Ayushi Patni, Pune V. Deputy Commissioner of Income-tax, Pune

ITA 1424/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7737 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-08-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Capital asset; Benefit of exemption
• Section: 54F; 54

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI VIKAS AWASTHY, JM . / ITA NO.1424/PUN/2016 / ASSESSMENT YEAR : 2012-13 AYUSHI PATNI, S.NO.1A, IRANI MARKET COMPOUND, YERAWADA, PUNE 411 006. PAN : AQIPP9753D. . / APPELLANT V/S THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE. . / RESPONDENT . / ITA NO.1707/PUN/2016 / ASSESSMENT YEAR : 2012-13 THE DY.COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE. . / APPELLANT V/S AYUSHI PATNI, S.NO.1A, IRANI MARKET COMPOUND, YERAWADA, PUNE 411 006. PAN : AQIPP9753D. . / RESPONDENT ASSESSEE BY : SHRI C.H. NANIWADEKAR. REVENUE BY : SHRI PANKAJ GARG. / ORDER PER VIKAS AWASTHY, JM : THE ASSESSEE IN ITA NO.1424/PUN/2016 HAS ASSAILED THE O RDER OF COMMISSIONER OF INCOME TAX (APPEALS) 5, PUNE, DATED 29 .04.2016 / DATE OF HEARING : 19.11.2018 / DATE OF PRONOUNCEMENT: 17.01.2019. 2 ITA NOS.1424 & 1707/PUN/2016 FOR ASSESSMENT YEAR 2012-13, IN NOT ALLOWING FULL EXEMPTION U/S 54F OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). THE REVENUE IN ITA NO.1707/PUN/2016 HAS FILED CROSS APPEAL A SSAILING THE AFORESAID ORDER OF CIT(A) AGAINST ALLOWING PART EXEMPTIO N U/S 54F OF THE ACT TO THE ASSESSEE. 2. SINCE THE ISSUE RAISED BY BOTH SIDES IN THEIR RESPECTIV E APPEALS IS ARISING FROM SAME SET OF FACTS, THE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION. 3. SHRI C.H. NANIWADEKAR APPEARING ON BEHALF OF ASSESSEE SUBMITTED THAT THE ASSESSEE HAD TRANSFERRED CAPITAL ASS ET ON 11.05.2011. THE ASSESSEE ENTERED INTO AGREEMENT FOR PUR CHASE OF FLAT ON 16.06.2009. THE ACTUAL POSSESSION OF THE FLAT WAS RE CEIVED BY THE ASSESSEE ON 17.09.2010. THE ASSESSEE CLAIMED BENEFIT OF EXEMPTION U/S 54F OF THE ACT IN RESPECT OF LONG TERM CAP ITAL GAIN ARISING FROM SALE OF SHARES INVESTED IN PURCHASE OF RESIDENT IAL FLAT. THE LD.A.R. SUBMITTED THAT THE AO DISALLOWED ASSESSEES CLAIM OF EXEMPTION U/S 54F ON THE PRETEXT THAT THE FLAT WAS PUR CHASED BY THE ASSESSEE MORE THAN ONE YEAR PRIOR TO THE DATE OF TRAN SFER OF CAPITAL ASSET. THE LD.A.R. POINTED OUT THAT ON THE DATE OF SIGNING OF AGREEMENT FOR PURCHASE OF FLAT, THE RESIDENTIAL HOUSE/FLAT WA S NOT EVEN IN EXISTENCE. THEREFORE, DATE OF SIGNING OF THE AGREE MENT CANNOT BE SAID TO BE THE DATE OF PURCHASE OF RESIDENTIAL HOUSE. THE ASSESSEE TOOK POSSESSION OF RESIDENTIAL HOUSE/FLAT ON 17.09.2010. THE OCCUPATION CERTIFICATE OF FLAT WAS ISSUED BY THE MUNICIPAL CORPORATION OF GREATER MUMBAI ON 17.02.2011, THEREFORE, IT IS THE 3 ITA NOS.1424 & 1707/PUN/2016 ACTUAL DATE OF POSSESSION WHICH IS RELEVANT TO DETERMINE T HE ASSESSEES ELIGIBILITY FOR CLAIMING EXEMPTION U/S 54F OF THE A CT. THE LD.A.R. FURTHER REFERRED TO CLAUSE (12) OF THE DEED OF AGREEM ENT DATED 16.06.2009. THE LD.A.R. POINTED THAT A PERUSAL OF SAID CLAUSE WOULD MAKE ABUNDANTLY CLEAR THAT THE TITLE OF PROPERTY WAS CONFERRED ON ASSESSEE ONLY AFTER MAKING FULL PAYMENT OF CONSIDERATION. THE ASSESSEE HAD NO RIGHT WHATSOEVER ON THE PROPERTY ON MERE EXECUTION OF AGREEMENT. THE LD.A.R. SUBMITTED THAT THE CIT(A) AFTER PLA CING RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN T HE CASE OF V.M. DUJODWALA VS. ITO REPORTED AS 36 ITD 130 GRANTE D RELIEF TO THE ASSESSEE TO THE EXTENT OF PAYMENTS MADE BY ASSE SSEE TO PURCHASE THE FLAT WITHIN A PERIOD OF ONE YEAR PRIOR TO THE DATE OF TRANSFER OF CAPITAL ASSET. THE INSTALLMENTS PAID BY ASSESSEE BEYOND THE PERIOD OF ONE YEAR BEFORE THE DATE OF TRANSFER OF CAPITAL GAINS WER E HELD TO BE NOT ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT. 4. THE LD.A.R. SUBMITTED THAT THE DATE OF PURCHASE OF RES IDENTIAL HOUSE/FLAT HAS TO BE RECKONED FROM THE DATE WHEN ENTIRE CONSIDERATION IS PAID AND TITLE OF THE PROPERTY IS TRANSFERR ED AND POSSESSION OF FLAT IS HANDED OVER. IN SUPPORT OF HIS SUBMIS SIONS, THE LD.A.R. PLACED RELIANCE ON THE DECISION OF HON'BLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. SMT. BEENA K. JAIN REPORTED AS 217 ITR 363 AND THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE C ASE OF BASTIMAL K. JAIN VS. ITO IN ITA NO.2896/MUM/2014 FOR A.Y. 2 010-11 DECIDED ON 08.06.2016. THE LD.A.R. SUBMITTED THAT THE DEPAR TMENT IN ITS APPEAL HAS ASSAILED THE ORDER OF CIT(A) IN GRANTING PAR T RELIEF TO ASSESSEE U/S 54F OF THE ACT. 4 ITA NOS.1424 & 1707/PUN/2016 5. ON THE OTHER HAND, SHRI PANKAJ GARG REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ASSESSMENT ORDER IN REJECTING ASSESSEES CLAIM OF EXEMPTION U/S 54F OF THE ACT IN RESPE CT OF LONG TERM CAPITAL GAINS ARISING ON TRANSFER OF SHARES. THE LD.D.R . SUBMITTED THAT AS PER THE PROVISIONS OF SEC.54F, THE ASSE SSEE CAN CLAIM EXEMPTION ONLY IN RESPECT OF PURCHASE OF RESIDENTIAL H OUSE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE CAPITAL ASSET IS TRANSFERRED. IN THE PRESENT CASE, U NDISPUTEDLY, THE ASSESSEE HAD TRANSFERRED CAPITAL ASSET ON 11.05.2011 AND ENTERED INTO AN AGREEMENT FOR PURCHASE OF RESIDENTIAL FLAT ON 16.06 .2009. AS IS EVIDENT FROM THE RECORDS, DATE OF EXECUTION OF AGREE MENT IS BEYOND THE PERIOD OF ONE YEAR FROM THE DATE OF TRANSFER OF CAPITAL ASSET. HENCE, ASSESSEE IS NOT ELIGIBLE FOR CLAIMING EXEMPTION U/S 54F. THE LD.D.R. SUBMITTED THAT THE CIT(A) HAS ERRED IN G RANTING PART RELIEF TO THE EXTENT OF INSTALLMENTS DEPOSITED WITHIN A PERIO D OF ONE YEAR PRIOR TO THE DATE OF TRANSFER OF CAPITAL ASSET. THE ASSESSEE DOES NOT QUALIFY THE CONDITIONS SET OUT IN SEC.54F FOR CLAIMING EXEMPTION. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO PE RUSED THE DECISIONS ON WHICH THE LD.A.R. HAS PLACED RELIANCE. THE SOLITARY ISSUE RAISED IN THE PRESENT APPEALS BY THE ASSESSEE AND REVENUE IS : WHETHER THE ASSESSEE IS ELIGIBLE FOR CLAIMING EXEMPTIO N U/S 54F IN RESPECT OF RESIDENTIAL FLAT / HOUSE FOR WHICH THE ASSESSEE HAS ENTERED INTO AN AGREEMENT FOR PURCHASE MORE THAN ON E YEAR BEFORE THE DATE OF TRANSFER OF CAPITAL ASSET ? 5 ITA NOS.1424 & 1707/PUN/2016 THE DATES QUA, TRANSFER OF CAPITAL ASSET, EXECUTION OF AGR EEMENT FOR PURCHASE OF RESIDENTIAL FLAT AND POSSESSION OF THE FLAT ARE NOT IN DISPUTE. 7. THE CONTENTION OF THE ASSESSEE IS THAT SINCE FINAL CON SIDERATION WAS PAID AND THE POSSESSION OF FLAT WAS RECEIVED WITHIN A PERIOD OF ONE YEAR PRIOR TO THE DATE OF TRANSFER OF CAPITAL ASSET, T HE SAME SHOULD BE CONSIDERED AS THE DATE OF PURCHASE. WHEREAS, THE ST AND OF DEPARTMENT IS THAT THE DATE OF EXECUTION OF AGREEMENT FO R PURCHASE OF FLAT SHOULD BE CONSIDERED AS THE DATE OF PURCHASE. 8. THE LD.A.R. HAS DRAWN OUR ATTENTION TO CLAUSE (12) OF THE DEED OF AGREEMENT BETWEEN THE ASSESSEE AND THE BUILDER FOR PURCHASE OF FLAT. THE SAID CLAUSE IS REPRODUCED HEREIN BELOW : 12. NOTHING CONTAINED IN THIS AGREEMENT SHALL BE C ONSTRUED TO AS TO CONFER UPON THE PURCHASER ANY RIGHT WHATSOEVER INTO OR OVER THE SAID PROPERTY OR THE SAID NEW BUILDING OR ANY PART THERE OF INCLUDING THE SAID PREMISES ON EXECUTION OF THIS AGREEMENT. IT IS AGR EED BY AND BETWEEN THE PARTIES THAT CONFERMENT OF TITLE IN RESPECT OF THE SAID PREMISES SHALL TAKE PLACE IN FAVOUR OF THE PURCHASERS ONLY ON THE PURCHASERS MAKING FULL PAYMENT OF CONSIDERATION TO THE DEVELOPERS AND COMPLYING WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT AND ON THE P URCHASER BEING ADMITTED AS A MEMBER OF THE SAID SOCIETY AS HEREIN PROVIDED. THE AFORESAID CLAUSE MAKES IT UNAMBIGUOUSLY EVIDENT THAT THE ASSESSEE HAS NO RIGHT WHATSOEVER IN THE PROPERTY ON MERE EXECUTION OF AGREEMENT. THE ASSESSEE SHALL BE CONFERRED TITLE OF P ROPERTY ONLY ON MAKING FULL PAYMENT OF CONSIDERATION TO THE BUILDER. IN THE INSTANT CASE, FULL CONSIDERATION HAS BEEN PAID BY THE ASSES SEE FOR PURCHASE OF RESIDENTIAL FLAT WITHIN A PERIOD OF ONE YEAR BEFO RE THE DATE 6 ITA NOS.1424 & 1707/PUN/2016 OF TRANSFER OF CAPITAL ASSET. THEREAFTER, ACTUAL POSSESSION O F THE FLAT WAS DELIVERED TO ASSESSEE ON 17.09.2010 I.E., WITHIN A PERIOD OF ONE YEAR PRIOR TO THE DATE OF TRANSFER OF CAPITAL ASSET. IT IS AN UN-REBUTTED FACT THAT AT THE TIME OF EXECUTION OF AGREEMENT, THE RE SIDENTIAL PROPERTY WAS NOT IN EXISTENCE. THEREFORE, TAKING INTO CON SIDERATION FACTS OF THE CASE, THE DATE OF POSSESSION OF FLAT IS THE DAT E OF ACTUAL PURCHASE FOR THE PURPOSE OF CLAIMING EXEMPTION U/S 54F OF THE ACT. 9. WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE THE HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SMT. BEENA K. J AIN (SUPRA). THE HON'BLE HIGH COURT IN THE APPEAL BY DEPARTMENT, UPH OLDING THE ORDER OF TRIBUNAL AND ALLOWED THE BENEFIT OF EXEMPTION U/S 5 4F TO THE ASSESSEE. THE SUBSTANTIAL QUESTION FOR CONSIDERATION BEFOR E THE HON'BLE HIGH COURT WAS : WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN ALLOWING EXEMPTION OF RS.11,0 4,423/- UNDER SECTION 54F OF THE INCOME TAX ACT, 1961, CONSIDERIN G THE DATE OF POSSESSION OF THE NEW RESIDENTIAL PREMISES INSTEAD OF THE DATE OF SALE AGREEMENT AND THE DATE OF REGISTRATION ? THE HON'BLE HIGH COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY ANSWERING THE QUESTION AS UNDER : 2. UNDER SECTION 54F OF THE INCOME-TAX ACT, IN THE CASE OF AN ASSESSEE IF ANY CAPITAL GAIN ARISES FROM THE TRANSF ER OF ANY LONG- TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE, AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEAR S AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE, PURCHASED A RESID ENTIAL HOUSE, THE CAPITAL GAIN SHALL BE DEALT WITH AS PROVIDED IN THA T 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 RES IDENTIAL HOUSE EITHER ONE YEAR PRIOR TO OR TWO YEARS AFTER THE SAL E OF THE CAPITAL ASSET WHICH RESULTED IN THE LONG-TERM CAPITAL GAINS . ACCORDING TO THE DEPARTMENT, THE AGREEMENT FOR PURCHASE OF THE NEW F LAT WAS ENTERED INTO MORE THAN ONE YEAR PRIOR TO THE SALE. HENCE, THE 7 ITA NOS.1424 & 1707/PUN/2016 PETITIONER IS NOT ENTITLED TO THE BENEFIT UNDER SECTION 54F . IN OUR VIEW, THE TRIBUNAL HAS RIGHTLY NEGATIVED THIS CONTE NTION AND HAS HELD THAT THE NEW RESIDENTIAL HOUSE HAD BEEN PURCHASED B Y THE ASSESSEE WITHIN TWO YEARS AFTER THE SALE OF THE CAPITAL ASSE T WHICH RESULTED IN LONG-TERM CAPITAL GAINS. THE TRIBUNAL HAS HELD THA T THE RELEVANT DATE IN THIS CONNECTION IS JULY 29, 1988, WHEN THE PETITION ER PAID THE FULL CONSIDERATION AMOUNT ON THE FLAT BECOMING READY FOR OCCUPATION AND OBTAINED POSSESSION OF THE FLAT. THIS HAS BEEN TAK EN BY THE TRIBUNAL AS THE DATE OF PURCHASE. THE TRIBUNAL HAS LOOKED A T THE SUBSTANCE OF THE TRANSACTION AND COME TO THE CONCLUSION THAT THE PURCHASE WAS SUBSTANTIALLY EFFECTED WHEN THE AGREEMENT OF PURCHA SE WAS CARRIED OUT OR COMPLETED BY PAYMENT OF FULL CONSIDERATION ON JUL Y 29, 1988, AND HANDING OVER OF POSSESSION OF THE FLAT ON THE NEXT DAY. 10. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BAST IMAL K. JAIN VS. ITO (SUPRA) UNDER SIMILAR SET OF FACTS HAD ALLOWED TH E BENEFIT OF EXEMPTION U/S 54 TO THE ASSESSEE BY FOLLOWING THE RATIO LAID DOWN IN THE CASE OF CIT VS. SMT. BEENA K. JAIN (SUPRA). 11. THUS, IN VIEW OF UNDISPUTED FACTS OF THE CASE AND THE DECISION RENDERED IN THE CASE OF CIT VS. SMT. BEENA K. JAIN (SUP RA), WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING EXEMPTION U/S 54F ON THE ENTIRE AMOUNT OF CAPITAL GAIN UTILIZED FOR PURCHASE OF RESIDEN TIAL PROPERTY. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED AND A PPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 17 TH DAY OF JANUARY, 2019. SD/- SD/- (R.S. SYAL) (VIKAS A WASTHY ) VICE PRESIDENT JUDICIAL MEMB ER PUNE; DATED : 17 TH JANUARY, 2019. YAMINI 8 ITA NOS.1424 & 1707/PUN/2016 !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-5, PUNE. PR. CIT-4, PUNE. '#$ %%&',)&', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // Y // -./%0&1 / SR. PRIVATE SECRETARY )&', / ITAT, PUNE.