, Circle - 5(3)(1), Bangalore

ITA 1395/BANG/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3028 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-06-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 10-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Keywords: Capital Gains
• Section: 54F; 139(1); 48; 54

Judgement Text

ITA NO.1395/BANG/20190 SHRI RAJAPPA SREENIVASA MURTHY CHANDRASHEKHAR, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.1395/BANG/2019 ASSESSMENT YEAR : 2012-13 SHRI RAJAPPA SREENIVASA MURTHY CHANDRASHEKARA 921, SOBHA DEW FLOWER, MG GARDENS 4 TH CROSS, SARAKKI MAIN ROAD JP NAGAR 1 ST PHASE BENGALURU PAN NO : ACOPC5878L VS. ACIT CIRCLE-5(3)(1) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI RAVISHANKAR, A.R. RESPONDENT BY : SHRI PRIYADARSHI MISHRA, D.R. DATE OF HEARING : 16.06.2021 DATE OF PRONOUNCEMENT : 18.06.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSE HAS FILED THIS APPEAL CHALLENGING THE O RDER DATED 29.3.2019 PASSED BY LD. CIT(A) 9 BENGALURU AND IT R ELATES TO THE ASSESSMENT YEAR 2012-13. THE ASSESSE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN PARTIALLY CONFIRMING THE DISALLOWA NCE MADE BY THE A.O. U/S 54F OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE SOLD AN ANCESTRAL PROPERTY ON 11.8.2011 FOR A CONSI DERATION OF ITA NO.1395/BANG/20190 SHRI RAJAPPA SREENIVASA MURTHY CHANDRASHEKHAR, BANGALORE PAGE 2 OF 6 RS.1.05 CRORES AND THE SAME RESULTED IN LONG TERM C APITAL GAIN TO THE ASSESSEE. HOWEVER, THE ASSESSEE INVESTED A SUM OF RS.1.78 CRORES ON PURCHASE OF A RESIDENTIAL APARTMENT FROM M/S. SHOBH A DEVELOPERS. THE ABOVE SAID AMOUNT WAS PAID IN INSTALMENTS BEGIN NING FROM 30.3.2011. THE DETAILS OF PAYMENT ARE PLACED AT PA GES 35-36 OF THE PAPER BOOK. IN VIEW OF THE PURCHASE OF NEW FLAT, T HE ASSESSEE CLAIMED THE DEDUCTION U/S 54F OF THE ACT AGAINST LONG TERM CAPITAL GAIN AND ACCORDINGLY RETURNED NIL INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN. THE A.O. NOTICED THAT THE ASSESSEE HAS INVES TED A SUM OF RS.57.24 LAKHS ONLY IN THE NEW HOUSE BEFORE THE DUE DATE FOR FILING RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13. AS P ER THE PROVISIONS OF SEC.54F OF THE ACT, IF THE SALE CONSIDERATION IS NOT FULLY UTILIZED IN PURCHASING/CONSTRUCTION A NEW HOUSE BEFORE THE DUE DATE FOR FILING RETURN OF INCOME, THEN THE UNUTILIZED AMOUNT SHOULD BE DEPOSITED IN CAPITAL GAINS ACCOUNT SCHEME. IN THAT CASE, THE AM OUNT SO DEPOSITED SHALL BE DEEMED TO BE THE INVESTMENT FOR THE PURPOS E OF DEDUCTION ALLOWED U/S 54F OF THE ACT. HOWEVER, THE ASSESSEE DID NOT DEPOSIT UNUTILIZED AMOUNT IN CAPITAL GAIN ACCOUNTS SCHEME A S REQUIRED U/S 54F OF THE ACT. ACCORDINGLY, THE AO RESTRICTED THE DEDUCTION U/S 54F OF THE ACT TO RS.57.24 LAKHS, BEING THE AMOUNT ACTU ALLY INVESTED IN PURCHASE OF NEW FLAT. ACCORDINGLY, THE AO COMPUTED THE TAXABLE AMOUNT OF LONG TERM CAPITAL GAIN AT RS.41.87 LAKHS. 3. BEFORE LD. CIT(A), THE ASSESSEE CONTENDED THAT I T HAS FULLY UTILIZED THE SALE CONSIDERATION IN PURCHASING A NEW FLAT WITHIN THE PERIOD OF TWO YEARS FROM THE DATE OF SALE OF ORIGIN AL ASSET, BEING THE PERIOD PRESCRIBED U/S 54F OF THE ACT FOR PURCHASE OF NEW HOUSE. THE ASSESSEE ALSO CONTESTED THE COST OF PROPERTY AS ON 1.4.1981 ADOPTED BY THE A.O, WHILE COMPUTING LONG TERM CAPITAL GAIN. THE LD. CIT(A) GRANTED RELIEF WITH REGARD TO THE COST OF PROPERTY AS ON 1.4.1981. HOWEVER, HE CONCURRED WITH THE VIEW TAKEN BY THE A. O. WITH REGARD ITA NO.1395/BANG/20190 SHRI RAJAPPA SREENIVASA MURTHY CHANDRASHEKHAR, BANGALORE PAGE 3 OF 6 TO THE CLAIM OF DEDUCTION MADE U/S 54F OF THE ACT. THE LD. CIT(A) TOOK THE VIEW THAT THE PROVISIONS OF SECTION 54F OF THE ACT SHOULD BE INTERPRETED STRICTLY. IN THIS REGARD, HE TOOK THE SUPPORT OF THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF COMMISSIONER OF CUSTOMS VS. DILIP KUMAR & COMPANY ( CIVIL APPEAL NO.3327 OF 2007). ACCORDINGLY, HE CONFIRMED THE PA RTIAL DISALLOWANCE OF CLAIM MADE U/S 54F OF THE ACT. 4. BEFORE US, THE LD. A.R. PLACED HIS RELIANCE ON T HE DECISION RENDERED BY COORDINATE BENCH IN THE CASE OF OF RAMA IAH DURAI RAJ 187 ITD 460 AND ALSO THE DECISION RENDERED IN THE C ASE OF SUDHEER VALSALA SREEKUMARAN ITA 393/BANG/2019 DATED 20.12.2 019. THE LD. A.R. SUBMITTED THAT THE COORDINATE BENCH IN THE CASE OF RAMAIAH DURAI RAJ (SUPRA) HAD PLACED ITS RELIANCE ON THE DE CISION RENDERED BY HONBLE MADRAS HIGH COURT IN THE CASE OF VENKATA DI LIP KUMAR VS. CIT 419 ITR 298, WHEREIN THE HONBLE MADRAS HIGH CO URT, AFTER CONSIDERING THE DECISION RENDERED BY HONBLE SUPREM E COURT IN THE CASE OF DILIP KUMAR & COMPANY HELD THAT IF THE ASSE SSE HAD SATISFIED THE MANDATORY REQUIREMENT OF INVESTING THE CAPITAL GAIN IN THE NEW PROPERTY WITHIN THE PRESCRIBED PERIOD, HE WOULD GET DEDUCTION U/S 54 OF THE ACT AND THE DECISION RENDERED IN THE CASE OF DILIP KUMAR & COMPANY WOULD NOT HELP THE REVENUE. FURTHER, THE C OORDINATE BENCH HAS ALSO FOLLOWED THE BINDING DECISION RENDERED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF K. RAMACHANDRA RAO (2015) 56 TAXMANN.COM 163. ACCORDINGLY, THE COORDINATE BENCH HAS HELD THAT SECTION 54F OF THE ACT IS BENEFICIAL PROVISION AND SHOULD BE INTERPRETED LIBERALLY. ACCORDINGLY, IT WAS HELD TH AT NON-DEPOSIT OF UNUTILIZED AMOUNT IN THE CAPITAL GAIN SCHEME WOULD NOT AFFECT THE CLAIM MADE U/S 54F OF THE ACT. ON THE CONTRARY, T HE LD DR SUPPORTED THE ORDER PASSED BY LD CIT(A). ITA NO.1395/BANG/20190 SHRI RAJAPPA SREENIVASA MURTHY CHANDRASHEKHAR, BANGALORE PAGE 4 OF 6 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT AN IDENTICAL ISSUE HAS BEEN EXAMINED BY THE CO-ORDI NATE BENCH IN THE CASE OF RAMIAH DURAI RAJ (SUPRA). FOR THE SAKE OF C ONVENIENCE, WE EXTRACT BELOW THE RELEVANT OBSERVATIONS MADE BY THE COORDINATE BENCH IN THE CASE OF RAMAIAHDURAI RAJ (SUPRA). 