P.R.Easwar Kumar , CHENNAI V. ACIT Non Corporate Circle 16 , CHENNAI

ITA 2001/CHNY/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4772 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 18-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: JHARNA B HARILAL
• Keywords: Capital asset
• Section: 143(3); 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! ' . #$ , %& BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.2001/CHNY/2017 ( / ASSESSMENT YEAR: 2013-14) SHRI P.R. EASWAR KUMAR, C1, 1 ST FLOOR, MALINI PALACE NEW NO.8, 2 ND CRESCENT PARK STREET, GANDHI NAGAR, ADYAR, CHENNAI 600 020. VS THE ACIT, NON-CORPORATE CIRCLE 16, CHENNAI PAN: AABPE0760G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MS. JHARNA B. HARILAL, FCA / RESPONDENT BY : SHRI N. MADHAVAN, ADDL. CIT /DATE OF HEARING : 05.01.2018 !' /DATE OF PRONOUNCEMENT : 15.02.2018 / O R D E R PER A.MOHAN ALANKAMONY, AM:- THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-4, CHENNAI DATED 30.06.2017 IN ITA NO.04/2016-17/A.Y.2 013- 14/CIT(A)-4 FOR THE ASSESSMENT YEAR 2013-14 PASSED U/S.250(6) R.W.S. 143(3) OF THE ACT. 2 ITA NO.2001/CHNY/2017 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HIS A PPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED INDIRECTING THE LD.AO TO GRANT DEDUCTION U/S.54 OF THE ACT, TO THE EXTENT OF INVESTMENT MADE IN THE CONSTRUCTION OF TH E NEW ASSET AFTER THE DATE OF SALE OF THE ORIGINAL ASSET DATED 13.03.2013. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL EMPLOYED IN M/S. BGR ENERGY SYSTEMS LTD. , FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 ON 02.07.2013 DECLARING TOTAL INCOME OF RS.1,20,72,800/-. INITIAL LY THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT. SUBSEQUENTLY THE C ASE WAS SELECTED FOR SCRUTINY UNDER CASS AND FINALLY ASSESS MENT ORDER WAS PASSED U/S.143(3) OF THE ACT ON 17.02.2016 WHER EIN THE LD.AO REJECTED THE CLAIM OF DEDUCTION CLAIMED U/S.5 4 OF THE ACT AND ASSESSED THE LONG TERM CAPITAL GAIN AT RS.96,52 ,000/-. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT IT WAS NOTICED BY THE LD.AO THAT THE ASSESSEE HAD SOLD HIS RESIDENTIA L HOUSE PROPERTY AT SRINAGAR COLONY, SAIDAPET, CHENNAI FOR SALE CONSIDERATION OF RS.1,32,02,000/- ON 13.03.2013. IN HIS COMPUTATION STATEMENT THE ASSESSEE HAD CLAIMED DEDU CTION U/S.54F OF THE ACT FOR RS.2,42,40,000/- BEING PURCH ASE OF NEW 3 ITA NO.2001/CHNY/2017 RESIDENTIAL HOUSE AT GANDHI NAGAR, ADYAR, CHENNAI. IT WAS FURTHER OBSERVED THAT THE ASSESSEE HAD MADE AGREEME NT ON 06.05.2011 WITH RESPECT TO PURCHASE OF HIS NEW ASSE T. IT WAS ALSO OBSERVED THAT THE ASSESSEE HAD PAID AN AMOUNT OF RS.2,24,00,000/- BEFORE 10.03.2012. SINCE THE ASSES SEE HAD MADE PAYMENT OF RS.2,24,00,000/- ON 06.05.2011 I.E. , BEFORE ONE YEAR FROM THE DATE OF SALE OF THE ORIGINAL ASSE T ON 13.03.2013 THE LD.AO OPINED THAT THE ASSESSEE HAS N OT COMPLIED WITH THE PROVISIONS OF THE SECTION 54F OF THE ACT BECAUSE THE ACT STIPULATES DEDUCTION U/S.54F SHALL BE ALLOWABLE ONLY IF THE NEW ASSET IS PURCHASED WITHIN ONE YEAR FROM THE DATE OF THE SALE OF THE ORIGINAL ASSET. THE ASSESSEE HAD REPLIED STATING THAT THE NEW ASSET WAS COMPLETED AND HANDED OVER BY THE INTERIOR DESIGNER ON 10.05.2013 AND THEREFORE HE WA S ELIGIBLE FOR DEDUCTION U/S.54F OF THE ACT. THEREAFTER THE LD.AO REJECTING THE CLAIM OF THE ASSESSEE DISALLOWED THE CLAIM OF DEDUC TION U/S.54F OF THE ACT BY OBSERVING AS UNDER:- THE CLAIM OF THE ASSESSEE THAT REPAYMENT OF HOUSIN G LOAN WITH LIC HAS BEEN MADE ON 16/03/2013 DOES NOT ENTITLE HIM TO AVA IL OF THE DEDUCTION CLAIM. THE DATE OF AGREEMENT IS 06/05/2011 WHICH IS MATERIAL FOR THE ADMISSIBILITY OF THE DEDUCTION U/S 54 OF THE IT ACT . BY MAKING AN AGREEMENT FOR PURCHASE OF PROPERTY THE ASSESSEE ENT ERED INTO AN AGREEMENT DATED 06.05.2011 WHICH IS BEYOND THE PERI OD OF ONE YEAR BEFORE AS STIPULATED IN THE PROVISION OF SEC.54F OF THE IT ACT. THE DECISION RELIED UPON BY THE ASSESSEE ARE INAPPLICABLE IN THE CASE O F ASSESSEE SINCE THE FACTS IN THOSE CASES ARE DIFFERENCE. THE ASSESSEE H AS GOT DOMAIN OVER THE 4 ITA NO.2001/CHNY/2017 PROPERTY BY MAKING PURCHASE AGREEMENT DATED 06.05.2 011. IN THE CASE OF SHAHJADABEGAM THE ISSUE WAS DATE OF PROVISIONS AND REGISTRATIONS OF SALE DEED, WHEREIN THE PROVISION WAS TAKEN EARLIER AND S ALE DEED WAS REGISTERED SUBSEQUENTLY. IN THE CASE OF MR. BALRAJV S. CIT, THE ISSUE WAS REGARDING REGISTRATION OF DOCUMENT FOR THE CLAIM OF DEDUCTION U/S.54. IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BHARTI M ISHRA, THE ISSUE WAS REGARDING THE CONSTRUCTION OF PROPERTY PRIOR TO DAT E OF TRANSFER OF ASSET/PROPERTY. IN THE CASE OF THE ASSESSEE THE ASS ESSEE HAS PURCHASED NEW RESIDENTIAL HOUSE BEYOND THE PERIOD SPECIFIED U/S.5 4 OF THE ITACT. THE ASSESSEE HAS FURNISHED COPYOF INTERIOR DESIGN AGREE MENT DATED 01.06.2012 FOR THE WORK TO BE CARRIED OUT OF RS.12,00,000/-. H OWEVER THESEDOES NOT SUBSTANTIATE THE CLAIM OF THE ASSESSEE FOR DEDUCTIO N U/S.54, SINCE THE ASSESSEE HAS PURCHASED THE PROPERTY EARLIER AND CAR RIED OUT INTERIOR WORK SUBSEQUENTLY. THESE DOES NOT SUBSTITUTE THE DATE OF PURCHASE OF PROPERTY AS PER AGREEMENT DATED 06.05.2011. THE CBDT VIDE CIRCU LAR NO.667 DATED 18.10.1993 HAS CLARIFIED THAT FOR DEDUCTION U/S.54/ 54F THE COST OF LAND AND CONSTRUCTION THEREON MAY BE CONSIDERED. THE BOARD H AS ALSO SPECIFIED THAT THE CONSTRUCTION THEREON IS COMPLETED WITHIN THE PE RIOD SPECIFIED IN THE SECTION. THE DEDUCTION CLAIMED U/S 54 OF THE IT ACT OF RS.96 52000/- IS ACCORDINGLY REJECTED. 5. ON APPEAL THE LD.CIT(A) PARTLY ALLOWED THE APPEA L OF THE ASSESSEE BY DIRECTING THE LD.AO TO GRANT DEDUCTION U/S.54 OF THE ACT TO THE ASSESSEE TO THE EXTENT OF INVESTMENT MAD E IN THE CONSTRUCTION OF THE NEW HOUSE PROPERTY AFTER THE SA LE OF THE PROPERTY WHICH TOOK PLACE ON 31.03.2013 BY OBSERVIN G AS UNDER:- 13. I HAVE CONSIDERED THE ABOVE CONTENTIONS OF THE APPELLANT AND IT IS CLEARLY ESTABLISHED THAT INVESTMENT IN THE NEW H OUSE PROPERTY IS TOWARDS CONSTRUCTION OF HOUSE PROPERTY RATHER THAN PURCHASE OF THE SAME AS HELD BY THE A.O. THEREFORE, THE PROVISIONS OF SE CTION 54 ARE INTERPRETED IN THAT CONTEXT. AS FAR AS INVESTMENT I N THE CONSTRUCTION OF NEW HOUSE PROPERTY U/S 54 IS CONCERNED, THERE IS NO AMBIGUITY IN THE SECTION REGARDING THE DATE OF INVESTMENT IN THE CON STRUCTION. THE RELEVANT PARA OF SECTION 54 READS AS FOLLOWS, '.. AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DA TE ON WHICH THE TRANSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIO D OF THREE YEARS AFTER 5 ITA NO.2001/CHNY/2017 THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE.' FROM TH E ABOVE, IT IS EVIDENTLY CLEAR THAT THE INVESTMENT IN THE CONSTRUCTION OF NE W HOUSE PROPERTY SHOULD COMMENCE FROM THE DATE OF SALE OF THE ORIGIN AL ASSET. ACCORDINGLY, THE BENEFIT U/S54 CAN BE ALLOWED FOR THE INVESTMENT IN THE CONSTRUCTION OF NEW HOUSE PROPERTY WHICH WAS MADE AFTER THE DATE OF SALE OF THE ORIGINAL ASSET. IN THE PRESENT CASE OF THE APPELLANT, AS PER THE CO NSTRUCTION AGREEMENT WITH M/S PALACE INVESTMENTS, IT IS NOTICED THAT THE SAME WAS EXECUTED ON 13/02/2011 WHICH IS MUCH PRIOR TO THE SALE AT THE O RIGINAL CAPITAL ASSET ON 13/03/2013. THE APPELLANT HAS SUBMITTED A COPY O F THE CONSTRUCTION AGREEMENT AND AT PAGE 6 OF THE SAME, THERE IS MENTI ON OF THE 'SCHEDULE OF PAYMENT' OF RS.2,46,65,000/-. IT IS MENTIONED THAT THE ASSESSEE HAS UNDERTAKEN TO PAY THE SAME IN THE MANNER AND SCHEDU LE AS STIPULATED IN ANNEXURE-II ATTEST TO THIS AGREEMENT. HOWEVER, THERE IS NO ANNEXURE-II ATTACHED TO THE COPY OF CONSTRUCTION AG REEMENT FILED WITH ME. THEREFORE, THE AO IS DIRECTED TO OBTAIN THE DET AIL OF PAYMENTS MADE BY THE APPELLANT TO THE BUILDER PRIOR TO 13/03/2013 . THE RELEVANT BANK ACCOUNTS SHOULD BE EXAMINED TO VERIFY THE SAID PAYM ENTS. ACCORDINGLY, THE AO SHOULD GRANT DEDUCTION U/S 54 TO THE EXTENT OF INVESTMENT MADE IN THE CONSTRUCTION OF THE NEW HOUSE PROPERTY AFTER TH E DATE OF SALE OF PROPERTY WHICH TOOK PLACE ON 13/03/2013. 6. BEFORE US THE LD.AR MADE THE FOLLOWING SUBMISSIO NS:- (I) THE ASSESSEE HAD SOLD HIS RESIDENTIAL HOUSE AT SRINAGAR COLONY ON 13.03.2013 FOR SALE CONSIDERATION OF RS.1,32,02,000/- AND THE SAME IS NOT IN DISPUTE. HE HAS RECEIVED THE SALE CONSIDERATION OF RS.18,00,000/- O N 04.03.2013 AND RS.1,14,00,000/- ON 14.03.2013 AGGREGATING TO RS.1,32,00,000/-. (II) THE ASSESSEE HAD CONSTRUCTED A HOUSE BY MAKING PAYMENTS IN THE FOLLOWING MANNER: S. PARTICULARS AMOUNT DATE OF AMOUNT (RS.) EXHI 6 ITA NO.2001/CHNY/2017 NO (RS.) PAYMENT BIT 1 PAYMENTS MADE THROUGH ASSESSEES BANK ACCOUNT NAME: STATE BANK OF INDIA 47,65,000 15/02/2011 5,00,000 2 17/02/2011 25,00,000 11/03/2011 3,50,000 20/05/2011 14,15,000 2 PAYMENTS MADE THROUGH SPOUSES BANK ACCOUNT NAME: INDIAN OVERSEAS BANK 14,98,000 11/03/2011 9,73,000 3 PAYMENT THROUGH SPOUSES POST OFFICE SAVINGS ACCOUNT 11/03/2011 5,25,000 3 PAYMENTS MADE THROUGH LIC HOUSING LOAN 1,79,77,000 25/03/2011 11,52,000 4 10/04/2011 40,00,000 05/07/2011 33,00,000 09/09/2011 22,00,000 15/11/2011 11,00,000 12/12/2011 22,00,000 17/03/2012 7,48,000 28/03/2012 14,52,000 19/05/2012 18,25,000 TOTAL 2,42,40,000 2,42,40,000 (III) FURTHER THE ASSESSEE HAD REPAID THE HOUSING L OAN OBTAINED FROM LIC TO THE EXTENT OF RS.1,38,70,790/- ON 19.03 .2013 AND THEREAFTER THE LOAN ACCOUNT WAS CLOSED ON 04.04 .2013. (IV) THUS THE ASSESSEE HAD UTILIZED THE SALE PROCEE DS TOWARDS THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE PROPE RTY WITHIN THE DUE DATE OF FILING THE RETURN WHICH IS O N 31 ST JULY 2013. (V) THE CONSTRUCTION OF THE RESIDENTIAL HOUSE WAS C OMPLETED IN ALL ASPECTS INCLUDING INTERIOR DECORATION AND THE P ROPERTY 7 ITA NO.2001/CHNY/2017 WAS TAKEN POSSESSION ON 10.05.2013 WHICH IS EVIDENT FROM THE POSSESSION CERTIFICATE ISSUED BY M/S. INSIGN. WITH THE ABOVE SUBMISSION THE LD.AR PLEADED THAT TH E ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SECTIO N 54 OF THE ACT AND THEREFORE HE IS ELIGIBLE FOR DEDUCTION CLAI MED UNDER THE ACT FOR RS.96,54,000/-. 7. THE LD.DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE LD.REVENUE AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. SECTION 54(1) OF THE ACT STIPULATES THAT THE ASSESSEE SHALL BE ENTITLED FOR DEDUCTION IF HE HAS CONSTRUCTED THE RESIDENTIAL HOUSE WITHIN A PERI OD OF 3 YEARS AFTER THE TRANSFER OF THE ORIGINAL ASSET. FURTHER S ECTION 54(2) OF THE ACT STIPULATES THAT THE ASSESSEE SHALL DEPOSIT THE AMOUNT WHICH IS NOT UTILIZED FOR CONSTRUCTION OF THE NEW ASSET BEFO RE THE DATE OF FILING THE RETURN OF INCOME U/S.139(1) OF THE ACT I N THE CAPITAL ACCOUNT SCHEME ACCOUNT OF ANY NATIONALIZED BANK. FR OM THE FACTS OF THE CASE ILLUSTRATED BY THE LD.AR HEREIN ABOVE, WE FIND THAT THE ASSESSEE HAS COMPLIED WITH BOTH THE CONDITIONS STIP ULATED UNDER THE PROVISIONS OF SECTION 54 OF THE ACT. THE POSSES SION LETTER FROM 8 ITA NO.2001/CHNY/2017 M/S. INSIGN MAKES IT EVIDENT THAT THE ASSESSEE HAS COMPLETED THE CONSTRUCTION OF THE NEW RESIDENTIAL PROPERTY ON 10. 05.2013 WHICH IS WELL BEFORE 3 YEARS AS PROVIDED UNDER THE ACT. I N THE CASE CIT VS. J.R. SUBRAMANYABHUT, THE HONBLE KARNATAKA HIGH COURT VIDE ITS ORDER DATED 05.06.1986 HAD MADE IT CLEAR THAT F OR GRANTING RELIEF U/S.54 OF THE ACT, THE DATE OF COMMENCEMENT OF CONS TRUCTION IS IMMATERIAL,IF THE CONSTRUCTION OF THE BUILDING IS C OMPLETED WITHIN THE STIPULATED PERIOD UNDER THE ACT THE ASSESSEE WI LL BE ENTITLED FOR DEDUCTION. FURTHER IN THE CASE OF THE ASSESSEE IT IS EVIDENT THAT THE ENTIRE SALE PROCEEDS WAS UTILIZED FOR REPAYMENT OF THE HOUSING LOAN OBTAINED FROM LIC FOR CONSTRUCTION OF THE NEW RESIDENTIAL HOUSING PROPERTY ON 19.03.2013. MOREOVER ON THE PLA IN READING OF SECTION 54 OF THE ACT WE DO NOT FIND ANY BAR AS TO WHEN THE ASSESSEE SHOULD START CONSTRUCTION OF THE NEW HOUSI NG PROPERTY. FURTHER DISTINCTION CANNOT BE DRAWN IN A CASE WHERE THE ASSESSEE HAD MADE PAYMENTS DIRECTLY TO THE CONTRACTOR WHO HA S CONSTRUCTED THE RESIDENTIAL HOUSE OF THE ASSESSEE O N CREDIT BASIS AND IN A CASE WHERE THE ASSESSEE HAD OBTAINED LOAN FOR CONSTRUCTION OF THE PROPERTY AND THEREAFTER REPAID THE LOAN AMOUNT. ACCORDINGLY IN THE CASE OF THE ASSESSEE, TH E PAYMENT MADE FOR REPAYMENT OF THE LOAN SHOULD BE CONSTRUED AS THE PAYMENT MADE FOR CONSTRUCTION OF THE HOUSE BECAUSE THE 9 ITA NO.2001/CHNY/2017 CONSTRUCTION OF THE RESIDENTIAL PROPERTY WAS COMPLE TED ONLY AFTER THE LOAN WAS REPAID. IT HAS BEEN HELD ON SEVERAL OC CASIONS BY THE HONBLE APEX COURT AND VARIOUS HIGH COURTS THAT BEN EFICIAL PROVISIONS OF THE ACT HAS TO BE INTERPRETED LIBERAL LY IN FAVOUR OF THE ASSESSEE KEEPING IN VIEW OF THE PURPOSE OF THE ENAC TMENT OF THE STATUTES. IT IS PERTINENT TO MENTION AT THIS JUNCTU RE THAT THE BENEFIT OF DEDUCTION U/S.54 WAS INTRODUCED IN THE STATUTE T O PROMOTE HOUSING INFRASTRUCTURE IN THE COUNTRY. THEREFORE IN THE CASE OF THE ASSESSEE AS PER THE FACTS MENTIONED IN PARA6 HEREI N ABOVE, WE FIND THAT THE ASSESSEE HAS SATISFIED THE CONDITIONS LAID DOWN IN SECTION 54 OF THE ACT BECAUSE THE ASSET SOLD BY THE ASSESSEE IS A RESIDENTIAL HOUSE AND HE HAS UTILIZED THE SALE PROC EEDS OF THE RESIDENTIAL HOUSE FOR CONSTRUCTION OF A NEW RESIDEN TIAL HOUSE PROPERTY WITHIN THE STIPULATED PERIOD OF 3 YEARS AN D THE OCCASION FOR REMITTING THE SALE PROCEEDS IN THE CAPITAL GAIN SCHEME ACCOUNT DID NOT ARISE BECAUSE THE ASSESSEE HAD UTILIZED THE SALE PROCEEDS FOR THE CONSTRUCTION OF THE RESIDENTIAL HOUSE ON 19 .03.2013I.E., WITHIN THE DUE DATE OF FILING THE RETURN OF INCOME WHICH IS ON 31/07/2013. HOWEVER FROM THE ORDER OF THE LD.AO AS WELL AS THE LD.CIT(A) IT APPEARS THAT THE DATES WITH RESPECT TO THE REPAYMENT OF THE HOUSING LOAN TO THE LIC OF RS.1,38,70,790/- AND THEFACTS MENTIONED BY THE LD.AR WHICH IS RECORDED IN PARA 6 HEREIN ABOVE 10 ITA NO.2001/CHNY/2017 IS NOT EXAMINED. THEREFORE IN THE INTEREST OF JUSTI CE WE HEREBY REMIT BACK THE MATTER TO THE FILE OF LD.AO IN ORDER TO VERIFY THE FACTS STATED BY THE LD.AR HEREIN ABOVE ANDIF THE DA TE OF REPAYMENT OF THE HOUSING LOAN IS FOUND TO BE ON 19. 03.2013 AND IF THE LETTER DATED 10.05.2013 OF M/S. INSIGNWITH REGA RD TO THE COMPLETION OF THE CONSTRUCTION OF THE RESIDENTIAL H OUSE IS FOUND TO BE GENUINE NEED LESS TO MENTION THAT INTERIOR DECOR ATION IS A PART OF CONSTRUCTION ACTIVITY, THEN GRANT DEDUCTION TO T HE ASSESSEE U/S.54 OF THE ACT, OTHERWISE PASS APPROPRIATE ORDER IN ACCORDANCE WITH MERIT AND LAW. IT IS ORDERED ACCORDINGLY. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED ON THE 15 TH FEBRUARY, 2018 AT CHENNAI. SD/- SD/- ( ! ' . #$ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # $% /JUDICIAL MEMBER $% / ACCOUNTANT MEMBER &# /CHENNAI, '$ /DATED15 TH FEBRUARY,2018 RSR $( )*+* /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. . ( )/CIT(A) 4. . /CIT 5. */0 1 /DR 6. 023 /GF