Shri Rajesh Kale, Indore V. THE IITO Ward-3(5), Indore

ITA 211/IND/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7186 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-09-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 10-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K MITRA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Difference of opinion; Valuation report; Non compliance
• Section: 143(3); 50C; 54F; 27; 148; 54; 139

Judgement Text

RAJESH KALE ITA NO.211/IND/2017 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.211/IND/2017 ASSESSMENT YEAR: 2013-14 REVENUE BY S HRI P.K. MITRA, SR.DR ASSESSEE BY SHRI PRANAY GOYAL ,CA DATE OF HEARING 1 0.09. 2018 DATE OF PRONOUNCEMENT 28 . 9 .2 018 O R D E R PER MANISH BORAD, AM. THE APPEAL FILED BY THE ASSESSEE PERTAINING TO A.Y. 2013-14 IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME TAX(APPEALS)-I, INDORE, (IN SHORT CIT(A)), VIDE A PPEAL NO. IT- 10158/2016-17 ORDER DATED 07.12.2016 WHICH IS ARISI NG OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(HEREINA FTER CALLED AS THE ACT) FRAMED ON 30.03.2016 BY ITO-3(5), INDOR E. SHRI RAJE SH KALE 625/8, NANDA NAGAR, INDORE VS. INCOME TAX OFFICER WARD 3(5), INDORE ( APPELLANT ) (RESPONDENT ) PAN NO.A ISPL3707G RAJESH KALE ITA NO.211/IND/2017 2 2. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE RECORDS ARE THAT THE APPELLANT IS AN INDIVIDUAL DOING THE BUSINESS OF TR ADING/SUPPLY (CONTRACT) OF ELECTRIC GOODS, AGRICULTURE & HORTICU LTURE GOODS BESIDES RECEIVING RENT OF WAREHOUSE. RETURN OF INCOME WAS F ILED DECLARING INCOME OF RS. 12,79,191/-. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS LD.A.O EXAMINED THE TRANSACTIONS OF SAL E OF WAREHOUSE OF THE ASSESSEE. SALE CONSIDERATION WAS DISCLOSED AT RS.2,07,00,000/- WHEREAS THE MARKET VALUE ADOPTED B Y THE LD.A.O WAS AT RS.4,75,00,000/- INVOKING THE POVISIONS OF SECTION 50C AND LONG TERM CAPITAL GAIN RECOMPUTED. BENEFIT OF EXEM PTION U/S 54F WAS ALSO LIMITED TO THE AMOUNT APPLIED UP TO THE DU E DATE OF FILING OF RETURN AS THE ASSESSEE COULD NOT DEPOSIT THE REM AINING AMOUNT UNDER THE CAPITAL GAIN ACCOUNT SCHEME. LD. AO FURTH ER RESTRICTED THE EXEMPTION U/S 54F OF THE ACT TO THE EXTENT OF A SSESSEES SHARE ON THE PROPORTIONATE BASIS AS THE RESIDENTIAL FLAT PURCHASED WAS IN JOINT NAME OF THE ASSESSEE, SHRI RAJESH SHARMA AND M/S. R & J CHEMICALS. LD.A.O ACCORDINGLY COMPUTED THE LONG TE RM CAPITAL GAIN IN FOLLOWING MANNER; RAJESH KALE ITA NO.211/IND/2017 3 SALE CONSIDERATION AS PER FAIR MARKET PRICE RS.4,75,00,000/ - LESS: INDEX COST OF ACQUISITION RS. 37,53,485/ - LESS: INDEX COST OF IMPROVEMENT RS. 33,09,589/ - LESS: TRANSFER EXPENSES RS. 33,49,170/ - TOTAL RS. 3,70,87,756/ - LESS: EXEMPTION U/S 54F RS. 23,82,116/ - LONG TERM CAPITAL GAIN RS. 3,47,05,640/ - THE ABOVE SUM OF LONG TERM CAPITAL GAIN WAS ADDED TO THE INCOME DISCLOSED IN THE INCOME TAX RETURN AT RS.12, 79,190/- AND INCOME ASSESSED AT RS.3,59,84,830/-. 3. AGGRIEVED ASSESSEE PREFERRED AN APPEAL FOR LD.CI T(A) AND PARTLY SUCCEEDED. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L RAISING FOLLOWING FIVE GROUNDS OF APPEAL; 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, INDORE HAS ERRED IN CONFORMING ADDITION TO THE EXTENT OF RS. 88,02,522/- TO THE TOTAL INCOME OF THE ASSESSEE, WHEREBY ADDITION OF RS. 79,0 5,700/_ IS CONFIRMED BY RESTRICTING THE CLAIM OF INVESTMENT MAD E IN PURCHASE OF RESIDENTIAL FLAT U/S 54F TO 33.33% AND MOREOVER BY O NLY CONSIDERING THE AMOUNT WHICH IS INVESTED UP TO 30.03.2013 I.E. D UE DATE OF FILLING RETURN U/S 139(1) OF THE ACT. FURTHER AN AMOUNT OF RS. 8,96,882/ - IS CONFIRMED ON ACCOUNT OF DIFFERENCE IN ACTUAL CONSIDER ATION AND DEEMED CONSIDERATION U/S 50C OF THE ACT. RAJESH KALE ITA NO.211/IND/2017 4 2. THAT, THE LD, CIT (APPEALS)-I, INDORE, ERRED IN NOT CONSIDERING THE SUBMISSION MADE BEFORE HIM THAT ADDITION OF RS. 8,96 ,882/ - WAS ONLY ON ACCOUNT OF DIFFERENCE IN DETERMINATION OF TH E FAIR MARKET VALUE BY LD. DVO AND THE ACTUAL TRANSACTION VALUE, W HEREBY VARIATION IN BETWEEN SUCH VALUE IS ONLY 4.33% WHICH IS A VERY NEGLIGIBLE VARIATION BASED ON DIFFERENCE IN OPINION A ND ESTIMATION VARIANCE, WHICH SHOULD BE IGNORED. 3. THAT, LD. CIT (APPEALS)-I, INDORE, ERRED NOT THE CON SIDER THE ALTERNATE SUBMISSION MADE BEFORE HIM REGARDING DELET ION OF ADDITION ON ACCOUNT OF DIFFERENCE IN VALUATION OF RS.8,96,88 2/-, WERE BY IT WAS SUBMITTED THAT EVEN IF VALUE DETERMINED BY LD. DVO IS TO BE CONSIDERED RATHER THAN THE ACTUAL TRANSACTION VALUE, SUCH ADDITION IS ACCOUNT OF NOTIONAL INCOME U/S 50C WHICH IS NOT ACT UALLY RECEIVED, HENCE IS ALSO NOT CAPABLE OF REINVESTMENT AND REAL A MOUNT RECEIVED IS REINVESTED TIMELY TO AVAIL VALID EXEMPTION U/S 54F , THUS SUCH ADDITION IS LIABLE TO BE DELETED. 4. THAT, LD. CIT (APPEALS)-I, INDORE ERRED IN RESTRICT ING THE CLAIM OF INVESTMENT MADE U/S 54F TO THE EXTENT OF 33.33% ON THE GROUND THAT PROPERTY IS PURCHASED IN JOINT NAMES WITH PARTNER A ND PARTNERSHIP FIRM, IGNORING THE FACT & SUBMISSION MADE THAT THE ENTIRE CONSIDERATION FOR THE PURCHASE OF PROPERTY HAS BEEN PAID BY THE A PPELLANT, THUS APPELLANT SHALL GET FULL CLAIM OF INVESTMENT SO MAD E. 5. THAT, LD. CIT (APPEALS)-I, FURTHER ERRED TO RESTRIC T THE AMOUNT OF REINVESTMENT MADE AND CLAIMED OF RS. 1,02,87,756/- TO AN AMOUNT OF RS. 71,46,348/- I.E. BY ALLOWING THE INVESTMENT MADE ONLY UP TILL THE DATE OF FILLING OF RETURN ON 30.03.2013, IGNORING THE FACT THAT THE REQUIRED AMOUNT WAS VALIDLY REINVESTED WITHIN THE STATUTORY TIME LIMIT OF 2 YEARS AS CONTEMPLATED U/S 54F. RAJESH KALE ITA NO.211/IND/2017 5 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED AS FOLLO WS; , 7.1. THAT, VIDE GROUND NO. 1 AND GROUND NO.2 RAISED IT IS ARGUED THAT THE ACTUAL TRANSACTION VALUE OF THE PROPERTY SOLD IS RS. 2,07,00,000/- AND THE VALUE REFERRED BY LD. DVO WAS RS. 2,15,96,882/- THUS THERE IS A VERY MARGINAL VARIATION OF RS.8,96,882/- I.E. ONLY OF 4.33% BETWEEN THE ACTUAL TRANSACTION VALUE AND VALUATION REFE RRED BY LD. DVO, HENCE IT IS HUMBLY PRAYED THAT ACTUAL TRANS ACTION VALUE SHOULD NOT BE REJECTED JUST ON ESTIMATION BASIS MORE PART ICULARLY WHEN THE VARIATION BETWEEN THE ACTUAL VALUE AND THE ON E ADOPTED IS LESS THAN 10%. RELIANCE IS PLACED ON FOLLOWING JUDICIAL PRONOUNCEMENT IN SUPPORT OF OUR ABOVE ARGUMENT. C.B. GAUTAM VS. UNION OF LNDIA, [1992165 TAXMAN 440 (SC) CIT VS. PRATAPSINGH AMROSINGH RAJENDRA SINGH AND DE EPAK KUMAR [1992164 TAXMAN 585 (RAT.) HONEST GROUP OF HOTELS P. LTD. VS. CIT TAXMAN 464 (J&K) ) SMT. SITA BAI KHETAN VS. ITO, [20171 88 TAXMANN.COM 377 (JAIPUR - TRIB.) BIMLA SINGH VS. COMMISSIONER OF INCOME TAXI (2009) 308 ITR 71 M/S JOHN FOWLER (INDIA) PVT. LTD. VS. DCIT, I.T.A N O. 7545/MUM/2014 M/S KRISHNA ENTERPRISES VS. ADDL. CIT, I.T.A. NO. 5 402(MUM 111/2014 RAHUL CONSTRUCTION VS. DCIT ITA NO. 1543 THUS, YOUR HONOR IN LIGHT OF THE ABOVE JUDICIAL PRONO UNCEMENT IT CAN BE SEEN THAT ESTIMATION VARIATION OF 10% OR LES S SHOULD BE IGNORED, THUS IT IS HUMBLY PRAYED TO DELETE THE ADDITION OF RS. 8,96,882/- MADE ON SUCH ACCOUNT. RAJESH KALE ITA NO.211/IND/2017 6 7.2. THAT, VIDE GROUND NO. 1 AND GROUND NO. 5, IT IS ARGUED THAT THE LD. CIT -A ERRED IN SUSTAINING ADDITION MADE OF RS, 31,41,408/- BY RESTRICTING CLAIM MADE U/S 54F OF THE ACT, MADE OF RS, 1,02,87,756/- (FLAT PURCHASED ON 18.02.2013 AT RS. 1,21,71,100/-) TO ONLY RS. 71,46,348/- ON THE BASIS THAT SUCH AMOUNT IS NOT DEPOSITED IN CAPITAL GAIN ACCOUNT SCHEME BEFORE THE DUE DATE OF FILLING RETURN U/S 139, HOWEVER IGNORING THE FACT THAT THE APPELLA NT HAS MADE INVESTMENT OF RS. 1,02,87,756/- VALIDLY BEFORE THE DUE DATE AS CONTEMPLATED UNDER THE SECTION I.E. TWO YEARS FROM THE DATE OF SALE OF ORIGINAL ASSET, TO SUPPORT SUCH CLAIM RELIANCE I S PLACED ON FOLLOWING JUDICIAL PRONOUNCEMENTS; CIT VS. K. RAMCHANDRA RAO, [20151 56 TAXMANN.COM 163 (KARNATAKA) MRS. SEEMA SABHARWAL VS. I.T.O, [2018] 91 TAXMANN.C OM 2 (CHANDIGARH - TRIB.) ASHOK KAPASIAWALA VS. ITO, [2015] 63 TAXMANN.COM 28 4 (AHMEDABAD - TRIB.) SMT. M.K. VITHYA VS. ITO, [2018] 91 TAXMANN.COM 102 (CHENNAI - TRIB.) THUS, IN LIGHT OF THE ABOVE PRONOUNCEMENTS IT IS HU MBLY PRAYED BEFORE YOUR HONORS TO KINDLY DELETE THE ADDITION OF RS.31,41,408/- MADE ON THIS ACCOUNT. 7.3. THAT, CLAIM OF INVESTMENT MADE BY THE APPELLAN T U/S 54F WAS RESTRICTED TO THE EXTENT OF 33.33% ON THE GROUND THAT PROPERTY IS PURCHASED IN THE JOINT NAME BY THE APPELLANT ALONG WITH HIS PARTNER AND PARTNERSHIP FIRM, IN THIS REGARD OUR HUMBLE SUB MISSION TO ALLOW OUR CLAIM IS AS UNDER; RAJESH KALE ITA NO.211/IND/2017 7 THAT, THE ENTIRE CONSIDERATION FOR THE PURCHASE OF THE FLAT WAS PAID BY THE APPELLANT. THAT, IT IS THE SETTLED PRINCIPL E THAT WHEN CONSIDERATION FOR THE PURCHASE OF PROPERTY IS PAID BY ASSESSEE, THEN EXEMPTION U/S 54 CAN BE VALIDLY CLAIMED BY THE ASSE SSEE EVEN IF PROPERTY IS PURCHASED IN THE JOINT NAMES, RELIANCE IS PL ACED ON GHANSHYAM MALI VS. ITO - ITAT INDORE, GURNAM SINGH VS. CIT (2008) 170 TAXMAN 160 (PUNT. & HAR.), MUKESH R. THAVERI VS. DY. CIT (2008) 10 ITT 305 (TRIB. INDORE) FURTHER, APPELLANT RELIES ON VARIOUS DECISION IN SUPPORT OF ITS CLAIM, THAT WHEN CONSIDERATION FLOWS FROM ASSESSEE, THE BENEFIT OF INVESTMENT SHOULD BE ALLOWED TO HIM, RAVINDRA KUMAR ARORA VS. CIT [20111 15 TAXMANN.COM 307 (DELHI), CIT VS. SHRI KAMAL WAHAL I TA 4/2013, DIRECTOR OF IT VS. MRS. JENNIFER BHIDE ITA 169/2011. 8. THAT, IT IS ALSO SUBMITTED RESPECTFULLY BEFORE YOUR HONOR'S THAT IN CONSTRUING A BENEFICIAL ENACTMENT, THE VIEW THAT ADVANCES T HE OBJECT OF THE ENACTMENT AND SERVES ITS PURPOSE MUST BE PREFE RRED TO THE ONE WHICH OBSTRUCTS THE OBJECT AND PARALYSES THE PU RPOSE OF THE BENEFICIAL ENACTMENT, RELIANCE IS PLACED ON CIT VS. RAJESH KUMAR TALAN 286 ITR 274 (GAU. H.C.) 9. THAT, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE , CASE LAWS ON THE ISSUE CITED ABOVE, IT IS HUMBLY REQUESTED YOUR HONOR'S TO KINDLY DECIDE THE ISSUE ON MERIT AND DELETE THE ADDITION SUSTAINED BY LD. CIT-A. 6. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED, SUPPORTING THE FINDINGS OF LD. CIT(A). RAJESH KALE ITA NO.211/IND/2017 8 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND ALSO GONE THROUGH THE JUDGMENTS AND D ECISIONS REFERRED AND RELIED BY LD. COUNSEL FOR THE ASSESSEE CAREFULLY. 8. FIRST WE WILL TAKE UP GROUND NO.1, 2 & 3 WHICH REVOLVES AROUND THE ADDITION OF RS. 8,96,882/- CONFIRMED BY THE LD. CIT(A). WE FIND THAT THE ASSESSEE SOLD THE WAREHOUSE AT A S ALE CONSIDERATION OF RS.2,07,00,000/-. LD.A.O ADOPTED F AIR MARKET VALUE PRICE OF RS.4,75,00,000/-. DURING THE ASSESSM ENT PROCEEDINGS LD.A.O CALLED FOR THE DEPARTMENTAL VALUATION OFFICE RS REPORT VIDE LETTER DATED 16.3.2016 BUT THE VALUATION REPORT WAS RECEIVED BY THE ASSESSEE ON 13.6.2016 WHICH WAS MUCH AFTER THE FIN ALIZATION OF THE ASSESSMENT U/S 143(3) OF THE ACT ON 30.3.2016. WHE N THE MATTER WAS TAKEN UP BEFORE LD.CIT(A) AND THE REPORT OF DEP ARTMENTAL VALUATION OFFICER (DVO) WAS PLACED BEFORE HIM, LD. CIT(A) OBSERVED THAT AS PER THE LD. DVO THE FAIR MARKET VALUE WAS C OMPUTED AT RS.2,15,96,882/- . ON THE BASIS OF LD. DVOS REPOR T, LD.CIT(A) DELETED THE ADDITION OF RS.2,59,03,118/-. 9. NOW THE ASSESSEE IS AGGRIEVED WITH THE FINDINGS OF LD.CIT(A) SUSTAINING THE ADDITION OF RS. 8,89,882/-. IT HAS BEEN ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE VARIATION BETWEEN THE SALE CONSIDERATION SHOWN BY THE ASSESSEE VIS--VIS THE V ALUATION DONE BY LD. DVO IS HAVING THE DIFFERENCE OF ONLY AROUND 4.3 3%, AND THERE ARE VARIOUS JUDGMENTS IN FAVOUR OF THE ASSESSEE WHI CH SHOWS THAT IF THE DIFFERENCE IS LESS THAN 10% THEN THE ASSESSEE S HOULD BE GIVEN RAJESH KALE ITA NO.211/IND/2017 9 THE BENEFIT AND NO ADDITION SHOULD BE MADE. 10. WE HAVE GONE THROUGH THE DECISION OF CO-ORDINATE BENCH OF JAIPUR IN THE CASE OF SITA BAI KHETAN V/S ITO 88 TA XMANN.COM 377(2017) DATED 27.7.2016 WHEREIN SIMILAR ISSUE H AS BEEN DEALT IN WHICH PROVISIONS OF SECTION 50C OF THE ACT WAS INVO KED AND CAPITAL GAIN WAS COMPUTED BUT THE DIFFERENCE BETWEEN THE VA LUATION ADOPTED BY THE STAMP VALUATION AUTHORITY AND THAT D ECLARED BY THE ASSESSEE WAS LESS THAN 10%, TRIBUNAL HELD IN FAVOUR OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO ADOPT THE VA LUE AS DECLARED BY THE ASSESSEE. 11. HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V/S PRATAPSINGH AMROSINGH RAJENDRA SINGH AND RAJENDRA K UMAR 200 ITR 788 (1993) DEALING WITH THE VERY SAME ISSUE HEL D THAT THERE MAY BE A VERY MARGINAL DIFFERENCE IN THE ACTUAL INV ESTMENT AND THE REPORT OF THE VALUATION OFFICER FOR A NUMBER OF REA SONS AS THE VALUATION REPORT IS PREPARED ON THE BASIS OF NORMS PRESCRIBED BY THE CPWD FOR THE CONSTRUCTION OF BUILDINGS AND THE DIFF ERENCE MAY BE WITH REGARD TO THE QUALITY OF THE MATERIALS ETC. T HE INCOME TAX OFFICER COULD HAVE EXAMINED THE MATTER IN DETAIL WI TH REGARD TO THE BOOKS OF ACCOUNTS IN ORDER TO SAY THAT THE BOOKS AR E NOT RELIABLE. SIMPLY BECAUSE THE VALUATION REPORT IS OF HIGHER AM OUNT, DIFFERENCE CANNOT BE SAID TO BE NOT RELIABLE UNLESS ANY DEFECT IS FOUND IN THE ACCOUNTS OF BOOKS OF ACCOUNTS. TRIBUNAL WAS THEREFO RE JUSTIFIED IN DEALING THE ADDITION. RAJESH KALE ITA NO.211/IND/2017 10 12. WE THEREFORE RESPECTFULLY FOLLOWING THE ABOVE RE FERRED JUDGMENTS AND DECISIONS AS WELL AS IN THE GIVEN FAC TS AND CIRCUMSTANCES OF THE CASE WHERE THE ALLEGED DIFFERE NCE BETWEEN THE VALUATION MADE BY THE LD. DVO AND THE SALE CONSIDER ATION SHOWN BY THE ASSESSEE IS ONLY 4.33%, LD. CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS.8,89,882/-. WE THEREFORE DIRECT THE LD.A.O TO COMPUTE THE LONG TERM CAPITAL GAIN ON THE BASIS OF SALE CONSIDERATION OF RS.2,07,00,000/- DISCLOSED BY THE ASSESSEE. IN THE RESULT GROUND NO.1, 2 & 3 OF ASSESSEES APPEAL ARE ALLOWED TO THE EXTENT OF DELETION OF ADDITION OF RS.8,89,882/-. 13. NOW WE TAKE UP GROUND NO.4 WHICH RELATES TO REST RICTION OF CLAIM OF BENEFIT UNDER SECTION 54F OF THE ACT TO TH E EXTENT OF 33.33%. BRIEF FACTS ARE THAT THE ASSESSEE IN ORDER TO CLAIM THE BENEFIT U/S 54F OF THE ACT INVESTED THE SALE CONSID ERATION FROM SALE OF WAREHOUSE FOR PURCHASING RESIDENTIAL FLAT. THE FLAT WAS PURCHASED IN THE JOINT NAME OF ASSESSEE, SHRI RAJES H SHARMA AND PARTNERSHIP FIRM M/S R&J CHEMICALS. THE ASSESSEE C LAIMED THE EXEMPTION OF RS.1,02,87,756/-. LD. A.O ON OBSERVING THAT THE PAYMENT FOR PURCHASE OF RESIDENTIAL FLAT HAS ONLY B EEN MADE AT RS. 71,46,348/- UP TO THE DATE OF FILING OF THE RETURN OF THE INCOME IGNORED THE REMAINING AMOUNT. LD.A.O FURTHER GAVE PROPORTIONATE BENEFIT TO 33.33% OF RS.71,46,348/- ON THE PREMISE THAT THE ASSESSEE IS A JOINT HOLDER WITH OTHER TWO PERSONS. THIS FACT IS NOT RAJESH KALE ITA NO.211/IND/2017 11 DISPUTED THAT THE SALE CONSIDERATION OF SALE OF WAR EHOUSE HAS ONLY BEEN INVESTED FOR PURCHASE OF FLAT BUT COUPLED WITH THIS THE OTHER FACTS ARE THAT THE ASSESSEE TOOK LOAN AND THERE ALS O STOOD CURRENT LIABILITY IN THE NAME OF M/S. R&J CHEMICALS AS ON 3 1.3.2013. IT IS NOT THE CASE OF THE ASSESSEE THAT SHRI RAJESH SHARM A IS HAVING ANY RELATION EXCEPT THAT OF A PARTNER. NOW THE ISSUE I S WHETHER THE ASSESSEE CAN CLAIM THE BENEFIT OF SECTION 54F OF TH E ACT FOR THE INVESTMENT MADE IN THE NAME OF OTHER PERSONS. WE FI ND THAT LD.CIT(A) CONFIRMED THE ACTION OF LD.A.O OF RESTRIC TING THE DEDUCTION U/S 54F TO THE EXTENT OF 33.33% OBSERVING AS FOLLOW S; 7.2 THE OTHER GRIEVANCE OF THE APPELLANT IS AGAINST THE RESTRICTING OF THE CLAIM OF EXEMPTION U/S 54F TO 33.33% EVEN THOUGH THE ENTIRE PURCHASE CONSIDERATION WAS PAID B Y THE APPELLANT AS THE PURCHASE 'WAS IN JOINT NAMES WITH PARTNER AND PARTNERSHIP FIRM. AS NOTED IN DETAIL IN PARA 4 OF THE ASSESSMENT ORDER WHICH IS REPRODUCED ABOVE AT PARA 2 PAGE 4 OF THIS ORDER THE NEW PROPERTY HAS BEEN PURCHASED BY THE APPELLANT IN THE NAME' OF HIMSELF, HIS PARTNER RAJE SH SHARMA AND ERR PARTNERSHIP FIRM M/ S R & J CHEMICALS. THE APPELLANT HAS CLAIMED THAT E ENTIRE CONSIDERATION WAS PAID BY HIM AND HENCE IN VIEW OF THE DECISIONS THE CASE OF GURNAM S INGH VS. CIT, RAVINDRA KUMAR ARORA VS CIT, DIT VS MRS JENNIF ER BHIDE, CIT VS. KAMAL WAHAL ETC ALREADY CITED IN PAR A NO.3 ABOVE. 7.3 ON PERUSAL OF THE JUDGMENTS IT I S SEEN THAT THE FACTS ARE DISTINGUISHABLE. IN ALL THE ABOVE CASE THE REINVEST MENT WAS IN THE NAME OF THE FAMILY MEMBERS VIZ SON, WIFE , RAJESH KALE ITA NO.211/IND/2017 12 HUSBAND ETC. IN THE CASE OF THE APPELLANT THE REINVESTMENT HAS BEEN MADE IN THE NAME OF PARTNERSH IP FIRM AND THE OTHER PARTNER IN THE FIRM. THE REASON GIVEN B) THE APPELLANT IS STATED TO BE ON ACCOUNT OF SAFE TY AND SECURITY. THE APPELLANT HAS NOT ELABORATED UPON THE REASONS AS TO HOW THIS WAS ACHIEVED. 0'1. THE CONTRARY THE PURCHASE IN THE NAME OF FIRM AND PARTNER SHRI RAJESH SHARMA COULD LEAD TO INSECURITY IN VIEW OF T HE LEGAL CLAIMS THAT COULD BE RAISED BY THE CO-OWNERS IN WHOSE NAME THE PROPERTY HAS BEEN REGISTERED. IN THI S CONTEXT IT IS PERTINENT TO NOTE THE OBSERVATIONS OF THE BOMBAY HIGH COURT IN THE CASE OF PRAKASH VS ITO WHEREIN THE COURT DID NOT APPROVE THE CLAIM OF EXEM PTION U/ S 54F ON PROPERTY PURCHASED IN THE NAME OF ADOPT ED SON. 'THE CONCEPTS OF THE 'ASSESSEE', 'OWN', 'OWNED' 'OW NER', 'OWNERSHIP', 'CO- OWNER', 'OWNER OF HOUSE PROPERTY' OR 'OWNERSHIP OF PROPERTY' AS ELABORATED IN S. 22 TO 27 AND 32 OF THE IT ACT, ARE VERY MUCH INTERLINKED AND CONNECTED FOR GRANTING THE BEN EFIT UNDER THE 11' ACT. THE WORD AND PHRASE 'OWNER' IN THE CONTEXT OF S. 22 OF THE IT ACT HAS BEEN ELABORATED IN CIT VS. PODAR CEMENT (P) LTD. ETC. (1997) 141 CTR (SC) 67 : (1997) 226 ITR 625 (SC); AND MYSORE MINERALS LTD. VS. CIT (1999) 156 CTR (SC) 1 : (1999) 239 ITR 775 (SC). AN ASSESSEE MUST HAVE VALID TITLE LEGALLY CONVEYED TO HIM AFTER COMPLYING WITH THE REQUIREMENT OF LAW OR AT LEAST ENTITLED TO RECEIVE INCOME FROM THE PROPERTY IN HIS OWN RIGHT AND HAVE CONTROL AND DOMAIN OVER THE SAID PROPERTY FOR ALL T HE LEGAL PURPOSES, WHICH BASICALLY EXCLUDING A THIRD PERSON OF ANY RIG HT OVER THE SAID PROPERTY. THEREFORE, ALL THESE CONCEPTS ARE INTER-L INKED. THE SCHEME AND PURPOSE OF S. 54F, WHICH WAS INSERTED BY THE 'FINANCE ACT, RAJESH KALE ITA NO.211/IND/2017 13 1982, W.E.F 1ST APRIL, 1983, I.E., FROM THE ASST. YR. 1983-84 IS WITH A VIEW TO ENCOURAGE HOUSE CONSTRUCTION. THE OBJECT, THEREFORE , IS TO GIVE ALL BENEFITS UNDER THIS SECTION TO THE ASSESSEE ON CONDITIONS AS ELABORATED IN THE SECTION. NO SUCH BENEFIT IS AVAILABLE TO A PERSON OTHER THAN THE ASSESSEE. IT ALSO MEANS THE ASSESSEE MUST COMPLY WITH THE CONDITIONS STRICTLY A S PER THIS PROVISION IN ALL RESPECTS. AS NOTED, THIS EXEMPTION WILL NOT BE AVAILABLE IN CASE WHERE THE ASSESSEE OWNS, ON THE D ATE OF TRANSFER OF THE ORIGINAL ASSET, ANY RESIDENTIAL HOU SE OR PURCHASES WITHIN THE PERIOD OF ONE YEAR, AFTER SUCH ATE OR CONSTRUCTS WITHIN A PERIOD OF THREE YEARS AFTER SUCH DATE ANY OTHER RESIDENTIAL HOUSE. WHERE AN ASSESSEE PURCHASE S OR CONSTRUCTS ANY OTHER RESIDENTIAL HOUSE WITHIN THE P ERIOD OF THE AFORESAID EXEMPTION UNDER THE PROPOSED PROVISION, IF ALLOWED, SHALL STAND FORFEITED. THE AMOUNT OF CAPITAL GAIN A RISING FROM THE TRANSFER OF THE ORIGINAL ASSET WHICH WAS NOT CH ARGED TO TAXES SHALL BE ALLOWED TO BE INCOME CHARGEABLE UNDE R THE HEAD 'CAPITAL GAIN' RELATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOUS YEAR IN WHICH SUCH RESIDENTIAL HOUSE IS SO PURCHASED OR CONSTRUCTED. FURTHERMORE, IF AN ASSESSEE TRANSFERS NEWLY ACQUIRED RESIDENTIAL HOUSE WITHIN THREE YEARS OF IT S PURCHASE OR CONSTRUCTION, THEN THE AMOUNT OF CAPITAL GAIN ARISI NG FROM THE TRANSFER OF ORIGINAL ASSET, WHICH WAS NOT CHARGED T O TAX, SHALL BE DEEMED TO BE THE INCOME OF THE YEAR IN WHICH THE NEW ASSET IS TRANSFERRED AND THE SAID INCOME SHALL BE CHARGED TO TAX UNDER THE HEAD OF CAPITAL GAINS RELATING TO THE LON G-TERM CAPITAL ASSETS [(1982) 31 CTR (TLT) 12 : (1982) 138 ITR (ST) 10)} (DEPARTMENTAL CIRCULAR NO. 346, DT. 30TH JUNE, 1982). IT IS, THEREFORE, CLEAR THAT THE PURPOSE IS TO GIVE THIS B ENEFIT ON THE OWNERSHIP OF ONE RESIDENTIAL HOUSE ONLY BY THE ASSE SSEE AND TO ENCOURAGE TO HAVE ONE RESIDENTIAL HOUSE OF THE ASSE SSEE. RAJESH KALE ITA NO.211/IND/2017 14 THEREFORE, RIGHT FROM THE SALE OF ORIGINAL ASSET TI LL THE PURCHASE AND/ OR CONSTRUCTION OF THE RESIDENTIAL HOUSE I. E. , THE 'NEW ASSET', THE OWNERSHIP AND DOMAIN OVER THE NEW ASSET IS A MUST. THE NEW PROPERTY MUST BE OWNED BY THE ASSESSE E AND/ OR HAVING LEGAL TITLE OVER THE SAME. T1E ETHERS MAY USE AND OCCUPY THE SAME ALONG WITH THE ASSESSEE BUT THE OWN ERSHIP SHOULD BE OF THE ASSESSEE OF THE RESIDENTIAL HOUSE SO PURCHASED FROM THE NET CONSIDERATION/SALE PROCEEDS OF THE SALE OF ORIGINAL ASSET BY THE ASSESSEE. HAVING OBSERVED ABOVE AND IN VIEW OF THE UNDISPUTED POSITION ON THE RECORD TH AT THE DECEASED ASSESSEE, ADMITTEDLY, THOUGH SOLD THE PROP ERTY OWNED BY HIM YET PURCHASED THE NEW PROPERTY IN THE NAME OF ADOPTED SON AND PAID CONSIDERATION OUT OF THE SALE PROCEEDS IN QUESTION, WITH CLEAR INTENTION TO TRANSFER THE PROP ERTY TO THE ADOPTED SON. HE, THEREFORE, UTILISED THE SALE PROCE EDS TO CONSTRUCT A HOUSE BY TRANSFERRING THE PROPERTY AND SUBMITTING PLAN IN THE NAME OF THE SON ONLY. THE INTENTION WAS VERY CLEAR FROM THE DAY ONE TO TRANSFER THE PROPERTY EVEN BEFO RE THE CONSTRUCTION OF RESIDENTIAL HOUSE TO THE ADOPTED SO N. HE TRANSFERRED THE PROPERTY BEFORE THE PRESCRIBED PERI OD, AS PER THE SCHEME OF SECTION, AND THE SON BECOMES THE OWNER OF THE PROPERTY FOR ALL THE PURPOSES. THE DECEASED ASSESSE E, ADMITTEDLY, HAD NO DOMAIN AND/ OR RIGHT WHATSOEVER ON THE SAID PROPERTY. THIS FACT ITSELF, THEREFORE, DISENTI TLED TO CLAIM ANY EXEMPTION AS THERE WERE VARIOUS NON COMPLIANCES OF THE CONDITIONS AS PER TH E SCHEME OF SS. 54 AND 54F OF THE IT ACT AS MENTIONED ABOVE. IN VIEW OF THE ABOVE THE CLAIM OF THE APPELLANT HAS BEEN RIGHTLY RESTRICTED TO 33.33% BY THE AO. THE SAME IS CONFIRMED IN APPEAL. THIS GROUND OF THE APPELLANT I S RAJESH KALE ITA NO.211/IND/2017 15 THEREFORE DISMISSED. 14. THE ASSESSEE HAS REFERRED AND RELIED VARIOUS JUD GMENTS BUT THE FACTS ARE NOT SIMILAR TO THAT OF THE ASSESSEE B ECAUSE THE INVESTMENTS HAVE NOT BEEN MADE IN THE NAME OF ANY R ELATIVE OF THE ASSESSEE E.G. WIFE, DAUGHTER OR SON. IN THE JUDGME NT REFERRED AND RELIED BY THE ASSESSEE THERE IS A RELATION BETWEEN THE ASSESSEE AND THE PERSONS IN WHOSE NAME THE PROPERTY IS PURCHASED , I.E. MAY BE SPOUSE OR LEGAL HEIR. THE ASSESSEES MAIN CONTENTI ON IS THAT PROVISIONS U/S 54F OF THE ACT DOES NOT SPECIFICALL Y MENTION THAT THE PURCHASE SHOULD BE IN THE NAME OF THE ASSESSEE AND THE BENEFIT SHOULD BE GIVEN AS THE PAYMENT HAS BEEN MADE BY THE ASSESSEE. WE, HOWEVER DO NOT FIND ANY MERIT IN THIS CONTENTIO N OF THE ASSESSEE. THE HONBLE HIGH COURT OF DELHI IN THE C ASE OF CIT VS. RAVINDRA KUMAR ARORA IT NO.1106/2011 DATED 27.9.201 1, (2011) 15 TAXMANN.COM 307 (DELHI) DEALING WITH THE BENEFI T PROVIDED IN THE SECTION 54F OF THE ACT MENTIONED THAT THE WORD ASSESSEE MUST BE GIVEN WIDE AND LIBERAL INTERPRETATION SO AS TO I NCLUDE LEGAL HEIRS ALSO THERE IS NO WARRANT FOR GIVING TWO STRICT IN TERPRETATION TO THE WORD ASSESSEE AS THAT WOULD FRUSTRATE THE OBJECT OF GRANTING EXEMPTION. SIMILARLY HONBLE DELHI HIGH COURT IN ANOTHER CAS E OF CIT V/S SHRI KAMAL WAHAL ITA NO.4/2013 DATED 11.1.2 013 DEALING WITH THE ISSUE OF EXEMPTION UNDER SECTION 54F OF TH E ACT HELD THAT IT THUS APPEARS TO US THAT THE PREDOMINANT JUDICIA L VIEW, INCLUDING THAT OF THIS, COURT. IS THAT FOR THE PURPOSES OF SE CTION 54F, THE NEW RESIDENTIAL HOUSE NEED NOT BE PURCHASED BY THE ASSE SSEE IN HIS OWN RAJESH KALE ITA NO.211/IND/2017 16 NAME NOR IS IT NECESSARY THAT IT SHOULD BE PURCHASE D EXCLUSIVELY IN HIS NAME. IT IS MOREOVER TO BE NOTED THAT THE ASSES SEE IN THE PRESENT CASE HAS NOT PURCHASED THE NEW HOUSE IN THE NAME OF A STRANGER OR SOMEBODY WHO IS UNCONNECTED WITH HIM. HE HAS PURCHA SED IT ONLY IN THE NAME OF HIS WIFE. THERE IS ALSO NO DISPUTE THAT THE ENTIRE INVESTMENT HAS COME OUT OF THE SALE PROCEEDS, AND T HAT THERE WAS NO CONTRIBUTION FROM THE ASSESSEE'S WIFE. 15. FROM PERUSAL OF ABOVE JUDGMENTS WE FIND THAT HO NBLE COURTS HAVE HELD THAT IN CASES WHERE FOR THE PURPOSE OF CL AIMING DEDUCTION U/S 54/54F/54B THE INVESTMENT IN PURCHASE OF RESIDE NTIAL HOUSE/ AGRICULTURE LAND ETC IS MADE IN THE NAME OF HIS WIF E OR LEGAL HEIR THE BENEFIT SHOULD NOT BE DENIED BECAUSE THE PERSONS AR E NOT STRANGERS TO THE ASSESSEE. HOWEVER IN THE INSTANT CASE THE O THER CO-OWNERS ARE NOT THE RELATIVES OF THE ASSESSEE BUT ARE PARTN ERS IN THE PARTNERSHIP FIRM. THEREFORE IN THE GIVEN CIRCUMSTA NCES LD.A.O HAS RIGHTLY LIMITED THE BENEFIT TO 33.33% OF THE AMOUNT INVESTED IN PURCHASE OF RESIDENTIAL HOUSE AT RS.71,46,348/-. W E FIND NO REASON TO INTERFERE IN THE FINDINGS OF LD.CIT(A). GROUND NO.4 OF THE ASSESSEE IS DISMISSED. 16. NOW WE TAKE UP GROUND NO.5 OF THE ASSESSEE WHER EIN ASSESSEE HAS ASSAILED THE FINDINGS OF LD. CIT(A) PLEADING TH AT BOTH THE LOWER AUTHORITIES ERRED IN ALLOWING THE BENEFIT U/S 54F O NLY TO THE EXTENT RAJESH KALE ITA NO.211/IND/2017 17 OF AMOUNT DEPOSITED TILL THE DATE OF FILING OF RETU RN AT RS.71,46,348/- IGNORING THE FACT THAT REQUIRED AMOU NT WAS DEPOSITED WITHIN THE STATUTORY TIME LIMIT OF TWO YE ARS AS CONTEMPLATED U/S 54F OF THE ACT. 17. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE R ECORDS PLACED BEFORE US. WE FIND THAT THE ASSESSEE IN ORD ER TO CLAIM EXEMPTION U/S 54F OF THE ACT, INVESTED PART OF THE CONSIDERATION RECEIVED FROM SALE OF WAREHOUSE FOR PURCHASING RESI DENTIAL FLAT AT FLAT-1403, 4 TH FLOOR, TOWER-A, OMKAR ALTA MONTE BLDG, KURAR VILLA GE, WE HIGHWAY, MALAD-E, MUMBAI IN THE NAME OF SHRI RAJ ESH KALA (ASSESSEE), SHRI RAJESH SHARMA AND M/S. R&J CHEMICA LS. THE REGISTERED PURCHASE DEED OF THE FLAT IS DATED 18.2. 2013 AND THE PURCHASE CONSIDERATION IS SHOWN AT RS.1,21,71,100/- . THE DUE DATE FOR FILING OF RETURN OF INCOME TAX FOR ASSESSM ENT YEAR 2013-14 WAS 30.09.2013. UP TO THIS DATE I.E. 30.09.2013 ON LY A SUM OF RS.71,46,348/- WAS PAID TOWARDS PURCHASE OF FLAT AN D BALANCE AMOUNT WAS NOT DEPOSITED IN THE CAPITAL GAIN ACCOUN T WITH SCHEDULED BANK AS MANDATED BY PROVISION OF SECTION 54F OF THE RAJESH KALE ITA NO.211/IND/2017 18 ACT. HOWEVER, ASSESSEE PAID TOTAL CONSIDERATION WI THIN TWO YEARS OF THE DATE OF SALE OF THE WAREHOUSE. THE ISSUE RAISE D BY THE ASSESSEE IS THAT BOTH THE LOWER AUTHORITIES SHOULD HAVE ALLO WED THE BENEFIT OF SECTION 54F FOR THE AMOUNT DEPOSITED WITHIN TWO YEA RS OF THE DATE OF SALE. 18. WE FIND THAT THE LD.CIT(A) DISMISSED THE ASSESSE ES GROUND OBSERVING AS FOLLOWS; 7. GROUND NOS. 3 TO 6 :- BY THESE GROUNDS THE APPELLANT HAS RAISED THE CONTENTION THAT THE AO ERRED IN RESTRICT ING THE CLAIM OF EXEMPTION U/S 54F OF THE ACT TO 33 AND TO THE EXTEN T OF REINVESTMENT MADE TILL THE TIME OF FILING OF RETURN AND NOT CONSIDERING THE ACTUAL SALE CONSIDERATION RECEIVED FOR THE COMPUTATION OF SUCH DEDUCTION CLAIMING THAT SECTION 54F OF THE ACT BEING BENEFICIAL ENACTMENT THE SAME SHOULD BE C ONSTRUED LIBERALLY. THE DETAILED FACTS OF THE CASE AS PER TH E ASSESSMENT ORDER ARE REPRODUCED AT PARA NO. 2 ABOVE AND THE DE TAILED SUBMISSIONS OF THE APPELLANT ARE REPRODUCED AT PARA NO.3 ABOVE. 7.1 THE APPELLANT HAS CONTENDED THAT THE AO HAS RESTRIC TED THE BENEFIT U/S 54 F TO THE REINVESTMENT MADE IN NEW AS SET TILL THE DUE DATE FOR FILING OF RETURN I.E, 30.9.2013 WHEREA S SUCH REINVESTMENT COULD HAVE BEEN MADE UP TO THE STATUTO RY TIME LIMIT OF 2 YEARS WITHIN WHICH LIMIT THE ENTIRE SALE CONSI DERATION WAS REINVESTED. THE APPELLANT HAS RELIED ON SEVERAL JUD GMENTS IN RAJESH KALE ITA NO.211/IND/2017 19 SUPPORT OF THE ABOVE PROPOSITION WHICH ARE ALREADY NOTED IN PARA 3 ABOVE. FROM THE MATERIAL AVAILABLE ON RECORD IT I S AN ADMITTED FACT THAT THE APPELLANT DID NOT MAKE THE INVESTMENT IN THE PERIOD SPECIFIED IN SECTION 54F(4) OF THE ACT AND DID NOT DEPOSIT THE AMOUNT IN THE CAPITAL GAINS ACCOUNT SCHEME WITHIN T HE SPECIFIED PERIOD. THE PERUSAL OF THE DECISIONS CITED BY THE A PPELLANT SHOWS THAT IN THESE DECISIONS IT HAS BEEN HELD THAT THE D UE DATE FOR FURNISHING OF RETURN OF INCOME AS PER SECTION 139(1 ) OF THE ACT IS SUBJECT TO THE EXTENDED PERIOD PROVIDED UNDER SUBSE CTION 4 OF SECTION 139 OF THE ACT IMPLYING THAT THE INVESTMENT COULD HAVE BEEN MADE AT ANY TIME BEFORE FILING OF RETURN UP TO THE DUE DATE AS PER SECTION 139(4). THE DECISION OF THE JURISDIC TIONAL ITAT IN THE CASE OF AFTAB MOHAMMAD HAS ALSO BEEN RELIED UPO N BY THE APPELLANT. THE SAID DECISION IS DISTINGUISHABLE ON FACTS AS IN THAT CASE NO RETURN OF COME WAS FILED BY THE ASSESS EE U/S 139(1)/139(4) OF THE ACT AND THERE WAS FILED ONLY I N RESPONSE TO NOTICE U/S 148 AND THE REINVESTMENT WAS MADE BEFORE THAT DATE WITHIN THE STATUTORILY PROVIDED PERIOD OF THREE YEA RS AND HENCE IT WAS HELD THAT THE ASSESSEE WAS ELIGIBLE FOR THE BENEFIT U/S 54F IN THE LIGHT OF THE EXTANT JUDICIAL POSITION. I N THE CASE OF THE PRESENT APPELLANT IT IS SEEN THAT THE DUE DATE FOR FILING OF RETURN U/S 139(1) WAS 30.9.2013 AND U/S 139(4) IT WAS 31.3 .2015. THE RETURN OF INCOME WAS FILED BY THE APPELLANT ON 30.3.2014 AND HENCE EVEN IF THE RATIO OF THE DECISIONS CITED BY THE APPELLANT IS APPLIED THE SALE CONSIDERATION SHOULD HAV E BEEN UTILIZED FOR REINVESTMENT BEFORE THE SAID DATE I.E. 30.3.2014 AND THE UNUTILIZED AMOUNT SHOULD HAVE BEEN DEPOSITED IN THE CAPITAL GAINS ACCOUNT SCHEME AND THE PROOF OF SUCH DEPOSIT SHOULD HAVE ACCOMPANIED THE RETURN. IN THIS CONTEXT IT WOULD BE RELEVANT TO MAKE NOTE OF THE OBSERVATIONS IN THE CA SE OF CIT VS V.R.DESAI 197 TAXMAN 52(2011) (KERELA) WHICH ARE RE PRODUCED RAJESH KALE ITA NO.211/IND/2017 20 BELOW: 'FURTHER, FOR QUALIFYING FOR EXEMPTION, THE ASSESSE E SHOULD HAVE, BEFORE THE DATE OF FILING RETURN, DEPOSITED THE NET SALE CONSIDERATION RECEIVED IN A NATIONALIZED BANK IN TERMS OF THE SEC TION 54F(4) AND THE RECEIPTS SHOULD HAVE BEEN PRODUCED ALONG WITH THE R ETURN FILED. THE COUNSEL FOR THE ASSESSEE ON THE OTHER HAND, CONTEND ED THAT IN ORDER TO QUALIFY FOR EXEMPTION, THERE IS NO NEED TO UTILIZE THE SALE CONSIDERATION TOWARDS THE CONSTRUCTION COST OF THE HOUSE AND IT IS ENOUGH DURING THE PERIOD OF THREE YEARS, EQUIVALENT AMOUNT IS INVESTED IN THE CONSTRUCTION OF THE HOUSE. ACCORDING TO THE ASSESSE E'S COUNSEL, THE ASSESSEE ADMITTEDLY HAD CONSTRUCTED NEW HOUSE WITHI N THREE YEARS FROM THE DATE OF TRANSFER OF THE PROPERTY AND THERE FORE IS ELIGIBLE FOR EXEMPTION. ON GOING THROUGH SECTION 54F, PARTICULAR LY SUB-SECTION 4, IN ORDER TO QUALIFY FOR EXEMPTION ON CAPITAL GAINS, BEFORE THE LAST DATE FOR FILING RETURN, THE NET SALE CONSIDERATION SHOUL D HAVE BEEN DEPOSITED IN ANY BANK ACCOUNT SPECIFIED BY THE GOVE RNMENT FOR THIS PURPOSE. IN FACT, THE REQUIREMENT OF SUB-SECTION 4 OF SECTION 54F IS THAT THE ASSESSEE SHOULD PRODUCE ALONG WITH THE RET URN, PROOF OF DEPOSIT OF THE AMOUNT UNDER THE SPECIFIED SCHEME IN A NATIONALIZED BANK. ADMITTEDLY, THE ASSESSEE ALLOWED THE FIRM TO WHICH THE PROPERTY WAS TRANSFERRED TO RETAIN AND USE IT AS A BUSINESS ASSET AND TOWARDS CONSIDERATION HE GOT ONLY CREDIT OF LAN D VALUE IN HIS CAPITAL ACCOUNT. IN OTHER WORDS, SALE CONSIDERATION WAS NOT RECEIVED BY THE ASSESSEE IN CASH OR DEPOSITED THE S AME IN TERMS OF CL. 4 OF SECTION 54F WITH ANY NATIONALIZED BANK OR INSTITUTION. CONSEQUENTLY, THE ASSESSEE DID NOT HAVE THE SALE PR OCEEDS AVAILABLE FOR INVESTMENT IN TERMS OF SCHEME UNDER S ECTION 54F (3). IN ORDER TO QUALIFY FOR EXEMPTION UNDER SECTION 54F (3), THE ASSESSEE SHOULD HAVE FIRST DEPOSITED THE SALE PROCEEDS OF TH E PROPERTY IN ANY BANK ACCOUNT AND THE CONSTRUCTION OF THE HOUSE TO Q UALIFY FOR RAJESH KALE ITA NO.211/IND/2017 21 EXEMPTION UNDER S. 54F SHOULD HAVE BEEN COMPLETED BY UTILIZING THE SALE PROCEEDS ALSO AVAILABLE WITH THE ASSESSEE. IN THIS CASE, THOUGH THE ASSESSEE CONSTRUCTED NEW BUILDING WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF SALE, IT WAS WITH . FUNDS BORROWED FROM HDFC. THE ASSESSEE IS NOT ENTITLED TO EXEMPTION UND ER SECTION 54F BECAUSE THE ASSESSEE NEITHER DEPOSITED THE SALE PRO CEEDS FOR CONSTRUCTION OF THE BUILDING IN THE BANK IN TERMS O F SUB-SECTION (4) BEFORE THE DATE OF FILING RETURNS NOR WAS THE SALE PROCEEDS UTILIZED FOR CONSTRUCTION IN TERMS OF SECTION 54F(3). SO MUCH SO, THE ASSESSEE WAS NOT ENTITLED TO CLAIM EXEMPTION ON CAP ITAL GAINS UNDER SECTION 54F OF THE ACT WHICH THE AO RIGHTLY D ECLINED.' AS HAS ALREADY BEEN NOTED ABOVE THE DECISION OF THE JURISDICTIONAL OF I TAT IN THE CASE OF AFTAB MOHAMMAD IS ALSO OF NO HELP TO THE APPELLANT ON THE ISSUE AS THE FAC TS ARE DIFFERENT. THE AO HAS ALREADY ALLOWED THE BENEFIT U /S 54 F TO THE EXTENT OF REINVESTMENT MADE UP TO THE DATE OF F ILING OF RETURN AS IS EVIDENT FROM THE LEDGER OF INVESTMENT IN NEW HOUSE FILED BY THE APPELLANT. IN VIEW OF THE ABOVE DISCUS SION THE ACTION OF THE AO IS APPROVED AND CONFIRMED IN APPEA L. 19. FURTHER IN ORDER TO ADJUDICATE THE ISSUE WE WILL LI KE TO GO THROUGH THE PROVISIONS OF SECTION 54F OF THE ACT WHICH READS AS UNDER; SECTION 54F CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. 54F. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDE D FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPI TAL ASSET, NOT BEING A RAJESH KALE ITA NO.211/IND/2017 22 RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR B EFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PUR CHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOL LOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN T HE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CA PITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER S ECTION 45: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY WHERE (A) THE ASSESSEE, (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THA N THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN TH E NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF TH E ORIGINAL ASSET; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER T HAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, 'NET CONSIDERATION', IN RELATION TO THE TRANSFER OF A CAPITAL ASSET, MEANS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUIN G AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS REDUCED BY ANY EXP ENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRAN SFER. (2) WHERE THE ASSESSEE PURCHASES, WITHIN THE PERIOD OF TWO YEARS AFTER THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET, OR CONS TRUCTS, WITHIN THE PERIOD OF THREE YEARS AFTER SUCH DATE, ANY RESIDENTIAL HOUSE, THE INCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PRO PERTY', OTHER THAN THE NEW ASSET, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF SUCH NEW ASSET AS PROVIDED IN CLAUSE (A), OR, AS THE CAS E MAY BE, CLAUSE (B), OF SUB-SECTION (1), SHALL BE DEEMED TO BE INCOME CHARG EABLE UNDER THE HEAD RAJESH KALE ITA NO.211/IND/2017 23 'CAPITAL GAINS' RELATING TO LONG-TERM CAPITAL ASSET S OF THE PREVIOUS YEAR IN WHICH SUCH RESIDENTIAL HOUSE IS PURCHASED OR CONSTR UCTED. (3) WHERE THE NEW ASSET IS TRANSFERRED WITHIN A PER IOD OF THREE YEARS FROM THE DATE OF ITS PURCHASE OR, AS THE CASE MAY BE, IT S CONSTRUCTION, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST O F SUCH NEW ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAU SE (B), OF SUB-SECTION (1) SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER THE H EAD 'CAPITAL GAINS' RELATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOU S YEAR IN WHICH SUCH NEW ASSET IS TRANSFERRED. (4) THE AMOUNT OF THE NET CONSIDERATION WHICH IS NO T APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGIN AL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CO NSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF I NCOME UNDER SECTION 139, SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RE TURN [SUCH DEPOSIT BEING MADE 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 INSTI TUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFI CIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT ; AND, FOR THE PURPOSES OF SUB-SECTION (1), THE AMO UNT, IF ANY, ALREADY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTR UCTION OF THE NEW 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 CONST RUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THE N, (I) THE AMOUNT BY WHICH (A) THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRA NSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE CO ST OF THE NEW ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAU SE (B) OF SUB-SECTION (1),EXCEEDS (B) THE AMOUNT THAT WOULD NOT HAVE BEEN SO CHARGED HAD THE AMOUNT ACTUALLY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTIO N (1) BEEN THE COST OF THE NEW ASSET, SHALL BE CHARGED UNDER SECTION 45 AS INC OME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DA TE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND RAJESH KALE ITA NO.211/IND/2017 24 (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW THE UNUTILISED AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. EXPLANATION.[OMITTED BY THE FINANCE ACT, 1992, W.E .F. 1-4-1993.] 20. FROM PERUSAL OF THE FINDINGS OF LD.CIT(A) AS WELL AS GOING TO THE PROVISIONS OF SECTION 54F SUB-SECTION 4 OF THE ACT WHICH CONTEMPLATES THAT IF THE NET CONSIDERATION IS NOT A PPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF NEW ASSET EITH ER WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF ORIGI NAL ASSET TOOK PLACE OR WHICH IS NOT UTILIZED BY HIM FOR THE PURCH ASE/CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME U/S 139(1) OF THE ACT, THEN IN ORDER TO CLAIM THE BENEFIT, THE REMAINING AMOUNT NEEDS TO BE DEPOSITED IN THE CAPIT AL GAIN ACCOUNT IN ACCORDANCE WITH THE SCHEME WHICH THE CENTRAL GO VERNMENT NOTIFY THROUGH NOTIFICATION FRAMED IN THIS BEHALF A ND THE PROOF OF SUCH DEPOSIT NEEDS TO BE ACCOMPANIED WITH THE INCOM E TAX RETURN. THEREAFTER THE ASSESSEE WILL BE AT LIBERTY TO UTILI ZE THE AMOUNT DEPOSITED IN SUCH CAPITAL GAIN ACCOUNT SCHEME FOR P URCHASE OR CONSTRUCT THE NEW ASSET WITHIN THE STATUTORY TIME LIMIT PROVIDED IN SECTION 54F OF THE ACT I.E. EITHER TO CONSTRUCT WIT HIN THREE YEARS OR TO PURCHASE WITHIN TWO YEARS FROM THE DATE OF SALE OF ORIGINAL ASSET. RAJESH KALE ITA NO.211/IND/2017 25 IN OUR VIEW ONE CANNOT HAVE ANY OTHER OPINION EXCEP T THAT THE ASSESSEE HAS TO EITHER APPLY THE NET CONSIDERATION FOR PURCHASE OF CONSTRUCTION BEFORE THE DUE DATE OF FILING OF RETUR N OF INCOME OR IN THE ALTERNATIVE DEPOSIT THE SAME IN THE CAPITAL GAI N ACCOUNT. WE CAN UNDERSTAND THIS PROVISION WITH AN EXAMPLE. FO R INSTANCE IF DURING THE FINANCIAL YEAR 2012-13, SALE OF IMMOVABL E PROPERTY I.E. THE CAPITAL ASSET TAKE PLACE ON 1.4.2012 AND THE DU E DATE OF FILING OF RETURN OF INCOME IS 30.9.2013, THEN THE ASSESSEE WI LL HAVE 18 MONTHS TO UTILIZE THE NET CONSIDERATION. IF FOR IN STANCE THE ASSESSEE SELLS CAPITAL ASSETS ON 31.3.2013 THEN THE ASSESSEE WILL HAVE ONLY 6 MONTHS TO UTILIZE THE CONSIDERATION FOR PURCHASE OR CONSTRUCTION OF THE PROPERTY AND IF THE ASSESSEE WANT TO CLAIM THE BENEFIT U/S 54F OF THE ACT THEN THE REMAINING UNUTILIZED AMOUNT TO BE DEPOSITED WITH THE CAPITAL GAIN ACCOUNT WITH A STATUTORY BAN K. 21. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMST ANCES OF THE CASE ARE OF THE CONSIDERED VIEW THAT THE AMOUNT ELIGIBLE FOR BENEFIT U/S 54F OF THE ACT IN THE CASE OF THE ASSESSEE WILL BE TO THE EXTENT OF RS.71,46,348/- AND THE ASSESSEE WILL GET THE BENEFI T OF 33.33% ON RAJESH KALE ITA NO.211/IND/2017 26 THIS AMOUNT. WE FIND NO INFIRMITY IN THE FINDINGS OF LD.CIT(A) AND ACCORDINGLY HOLD THE SAME. 22. IN THE RESULT THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.9.2 018. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : SEPTEMBER, 2018 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER PRIVATE SECRETARY/DDO, INDORE