M/S. SUNIL DATWANI, MUMBAI V. THE ITO WD 19(3)(4), MUMBAI

ITA 1775/MUM/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4872 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 14-09-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 12-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P N DEVADASAN
• Assessee Lawyers: S C TIWARI
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI. N.V. VASUDEVAN (J.M.) AND SHRI. R.K. P ANDA (A.M.) ITA NO.1775/MUM/2008 ASSESSMENT YEAR : 2004-2005 SUNIL DATWANI C/O. ANMOL JEWELLERS, TURNER RD., BANDRA (W), MUMBAI 400 050. PAN : AABPD2416L I.T.O. WARD 19(3)(4) PIRAMAL CHAMBERS, MUMBAI 400 012. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI S.C. TIWARI RESPONDENT BY : SHRI P.N. DEVADASAN O R D E R PER R.K. PANDA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 21.01.2008 OF THE CIT(A)-XIX, MUMBAI RELATING TO A SSESSMENT YEAR 2004- 2005. 2. THIS APPEAL WAS EARLIER DISMISSED BY THE TRIBUN AL FOR NON- PROSECUTION. SUBSEQUENTLY, THE TRIBUNAL VIDE ORDER DATED 02.07.2010 RECALLED ITS EARLIER ORDER. HENCE THIS IS A RECALL ED MATTER. 3. THE ASSESSEE IN ITS GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DENIAL OF EXEMPTION U/S.54 AND 54F BY THE ASSESSING OFFICER IN RESPECT OF LONG TERM CAPITAL G AIN ARISING ON TRANSFER OF RESIDENCE AND SHARES. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE HAS SOLD FLAT NOS.301 AND 302 AT KHAR PRIYA APT., KHAR, MUMBAI FOR A CONS IDERATION OF ` .18,70,000/- AND ` .23,30,000/- RESPECTIVELY. THIS HAS RESULTED IN LO NG TERM CAPITAL GAIN OF ` .32,30,000/- TO THE ASSESSEE. THE LONG TERM CAPITA L GAIN HAS BEEN CLAIMED EXEMPT BY THE ASSESSEE ON THE GROUND THAT THE SALE ITA NO.1775/MUM/2008 ASSESSMENT YEAR : 2004-2005 2 PROCEEDS HAVE BEEN INVESTED IN PURCHASE OF NEW RESI DENTIAL PROPERTY. THE ASSESSING OFFICER MADE THE FOLLOWING OBSERVATIONS: (A) THE PROPERTIES WERE SOLD ON 26.03.2004 AND THE ASSESSEE PURCHASED NEW PROPERTY VIDE AGREEMENT DATED 23.10.2 002. ACCORDINGLY THE CONDITIONS LAID DOWN IN SEC.54 ARE NOT SATISFIED AND HENCE THE CLAIM OF EXEMPTION MADE BY THE ASSESSEE H AS TO BE DISALLOWED. (B) THE ASSESSEE HAS ALSO CLAIMED DEDUCTION U/S.54F OF ` .12,50,000/- AFTER HAVING MADE THE CAPITAL GAIN OF ` .17,50,000/- ON 29.10.2003. IN THIS CASE ALSO THE PROPERTY PURCHA SED WAS DONE VIDE AGREEMENT DATED 23.10.2002 AND THE CONDITIONS FOR C LAIMING EXEMPTION WERE VIOLATED. (C) AS PER THE AGREEMENT WITH THE DEVELOPER ALSO PO SSESSION OF THE FLAT WAS TO BE GIVEN TO THE ASSESSEE AFTER RECEIPT OF LAST INSTALMENT ON OR BEFORE 15.11.2002. ACCORDINGLY, THE ISSUE OF INVESTMENT FOR PURCHASE OF SEC.54 AND 54F CAN NOT BE CONSIDERED FO R ANY PERIOD BEYOND 15.11.2002. RELYING ON A COUPLE OF DECISIONS THE ASSESSING OFFI CER HELD THAT THE DATE OF INVESTMENT IN THE NEW PROPERTY IS CRUCIAL TO THE ISSUE OF CLAIMING THE EXEMPTION U/S.54 AND NOT THE DATE OF P OSSESSION. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE AND DISTINGUISHING THE DECISIONS CITED BEFORE HIM, HE R EJECTED THE CLAIM OF EXEMPTION MADE BY THE ASSESSEE. 5. IN APPEAL, THE LEARNED CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER BY HOLDING AS UNDER: I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AS WELL AS THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE ASSE SSMENT ORDER, THE ASSESSING OFFICER STRONGLY ARGUED THAT TH E RELEVANT DATE HAS TO BE THE DATE OF INVESTMENT AND NOT THE DATE O F ACTUAL POSSESSION. THE CASE ON WHICH THE APPELLANT HAS RELIED UPON HAS ALSO BEEN DIFFERENTIATED BY THE ASSESSING OFFICER IN HI S ORDER. FROM A CAREFUL READING OF SEC.54 AND 54F OF THE I.T. ACT AS WELL AS VARIOUS JUDICIAL PRONOUNCEMENTS IT CAN BE INFERRED THA T THE INTENTIONS OF THE LEGISLATURE IN PROVIDING THESE EXE MPTIONS WERE BASED ON THE CAPITAL INVESTMENT WHICH HAVE TO BE MADE BY TH E ASSESSEE WHENEVER THE CAPITAL GAIN ACCRUES. MERELY, BECAU SE POSSESSION HAS BEEN TAKEN ON PARTICULAR DATE OR WITHOU T ANY REASONABLE INVESTMENT HAVING NOT BEEN MADE DURING THE REL EVANT PERIOD SHOULD NOT BE SUFFICIENT FOR THE APPELLANT TO GET THE BENEFIT UNDER HIS SECTION. IN THE PRESENT CASE EVEN IF THE APPELLANT IS RIGHT IN MAKING A CLAIM FOR POSSESSION HAS BEEN TAKEN WI THIN THE SPECIFIED TIME AS PER SEC.54 AND 54F OF THE I.T. ACT, TH E FACT REMAINS THAT MOST IF NOT ALL THE INVESTMENTS MADE BY HIM , WERE BEYOND THE PRESCRIBED TIME LIMIT. ACCORDINGLY, IN TH E FACTS AND CIRCUMSTANCES OF THE CASE I HAVE NO HESITATION IN AGRE EING WITH ITA NO.1775/MUM/2008 ASSESSMENT YEAR : 2004-2005 3 THE STAND TAKEN BY THE ASSESSING OFFICER. ACCORDINGL Y, THE ASSESSING OFFICER RIGHTLY DISALLOWED THE CLAIM U/S.54 AN D 54F OF THE I.T. ACT. AFTER CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, VARIOUS JUDICIAL PRONOUNCEMENTS AS WELL AS THE SPIRIT OF THE SECTION, THIS GROUND OF THE APPELLANT IS DISMISSED. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUT SET , SUBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SMT. BEENA K. JAIN REPORTED IN 217 ITR 263 (BOM)(1996). REFERRING TO THE SAID DECI SION HE SUBMITTED THAT DATE OF POSSESSION IS THE DETERMINATIVE FACTOR FOR CLAIMING EXEMPTION U/S.54F AND NOT THE DATE OF REGISTRATION OR AGREEME NT. 7. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LEARNED CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE A LSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS SOLD THE RESIDENTIAL PROPERTIES ON 26.03.2004 A ND SOLD THE SHARES ON 29.10.2003. THERE IS ALSO NO DISPUTE TO THE FACT THAT DATE OF AGREEMENT FOR PURCHASE OF RESIDENTIAL HOUSE WAS 23.10.2002 AND TH E LAST INSTALMENT WAS PAID ON 15.11.2002. THERE IS ALSO NO DISPUTE TO T HE FACT THAT THE DATE OF POSSESSION OF THE PROPERTY IS 30.03.2003 WHICH IS A S PER PAGE NO.3 OF THE ASSESSMENT ORDER. THEREFORE, THE QUESTION THAT HA S TO BE DECIDED IS AS TO WHETHER THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S.54F ON THE BASIS OF THE DATE OF LAST INSTALMENT PAID OR ON THE BASIS OF THE DATE OF POSSESSION. ACCORDING TO THE ASSESSING OFFICER AND CIT(A) SINCE THE AGREEMENT WAS DATED 23.10.2002 FOR PURCHASE OF THE NEW RESIDENTIAL HOUS E AND THE LAST INSTALMENT PAID ON 15.11.2002 THEREFORE, THE SAME B EING MORE THAN ONE YEAR PRIOR TO DATE OF SALE OF THE ASSETS ON WHICH C APITAL GAIN AROSE, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S.54 AND 54 F OF THE ACT. ACCORDING ITA NO.1775/MUM/2008 ASSESSMENT YEAR : 2004-2005 4 TO THE LEARNED COUNSEL FOR THE ASSESSEE SINCE THE D ATE OF POSSESSION IS 30.03.2003, THEREFORE, THE INVESTMENT BEING MADE WI THIN THE SPECIFIED DATE AS PRESCRIBED U/S.54 AND 54F, THEREFORE, THE ASSESS EE IS ENTITLED TO DEDUCTION. WE FIND THE ISSUE STANDS COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF SMT. BEENA K. JAIN(SUPRA). WE FIND THE ISSUE BEFORE THE HONBLE HIGH COURT WAS AS TO WHETHER, ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE TRIBUNAL WAS RIGHT IN ALLOWING EXEMPTION OF ` .11,04,423/- U/S.54F OF THE I.T. ACT, 1961, CONSIDERING THE DATE OF POSSESSION OF THE NEW RESIDENTIAL PREMISES INSTEAD OF THE DATE OF SALE AGREEMENT AND THE DATE OF REGISTRATION?. WE FIND THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD AS UNDER UNDER SEC.54F OF THE I.T. ACT, IN THE CASE OF AN ASSESS EE IF ANY CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG TERM C APITAL ASSET, NOT BEING A RESIDENTIAL HOUSE, AND THE ASSESSEE H AS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER HE DATE ON WHICH THE TRANSFER TOOK PLACE, PURCHASED A RESIDENTIAL HOUSE, THE CAPITAL GAIN SHALL BE DEALT WITH AS PROVIDED IN THAT SECTION. A S PER THE SECTION CERTAIN EXEMPTION HAS TO BE ALLOWED IN RESPECT OF THE CAPITAL GAINS TO BE CALCULATED AS SE OUT THEREIN. THE DE PARTMENT CONTENDS THAT THE ASSESSEE DID NOT PURCHASE THE RESIDE NTIAL HOUSE EITHER ONE YEA PRIOR O OR TWO YEARS AFTER THE SALE OF THE CAPITAL ASSET WHICH RESULTED IN THE LONG TERM CAPITAL GAIN. A CCORDING TO THE DEPARTMENT, THE AGREEMENT FOR PURCHASE OF THE NEW FLAT WAS ENTERED INTO MORE THAN ONE YEAR PRIOR TO THE SALE. HENCE, THE PETITIONER IS NOT ENTITLED TO THE BENEFIT U/S.54F . IN OUR VIEW, THE TRIBUNAL HAS RIGHTLY NEGATIVED THIS CONTENTION AND H AS HELD THAT THE NEW RESIDENTIAL HOUSE HAD BEEN PURCHASED BY THE ASSESSEE WITHIN TWO YEARS AFTER THE SALE OF THE CAPITA L ASSET WHICH RESULTED IN LONG TERM CAPITAL GAIN. THE TRIBUNAL HAS HE LD THAT THE RELEVANT DATE IN THIS CONNECTION IS 29 TH JULY, 1988, WHEN THE PETITIONER PAID THE FULL CONSIDERATION AMOUNT ON THE FLAT BECOMING READY FOR OCCUPATION AND OBTAINED POSSESSION OF THE FLAT. THIS HAS BEEN TAKEN BY THE TRIBUNAL AS THE DATE OF PURCHASE. THE TR IBUNAL HAS LOOKED AT THE SUBSTANCE OF THE TRANSACTION AND COME TO THE CONCLUSION THAT THE PURCHASE WAS SUBSTANTIALLY EFFECTED WHEN THE AGREEMENT OF PURCHASE WAS CARRIED OUT OR COMPLETED BY P AYMENT OF FULL CONSIDERATION ON 29 TH JULY, 1988, AND HANDING OVER OF POSSESSION OF THE FLAT ON THE NEXT DAY. 8. SINCE IN THE INSTANT CASE, THE SUBMISSION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT POSSESSION OF THE FLAT WAS T AKEN ON 30.03.2003 HAS NOT BEEN CONTROVERT BY THE REVENUE, THEREFORE, FOLL OWING THE DECISION OF THE JURISDICTIONAL HIGH COURT, WE HOLD THAT THE ASSESSE E HAS INVESTED THE LONG ITA NO.1775/MUM/2008 ASSESSMENT YEAR : 2004-2005 5 TERM CAPITAL GAIN ARISING ON ACCOUNT OF SALE OF RES IDENCE AND THE SHARES IN PURCHASING THE RESIDENTIAL HOUSE WITHIN THE SPECIFI ED PERIOD PRESCRIBED UNDER THE ACT. ACCORDINGLY THE ASSESSEE IS ENTITLE D TO GET THE EXEMPTION. THE ORDER OF THE CIT(A) IS ACCORDINGLY SET ASIDE AN D THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON THIS 22 ND DAY OF SEPTEMBER, 2010. SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 22.09.2010 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUM BAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI