ACIT, CHENNAI V. Haripriay Jagdish, CHENNAI

ITA 1532/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3988 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 27-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MURALI MOHAN ACIT
• Assessee Lawyers: P S PRABHAKARC A
• Keywords: Capital asset; Gift; Condonation of delay
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.1532/MDS./2016 / ASSESSMENT YEAR :2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE -15, CHENNAI 600 034. VS. MRS.HARIPRIYA JAGDISH , A-3, 3 RD FLOOR, OLD NO.17, NEW NO.18,11 CRESCENT PARK ROAD, GANDHI NAGAR, ADYAR, CHENNAI 600 020. [PAN ACLPH 5475 K] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : MR.MURALI MOHAN, ACIT, D.R /RESPONDENT BY : MR.P.S.PRABHAKAR,C.A / DATE OF HEARING : 01 - 06 - 2017 / DATE OF PRONOUNCEMENT : 26 - 07 - 2017 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-15, DATED 03.02.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. ITA NO.1532/MDS./2016 :- 2 -: 2. ON PERUSING THE APPEAL, WE FIND THAT THE AO HAD FILED THE APPEAL WITH DELAY OF 05 DAYS. THE LEARNED AO HAS SUBMITTED A PETITION DATED 27.05.2016 SEEKING CONDONATION OF DELAY AND THE AO STATED IN THIS PETITION THAT THE DELAY OF 5 DAYS IN FILING THE APP EAL BEFORE THIS TRIBUNAL IS ON ACCOUNT OF MIXING UP OF FILES IN HIS OFFICE A ND THE FILE WAS NOT TRACEABLE AND AS SOON AS HE TRACED THE FILE, HE FIL ED THE APPEAL ON 27.05.2016. IN OUR OPINION, THE REASONS EXPLAINED B Y THE AO FOR FILING THE APPEAL BELATEDLY IS BONAFIDE. ACCORDINGLY, THE DELAY IS CONDONED. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS FO R OUR ADJUDICATION. 1.1 THE CIT(A) HAS ERRED IN SETTING ASIDE THE ISSUE WITH REFERENCE TO COST OF INDEXATION TO THE ASSESSING OFFICER WITHOUT TAKI NG A DECISION. THIS ACTION ON PART OF THE CIT(A) IS ILLEGAL. 1.2.THE CIT(A) FAILED TO APPRECIATE THAT THE ASSESS EE CONSTRUCTED/PURCHASED A FLAT 15 MONTHS BEFORE THE D ATE OF SALE OF ORIGINAL ASSET WHICH IS OUTSIDE THE TIME LIMITS OF 1 YEAR STIPULATED AS PER THE INCOME TAX ACT. 1.3 THE LD CIT(A) FAILED TO APPRECIATE THAT THE ASS ESSEE INVESTED MAJOR PORTION OF THE SALE MADE BEFORE 15 MONTHS BEFORE TH E TRANSFER OF ORIGINAL ASSET WHICH CONTRAVENES TO THE PROVISION O F SECTION 54F OF THE I.T ACT1961. 1.4 THE LD CIT(A) FAILED TO APPRECIATE THAT ASSESSE E HAS UTILIZED AN AMOUNT OF ` 50,00,000/- OUT OF SALE PROCEEDS OF ` 54,41,165/- TO REPAY ITA NO.1532/MDS./2016 :- 3 -: THE HOUSING LOAN TAKEN FOR THE PURPOSE OF PURCHASE OF THE FLAT ON (19/05/2010) FOR CLAIMING EXEMPTION U/S 54F. THUS T HE AMOUNT OF SALE PROCEEDS HAS NOT BEEN INVESTED IN THE ACQUIRED /CONSTRUCTED PROPERTY. HENCE, THERE IS A VIOLATION OF SECTION 54 OF THE I.T ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE SOLD ONE PROPERTY ON 09.09.2011 FOR A CONSIDERATION OF ` 11,88,000/- WHICH WAS PURCHASED BY HER ON 20.01.2006, AND THE ASSESSEE SOLD ANOTHER PROPER TY ON 31.12.2011 FOR A CONSIDERATION OF ` 48,00,000/- WHICH WAS GIFTED TO HER BY HER HUSBAND ON JUNE, 2002 AND CALCULATED LONG TERM CAPITAL GAIN OF ` 52,66,382/-. SHE HAD ENTERED INTO CONSTRUCTION AGREEMENT WITH M/S LAND M ARK CONSTRUCTIONS ON 02.06.2010 FOR ` 1,76,05,360/-. THE ASSESSEE PURCHASED UDS VIDE SALE DEED DATED 04.06.2010. TOTAL COST OF CONSTRUCTION OF PRO PERTY WAS ` 2,33,70,360/-. THE ASSESSEE TOOK POSSESSION OF FLAT ON 12.03.2012. OUT OF SALE CONSIDERATION RECEIVED, ` 50,00,000/- WAS UTILIZED TO REPAY HOUSING LOAN ON 19.05.2012. THE AO HELD THAT SHE HAD PURCHASED PROP ERTY BEFORE ONE YEAR PRIOR TO THE DATE OF SALE OF HER FIRST ASSET AND DI SALLOWED THE CLAIM MADE BY THE ASSESSEE U/S 54F ONLY ON THE BASIS THAT PROPER TY WAS PURCHASED BEFORE ONE YEAR PRIOR TO DATE OF SALE OF FIRST ASSET. AGG RIEVED BY THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 4.1 BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED T HAT SHE HAD GOT POSSESSION OF FLAT ON 12.03.2012. SHE HAD ENTERED I NTO CONSTRUCTION AGREEMENT ON 02.06.2010 WHICH WAS AN ONGOING PROCES S AND THE CONSTRUCTION WAS COMPLETED WITHIN THREE YEARS FROM THE DATE OF SALE. THE ITA NO.1532/MDS./2016 :- 4 -: ASSESSEE HAS RELIED UPON THE JUDGEMENT OF HONBLE MADRAS HIGH COURT IN THE CASE CIT VS. R.SRINIVASAN (2010) 235 CTR 588. THE LD.CIT(A) OBSERVED THAT THE AD STATED IN THE ASSESSMENT ORDER THAT ` 50,00,000/- WAS USED TO REPAY HOUSING LOAN OUT OF TOTAL SALE CONSIDERATION RECEIVED. ACCORDING TO LD.CIT(A), THE AO IS NOT RIGHT IN REJECTING CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 54F ONLY ON THIS GROUND. FURTHER, LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD TAKEN POSSESSION OF THE NEW PROPERTY ON 12.03.2012 WHICH IS COVERED BY THE OTHER PRE-CONDITION OF SEC.54F, I.E. PURCHASED WITHIN TWO YEARS OR CONSTRUCTED WITHIN THREE YEARS FROM THE DA TE OF TRANSFER OF OLD ASSET A RESIDENTIAL HOUSE. HENCE, THE LD.CIT(A) ALLOWED T HE EXEMPTION CLAIMED BY THE ASSESSEE IN TERMS OF SEC.54F OF THE ACT. AGAIN ST THE ORDER OF LD.CIT(A), NOW THE REVENUE/ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE MAIN CONTENTION OF LD.D.R IS THAT THE LD.CIT(A) GRANTED DEDUCTION U/S.54F OF THE ACT IN RESPECT OF EXPENDIT URE INCURRED BY THE ASSESSEE BEFORE ONE YEAR ON THE SALE OF THE PROPERT Y, WHICH RESULTED IN CAPITAL GAINS. THE LD.A.R BROUGHT THE DETAILS OF I NVESTMENTS MADE BY THE ASSESSEE. SL. NO. DATE SOURCE AMOUNT ( `) 1 20.05.2010 OWN SOURCE 40,00,000 2 04.06.2010 OWN SOURCE 17,65,000 3 09.06.2010 HOME LOAN FROM ICICI BANK 1,23,00,000 4 30.07.2010 HOME LOAN FROM ICICI BANK 13,00,000 5 21.12.2010 HOME LOAN FROM ICICI BANK 24,50,000 6 TOTAL 2,18,15,000 ITA NO.1532/MDS./2016 :- 5 -: 5.1 ACCORDING TO LD.A.R, EVEN THOUGH NEW BUILDING IS NOT COMPLETED WITHIN THE PRESCRIBED TIME LIMIT U/S.54F OF THE ACT, STILL THE INVESTMENTS ARE MADE IN THE NEW RESIDENTIAL HOUSE TO BE CONSIDERED FOR GRAN TING DEDUCTION U/S.54F OF THE ACT. IN OUR OPINION, THE ACT DOES NOT PRESCRIB E ANY CONDITION AS TO THE DATE OF COMMENCEMENT OF CONSTRUCTION OF NEW HOUSE P ROPERTY, ONLY THE CONDITION IS THAT CONSTRUCTION OF HOUSE PROPERTY SH OULD BE COMPLETED WITHIN 3 YEARS FROM THE DATE OF TRANSFER OF ORIGINAL CAPI TAL ASSET. THE DATE OF COMMENCEMENT FOR CONSTRUCTION IS IRRELEVANT AND CON STRUCTION SHOULD BE COMMENCED EVEN BEFORE THE TRANSFER OF CAPITAL ASSET AS HELD BY THE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARTI MISHRA REP ORTED IN [2014] 41 TAXMANN.COM 50(DELHI). FURTHER, HIGH COURT OF KARN ATAKA IN THE CASE OF CIT VS.J.R.SUBRAMANYA BHAT IN [1986] 28 TAXMAN 578 (KAR.) HAS TAKEN A SIMILAR VIEW, WHICH WAS IN TURN FOLLOWED BY ALLAHA BAD HIGH COURT IN THE CASE OF CIT VS. H.K.KAPOOR IN [1998] 234 ITR 753 (ALLAHA BAD). FURTHER, THE ANDHRA PRADESH HIGH COURT AND TELANGANA IN THE CASE OF LEARNED COMMISSIONER OF INCOME TAX VS. SMT. V.VENKATA LAXMI IN [2015] 59 TAXMANN.COM 216 HELD THAT WHERE INVESTMENT IN CONST RUCTION OF A NEW BUILDING IS MADE WITHIN 3 YEARS OF SALE OF THE PROP ERTY, THE BENEFIT OF SEC.54 IS TO BE GIVEN. 5.2 IN THE PRESENT CASE, THE ASSESSEE SOLD TWO PRO PERTIES, ONE ON 09.09.2011 AND ANOTHER PROPERTY ON 31.12.2011 AND T HE ASSESSEE MADE INVESTMENTS IN CONSTRUCTION OF A NEW RESIDENTIAL HO USE BEFORE ONE YEAR OF THESE TWO DATES. ACCORDINGLY, THE ASSESSEE SOUGHT RELIEF U/S.54F OF THE ACT ITA NO.1532/MDS./2016 :- 6 -: FOR THE INVESTMENTS MADE IN A CONSTRUCTION OF NEW R ESIDENTIAL HOUSE BEFORE ONE YEAR PRIOR TO DATE OF SALE OF FIRS ASSET. IN O THER WORDS, THE CLAIM OF DEDUCTION U/S.54F OF THE ACT IN RESPECT OF FIRST PR OPERTY TO BE MADE ONE YEAR BEFORE 09.09.2011, AND IN RESPECT OF SECOND PROPERT Y, ONE YEAR BEFORE 31.12.2011 TO BE CONSIDERED THE INVESTMENTS AND PRI OR TO THESE TWO DAYS CANNOT BE CONSIDERED FOR DEDUCTION U/S.54F OF THE A CT. FURHTER, WE MAKE IT CLEAR THAT THE LAW DOES NOT CONTEMPLATE THE IDENTIT Y OF THE FUNDS FOR INVESTMENTS IN CONSTRUCTION OF NEW HOUSE OF RESIDEN TIAL PROPERTY. IF THE ASSESSEE STARTED THE CONSTRUCTION BEFORE ONE YEAR O F THE TRANSFER OF PROPERTY BY BORROWING THE FUNDS OR HIS OWN FUNDS, THE ASSESS EE CANNOT BE PRECLUDED FROM CLAIM OF DEDUCTION U/S.54 OR U/S.54F OF THE AC T. HOWEVER, OUR VIEW IS FORTIFIED BY THE DECISION OF CO-ORDINATE BENCH OF T RIBUNAL IN THE CASE OF MUNEER KHAN VS. ITO IN [2010] 41 SOT 504 (ITAT) [HY D]) AND ALSO RECENT DECISION OF CHENNAI TRIBUNAL IN THE CASE OF SMT.USH A VS. ACIT IN ITA NO.2033/MDS./2016 VIDE ORDER DATED 26.04.2017. FUR THER, THE REPAYMENT MADE BY THE ASSESSEE TOWARDS HOUSING LOAN WHICH CAN NOT BE CONSTRUED AS PART OF CONSTRUCTION COST MET BY THE ASSESSEE. IF I T IS TO BE EXCLUDED AND THE ARGUMENT OF THE COUNSEL OF ASSESSEE AS IN-APPROPRIA TE, IT CANNOT BE CONSIDERED AS A COST OF CONSTRUCTION. ACCORDINGLY, WE REMIT THE ISUSE TO THE FILE OF AO TO RE-WORK THE DEDUCTION U/S.54F OF THE ACT, WHICH IS INCURRED BEFORE THE ONE YEAR OF THE SALE OF PROPERTY AND THR EE YEARS FROM THE DATE OF THE TRANSFER OF PROPERTY. ACCORDINGLY, WE REVERSE T HE ORDER OF THE LD.CIT(A) AND RESTORE THE ISSUE TO ITA NO.1532/MDS./2016 :- 7 -: THE FILE OF LD. ASSESSING OFFICER FOR RE-DETERMINAT ION OF DEDUCTION U/S.54F OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 26 TH JULY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 26 TH JULY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF