Smt. Jakilati Sri Lakshmi, Hyd, Hyderabad V. DCIT. Circle-3(3), Hyderabad

ITA 1867/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61919 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Capital asset
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1866/HYD/2011 : ASSESSMENT YEAR 2008- 09 SHRI J.V.KRISHNA RAO, HYDERABAD ( PAN - AGTPB 3580 B ) V/S DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(3), HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.1867/HYD/2011) : ASSESSMENT YEAR 2008-09 SMT. J. SRI LAKSHMI, HYDERABAD ( PAN - AFZPJ 7622 P ) V/S DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(3), HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE S BY : SHRI K.A.SAI PRASAD RE VENUE BY : SMT. NIVEDITA BISWAS DATE OF HEARING 11.6.2012 DATE OF PRONOUNCEMENT 15.6.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEES, WHO ARE RELATED TO EACH OTHER, ARE DIRECTED AGAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-IV, HYDERABAD BOTH DATED 30.9.2 011 FOR THE ASSESSMENT YEAR 2008-09. SINCE COMMON ISSUES ARE I NVOLVED, THESE TWO APPEALS ARE BEING DISPOSED OFF TOGETHER BY THIS COM MON ORDER FOR THE SAKE OF CONVENIENCE. 2. EFFECTIVE GROUNDS OF APPEAL OF THE ASSESSEE, AS TAKEN FROM APPEAL ITA NO.1866/HYD/2011, READ AS FOLLOWS- 1) THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF RS.50,0 5,530 MADE BY THE ASSESSING OFFICER. ITA NO.1866 & 1867/HYD/2011 SHRI J.V.KRISHNA RAO & ANR., HYDERABAD 2 2) THE LEARNED FIRST APPELLATE AUTHORITY IS NOT JUSTIF IED IN SUSTAINING THE DISALLOWANCE OF THE DEDUCTION U/S. 5 4F IN RELATION TO THE AMOUNTS DEPOSITED IN CAPITAL ACCOUN TS SCHEME OUT OF THE BORROWED FUNDS. 3) THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APP RECIATE THE FACT THAT THE PROVISIONS OF U/S. 54F DO NOT REQUIRE THE SAME SALE PROCEEDS TO BE UTILIZED TO CLAIM DEDUCTION U/S . 54F. 4) THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) IS NOT JUSTIFIED IN NOT FOLLOWING THE DECISION RENDERED BY THE JURISDICTIONAL INCOM E TAX APPELLATE TRIBUNAL IN THE CASE OF MUNEER KHAN VS. ITO W ARD 7(2), HYDERABAD 41 SOT 504 HYD. 5) .. IN ITA NO.1867/HYD/2011 FIELD BY SMT. J. SRI LAKSHM I ALSO, BUT FOR THE AMOUNT INVOLVED IN GROUND NO.1 ABOVE, WHICH IN THAT CASE IS RS.32,95,525, GROUNDS TAKEN BY THE ASSESSEE ARE IDE NTICAL. THUS, THE ONLY ISSUE INVOLVED IN BOTH THESE APPEALS RELATES TO DIS ALLOWANCES MADE OUT OF THE ASSESSEES CLAIMS FOR RELIEF UNDER S.54F OF THE INCOME-TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEES, AS TAKEN FROM ITA NO.1866/HYD/2011, ARE THAT THE ASSESSEE, SHRI J .V.KRISHNA RAO, SOLD 26,200 SHARES OF M/S. SWAQATH SEEDS P. LTD. @ RS.396.46 PER SHARE FOR A TOTAL CONSIDERATION OF RS.1,03,87,252/- DURIN G THE YEAR. AFTER DEDUCTING THE INDEXED COST, THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAINS AT RS.99,96,867. THE ASSESSEE CLAIMED THE ENT IRE CAPITAL GAINS AS EXEMPT UNDER S.54F, ON THE GROUND THAT HE HAS DEPOS ITED THE NET CONSIDERATION WITH STATE BANK OF INDIA, UNDER CAPIT AL GAINS ACCOUNT SCHEME, 1988. ON VERIFICATION OF DETAILS, THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEES DEPOSIT IN THE CAPITAL GAINS A CCOUNTS SCHEME INCLUDED BORROWED FUNDS TO THE EXTENT OF RS.52,01,0 00/- IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER THAT THE SAID FUNDS HAD BEEN BORROWED BY HIM FROM SHRI J.V.LAXMAN RAO F OR DEPOSITING THE SAME UNDER THE CAPITAL GAINS ACCOUNT SCHEME, 1988 . ON CONSIDERATION OF THE PROVISIONS OF THE ACT, THE ASSESSING OFFICER OPINED THAT AS PER SUB- SECTION (1) AND SUB-SEC.(4) OF S.54F OF THE ACT, IN ORDER TO AVAIL THE BENEFIT UNDER S.54F, AN ASSESSEE IS REQUIRED EITHER TO PURCHASE A ITA NO.1866 & 1867/HYD/2011 SHRI J.V.KRISHNA RAO & ANR., HYDERABAD 3 RESIDENTIAL HOUSE OUT OF THE SALE PROCEEDS OF THE L ONG TERM CAPITAL ASSET WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFT ER THE DATE ON WHICH TRANSFER TOOK PLACE, OR WITHIN A PERIOD OF THREE YE ARS AFTER THAT DATE CONSTRUCT A RESIDENTIAL HOUSE. THE ASSESSING OFFI CER FURTHER NOTED THAT WHEN THE SALE PROCEEDS OR THE CAPITAL GAIN ACCRUING TO THE ASSESSEE IS NOT WHOLLY APPROPRIATED TOWARDS THE PURCHASE OF THE RES IDENTIAL HOUSE WITHIN THE SPECIFIED PERIOD, HE IS REQUIRED TO DEPOSIT THE SAME IN THE CAPITAL GAINS ACCOUNT SCHEME, 1988, BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. SHE FELT THAT THE RESIDENTIAL PROPERTY SHO ULD EITHER BE ACQUIRED OR CONSTRUCTED, OR ELSE THE UNAPPROPRIATED PROCEEDS SHOULD BE DEPOSITED IN SUCH ACCOUNT AS SUCH OR THE DEPOSIT SHOULD BE MA DE OUT OF PERSONAL FUNDS OF THE ASSESSEE. SHE OPINED THAT IF THE RESID ENTIAL HOUSE IS ACQUIRED OR CONSTRUCTED OR IF THE DEPOSITS IN THE SPECIFIED ACCOUNT ARE MADE OUT OF BORROWED FUNDS, THE ASSESSEE WOULD NOT BE ELIGIBLE FOR DEDUCTION U/S. 54F. IN THIS VIEW OF THE MATTER AND PLACING RELIAN CE ON THE DECISIONS OF THE MUMBAI BENCHES OF THE TRIBUNAL IN MILAN SHARAD RUPAREL (121 TTJ 77), THE ASSESSING OFFICER CONCLUDED THAT SINCE THE NET CONSIDERATION IN THE INSTANT CASE HAD NOT BEEN SO UTILIZED OR APPROP RIATED BY THE ASSESSEE, THE EXEMPTION CLAIMED U/S. 54F WAS REQUIRED TO BE C URTAILED TO THE CORRESPONDING AMOUNT UTILIZED AND THAT THE BORROWED FUNDS OF RS.52,01,000 DID NOT DESERVE CONSIDERATION FOR EXEM PTION U/S. 54F OF THE ACT. 4. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANC E MADE BY THE ASSESSING OFFICER OUT OF THE ASSESSEES CLAIM F OR EXEMPTION UNDER S.54F OF THE ACT, IN RESPECT OF LONG TERM CAPITAL GAINS REALISED DURING THE YEAR. 5. BUT FOR THE NUMBER OF SHARES AND AMOUNTS INVOLV ED, FACTS INVOLVED IN THE CASE OF SMT. SRI LAKSHMI(ITA NO.186 7/HYD/2011) ARE IDENTICAL TO THOSE DISCUSSED ABOVE. IN HER CASE, N UMBER OF SHARES OF M/S. SWAGATH SEEDS P.LTD. SOLD ARE 78,000 AND SALE CONSI DERATION RECEIVED ON ITA NO.1866 & 1867/HYD/2011 SHRI J.V.KRISHNA RAO & ANR., HYDERABAD 4 SALE AOF THE SAID SHARES AT RS.396.46 PER SHARE WAS RS.3,09,23,880, AND THE LONG TERM CAPITAL GAINS DISCLOSED AFTER DEDUCTI NG INCIDENTAL EXPENDITURE, ETC. IS RS.3,03,77,343. OUT OF THIS A MOUNT OF RS.3,03,77,543/-, THE ASSESSING OFFICER NOTICED BOR ROWED FUNDS TO THE EXTENT OF RS.33,46,333/- HAVING BEEN DEPOSITED BY T HE ASSESSEE IN THE CAPITAL GAINS ACCOUNT SCHEME, 1988, WHICH WAS CLAIM ED TO HAVE BEEN BORROWED BY THE ASSESSEE FROM SHRI J.V.LAXMAN RAO. IN THESE FACTS OF THE CASE, THE ASSESSING OFFICER RESTRICTED THE AS SESSEES CLAIM FOR RELIEF UNDER S.54F TO THE AMOUNT OF RS. 2,70,82,018, DISAL LOWING THE BALANCE CLAIM OF RS.32,95,555 INVESTED IN THE CAPITAL GAINS ACCOUNT SCHEME, 1988 BY BORROWING THE SAME FROM SHRI J.V.LAXMAN RAO . ON APPEAL, THE CIT(A) UPHELD THE DISALLOWANCE MADE BY THE ASSESSIN G OFFICER. 6. AGGRIEVED BY THE DISALLOWANCES OUT OF THE CLAIM S FOR EXEMPTION UNDER S.54F OF THE ACT IN RESPECT OF CAPI TAL GAINS REALIZED BY THE ASSESSEES, SUSTAINED BY THE CIT(A), ASSESSEES P REFERRED THESE SECOND APPEALS BEFORE US. 7. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE LAW PERMITS UTILIZATION OF CAPITAL GAINS R ECEIVED WITHIN THE SPECIFIED TIME FOR OTHER PURPOSES, AND THAT THE ASS ESSEE MAY USE SUCH FUNDS FOR OTHER PURPOSES AND MAY FIND SOURCES FROM OTHER SOURCES FOR INVESTMENTS QUALIFYING FOR EXEMPTION UNDER S.54F OF THE ACT, WHENEVER THE SAME ARE MADE WITHIN THE TIME SPECIFIED BY THE STATUTE. IN SUPPORT OF THIS PROPOSITION, HE REITERATED THE CONTENTIONS URG ED BEFORE THE LOWER AUTHORITIES AND PLACED RELIANCE ON THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF MUNEER KHAN V/S. ITO (4 1 SOT 504), WHICH ACCORDING TO HIM SQUARELY COVERS THE ISSUE IN FAVOU R OF THE ASSESSEE. HE ALSO PLACED RELIANCE ON THE DECISIONS OF THE DELHI BENCH DECISION OF THE TRIBUNAL IN THE CASE OF SITA JAIN V/S. ACIT(ITA NO. 4754; 4755 & 5036/DEL/10 DATED 20.5.2011; AND OF THE MUMBAI BENC H OF THE TRIBUNAL IN THE CASE OF BOMBAY HOUSING CORPORATION V/S. ACIT (81 ITD 545); AND ITA NO.1866 & 1867/HYD/2011 SHRI J.V.KRISHNA RAO & ANR., HYDERABAD 5 OF THE MUMBAI BENCH OF THE TRIBUNAL IN MRS. PREMA P . SHAH V/S. ITO(100 ITD 60), DULY FURNISHING A COPY EACH THEREOF IN THE PAPER-BOOK FILED BEFORE US. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE, PER CO NTRA, STRONGLY RELIED ON THE ORDERS OF THE REVENUE AUTHOR ITIES. 9. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDER S OF THE LOWER AUTHORITIES. WE HAVE ALSO PERUSED THE CASE-LA W RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE. THE POINT IN DIS PUTE BEFORE US IS WHEN THE ASSESSEE UNDISPUTEDLY EARNED CAPITAL GAINS AND WHEN THE DEPOSITED EQUIVALENT AMOUNT IN THE BANK UNDER CAPITAL GAINS A CCOUNTS SCHEMES, WHETHER THE ASSESSING OFFICER IS JUSTIFIED IN DENYI NG BENEFIT OF S.54F ON THE GROUND THAT PART OF SUCH DEPOSIT HAS SOURCE IN BORROWAL OF FUNDS AND PART OF SUCH GAINS IS DIVERTED ELSEWHERE FOR OTHER PURPOSES. ON THIS, WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HYDERABAD BENCH OF SHRI MUNEER KHAN (SUPRA), WHEREIN IT HAS BEEN HELD THAT MONEY HAS NO COLOUR AND ALL THAT IS REQUIRED TO BE ELIGIBLE FOR RELIEF UNDER S.54F OF THE ACT IS COMPLIANCE WITH THE CONDITION OF INVESTMENT WITHIN THE SPECIFIED TIME. WE ALSO FIND SUPPORT FOR THIS VIEW FROM THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF SITA JAIN & OT HERS V/S. ACIT, WHEREIN IT WAS HELD THAT ONE TO ONE CORRELATION BETWEEN THE SALE PROCEEDS OF AGRICULTURAL LANDS AND UTILISATION OF SUCH PROCEEDS FOR PURCHASE OF LAND IS NOT NECESSARY. IN THE CASE OF BOMBAY HOUSING CORPO RATION (SUPRA), THE MUMBAI BENCH OF THE TRIBUNAL HELD THAT EVEN IF AN A SSESSEE BORROWS REQUIRED FUNDS AND SATISFIED CONDITIONS RELATING TO INVESTMENT IN SPECIFIED ASSETS, HE IS ENTITLED TO EXEMPTION. THE LATER DEC ISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF MRS. PREMA P.S HAH (SUPRA) IS ALSO TO THE SAME EFFECT, AND IT IN FACT FOLLOWED THE EARLIE R DECISION OF THE MUMBAI BENCH IN THE CASE OF BOMBAY HOUSING CORPORATION (SU PRA). WE HAVE PERUSED THE DECISION OF THE HONBLE KERALA HIGH COU RT IN THE CASE OF V.R.DESAI (197 TAXMAN 52), RELIED UPON BY THE LEARN ED CIT(A), AND FIND ITA NO.1866 & 1867/HYD/2011 SHRI J.V.KRISHNA RAO & ANR., HYDERABAD 6 THAT IT IS DISTINGUISHABLE ON FACTS IN AS MUCH AS IN THAT CASE THE ASSESSEE HAS FAILED TO MAKE INVESTMENT IN ELIGIBLE ASSET WIT HIN THE SPECIFIED PERIOD, AND THEREFORE, IN OUR OPINION, THE CIT(A) ERRED IN FOLLOWING THAT DECISION IN THE IMPUGNED ORDER. 10. IN THE LIGHT OF THE ABOVE DISCUSSION, FOLLOW ING THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF MUNEER KHAN (S UPRA) AND ALSO THE OTHER DECISIONS OF THE TRIBUNAL RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEES BEFORE US, WE HOLD THAT THE CAPITAL GAINS EARNED BY THE ASSESSEE CAN BE UTILISED FOR OTHER PURPOSES, AND A S LONG AS THE ASSESSEE FULFILS THE CONDITION OF INVESTMENT OF THE EQUIVALE NT AMOUNT IN THE SCHEME SPECIFIED OR IN THE ASSET QUALIFYING FOR RELIEF UND ER S.54F, BY SECURING THE MONEY SPENT OUT OF THE CAPITAL GAINS OR FROM OTHER SOURCES AVAILABLE TO IT EITHER BY BORROWAL OR OTHERWISE, AND THE ASSESSEES ARE ELIGIBLE FOR RELIEF UNDER S.54F OF THE ACT IN RESPECT OF THE ENTIRE AMO UNT OF CAPITAL GAINS SO DEPOSITED. IN THE CIRCUMSTANCES, WE FIND MERIT I N THE CONTENTIONS OF THE ASSESSEES THAT INASMUCH AS THEY HAVE MADE DEPOSITS OF THE AMOUNTS EQUIVALENT TO THE CAPITAL GAINS REALIZED IN THE CAP ITAL GAINS INVESTMENTS ACCOUNTS, EVEN THOUGH PART OF THOSE CAPITAL GAINS H AVE BEEN UTILIZED FOR OTHER PURPOSES, BORROWING AMOUNTS EQUIVALENT TO SUC H UTILISED FUNDS FROM SHRI J.V.LAXMAN RAO. THE ASSESSEES ARE ENTITLED TO RELIEF UNDER S.54F OF THE ACT, AS ULTIMATELY THE ASSESSEES DEPOSITED THE REQUISITE AMOUNTS IN THE CAPITAL GAINS ACCOUNTS SCHEMES FOR EXEMPTION UN DER S.54F OF THE ACT WITHIN THE TIME STIPULATED BY THE STATUTE. WE ACCO RDINGLY, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE, AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER IN THIS REGARD. GROUNDS OF THE ASSESSEES IN THESE APPEALS A RE CONSEQUENTLY ALLOWED . 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE ES ARE ALLOWED. ITA NO.1866 & 1867/HYD/2011 SHRI J.V.KRISHNA RAO & ANR., HYDERABAD 7 ORDER PRONOUNCED IN THE COURT ON 15.6.2012 SD/- SD/- (SAKTIJIT DEY) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 15 TH JUNE, 2012 COPY FORWARDED TO: 1. 2. 3 4. 5. SHRI J.V.KRISHNA RAO , M/S CH. PARTHASARATHY & CO., 1 - 1 - 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, ASHOK NAGAR, HYDERABAD. SMT. J. SRI LAKSHMI, M/S CH. PARTHASARATHY & CO., 1 -1- 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, ASHOK NAGAR, HYDERABAD. DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(3), HYDER ABAD COMMISSIONER OF INCOME-TAX(APPEALS)-IV, HYDERABAD COMMISSIONER OF INCOME-TAX III HYDERABAD 6 . DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD B.V.S.