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THA T THE ASSESSEE HAS FINALLY INVESTED THE NET SALE CONSIDERATION IN THE CONSTRUC TION OF NEW RESIDENTIAL HOUSE WITHIN THE STIPULATED PERIOD THOUGH THE ASSESSEE WAS FAILE D TO KEEP THE NET SALE CONSIDERATION IN CAPITAL GAIN SCHEME ACCOUNT. ACCORDING TO HIM, NON- DEPOSITING OF FUND IN PRESCRIBED CAPITAL GAIN SCHEME ACCOUNT CANNOT GO AGAINST THE A SSESSEE WHEN THE ASSESSEE HAS FULLY UTILIZED THE NET SALE CONSIDERATION IN THE CONSTRUC TION OF NEW RESIDENTIAL HOUSE. THE ID. AR FURTHER SUBMITTED THAT THE INVESTMENT OF NET SAL E CONSIDERATION IN NEW RESIDENTIAL PROPERTY WITHIN A PERIOD OF THREE YEARS FROM THE DA TE OF SALE OF THE PROPERTY IS IMPORTANT RATHER THAN KEEPING THE NET SALE CONSIDERATION IN S EPARATE CAPITAL GAIN SCHEME ACCOUNT AS NOTIFIED BY THE CENTRAL GOVERNMENT. FOR THIS PUR POSE HE RELIED ON THE FOLLOWING JUDGEMENTS : 1. CIT V. K. RAMACHANDRA RAO [2015156 TAXMANN.COM 163/.3O TAXMAN 334(KA R. ) 2. CIT V. SMT. B.S. SHANTHAKUMARI [2015] 6O TAXMANN.COM 74/233 TAXMAN 347_(KAR.) 3. CIT V. SAMBANDAM UDAYKUMAR [2012] 19 TAXMANN.COM 17/206 TAXMAN 15Q/345 ITR 389 (KAR.) 4 GOVERDHAN SINGH SHEKHAWAT V. ITO [2019] 102 TAXMANN.COM 50/175 ITD 272 (JP - TRIB) 5. VENKATA DILIP KUMAR V. CIT [2019] 111 TAXMANN.COM 180/[2020] 268 TAXMAN 11020191 419 ITR 298 MAD.). 6. MS. MOTURI LAKSHMI V. ITO [2020]119 TAXMANN.COM 48 8/2 74 TAXMAN 286 (MAD.) 7. SMT. BABITHA KEMPARAJEE URS. V. CIT[2 017 ] 86 TAXMANN.COM 437 ITD 125 (BANG - TRIB) 8. KANNAN CHANDRASEKAR V. ITO [2017] 82 TAXMANN.COM 284 / 165 ITD 223 (CHENNAI - TRIB) 5. ON THE OTHER HAND, THE ID. DR SUBMITTED THAT SECTIO N 54F(4) OF THE ACT STIPULATES THAT FOR CLAIMING THE BENEFIT OF CAPITAL GAIN TAX E XEMPTION, THE ASSESSEE HAS TO INVEST WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFT ER THE DATE OF TRANSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIOD OF THREE YEARS AFT ER THE SALE DATE CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA, THE CAPITAL GAIN SHALL BE EXEMPTED FROM THE TAX. IF THE ASSESSEE HAS NOT COMPLIED WITH THESE REQUIREMENTS AND NOT AP PROPRIATED THE NET SALE CONSIDERATION TOWARDS PURCHASE OF NEW ASSET OR CONSTRUCTED NEW RE SIDENTIAL HOUSE THAN THE SAID NET SALE CONSIDERATION TO BE DEPOSITED IN PRESCRIBED CA PITAL GAINS SCHEME AS NOTIFIED BY THE CENTRAL GOVERNMENT. ACCORDING TO ID. DR IF THE ASSE SSEE NOT COMPLIED WITH THE CONDITIONS LAID DOWN UNDER SECTION 54F( I) OF THE ACT OR 54F(4 ) OF THE ACT, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION UNDER SECTION 54F OF THE ACT. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE MAIN CONTENTION OF THE ID. DR IS THAT THE ASSESSEE HAS N OT COMPLIED WITH THE CONDITIONS LAID DOWN U/S. 54F(1) OR 54F(4) OF THE ACT. U/S. 54F OF THE ACT, WHEN THE ASSESSEE INVESTS THE SALE CONSIDERATION FROM TRANSFER EITHER PURCHASING A RESIDENTIAL HOUSE OR CONSTRUCTING A NEW HOUSE WITHIN A PERIOD STIPULATED IN SECTION 54F (1) OF THE ACT, THEN ONLY THE ASSESSEE ENTITLES FOR DEDUCTION UNDER THIS SECTION. IN THE I NTERMEDIATERY PERIOD THE ASSESSEE SHALL ITA NO.1395/BANG/20190 SHRI RAJAPPA SREENIVASA MURTHY CHANDRASHEKHAR, BANGALORE PAGE 5 OF 6 DEPOSIT THE AMOUNT IN AN ACCOUNT WHICH IS DULY NOTI FIED BY THE CENTRAL GOVERNMENT. IN THIS CASE, THE ASSESSEE HAS NOT DEPOSITED THE NET S ALE CONSIDERATION IN THE CAPITAL GAINS SCHEME ACCOUNT NOTIFIED BY THE CENTRAL GOVERNMENT. HOWEVER THE PLEA OF THE ASSESSEE IS THAT WITHIN THE STIPULATED TIME, THE ASSESSEE HA S UTILIZED THE NET SALE CONSIDERATION AS ENUMERATED IN THE SECTION 54F(1) OF THE ACT AND THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 54F OF THE ACT. THIS ISSUE HAS CAME U P FOR CONSIDERATION BEFORE THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF K. RAMA CHANDRA RAO (SUPRA) WHEREIN THE FOLLOWING QUESTION WAS BEFORE THE HON'BLE HIGH COUR T : ' WHEN THE ASSESSEE INVESTS THE ENTIRE SALE CONSIDE RATION IN CONSTRUCTION OF A RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER CAN HE BE DENIED EXEMPTION UNDER SECTION 54F ON THE GROUND THAT HE DID NOT DEPOSIT THE SAID AMOUNT IN CAPITAL GAINS ACCOUNT SCHEME BEFORE THE DUE DATE PRESCRIBED UNDER SECTION 139(1) OF THE IT ACT ? ' THIS WAS ANSWERED BY HON'BLE HIGH COURT AS FOLLOWS : ' AS IS CLEAR FROM SUB SECTION (4) IN THE EVENT OF THE ASSESSEE NOT INVESTING THE CAPITAL GAINS EITHER IN PURCHASING THE RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54F( 1 ), I F THE ASSESSEE WANTS THE BENEFIT OF SECTION 54F, THEN HE SHOULD DEPOSIT THE SAID CAPITAL GAINS IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT. IN OTHER WORDS IF HE WANT O F CLAIM EXEMPTION FROM PAYMENT OF INCOME TAX BY RETAINING THE CASH, THEN THE SAID AMO UNT IS TO BE INVESTED IN THE SAID ACCOUNT. IF THE INTENTION IS NOT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE OF THE PROPERTY AND IF SUCH INVESTMENT IS MADE WITH IN THE PERIOD STIPULATED THEREIN, THEN SECTION 54F(4) IS NOT AT ALL ATTRACTED AND THEREFOR E THE CONTENTION THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS STI PULATED AND THEREFORE, HE IS NOT ENTITLED TO THE BENEFIT EVEN THOUGH HE HAS INVESTED THE MONEY IN CONSTRUCTION IS ALSO NOT CORRECT.' 7. BEING SO, IN OUR OPINION, THE SECTION 54F IS BENEFI CIAL PROVISION AND SHOULD BE INTERPRETED LIBERALLY AND THE ASSESSING OFFICER HAS TO SEE THE END UTILIZATION OF NET SALE CONSIDERATION IN THE WAY PRESCRIBED IN SECTION 54F OF THE ACT, THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 54F OF THE ACT. WITH THIS O BSERVATION, WE REMIT THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. 6. WE NOTICE THAT THE CO-ORDINATE BENCH HAS FOLLOWE D THE DECISION RENDERED BY THE HONBLE MADRAS HIGH COURT IN THE CA SE OF OF VENKATA DILIP KUMAR (SUPRA), WHEREIN IT HAS BEEN HELD THAT THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF DI LIP KUMAR & CO (SUPRA) WILL NOT COME TO THE HELP OF THE ASSESSEE. FURTHER THE CLAIM OF THE ASSESSEE IS SUPPORTED BY THE BINDING DECISIO N RENDERED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF K RAMAC HANDRA RAO (SUPRA). 7. ACCORDINGLY, FOLLOWING THE ABOVE SAID DECISIONS, WE DIRECT THE A.O. TO ALLOW THE CLAIM OF THE ASSESSEE AFTER VERIF YING THE DETAILS OF ITA NO.1395/BANG/20190 SHRI RAJAPPA SREENIVASA MURTHY CHANDRASHEKHAR, BANGALORE PAGE 6 OF 6 INVESTMENT MADE IN THE PURCHASE OF NEW FLAT BY THE ASSESSEE, I.E., WHETHER THE INVESTMENT HAS BEEN MADE WITHIN THE PER IOD PRESCRIBED U/S 54F OF THE ACT 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JUNE, 2021 SD/- (GEORGE GEORGE K. ) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 18 TH JUNE, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.