ANIL KUMAR GOYAL HUF, FIROZABAD V. ITO WARD-5(1), FIROZABAD

ITA 189/AGR/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7190 (ITAT-AGRA)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 06-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAVI AGARWAL
• Keywords: Sale consideration of property below Jantri Value; Set aside
• Section: 50C; 54F; 54

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI LALIET KUMAR, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER ITA NO. 189/AGR/2017 ASSESSMENT YEAR:2012-13 SH. ANIL KUMAR GOYAL, HUF, FLAT NO. G-1205, PURVA VENEZIA APPARTMENT, NEAR MOTHER DAIRY, YELHANKA, NEW TOWN, BANGALORE. PAN- AAGHA1364K (APPELLANT) VS. INCOME - TAX OFFICER, WARD 5(1), FIROZABAD. (RESPONDENT) APPELLANT BY SH. RAVI AGARWAL, ADVOCATE RESPONDENT BY SH. WASEEM ARSHAD, SR. DR ORDER PER LALIET KUMAR, J.M.: THIS APPEAL IS BEING FILED BY THE ASSESSEE, FEELI NG AGGRIEVED BY THE ORDER PASSED BY THE CIT(A) DATED 28.02.2017, INTER ALIA, ON THE FOLLOWING GROUNDS : 1. BECAUSE ORDER OF CIT APPEAL DISALLOWING THE EXEMP TION U/S 54 OF THE INCOME TAX ACT TO THE ASSESSEE IS ILLEGAL AND BAD IN LAW. 2. BECAUSE THE ASSESSEE SOLD HIS HOUSE NO. 219 SRI NAGAR, JALESAR ROAD, FIROZABAD ON 15.04.2011 FOR TOTAL PRICE OF RS.1,15, 00,000.00. THE SALE CONSIDERATION WAS INVESTED BY THE ASSESSEE UP TO 31 .03.2013 IN THE PURCHASE OF NEW RESIDENTIAL HOUSE AMOUNTING TO RS. 1,80,44,590/ -. THIS NEW HOUSE WAS PURCHASED FROM CHALET HOTEL PVT. LTD., BANGALORE BU ILDER IN THE RESIDENTIAL TOWER WING E BEING APARTMENT NO. E-1601 ON 16TH FLOOR IN THE BUILDING STYLE VIVAREA AREA AT KORAMANGLA INDUSTRIAL LAYOUT, BANGALORE. THE MEMO OF UNDERSTANDING/ WRITING WAS ALSO EXECUTED BETWEEN BUILDER AND ASSES SEE ON 07.01.2011. THE PAYMENT WAS MADE IN INSTALLMENT AND POSSESSION OF T HE SAME WAS TO BE DATE OF HEARING 17.07.2019 DATE OF PRONOUNCEMENT 30 .07.2019 ITA NO. 189/AGR/2017 2 DELIVERED ON 30TH JUNE, 2013 AS PER SAID WRITING. TH US, THE ASSESSEE COMPLIED WITH ALL THE REQUIREMENT U/S 54 OF IT ACT AND WAS EN TITLED TO EXEMPTION IN THE SAID SECTION. THE AUTHORITY BELOW WAS NOT JUSTIFIED IN NOT ALLOWING THE EXEMPTION U/S 54 OF INCOME TAX ACT TO THE ASSESSEE. 3. BECAUSE ON ACCOUNT OF UNFORESEEN REASONS BEYOND CONTROL OF THE ASSESSEE AND BUILDER, THE NOC OF THE BUILDING ALLOTTED WAS CANCE LLED BY THE HAL BY THE NOTICE DTD. 16.08.13. THE BUILDER FILED A WRIT PETITION NO. 37571 BEFORE HON'BLE KARNATAKA HIGH COURT TO SET ASIDE THE CANCELLATION OF THE NOC BY THE HAL. THE HON'BLE HIGH COURT DIRECTED THE CHALET HOTEL PVT. L TD NOT TO CARRY OUT CONSTRUCTION ABOVE 40 MTR. AND THE CONSTRUCTION ALR EADY MADE WAS SUBJECT TO DECISION OF THE WRIT PETITION. ON ACCOUNT OF THE COURT ORDER, CONSTRUCTION OF BUIL DING BEYOND 10TH FLOOR WAS STAYED BY THE HON'BLE HIGH COURT. THEREAFTER THE COM PANY BY LETTER DTD. 25.04.14 MADE A MITIGATION PROGRAM REQUESTING THE CUSTOMERS EITHER TO EXIT FROM THE PURCHASE AGREEMENT BEYOND 10 FLOOR OR TO AGREE FOR RELOCATION OF FLAT BELOW 10TH FLOOR. THE APPLICANT THEREAFTER BY LETTER DTD. 23.05.14 OPTED FOR RELOCATION OF THE FLAT IN LIEU OF OLD LOCATION WITHIN 10 FLOOR IN THE BUILDING AND THE LOCATION PROCESS OF THE FLAT IS IN PROCESS. THUS THE ALLOTMEN T OF FLAT AS PER WRITING DTD. 07.01.2011 STILL STANDS. THUS, IT IS CLEAR THE ASSESSEE HAS DONE ALL THE EFFO RTS TO PROCURE POSSESSION OF THE FLAT FROM THE BUILDER AGAINST THE PAYMENT OF FULL S ALE PRICE, BUT IT WAS BEYOND CONTROL OF ASSESSEE DUE TO STAY ORDER OF HIGH COURT , ON ACCOUNT OF WHICH POSSESSION COULD NOT BE DELIVERED TO ASSESSEE IN TI ME. HOWEVER, THE STRUCTURE OF THE BUILDING UP TO 17TH WAS ALREADY CONSTRUCTED BY BUILDER IN TIME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT APPEAL WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF EXEMPTI ON U/S 54 TO THE ASSESSEE AND HAS ERRED IN SUSTAINING THE DISALLOWANCE OF EXEMPTI ON OF RS. 91,95,570/- AND ADDING THE SAME TO THE INCOME OF THE ASSESSEE. 4. BECAUSE IT HAS BEEN HELD BY SEVERAL HIGH COURTS AND THE ITAT AND PARTICULARLY DECISION IN THE CASE OF CIT V/S SADARMAL KOTHARI (20 08) 302 ITR PAGE 286 (MADRAS). BALRAJ V/S CIT (2002) 254 ITR PAGE 22 DELHI . SASHI VERMA V/S CIT 224 ITR PAGE 106 MP HIGH COURT, CIT V/S KULDEEP SINGH 270 CTR PAGE 561 (DELHI) AND ALSO IN VIEW CIRCULAR NO. 471 DTD. 15.10.86 AND NO. 672 DTD. 16.12.93, IT IS CLEAR THAT MONEY HAS BEEN PAID IN FULL BY THE ASSES SEE, THE PROVISION OF SECTION 54 MUST BE DEEMED HAVE BEEN COMPLIED WITH AND ASSESSEE SHOULD BE ALLOWED THE BENEFIT OF THE BENEFICIAL PROVISION CONTAINED IN SE CTION 54 OF THE IT ACT. THE ITA NO. 189/AGR/2017 3 AUTHORITIES BELOW WERE NOT JUSTIFIED IS NOT PROPERL Y APPRECIATING THE POSITION OF LAW AND FACTS AND HAVE ERRED IN NOT ALLOWING EXEMPT ION U/S 54 OF IT ACT. 5. BECAUSE THE ORDER OF CIT APPEAL IS ILLEGAL AND BA D IN LAW DESERVED TO BE CANCELLED. BRIEF FACTS: 2. THE ASSESSEE SOLD A RESIDENTIAL HOUSE BEARING NO . 219 SRI NAGAR, JALESAR ROAD, FIROZABAD ON 15.04.2011 FOR TOTAL PRICE OF RS. 1,06 ,22,000/-,HAVING CIRCLE RATE VALUE OF RS.1,15,00,000/-. ON ACCOUNT OF SALE OF THE RESI DENTIAL HOUSE, A LONG TERM CAPITAL GAIN OF RS.91,95,570/- WAS ACCRUED TO THE ASSESSEE AFTER DEDUCTION OF THE COST OF INDEXATION. 2.1 THE ASSESSEE HAD CLAIMED EXEMPTION U/S. 54F, AS THE ASSESSEE HAD INVESTED AN AMOUNT OF RS. 1,13,76,245/- FOR THE PURCHASE OF A R ESIDENTIAL FLAT BEARING FLAT NO. E- 1601, 16 TH FLOOR IN THE BUILDING, VIVAREA, AT KORAMANGLA INDU STRIAL LAYOUT, BANGALORE. 2.2 AS PER THE CASE OF THE ASSESSEE, A MEMORANDUM O F UNDERSTANDING (MOU) IN RESPECT OF PURCHASE OF FLAT WAS ENTERED BETWEEN THE ASSESSEE AND THE BUILDER, CHALET HOTELS LIMITED ON 07.01.2011. HOWEVER, THE FIRST PA YMENT OF RS.26 LAKHS WAS MADE ON 01.12.2010. THE ASSESSEE HAD MADE VARIOUS PAYMEN TS OVER A PERIOD 01.12.2010 TO 05.10.2011 FOR A TOTAL AMOUNT OF RS.1.80 CRORES FOR THE PURCHASE OF FLAT NO. E- 1601, 16 TH FLOOR, VIVAREA, AT KORAMANGLA INDUSTRIAL LAYOUT, B ANGALORE. AS PER THE MOU, THE BUILDER WAS TO DELIVER THE POSSESSION OF T HE FLAT BY 30.07.2013. ITA NO. 189/AGR/2017 4 2.3 AFTER ENTERING INTO THE SAID AGREEMENT AND AFTE R MAKING THE PAYMENTS OF RS.1,80,44,590/-, THE ASSESSEE LEARNT THAT HINDUSTA N AERONAUTICAL LTD. (HAL) EARLIER HAD ISSUED A NO OBJECTION CERTIFICATE (NOC) ON 28.1 0.2010. HOWEVER, THE SAID NOC WAS CANCELLED BY THE HAL VIDE THEIR COMMUNICATION D ATED 16.08.2011. 2.4 FEELING AGGRIEVED BY THE CANCELLATION OF NOC GR ANTED BY HAL, THE BUILDER, NAMELY, CHALET HOTELS PVT. LTD. HAD PREFERRED A WRI T PETITION BEFORE THE KARNATAKA HIGH COURT AT BANGALORE VIDE W.P. NO. 37571 OF 2013 . IT WAS STATED AT BAR BY THE COUNSEL FOR THE ASSESSEE THAT THE SAID WRIT PETITIO N IS STILL PENDING ADJUDICATION AND IS NOW FIXED FOR 24.07.2019. 2.5 IT WAS THE CASE OF THE ASSESSEE THAT ON ACCOUNT OF THE MATTER BEING SUBJUDICE BEFORE THE HIGH COURT OF KARNATAKA (REVOCATION OF N OC BY HAL), THE BUILDER HAD NOT ALLOTTED FLAT NO. E-1601, 16 TH FLOOR, VIVAREA, AT KORAMANGLA INDUSTRIAL LAYOUT, BANGALORE AS PER MOU. TILL DATE, THE POSSESSION IS NOT GIVEN TO THE ASSESSEE ON ACCOUNT OF THE COURT ORDER AND PENDENCY OF PETITION OF THE BUILDER BEFORE THE HONBLE HIGH COURT OF KARNATAKA. THE ASSESSING OFFI CER IN THE ASSESSMENT ORDER RECORDS THE SUBMISSIONS OF THE ASSESSEE AND AT PAGE 2 OF THE ORDER, IT WAS MENTIONED AS UNDER : ITA NO. 189/AGR/2017 5 VIDE THIS OFFICE ORDER SHEET DATE 04.03.2015, THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF INVESTMENT I.E., SOURCE OF I NVESTMENT MADE BY THE ASSESSEE IN A.Y. 2012-13, AND HE WAS FURTHER REQUIRED TO EXP LAIN AS TO HOW IN THE ABSENCE OF PURCHASE DEED/TRANSFER OF PROPERTY IN QUESTION I T CAN BE ESTABLISHED THAT THE ASSESSEE HAS PURCHASED THE SAID PROPERTY. DURING DI SCUSSION, THE ASSESSEE STATED THAT DUE TO LITIGATION, POSSESSION OF PROPERTY IS N OT HANDED OVER TO HIM. FOR PROOF HE FURNISHED A COPY OF PAPER CUTTING DATED 24.10.20 13 OF DAILY CITY, WHEREIN IT IS REPORTED THAT HONBLE HIGH COURT, KARNATAKA HAS DIRECTED THE COMPANY NOT TO SELL, AGREE TO SELL OR ENTER INTO AGREEMENT WITH RE GARD TO PARTIES AND WHATSOEVER IN MANNER IN RESPECT OF PORTION OF BUILDING ABOVE 4 0 METER. FOR READY REFERENCE COPY OF PAPER CUTTING IS REPRODUCED ON NEXT PAGE: 2.6 THE ASSESSING OFFICER AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE HAD DISALLOWED THE CLAIM OF THE ASSESSEE U/S. 54F. 3. FEELING AGGRIEVED BY THE ORDER PASSED BY THE ASS ESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE L D. CIT(A) HAD CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER IN PARAGRAPH NO. 7 TO 7.3, WHEREIN IT WAS HELD AS UNDER : 7. I HAVE CONSIDERED THE FACTS OF THE CASE, WRITTEN SUBMISSIONS FILED BY THE LD.AR FOR THE APPELLANT AND PERUSED THE ORDER OF THE AO. IT IS AN UNDISPUTED FACT IN THIS CASE THAT THE ASSESSEE (APPELLANT) HAD SOLD HIS RES IDENTIAL HOUSE AT FIROZABAD ON 15.04.2011 FOR RS. 1,06,22,000/- HAVING STAMP VALUE OF RS.1,15,00,000/-. AS PER PROVISIONS OF SECTION 54 OF THE ACT, TO AVAIL BENEF IT OF THIS SECTION, THE APPELLANT HAS TO HAVE THE RESIDENTIAL HOUSE CONSTRUCTED WITHI N A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER WHICH IN THE ASSESSEE'S CASE F ALLS ON 15.04.2014. HOWEVER, AS OBSERVED, THE APPELLANT THOUGH UPTO THE DATE OF FIL ING HIS RETURN OF INCOME TAX, HAS MADE THE PAYMENT OF RS.1,80,44,590/- TO THE BUI LDER BUT HE HAS NEITHER GOT THE POSSESSION OF THE RESIDENTIAL HOUSE NOR HE HAD GOT REGISTERED ANY AGREEMENT TO SELL. IN THIS REGARD, I HAVE GONE THROUGH THE C BDT CIRCULAR NOS.471 AND 672 DATED 15.10.1986 AND 16.12.1993 WHICH HAVE BEEN REL IED UPON BY THE LD.AR FOR THE APPELLANT. ITA NO. 189/AGR/2017 6 7.1 THE ASSESSEE CAN DERIVE NO BENEFIT FROM THE PROV ISIONS OF CIRCULAR NO. 672 DATED 16TH DECEMBER, 1993 IN AS MUCH AS THE SCHEME CONTEMPLATED IN PARAGRAPH 2 OF CIRCULAR NO. 471 IS NOT AVAILABLE TO THE APPELLANT. THE APPELLANT HAS NOT FILED ANY ALLOTMENT LETTER DURING APPEAL PR OCEEDINGS WHICH CONFER TITLE UNTIL THE AGREEMENT FOR SALE IS REGISTERED. IN THE PRESENT CASE, HOWEVER, IT IS NOT IN DISPUTE THAT NO AGREEMENT FOR SALE IS REGISTERED . IN THE PRESENT CASE, HOWEVER, IT IS NOT AT DISPUTE THAT THE NO AGREEMENT FOR SALE WAS ENTERED INTO WITHIN THE PERIOD OF THREE YEAR FROM THE DATE OF SALE OF OLD R ESIDENTIAL HOUSE. MOREOVER, THE DEVELOPER HAD NO APPROVAL FOR CONSTRUCTION ABOVE 10 TH FLOOR WHEREIN THE ASSESEEE HAD BOOKED HIS FLAT, AS ALSO HON'BLE KARNA TAKA HIGH COURT STAYED THE CONSTRUCTION ABOVE 40 METERS. THUS, APPARENTLY THE A PPELLANT HAS INVESTED IN A FLAT WHICH WAS NEVER TO BE ALLOTTED TO THE ASSESSEE IN THOSE APARTMENTS. IT IS ALSO EQUALLY TRUE THAT THE IN THE REALLOCATION PLAN ALSO , THE APPELLANT DID NOT GET THE FLAT WITHIN THE STIPULATED TIME I.E. 15.04.2014. THU S, THERE IS NO QUESTION THAT THE ASSESSEE CAN ESTABLISH HIS TITLE OVER THE PROPERTY WHICH WAS NOT BEEN APPROVED FOR CONSTRUCTION AT THE MATERIAL TIME. 7.2 THOUGH THE PROVISIONS LIKE SECTION 54 OF THE ACT GETS BENEFICIAL INTERPRETATION, AND AS FAR AS POSSIBLE A BENEFICIAL PROVISIONS SHOULD BE INTERPRETED LIBERALLY HOWEVER NOT TO THE EXTENT THA T RENDERS THE INTENT OF THE PROVISION REDUNDANT. THE RESTRICTIONS ON THE TIME WI THIN WHICH THE CONDITIONS OF SECTION 54 HAVE TO BE COMPLIED WITH ARE REASONABLE. THIS LIMIT DOES GIVE AN ASSESSEE A TIME PERIOD OF THREE YEARS, WHICH IS QUI TE REASONABLE. SUCH RESTRICTION OF TIME CANNOT BE DILUTED. 7.3 AS REGARDS THE ASSESSEE'S RELIANCE IN THE CIRCU LAR NO. 471 OF THE CBDT IS CONCERNED, IT IS OBSERVED THAT SAID CIRCULAR HAS NO APPLICABILITY IN THE APPELLANT'S CASE. IN THE SAID CIRCULAR THE ALLOTMENT OF FLAT UN DER SELF FINANCING SCHEME SHALL BE TREATED AS CASES OF CONSTRUCTION. HOWEVER, AS PE R UNDISPUTED FACTS, IN THE ASSESSEE'S CASE THE CONSTRUCTION, WHAT TO SAY OF CO MPLETION, WAS NOT EVEN STARTED WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF RES IDENTIAL HOUSE. FOR THIS REASON THE JUDICIAL DECISIONS RELIED UPON BY THE LD. AR FO R THE APPELLANT, ESPECIALLY IN THE CASE OF SMT. SHASHI VERMA VS. COMMISSIONER OF INCOM E-TAX AND BALRAJ V CIT(2002) 254 ITR 22, DUE TO THE REASONS MENTIONED AB OVE, IS NOT FOUND TO BE HAVING ANY APPLICATION TO THE FACTS OF INSTANT CASE . THEREFORE, FOR THE REASON THAT THE CONSTRUCTION OF HOUSE(FLAT) FOR WHICH THE APPEL LANT CLAIMED BENEFIT OF SECTION 54F OF THE ACT WAS NOT EVEN STARTED WITHIN THREE YE ARS FROM THE DATE OF TRANSFER AND EVEN TILL DATE THE APPELLANT HAS NOT GOT THE PO SSESSION OF ANY FLAT IN PLACE OF FLAT BOOKED WITH THE BUILDER, I AM THEREFORE IN ALL AGREEMENT WITH THE FINDINGS OF THE AO THAT THE AMOUNT PAID TO THE BUILDER UPTO THE DATE OF FILING OF THE RETURN WOULD NOT RENDER THE APPELLANT TO CLAIM BENEFIT OF SECTION 54F OF ACT. THUS, IN ITA NO. 189/AGR/2017 7 VIEW OF THE FOREGOING, THE AO'S ORDER IN DENYING AS SESSEE'S CLAIM OF EXEMPTION U/S 54F IS SUSTAINED AND THE ADDITION OF RS. 91,95, 570/- MADE UNDER HEAD CAPITAL GAIN IS CONFIRMED. AS A RESULT, ALL THE GROUNDS TAK EN BY ASSESSEE ARE DISMISSED. NOW, THE ASSESSEE IS IN APPEAL BEFORE US ON THE GRO UNDS STATED HEREIN ABOVE. 4. FIRSTLY, IT WAS SUBMITTED BY THE ASSESSEE THAT A FTER THE LONG TERM CAPITAL GAIN AROSE IN FAVOUR OF THE ASSESSEE, THE ASSESSEE HAD I NVESTED WHOLE OF THE LONG-TERM CAPITAL GAIN IN PURCHASE OF RESIDENTIAL FLAT PURSUA NT TO MOU ENTERED BETWEEN THE ASSESSEE AND THE BUILDER. THERE WAS NO MISTAKE ON T HE PART OF THE ASSESSEE FOR INVESTING IN THE SAID TENEMENT WHERE SPECIFIC FLAT WAS ALLOTTED TO THE ASSESSEE BY THE BUILDER. IT WAS SUBMITTED THAT THE MOU MAY NOT BE N OMENCLATURED AS AGREEMENT TO SALE OR ALLOTMENT LETTER, BUT ALL THE PRE-REQUISITE OF A BINDING AGREEMENT AND ALLOTMENT OF FLATS WERE THERE IN THE MOU DATED 07.0 1.2011. IT WAS FURTHER SUBMITTED THAT THE SAID MOU WAS LEGALLY ENFORCEABLE AND ON AC COUNT OF INTERDICTION BY THE KARNATAKA HIGH COURT, THE POSSESSION OF THE FLAT WA S NOT HANDED OVER TO THE ASSESSEE BY THE BUILDER. THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF LAW AND THEREFORE, THE BENEFIT OF 54F SHOULD BE GRANTED TO THE ASSESSE E. IT WAS SUBMITTED THAT THE DELAY IN HANDING OVER THE POSSESSION OF THE FLAT WAS ON A CCOUNT OF STAY GRANTED BY KARNATAKA HIGH COURT AND PENDENCY OF WRIT PETITION FOR CANCELLATION OF NOC BY HAL. THE LD. AR RELIES UPON THE DECISION OF HONBLE SUPR EME COURT IN THE MATTER OF SANJIV LAL VS. CIT, 365 ITR 389 (SC). FURTHER HE RELIED UP ON THE DECISION OF CHENNAI BENCH OF ITAT IN THE MATTER OF KANAN CHANDRA SEKHAR VS. I TO, 165 ITD 315 (CHENNAI). HE HAS ALSO RELIED ON THE DECISION OF CHANDIGARH BENCH OF TRIBUNAL IN THE MATTER OF ITA NO. 189/AGR/2017 8 SEEMA SABHARWAL VS. ITO, 193 TTJ 128 (CHANDIGARH IT AT) AND ALSO RELIES UPON THE CBDT CIRCULAR NO. 471 DATED 15.02.1986 AND 672 DATE D 16.02.2093. IN NUTSHELL, IT WAS THE CONTENTION OF THE ASSESSEE THAT THE ALLOTME NT OF LAND WAS NOT WITHIN THE POWER AND CONTROL OF THE ASSESSEE. THE ASSESSEE WIT H ALL BONA FIDE INVESTED THE LONG TERM CAPITAL GAIN FOR PURCHASE OF RESIDENTIAL FLAT AND ALSO INVESTED HUGE AMOUNT OF RS.1.80 CRORES. THE ASSESSEE CANNOT BE MADE TO SUFF ER TWICE ON ACCOUNT OF DENIAL OF BENEFIT OF SECTION 54 AS WELL AS NON-HANDING OVER T HE POSSESSION PURSUANT TO THE DIRECTIONS OF HONBLE KARNATAKA HIGH COURT. 5. PER CONTRA, THE LD. DR HAD VEHEMENTLY OPPOSED TH E CONTENTION OF THE LD. AR AND THE RELIEF SOUGHT BY THE ASSESSEE AND HAD SUBMI TTED AS UNDER AND HAS DRAWN OUR ATTENTION TO THE FOLLOWING ASPECT : 1. NOC NOT IN EXISTENCE. '(C) THE BANGALORE DEVELOPMENT AUTHORITY AND THE B RUHAT BANGALORE MAHANAGARA PALIKA HAVE APPROVED THE PLANS IN RESPEC T OF A PORTION OF THE SAID LARGER LAND VIDE ORDERS DATED 30 TH DECEMBER 2009 AND 4 TH FEBRUARY; 2010. BHARAT SANCHAR NIGAM LTD. HAS ISSUED NOC DATE D 4 TH SEPTEMBER, 2006 FOR CONSTRUCTION UPTO A HEIGHT OF 120 METERS C OMPRISING INTER ALIA OF GROUND PLUS 36 UPPER FLOORS. THE AIRPORTS AUTHORITY OF INDIA HAS ISSUED NOC DATED 4TH JUNE, 2010 FOR CONSTRUCTION OF BUILDI NG/STRUCTURE UPTO 104 METERS AS MORE PARTICULARLY SATED IN THE SAID NOC A ND YOU ARE IN THE PROCESS OF OBTAINING NOC FOR CONSTRUCTION OF BUILDI NG/S/STRUCTURE/S UPTO A HEIGHT OF 120 METERS IN THE LARGER LAND. THE AFORE SAID PLANS AND NOCS (WH,ICH HAVE BEEN INSPECTED AND VERIFIED BY ME/US) ARE INTERIM PLANS AND NOCS, AND ARE IN THE PROCESS OF BEING AND SHALL BE MODIFIED FROM TIME TO TIME AS SETOUT HEREINAFTER. PAGE 6 OF MOU - PLAN NOT IN EXISTENCE. ITA NO. 189/AGR/2017 9 (C) THE SAID RESIDENTIAL BUILDING TOWER E IS ESTIMATE D TO BE COMPLETED BY YOU BY 30 TH JUNE, 2013 (SUBJECT TO THE MODIFIED PLANS IN RESPE CT OF THE AMENDMENTS OR MODIFICATIONS REFERRED IN CLAUSE 2(B) (C) BEING SANCTIONED BY THE CONCERNED AUTHORITIES 1 SUBJECT TO FORCE MAJEURE. PAGE 11 DOES NOT PURPORT TO BE AN AGREEMENT FOR SALE. (A) POSSESSION OF THE CAPTIONED APARTMENT SHALL NOT BE TRANSFERRED AND IS NOT BEING TRANSFERRED NOR IS IT BEING AGREED TO BE TRANSFERRED TO ME/US ON THE BASIS OF THIS WRITING. I/WE FURTHER CONFIRM THAT POSSESSION OF THE CAPTIONED APARTMENT SHALL BE HANDED OVER TO ME/US O NLY AS PROVIDED IN THE PROPOSED AGREEMENT FOR SALE AND SIMULTANEOUS WITH THE EXECUTION OF THE DEED OF APARTMENT. ONLY AN OPTION - TO EXERCISE THE RIGHT. (B) THIS WRITING IS NOT AND DOES NOT PURPORT TO BE AND SHALL NOT BE DEEMED TO BE AN 'AGREEMENT FOR SALE' IN AS MUCH AS THE PURPOSE OF THIS WRITING/ARRANGEMENT CONTEMPLATED HEREIN IS, TO RESE RVE THE SAID PREMISES FOR ME/US AS AND BY WAY OF AN OPTION TO BE EXERCISE D BY ME/US EXCLUSIVELY PRIOR TO ENTERING INTO AND EXECUTING THE AGREEMENT FOR SALE, AS ENVISAGED HEREIN. CONSEQUENTLY, I/WE SHALL UNDER THIS WRITING BE DEEMED TO HAVE ACQUIRED A RIGHT ONLY TO EXERCISE THE OPTION AND EN TER INTO, EXECUTE AND REGISTER THE PURPOSED AGREEMENT FOR SALE WITH YOU I N RESPECT OF THE SAID PREMISES ON FULFILLMENT OF THE TERMS AND CONDITIONS RECORDED IN THIS WRITING. PAGE 12 MOU : PAGE 17- NO PROPERTY OR RIGHT, TITLE OR INTEREST IN THE PROPERTY. 'I/WE ARE AWARE THAT MY/OUR RIGHT TO ACQUIRE ANY IN TEREST IN THE SAID PREMISES SHALL BECOME EFFECTIVE ONLY ON EXECUTION OF THE SAID AGREEMENT FOR SALE AND COMPLIANCE OF THE TERMS AND CONDITIONS THEREOF AND NOT OTHERWISE.' ASSESSMENT ORDER PAGE 8- NOC AWAITED HC ONLY A STUDY AT ASSESSEE'S COST FOR A FURTHER CONSIDERATION TOWARDS NOC. 'HON'BLE HIGH COURT HAS CLEARLY DIRECTED THE SELLER (TO WHOM THE ASSESSEE HAS MADE PAYMENTS IN QUESTION) TO RESTRAIN FROM MOD IFYING, ALTERING, REMOVING AND DEVELOPING A HIGH RISE RESIDENTIAL APA RTMENT COMPLEX ABOVE 40 METERS FROM THE GROUND LEVEL. HON'BLE COURT HAS FURTHER DIRECTED THAT THE SALE OF FLATS WAS SUBJECT TO OUTCOME OF THE LIT IGATION. FROM PERUSAL OF LETTER DATED 31-12-2013 REPRODUCED ABOVE, IT TRANSP IRES THAT THE FLAT NO. ITA NO. 189/AGR/2017 10 E-1601 AT 16TH FLOOR OF THE APARTMENT WAS BOOKED FO R THE ASSESSEE. IN THIS VERY LETTER THE DEVELOPER HAS MENTIONED THAT HON'BL E HIGH COURT HAS THROUGH INTERIM ORDER IN THE PENDING WRIT PETITION HAS TEMPORARILY STAYED CONSTRUCTION ABOVE 10TH FLOOR. THIS MEANS THAT THE F LAT BOOKED FOR THE ASSESSEE WILL CERTAINLY BE AFFECTED BY THE HON'BLE HIGH COURT I.E. AS ON DATE IT CANNOT BE SAID THAT FLAT WILL BE ALLOTTED TO THE ASSESSEE.' 3. THE LEGALITY OF CONSTRUCTION OF FLAT BOOKED TO TH E ASSESSEE IS IN QUESTION I.E. THE FLAT MAY OR MAY NOT BE ALLOTTED TO HIM. THIS IS SUB JECT TO OUTCOME OF LITIGATION PENDING BEFORE HON'BLE HIGH COURT. 5. THE ASSESSEE HAS NOT PURCHASE THE LAND AND HAS NO T INVESTED THE AMOUNT OF CONSIDERATION OF PROPERTY SOLD BY HIM IN CONSTRUCTI ON ON SUCH LAND. 6. ON THE BASIS OF THE ABOVE, IT WAS SUBMITTED THAT NEITHER THERE WAS ANY AGREEMENT FOR PURCHASE OF RESIDENTIAL FLAT BY THE A SSESSEE AND THE BUILDER NOR THERE WAS ANY COMMITMENT ON THE PART OF THE BUILDER TO BU ILD-UP THE FLAT NOR IT WAS A CASE THAT NOC WAS GRANTED BY THE HAL. LASTLY, IT WAS SUB MITTED THAT THE ASSESSEE/BUYER SHOULD BE AWARE ABOUT HIS RIGHTS AND SHOULD NOT HAV E INVESTED IN THE APARTMENT WHICH HAS NO LEGAL SANCTION. THE LD. DR RELIED UPO N THE DECISION RENDERED IN THE CASE OF BANARIA ENGINEERING LTD. VS. ITO AND HAS SU BMITTED THAT THE ALLOTMENT LETTER BEING NOT A TITLED DOCUMENT, CANNOT BE ACTED. IN TH E ALTERNATIVE, IT WAS SUBMITTED THAT THE MOU IS NEITHER A TITLED DOCUMENT NOR SALE AGREEMENT IN FAVOUR OF THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE IS NOT ENTITLED TO ANY RELIEF FROM THIS TRIBUNAL. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE UNDISPUTED FACTS BEFORE US ARE AS UNDER : ITA NO. 189/AGR/2017 11 (I). THE LONG TERM CAPITAL GAIN OF RS.91,95,570/- W AS ACCRUED TO THE ASSESSEE ON ACCOUNT OF SALE OF RESIDENTIAL PLOT. (II). IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE H AD ENTERED INTO A MOU ON 07.01.2011 WITH THE BUILDER CHALET HOTELS LTD. (III). IT IS ALSO NOT IN DISPUTE THAT BY MOU, THE A SSESSEE WAS GIVEN FLAT NO. E- 1601, 16 TH FLOOR, VIVAREA, AT KORAMANGLA INDUSTRIAL LAYOUT, B ANGALORE. (IV). IT IS ALSO NOT DISPUTED THAT PURSUANT TO MOU, THE ASSESSEE MADE HUGE INVESTMENT OF RS.1.80 CRORES IN THE SAID RESIDENTIA L FLAT. (V). THE NOC INITIALLY GRANTED BY HAL WAS RECALLED BY IT BY SUBSEQUENT LETTER DATED 16.08.2013. (VI). THE KARNATAKA HIGH COURT HAS GRANTED STAY (AS RECORDED BY THE AO) FOR NOT ALLOTTING THE FLAT. 7.1 IN THE LIGHT OF THE ABOVE, IF WE CONSIDER THE C LAIM OF THE ASSESSEE THEN WE COME TO THE CONCLUSION THAT THE ASSESSEE PURSUANT TO MOU HAS INVESTED HUGE SUM OF RS.1.80 CRORES IN PURCHASE OF RESIDENTIAL UNIT IN T HE BUILDER APARTMENT AT KORMANGLA, BANGALORE. THE REASON GIVEN FOR DENIAL O F 54F BY THE ASSESSING OFFICER AS MENTIONED AT PAGE 11 OF THE ASSESSMENT ORDER WAS AS UNDER : IN THIS VERY LETTER THE DEVELOPER HAS MENTIONED THA T HON'BLE HIGH COURT HAS THROUGH INTERIM ORDER IN THE PENDING WRIT PETIT ION HAS TEMPORARILY STAYED CONSTRUCTION ABOVE 10 TH FLOOR. THIS MEANS THAT THE FLAT BOOKED FOR THE ASSE SSEE WILL CERTAINLY BE AFFECTED BY THE HON'BLE HIGH COUR T I.E. AS ON DATE IT CANNOT BE SAID THAT THE FLAT WILL BE ALLOTTED TO THE ASSESSEE . THERE IS EVERY CHANCE THAT IN CASE OF ADVERSE JUDGMENT BY HON'BLC HIGH COURT, THE FLAT BOOKED FOR THE ASSESSEE IS DEMOLISHED AND THE ASSESSEE MAY NOT BE ALLOTTED ANY FLAT AND THE MONEY DEPOSITED BY HIM WITH THE SELLER BE REFUNDED TO HIM . FROM THE FACTS OF THE CASE, THE FOLLOWING SITUATION EMERGES : ITA NO. 189/AGR/2017 12 1. THE PROPERTY IN QUESTION WAS SOLD ON 15.04 .2011 FOR CONSIDERATION OF RS. 1,06,22,000/-( RS.1,15,00,000 FOR SECTION 50C PURP OSE). 2. THE PERIOD STIPULATED FOR CLAIMING EXEMPT ION U/S 54 HAS EXPIRED ON 10.04.2013 I.E. TWO YEAR AFTER THE DATE OF TRANSFER OF PROPERLY. 3. THE LEGALITY OF CONSTRUCTION OF FLAT BOOK ED TO THE ASSESSEE IS IN QUESTION I.E. THE FLAT MAY OR MAY NOT BE ALLOTTED TO HIM. THIS IS SUBJECT TO OUTCOME OF LITIGATION PENDING BEFORE HON'BLE HIGH COURT. 4. IN CASE OF ADVERSE JUDGMENT BY HON'BLE HI GH COURT, THE MONEY MAY BE REFUNDED TO THE ASSESSEE WITHOUT ALLOTTING ANY FLAT IN LIEU OF FLAT BOOKED FOR HIM, BECAUSE THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE WHICH MAY PROVE THAT IN CASE OF ADVERSE JUDGMENT BY HON'BLE HIGH COURT, SOM E OTHER FLAT WILL BE ALLOTTED TO HIM BY THE DEVELOPER. 5. THE ASSESSEE HAS NOT PURCHASED THE LAND AN D HAS NOT INVESTED THE AMOUNT OF CONSIDERATION OF PROPERTY SOLD BY HIM IN CONSTRU CTION ON SUCH LAND. 6. SECTION 54/54F CLEARLY STIPULATES THAT PU RCHASE OR CONSTRUCTION MUST BE COMPLETED WITHIN STIPULATED PERIOD MENTIONED IN THI S SECTION. 7. EVEN AFTER EXPIRY OF STIPULATED PERIOD TH E ASSESSEE HAS FAILED TO PURCHASE/CONSTRUCT ANY PROPERTY OUT OF SALE CONSIDE RATION. 7.2 FROM THE PERUSAL OF THE ABOVE, IT IS CLEAR THAT AS THE BUILDER FAILED TO ADHERE TO THE TIMELINE GIVEN IN THE MOU. THE ASSESSING OFFICE R HAS DENIED THE BENEFIT OF SECTION 54F. IT WAS NOT THE CASE OF THE ASSESSING O FFICER THAT THE ASSESSEE HAS NOT BOOKED THE FLAT WITH THE BUILDER. IT IS ALSO NOT TH E CASE OF THE ASSESSING OFFICER THAT HE HAS NOT MADE THE PAYMENT TO THE BUILDER IN TIME. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THERE WAS NO STAY BY THE HIGH COURT AN D THE MATTER IS NOT SUB-JUDICE BEFORE THE HIGH COURT. THE ONLY REASON GIVEN BY THE AO IS THAT IN CASE THE WRIT ITA NO. 189/AGR/2017 13 PETITION IS DISALLOWED AND THE RELIEF SOUGHT IS DEC LINED THEN THE ASSESSEE WOULD NOT BE ENTITLED TO FLAT. IN OUR VIEW WHAT IS REQUIRED T O BE SEEN IS INTENTION OF THE ASSESSEE AT THE TIME OF MAKING THE INVESTMENT IN THE BUILDIN G PROJECT. IF THERE WAS NO INHIBITION OR EMBARGO AT THE TIME OF INVESTMENT, AT THAT TIME THE ASSESSEE WAS ENTITLED TO THE TITLE OF THE RESIDENTIAL UNIT, THEN THE ASSESSEE IS ENTITLED TO BENEFIT OF SECTION 54F. IN OUR VIEW THE ASSESSEE CANNOT BE DEN IED BENEFIT OF SECTION 54F ON ACCOUNT OF DELAY BY THE BUILDER OR ON ACCOUNT OF TH E REASON FOR DELAY IN ALLOTMENT/CONSTRUCTION OF THE FLAT, WHICH ARE NOT A TTRIBUTABLE TO THE ASSESSEE. UNDISPUTEDLY, THE ASSESSEE HAD INVESTED THE AMOUNT FOR PURCHASE OF FLAT PURSUANT TO ILLEGALLY BINDING AGREEMENT. HOWEVER, ON ACCOUNT OF WITHDRAWAL OF NOC BY HAL, PROJECT COULD NOT BE COMPLETED AND THE FLAT WAS NOT ALLOTTED TO THE ASSESSEE. 7.3 FURTHER, WE MAY LIKE TO ADD THAT SECTION 54F IS A BENEFICIAL LEGISLATION AND HAS BEEN INSERTED WITH A VIEW TO PROMOTE INVESTMENT OF THE LONG TERM CAPITAL GAINS IN THE BUILDING OF RESIDENTIAL PREMISES. ON ACCOUNT OF TECHNICAL REASONS, AS MENTIONED ABOVE OR ON ACCOUNT OF FRAUD OR UNSCRUPULOUS ACTIVI TIES OF THE BUILDER WHERE SAID RESIDENTIAL UNITS WITHOUT HAVING PROPER CLEARANCE ( NOT DISCLOSED TO THE ASSESSEE AT THE TIME OF BOOKING OR SUBSEQUENT THERETO) CANNOT B E MADE A GROUND FOR DENIAL OF BENEFIT OF SECTION 54F. IN OUR VIEW, THE ASSESSEE I S ENTITLED TO BENEFIT OF SECTION 54F. HOWEVER, ON ACCOUNT OF INTERDICTION BY KARNATAKA HI GH COURT, THE POSSESSION HAD NOT BEEN HANDED OVER TO THE ASSESSEE. WE MAY FRUITF ULLY APPLY THE MECHANISM THAT ITA NO. 189/AGR/2017 14 NO ORDER OF THE COURT WAS INTENDING TO HARM ANY PER SON. FOR NO FAULT OF THE ASSESSEE, THE ASSESSEE CANNOT BE DENIED BENEFIT OF SECTION 54 F MERELY BECAUSE THE CLEARANCE OF THE PROJECT IS PENDING BEFORE THE HONBLE KARNAT AKA HIGH COURT. HENCE, THE APPEAL OF THE ASSESSEE IS ALLOWED. WE RELY UPON THE DECISI ON OF KARNATAKA HIGH COURT IN THE MATTER OF DILEEP RANJREKAR, 101 TAXMAN.COM 104 (KAR NATAKA HC) AND THE TRIBUNAL ORDER IN THE MATTER OF BALKISHAN ATAL VS. ACIT 104 TAXMAN.COM 432. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DR. MITHA LAL MEENA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA