Shri.Joseph Devadass, Bangalore V. Asst. Commissioner of Income Tax, Bangalore

ITA 2150/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8564 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 08-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S R VENU
• Keywords: Capital asset
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH - SMC A BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 2150 /BANG/201 6 (ASSESSMENT YEAR : 200 8 - 09 ) SHRI JOSEPH DEVADASS, NO.15, VEERANNA GARDEN, FRAZER TOWN, BENGALURU - 560 005 PAN AAQPD 4354C VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 5(3)(1), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI S.R. VENU, C.A. RESPONDENT BY : SHRI AR.V.SREENIVASAN, JCIT (D.R) DATE OF H EARING : 21.02.2017. DATE OF P RONOUNCEMENT : 28 .02. 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DT.1.9.2016 OF COMMI SSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 2 ITA NO. 2150 /BANG/ 2016 3. GROUND NO.1 IS GENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 4. GROUND NOS.2, 3 AND 7 ARE REGARDING VALIDITY OF REOPENING. AT THE TIME OF HEARING, THE LEARNED AUTHORISED REPRESENTATIVE HAS STATED AT BAR THAT THE 3 ITA NO. 2150 /BANG/ 2016 ASSESSEE DOES NOT PRESS THE GROUND NOS.2, 3 & 7 AND THE SAME ARE ACCORDINGLY DISMISSED. 5. GROUND NOS.4 TO 6 ARE REGARDING DISALLOWANCE O F DEDUCTION UNDER SECTION 54 OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') IN RESPECT OF CAPITAL GAINS ON SALE OF RESIDENTIAL PROPERTY. THE ASSESSEE IS AN INDIVIDUAL AND EARNED CAPITAL GAIN OF RS.5,69,181 ON SALE OF RESIDENTIAL PROPERTY. THE ASSESSEE CLAIMED THAT HE HAS INVESTED RS.88,17,830 IN NEW HOUSE PROPERTY AND CLAIMED DEDUCTION UNDER SECTION 54 OF THE ACT IN RESPECT OF CAPITAL GAIN ARISING FROM SALE OF THE EXISTING RESIDENTIAL PROPERTY. THE ASSESSING OFFICER HAS DENIED THE CLAIM OF DEDUCTION U NDER SECTION 54 ON THE GROUND THAT THE ASSESSEE HAS UTILIZED THE LOAN TAKEN FROM BHW HOUSING FINANCE LTD. OF RS.56 LAKHS. THUS THE ASSESSING OFFICER WAS OF THE VIEW THAT SECTION 54 DOES NOT MENTION THAT THE EXEMPTION SHOULD BE GIVEN ON LOAN FOR THE PUR C HASE OF NEW PROPERTY. HE HAS HELD THT THE INVESTMENT SHOULD BE MADE FROM CAPITAL GAIN ARISING FROM TRANSFER. AGGRIEVED BY THE ACTION OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE CIT (APPEALS) BUT COULD NOT SUCCEED. 4 ITA NO. 2150 /BANG/ 2016 6. BEFORE THE TR IBUNAL , THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS PURCHASED A NEW HOUSE THAT WAS UNDER CONSTRUCTION FOR RS.43,30,000 AND SPENT A FURTHER SUM OF RS.5,17,830 FOR RE GISTRATION . THE ASSESSEE ENTERED INTO AN AGRE EMENT FOR INTERIOR FITTINGS A SUM OF RS.39,70,000 THEREBY BRINGING THE TOTAL COST OF NEW HOUSE TO RS.88,17,830 OUT OF WHICH RS.56 LAKHS WAS MADE OUT OF THE LOAN. THUS THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT EVEN IF THE LOAN AMOUNT IS EXCL UDED, THE REST OF THE INVESTMENT HAS BEEN MADE BY THE ASSESSEE FROM THE AMOUNT INCLUDING THE CAPITAL GAIN OF RS.5,69,181. THE LEARNED AUTHORISED REPRESENTATIVE HAS CONTENDED THAT IGNORING THE LOAN AMOUNT THE BALANCE AMOUNT OF INVESTMENT HAS TO BE CONSIDER ED FOR DEDUCTION UNDER SECTION 54 OF THE ACT AND THEREFORE THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN DENYING THE CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF T HE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSING OFFICER AS WELL AS CIT (APPEALS) HAS DULY ANLAYSED THE FACTS UNDER SECTION 54 AND IT WAS 5 ITA NO. 2150 /BANG/ 2016 HELD THAT IF THE INVESTMENT IN THE NEW ASSET IS NOT MADE FROM THE CAPITAL GAIN THEN SECTION 54 IS NOT AVAILABLE. 8. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, IT IS NOTED THAT THE ASSESSING OFFICER HAS DENIED THE CLAIM UNDER SECTION 54 ON THE GROUND THAT THE ASSESSEE HAS AVAILED LOAN OF RS.56 LAKHS FOR PURCHASE OF NEW HOUSE PROPERTY. IT IS PERTINENT TO NOTE THAT IF THE REASONING GIVEN BY THE AUTHORITIES BELOW IS ACCEPTED THEN IT DE HORSE THE VERY OBJECT OF THIS INCENTIVE OF PROVIDING DEDUCTION UNDER SUB - SECTION (1) OF SECTION 54 AS UNDER : 54. (1) SUBJECT TO THE PROVISIO NS OF SUB - SECTION (2), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG - TERM CAPITAL ASSET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, T HE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE 39 [CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA], THEN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME - TAX AS INCOME OF THE PRE VIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, ( I ) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER THAN THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONS TRUCTED (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE DIFFERENCE BETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHA LL BE NIL ; OR ( II ) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; AN D FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. 6 ITA NO. 2150 /BANG/ 2016 9. I T IS CLEAR FROM THE PLAIN READING OF THE SECTION 54(1) THAT THE CAPITAL GAINS ARISING FROM TRANSFER OF LONG TERM CAPITAL ASSET BEING BUILDING OR LAND APPURTENANT THERETO AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCO ME FROM HOUSE PROPERTY' AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE OF CONSTRUCTION OF A RESIDENTIAL HOUSE THEN, INSTE AD OF THE CAPITAL GAIN BEING CHARGED TO INCOME - TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THUS THE DEDUCTION UNDER SECTION 54 IS AVAILABLE EVEN WHEN THE ASSESSEE HAS PURCHASED RESIDENTIAL HOUSE PRIOR TO THE DATE OF TRANSFER OF THE EXISTING RESIDENTIAL HOUSE. W HICH MEANS THAT AT THE TIME OF PURCHASE OF NEW HOUSE PRIOR TO THE SALE OF THE EXISTING HOUSE T HE CAPITAL GAIN IS NOT REQUIRED TO BE INVESTED AS IT IS NOT ARISEN AND AVAILABLE WITH THE ASSESSEE ON THE DATE OF PURCHASE OF NEW RESIDENTIAL HOUSE. THEREFORE THE PROVISIONS OF SECTION 54 PERMITS THE INVESTMENT PRIOR TO THE DATE OF SALE OF THE EXISTING HOUSE AND 7 ITA NO. 2150 /BANG/ 2016 THEREBY THE CONDITION OF THE INVESTMENT OF THE SALE PROCEEDS CANNOT BE UNDERSTOOD IN THE MANNER THAT THE INVESTMENT HAS TO BE MADE ONLY FROM THE PROCEEDS OF THE SALE BUT IT IS ONLY THE AMOUNT OF INVESTMENT WHICH IS RELEVANT . I F THE VIEW TAKEN BY THE AUTHORITIES BELOW IS ACCEPTED THEN THE PURCHASE OF THE HOU SE ONE YEAR PRIOR TO THE SALE OF EXISTING ASSET CANNOT BE ALLOWED UNDER SECTION 54(1) OF THE ACT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED OPINION THAT THE AUTHORITIES BELOW HAVE COMMITTED A SERIOUS ERROR IN NOT ALLOWING THE DEDUCTION UNDER SECTION 54 ON THE GROUND THAT THE ASSESSEE HAS AVAILED THE LOAN FOR PURCHASE OF NEW HOUSE. EVEN OTHERWISE WHEN THE TOTAL INVESTMENT IS MUCH MORE THAN THE LOAN AS WELL AS THE CAPITAL GAIN THEN THE CAPITAL GAIN IS TREATED TO BE INVESTED IN PURCHASE OF NEW HOUSE. HENCE THE CLAIM OF THE ASSESSEE UNDER SECTION 54 IS ALLOWED. 10. IN THE RESULT, THE ASSESSEE'S APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEB., 201 7 . SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE , DT. 28.02. 2017. *REDDY GP 8 ITA NO. 2150 /BANG/ 2016 COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . C.I.T. 4 . CIT(A) 5 . DR, ITAT, BANGALORE. 6 . GUARD FILE. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE .