ITO, V. Shri.Liyakath Ali,

ITA 1795/BANG/2013

• Counselvise Citation: 179521114 RSA 2013
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 19-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR K SHANKAR PRASAD JT
• Assessee Lawyers: C R NULVI
• Keywords: Capital asset; Cost of acquisition
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1795/BANG/2013 ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, WARD 10(1), BANGALORE. VS. SHRI LIYAKATH ALI, NO.10-1, KRISHNA REDDY LAYOUT, 6 TH CROSS, VIRATNAGAR, BOMMANAHALLI, BANGALORE 560 068. PAN: ADDPA 8827F APPELLANT RESPONDENT APPELLANT BY : DR. K. SHANKAR PRASAD, JT. CIT(DR) RESPONDENT BY : SHRI C.R. NULVI, C.A. DATE OF HEARING : 22.9.2014 DATE OF PRONOUNCEMENT : 26.9.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THESE ARE APPEALS BY THE REVENUE AGAINST THE COM MON ORDER DATED 5.9.2013 OF THE CIT(APPEALS), MYSORE RELATING TO AS SESSMENT YEAR 2009-10. ITA NO.1795/BANG/2013 PAGE 2 OF 8 2. THE ASSESSEE IS AN INDIVIDUAL. DURING THE PREVIO US YEAR, THE ASSESSEE SOLD A PROPERTY CONSISTING OF LAND AND BUI LDING AT BOMMANAHALLI VILLAGE, BEGUR HOBLI, BANGALORE FOR A SUM OF RS.81 LAKHS. AFTER COMPUTING THE COST OF ACQUISITION AND EXPENSES IN CONNECTION WITH THE TRANSFER, THE ASSESSEE COMPUTED NET CAPITAL GAINS OF RS.14,60,165 . THE ASSESSEE CLAIMED THAT THE CAPITAL GAIN WAS INVESTED IN CONST RUCTION OF ANOTHER RESIDENTIAL HOUSE PROPERTY AND CLAIMED EXEMPTION U/ S. 54 OF THE ACT. THE FOLLOWING IS THE COMPUTATION FILED BY THE ASSESSEE IN THIS REGARD BEFORE THE CIT(APPEALS) :- LONG TERM CAPITAL GAINS PARTICULARS AMOUNT SALE CONSIDERATION 81,00,000 LESS: SELLING EXPENSES COMMISSION PAID 2,00,000 NET SALE CONSIDERATION 79,00,000 ACQUISITION DETAILS F.Y. COST INDEXED COST SITE PURCHASED 9,88,715 X 582 / 447 2002-03 9,88,715 12,87,320 COST OF CONSTRUCTION 44,00,000 X 582/497 2005-06 44,00,000 51,52,515 INDEXED COST OF ACQUISITION 64,39,835 NET GAIN 14,60,165 EXEMPTIONS U/S. 54 CONSTRUCTION OF RESIDENTIAL HOUSE PROPERTY INVESTMENT EXEMPTION 40,74,527 14,60,165 14,60,165 CAPITAL GAINS NIL ITA NO.1795/BANG/2013 PAGE 3 OF 8 3. IN THE RETURN OF INCOME FILED, THE ASSESSEE HAD DECLARED TAXABLE CAPITAL GAIN OF RS,1,64,880. THE LD. CIT(APPEALS) AFTER EXAMINING THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S. 54 OF THE ACT, F OUND THE SAME TO BE ACCEPTABLE. THE CIT(A) FOUND THAT THE ASSESSEE HAD PURCHASED THE SITE FOR RS.16,00,000/- ON 05.09.2008 AND STAMP DUTY AND REG ISTRATION CHARGES HAVE BEEN PAID BY THE ASSESSEE. THE CIT(A) FOUND TH AT THE ASSESSING OFFICER HAD DENIED THE CLAIM STATING THAT NO DETAIL S OF APPROVED PLAN, CONSTRUCTION DETAILS, AND COMPLETION REPORT FOR THE NEWLY CONSTRUCTED HOUSE WERE FURNISHED. THE CIT(A) FOUND THAT THE ASSESSEE HAS FURNISHED THE COST DETAILS OF THE CONSTRUCTION ISSUED BY M/S ASSOCIATE D ENGINEERS GROUP, ENGINEERS AND ARCHITECTS STATING THE COST OF RS.22. 48 LAKHS, AND THAT THE CONSTRUCTED SITE WAS HANDED OVER ON 08.09.2009. REC EIPTS FOR PAYMENTS TO THE CONTRACTOR HAD ALSO BEEN FILED FOR RS.22.45 LAK HS BY THE ASSESSEE. THE PROPERTY TAX RECEIPTS FOR THE YEARS 2009-10 (RS.886 8/-), 2010-11 (RS.16467/-) AND 2011-12 (RS.15313/-) ISSUED BY BBM P FOR THE SAID PROPERTY HAD ALSO BEEN FILED. COPY OF POWER CONNEC TION LETTER DATED 27.11.2008 ISSUED BY BESCOM FOR THE SAID PROPERTY H AD ALSO BEEN FILED BY THE ASSESSEE. THE CIT(A) ALSO FOUND THAT NO QUESTI ON WAS RAISED BY THE ASSESSING OFFICER, AS EVIDENCED BY THE NOTING ON TH E ORDER SHEET, REGARDING THE CONSTRUCTION MADE FOR THE RESIDENTIAL BUILDING ON THE NEWLY ACQUIRED SITE PROPERTY. EVIDENCE REGARDING COMMISSION PAID OF RS. 75000/- FOR THE PURCHASE OF SITE IN 2008 HAD ALSO BEEN FILED BY THE ASSESSEE. IN THE LIGHT OF THE EVIDENCE BEFORE HIM THE CIT(A) CAME TO THE C ONCLUSION THAT THE ITA NO.1795/BANG/2013 PAGE 4 OF 8 ASSESSEE IS ENTITLED TO CLAIM OF DEDUCTION U/S 54. CIT(A) ALSO FOUND THAT NO SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE FOR DI SALLOWING THE DEDUCTION U/S 54 OR SPECIFYING THE DOCUMENTS REQUIR ED FOR ALLOWING THE DEDUCTION. IN VIEW OF THE OVERALL FACTS OF THE CASE , DISALLOWANCE U/S 54 WAS HELD BY THE CIT(A) TO BE NOT JUSTIFIED. 4. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE REVENUE HAS FILED THE PRESENT APPEAL. THE GROUNDS RAISED READ AS FOL LOWS:- 1. THE ORDER OF THE CIT (A) IS OPPOSED TO FACTS OF THE CASE. 2. THE CIT (A) HAS ERRED IN NOT CONSIDERING THE FA CT THAT THE SALE PROCEEDS HAD NOT BEEN DEPOSITED IN THE CAPITAL GAIN ACCOUNT SCHEME BEFORE THE DUE DATE OF FILING THE RETURN AS SPECIFIED IN SEC.54(2) OF THE IT ACT, TO CLAIM DEDUCTION U/S 54. 3. THE APPELLANT CRAVES FOR PERMISSION TO ADD OR D ELETE THE GROUNDS OF APPEA1 AT THE TIME OF HEARING THE CASE. 5. FROM A READING OF THE GROUNDS OF APPEAL BY THE R EVENUE, IT APPEARS THAT REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A ), IN AS MUCH AS THE ASSESSEE HAS NOT DEPOSITED THE UNUTILIZED CAPITAL G AIN IN THE SPECIFIED BANK ACCOUNT, AS IS REQUIRED U/S. 54(2) OF THE ACT. THE REVENUE DOES NOT DISPUTE THE FINDINGS OF THE CIT(A) WITH REGARD TO F ULFILLMENT OF ALL OTHER CONDITIONS FOR CLAIMING DEDUCTION U/S.54 OF THE ACT BY THE ASSESSEE. THE PROVISIONS OF SEC.54(2) WHICH ARE REFERRED TO IN TH E GROUNDS OF APPEAL BY THE REVENUE, READ AS FOLLOWS:- ITA NO.1795/BANG/2013 PAGE 5 OF 8 54. (1) (2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT APP ROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF T HE ORIGINAL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM F OR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139, SHALL BE DEPOSI TED BY HIM BEFORE FURNISHING SUCH RETURN [SUCH DEPOSIT BEING M ADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139] IN AN ACCOUNT IN ANY SUCH BANK OR I NSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WIT H, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION I N THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RET URN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSES OF SUB-SECTION (1), THE AMOUNT, IF ANY, ALREADY UTILIS ED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NE W ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHALL BE DEEM ED TO BE THE COST OF THE NEW ASSET : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR C ONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SE CTION (1), THEN, ( I ) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND ( II ) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUCH A MOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. 6. THE LD. DR REITERATED THE STAND OF THE REVENUE A S CONTAINED IN THE GROUNDS OF APPEAL. WE HAVE CONSIDERED HIS SUBMISSI ONS. ITA NO.1795/BANG/2013 PAGE 6 OF 8 7. THE DATE OF TRANSFER OF THE CAPITAL ASSET BY THE ASSESSEE IS 10.4.2008. THE TIME LIMIT FOR COMPLYING WITH THE C ONDITIONS LAID DOWN U/S. 54(1) OF THE ACT WILL BE 3 YEARS FROM 10.4.2008, AS IT IS A CASE OF CONSTRUCTION OF RESIDENTIAL HOUSE BY THE ASSESSEE, BY UTILIZING THE SALE PROCEEDS OF THE LONG TERM CAPITAL ASSET. THE EVIDE NCE ON RECORD CONSIDERED BY THE CIT(A) IN PARA 8 OF HIS ORDER SHO WS THAT CONSTRUCTION WAS COMPLETED AND HANDED OVER TO THE ASSESSEE ON 8.9.20 09. THE ASSESSEE HAS BEEN PAYING PROPERTY TAXES FOR THE YEARS 2009-1 0 AND 2010-11. IT IS THUS CLEAR FROM THE EVIDENCE ON RECORD THAT CONSTRU CTION OF THE HOUSE WAS COMPLETED ON 8.9.2009. AS PER THE PROVISIONS OF SE CTION 54(2) OF THE ACT, THE SALE PROCEEDS SHOULD BE UTILISED IN CONSTRUCTIO N OF HOUSE ON OR BEFORE THE PERIOD SPECIFIED IN SECTION 139(4) OF THE ACT, WHICH IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2009-10 WOULD BE 31.3.2010. ON OR BEFORE THIS PERIOD, THE ASSESSEE HAS UTILISED THE ENTIRE CONSID ERATION RECEIVED ON TRANSFER IN CONSTRUCTING A NEW RESIDENTIAL HOUSE. THEREFORE, THERE WAS NO QUESTION OF ANY DEPOSIT OF UNUTILIZED CAPITAL GAIN IN A SPECIFIED BANK ACCOUNT. THIS POSITION HAS BEEN MADE VERY CLEAR IN THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF FATIMA BAI, 32 DTR 243 (KARN.) , WHEREIN IT WAS HELD AS FOLLOWS:- 7. THE S. 54(1) DECLARES THAT WHEN THE ASSESSEE SELL S ANY LONG-TERM CAPITAL ASSET, THE ASSESSEE SHOULD PURCHA SE THE BUILDING WITHIN ONE YEAR BEFORE THE TRANSFER OR WITHIN TWO Y EARS AFTER THE TRANSFER BY INVESTING CAPITAL GAINS. IN WHICH EVENT THE ASSESSEE WILL NOT BE LIABLE FOR CAPITAL GAIN TAX. ITA NO.1795/BANG/2013 PAGE 7 OF 8 8. THE S. 54(2) DECLARES THAT WITHIN ONE YEAR FROM T HE DATE OF TRANSFER IF THE CAPITAL GAIN IS NOT INVESTED IN PUR CHASE OF BUILDING, HE SHOULD DEPOSIT THE AMOUNT IN THE CAPITAL GAIN A CCOUNT SCHEME OR ELSE THE ASSESSEE SHOULD INVEST THE CAPI TAL GAINS BEFORE FILING OF RETURN WITHIN THE PERMITTED PERIOD UNDER S. 139. IN WHICH EVENT, THE ASSESSEE WILL NOT BE LIABLE TO PAY CAPITAL GAIN TAX. 9. THE S. 139(4) DECLARES THAT THE ASSESSEE SHOULD F ILE RETURNS WITHIN THE TIME PRESCRIBED, IF HE FAILS TO FILE RET URNS, HE MAY FILE RETURNS FOR ANY PREVIOUS YEAR AT ANY TIME BEFORE EX PIRY OF ONE YEAR FROM THE END OF RELEVANT ASSESSMENT YEAR. 10. IN THE INSTANT CASE, THE DUE DATE FOR FILING OF R ETURN IS 30TH JULY, 1988. UNDER S. 139(4) THE ASSESSEE WAS ENTITL ED TO FILE RETURN IN THE EXTENDED TIME, WHICH IS WITHIN 31ST MARCH, 1 990. 11. THE EXTENDED DUE DATE UNDER S. 139(4) WOULD BE 31 ST MARCH, 1990. THE ASSESSEE DID NOT FILE THE RETURN W ITHIN THE EXTENDED DUE DATE, BUT FILED THE RETURN ON 27TH FEB ., 2000. HOWEVER, THE ASSESSEE HAD UTILISED THE ENTIRE CAPIT AL GAINS BY PURCHASE OF A HOUSE PROPERTY WITHIN THE STIPULATED PERIOD OF S. 54(2) I.E., BEFORE THE EXTENDED DUE DATE FOR RETURN UNDER S. 139. THE ASSESSEE TECHNICALLY MAY HAVE DEFAULTED IN NOT FILING THE RETURN UNDER S. 139(4). BUT, HOWEVER, UTILISED THE CAPITAL GAINS FOR PURCHASE OF PROPERTY BEFORE THE EXTENDED DUE DATE U NDER S. 139(4). THE CONTENTION OF THE REVENUE THAT THE DEPO SIT IN THE SCHEME SHOULD HAVE BEEN MADE BEFORE THE INITIAL DUE DATE AND NOT THE EXTENDED DUE DATE IS AN UNTENABLE CONTENTION. 12. THE GAUHATI HIGH COURT IN CIT VS. RAJESH KUMAR JA LAN (2006) 206 CTR (GAU) 361 : (2006) 286 ITR 274 (GAU) HAS TAKEN A SIMILAR VIEW THAT THE TIME-LIMIT FOR DEPOSIT UNDE R THE SCHEME OR UTILISATION CAN BE MADE BEFORE THE DUE DATE FOR FIL ING OF RETURNS UNDER S. 139(4). ITA NO.1795/BANG/2013 PAGE 8 OF 8 8. IN VIEW OF THE DECISION OF THE HONBLE HIGH COUR T OF KARNATAKA, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THE APPEA L BY THE REVENUE. CONSEQUENTLY, THE SAME IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF SEPTEMBER , 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 26 TH SEPTEMBER , 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.