The ITO, Ward-7(1), Ahmedabad V. Shri Anand Arvind Shah, Ahmedabad

ITA 2244/AHD/2010

• Counselvise Citation: 224420514 RSA 2010
• Duration Of Justice: 5 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 02-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: M J SHAH
• Section: 143(3); 54F; 131; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER ITO, WD. 7(1), AHMEDABAD (APPELLANT) VS ANAND ARVIND SHAH, 12, RUSHIL BUNGALOWS, JUDGES BUNGALOWS, BODEKDEV, AMEDABAD PAN: ACVPS6378L (RESPONDENT) ANAND ARVIND SHAH, 12, RUSHIL BUNGALOWS, JUDGES BUNGALOWS, BODEKDEV, AMEDABAD PAN: ACVPS6378L (CROSS OBJECTOR ) VS ITO, WD. 7(1), AHMEDABAD (RESPONDENT) REVENUE BY : S H RI DINESH SINGH , SR. D . R. ASSESSEE BY: S H RI M.J. SHAH , A.R. DATE OF HEARING : 03 - 12 - 2 015 DATE OF PRONOUNCEMENT : 28 - 12 - 2 015 I T A NO . 2244 / A HD/20 10 A SSESSMENT YEAR 200 7 - 08 CO NO. 256/AHD/2010 (IN ITA NO. 2244 /AHD/20 10) AS SESSMENT YEAR 200 7 - 08 I.T.A NO. 2244 /AHD/20 10 & CO NO. 256/AHD/2010 A.Y. 2007 - 08 PAGE NO ITO VS. ANAND ARVIND SHAH 2 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS REVENUE S APPEAL AND ASSESSEE S CROSS OBJECTION FOR ASSESSMENT YEAR 2007 - 08, ARISE FROM ORDER OF THE CIT(A) - XI, AHMEDABAD DATED 23 - 04 - 2010 IN APPEAL NO. CIT(A) - XI/1186 /09 - 10, IN PROCEEDINGS UNDER SE CTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE S SOLE SUBSTANTIVE GROUND SEEKS TO RESTORE THE ASSESSING OFFICER S ACTION MAKING LONG TERM CAPITAL GAINS ADDITION OF RS. 87,00,429/ - IN COURSE OF A REGULAR ASSESSMENT FRAMED ON 30 - 12 - 2009 THEREBY DISALLOWING SECTION 54DEDUCTION. THE ASSESSEE S CROSS OBJECTION ON THE OTHER HAND SUPPORTS THE CIT(A) S ORDER DELETING THE ABOVE STATED ADDITION. 3. WE COME TO FACTS OF THE CASE NOW. THE ASSESSEE - INDIVIDUAL DERIVES INCOME FROM SALAR Y AND OTHER SOURCES. HE FILED HIS RETURN ON 02 - 03 - 2009 DECLARING INCOME OF RS. 2,69,646/ - . HE HAD SOLD A HOUSE PR OPERTY ON 11 - 05 - 2006 FOR RS. 1, 18,00 ,0 00/ - . THIS WAS FOLLOWED BY HIS DEDUCTION CLAIM U/S. 54 OF THE ACT ARISING FROM PURCHASE OF AN OPEN PLOT FROM M/S. ABHISHREE RESIDENCY CO - OP. HOUSING SOCIETY LTD ON 31 - 03 - 2008. THE ASSESSEE PLACED ON RECORD PAYMENT RECEIPT DATED 12 - 03 - 2008 PROVING FIVE PAYMENT INSTANCES BETWEEN 18 - 05 - 2006 TO 08 - 06 - 2006 UNDER THE HEADS AGAINST LAND IN FIRST THREE OCCASION S AND WITHOUT INTEREST DEPOSIT IN THE LATTER TWO. THE I.T.A NO. 2244 /AHD/20 10 & CO NO. 256/AHD/2010 A.Y. 2007 - 08 PAGE NO ITO VS. ANAND ARVIND SHAH 3 ASSESSING OFFICER TOOK UP SCRUTINY. HE SOUGHT TO TREAT THE ABOVE STATED INVESTMENTS AS LOANS AND ADVANCES GIVEN TO BUILDER. HE ISSUED SECTION 131 NOTICES. THE BUILDER PRODUCED COPY OF LAND PURCHASE DEED EXECUTED ON 30 - 03 - 2007, PERMISSION FOR CHANGE OF LAND USER ON 21 - 11 - 2007, XEROX COPY OF SOCIETY S REGISTRATION CERTIFICATE DATED 28 - 12 - 2006, ASSESSEE S ACCOUNT MAINTAINED AND AUDA S PERMISSION LETTER DATED 15 - 12 - 2009 FOR DEVELOPING THE LAND FOR THE P URPOSE OF CONSTRUCTION . THE ASSESSING |OFFICER IN ASSESSMENT ORDER INTER ALIA OBSERVED THAT BUILDER S PURCHASE OF LAND ON 30 - 03 - 2007, SOCIETY S REGISTRATION IN DEC, 2006 AND NOC OBTAINED IN NOV, 2007 FOLLOWED BY AUDA S PERMISSION DATED 15 - 12 - 2009; ALL FEL L MUCH AFTER THE ASSESSEE MAKING HIS ALLEGED INVESTMENTS IN JUNE, 2006 IN THE NATURE STATED HEREINABOVE. HE FURTHER OBSERVED THAT THE IMPUGNED CAPITAL GAINS HAD ALSO NOT BEEN DEPOSITED IN A CAPITAL GAINS ACCOUNT SCHEME. HE ACCORDINGLY DISALLOWED IMPUGNED SECTION 54 DEDUCTION RESULTING IN LONG TERM CAPITAL GAINS ADDITION IN QUESTION OF RS. 87,00,429/ - . 4. THE CIT(A) HAS ACCEPTED ASSESSEE S CORRESPONDING GROUND ON MERITS AS UNDER: - 5.1. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, A.O'S OBSER VATIONS, THE SUBMISSIONS MADE BY THE APPELLANT THROUGH STATEMENT OF FACTS AND WRITTEN SUBMISSIONS. THE UNDISPUTED FACTS IN APPELLANT'S CASE ARE THAT THE APPELLANT SOLD THE EXISTING HOUSE PROPERTY FOR A CONSIDERATION OF RS. 118 LAKHS ON 11 - 05 - 2006 AND IMMED IATELY THEREAFTER THE APPELLANT BOOKED A RESIDENTIAL BUNGLOW IN THE SCHEME KNOWN AS 'ABHISHREE RESIDENCY - II' PUT UP BY THE SOCIETY ABHISHREE RESIDIENCY - LL CO.OP. HOUSING SOCIETY LTD AND THE DEVELOPER M/S. SARTHAV BUILDERS. THE APPELLANT PAID THE TOTAL AMOU NT I.T.A NO. 2244 /AHD/20 10 & CO NO. 256/AHD/2010 A.Y. 2007 - 08 PAGE NO ITO VS. ANAND ARVIND SHAH 4 OF RS. RS.115 LAKHS TOWARDS THE COST OF LAND AND COST OF CONSTRUCTION. THE APPELLANT HAS MADE THEPAYMENT BETWEEN THE PERIOD 18 - 05 - 2006 TO 08 - 06 - 2006. OUT OF THE TOTAL AMOUNT OF RS. 115 LAKHS PAID BY THE APPELLANT TO THE DEVELOPER, AN AMOUNT OF RS. 27 LA CS WAS TOWARDS THE COST OF LAND AND THE BALANCE AMOUNT OF RS. 88 LACS WAS TOWARDS THE COST OF CONSTRUCTION. SUBSEQUENTLY, THE SOCIETY HAS ALSO EXECUTED THE CONVEYANCE DEED IN RESPECT OF THE PLOT OF LAND IN FAVOUR OF THE APPELLANT ON 31 - 03 - 2008. THOUGH THE DEVELOPER STARTED THE CONSTRUCTION IN THE YEAR 2006, THE SAME WAS DISCONTINUED AFTER CONSTRUCTING TILL THE PLINTH LEVEL DUE TO DELAY ON THE PART OF THE AHMEDABAD URBAN DEVELOPMENT AUTHORITIES (ADDA) IN ISSUING THE APPROVAL. 5..1.2. THE APPELLANT PAID TH E ENTIRE AMOUNT IN THE MONTH OF MAY AND JUNE, 2006 I.E. BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME U/S. 139(1) OF THE ACT AND THEREFORE, THE APPELLANT WAS NOT REQUIRED TO DEPOSIT THE CAPITAL GAINS IN THE CAPITAL GAINS ACCOUNTS SCHEME AS PER THE PR OVISIONS OF SECTION 54(2) OF THE ACT. THE OBSERVATION OF THE A. O. THAT THE PAYMENT MADE TO THE DEVELOPER M/S. SARTHAV BUILDER OF RS. 87,95,500/ - IS BY WAY OF INTEREST FREE DEPOSIT IS NOT CORRECT. THE APPELLANT PLACED BEFORE THE A. O., THE LETTER OF THE BU ILDER DATED 28 - 12 - 2009 (PAGE 115 OF PAPER BOOK) STATING THAT THE SAID PAYMENT IS TOWARDS THE COST OF CONSTRUCTION OF RESIDENTIAL BUNGLOW OF THE APPELLANT. IN FACT CONSTRUCTIO N AGREEMENT WAS ENTERED INTO ON 18 - 08 - 2008. THE DELAY IN CONSTRUCTION OF THE RESIDE NTIAL HOUSE OF THE APPELLANT BY THE SOCIETY AND THE DEVELOPER IS DUE TO THE DELAY ON THE PART OF THE AUDA AND THE SAME IS BEYOND THE CONTROL OF THE APPELLANT, SOCIETY AND DEVELOPER. 5.1.3. THE CONTENTION OF THE APPELLANT THAT ONCE THE INVESTMENT IN NEW RESIDENTIAL HOUSE PROPERTY HAS BEEN MADE AND THE RIGHTS IN THE NEW HOUSE PROPERTY HAVE BEEN ACQUIRED BY THE APPELLANT, ON ACCOUNT OF DELAY ON THE PART OF THE SOCIETY AND DEVELOPER TO COMPLETE THE CONSTRUCTION, THE EXEMPTION 'AVAILABLE TO THE APPELLANT U/S. 54 CANNOT BE DENIED IS SUPPORTED BY THE CIRCULARS AND CASE LAWS RELIED UPON BY THE APPELLANT. 5.1.4. THE ID. A. R. RELIED ON CIRCULAR NOS. 471 AND 672. CIRCULAR NO. 471 IS TO THE EFFECT THAT THE SELF - FINANCING SCHEME OF THE DELHI DEVELOPMENT AUTHORITY S HALL BE TREATED AS CASE OF CONSTRUCTION OF THE FLAT. THE ALLOTMENT LETTER ISSUED AFTER THE PAYMENT OF FIRST INSTALLMENT IS FINAL AND THE ALLOTTEE GETS TITLE TO THE PROPERTY ON THE I.T.A NO. 2244 /AHD/20 10 & CO NO. 256/AHD/2010 A.Y. 2007 - 08 PAGE NO ITO VS. ANAND ARVIND SHAH 5 ISSUANCE OF ALLOTMENT LETTER AND PAYMENT OF FURTHER INSTALMENTS IS ONLY A FO LLOW - UP ACTION AND TAKING DELIVERY OF POSSESSION IS ONLY A FORMALITY. CIRCULAR NO. 672 IS TO THE EFFECT THAT IF THE TERMS OF THE SCHEMES BY CO OPERATIVE SOCIETIES ARE SIMILAR TO THOSE MENTIONED IN PARA - 2 OF CIRCULAR NO. 471, SUCH CASES MAY BE TREATED AS CA SES OF CONSTRUCTION FOR THE PURPOSES OF SEC. 54 AND 54F OF INCOME - TAX ACT. I HAVE ALSO TAKEN INTO CONSIDERATION CIRCULAR NO. 667 DATED 18 - 10 - 93, WHICH IS TO THE EFFECT THAT THE AGGREGATE COST FOR PURCHASE OF PLOT AND FOR CONSTRUCTION SHOULD BE CONSIDERED F OR DETERMINING THE QUANTUM OF DEDUCTION U/S. 54/54F PROVIDED THAT THE ACQUISITION OF PLOT AND ALSO THE CONSTRUCTION THEREON ARE COMPLETED WITHIN THE PERIOD SPECIFIED. I AM OF THE CONSIDERED VIEW THAT CIRCULAR NO. 667 IS APPLICABLE TO CASES OF CONSTRUCTION UNDERTAKEN BY THE ASSESSES THEMSELVES. WHEREAS THE LATER CIRCULAR NO. 672 IS APPLICABLE TO CASES OF CONSTRUCTION THROUGH CO.OP. SOCIETIES, WHICH IS THE CASE WITH THE APPELLANT. 5.1.5. COMING TO THE CASE LAWS RELIED ON BY THE APPELLANT, IN THE CASE OF SMT . SHASHI VARMA VS. CIT (224 ITR 106) (MP), AFTER CONSIDERING CIRCULAR NO. 471, IT WAS HELD THAT EXEMPTION UNDER S. 54 IS ALLOWABLE WHERE THE ASSESSEE HAS UTILIZED THE ENTIRE CAPITAL GAINS FOR MAKING PAYMENT TOWARDS AN INSTALLMENT FOR ACQUISITION OF A FLAT UNDER THE SCHEME OF DDA WITHIN THE PRESCRIBED PERIOD OF TWO YEARS, NOTWITHSTANDING THE FACT THAT THE FLAT WAS NOT COMPLETE AND POSSESSION WAS NOT HANDED OVER THE ASSESSEE. 5.1 .6. IN THE CASE OF CIT VS. R. L SOOD (245 ITR 727) (DELHI), AFTER CONSIDERING CIRCULAR NO. 471, IT WAS HELD THAT ASSESSEE HAVING ENTERED INTO AN AGREEMENT FOR PURCHASE OF NEW FLAT WITHIN FOUR DAYS OF SALE OF OLD PROPERTY AND PAID A SUBSTANTIAL AMOUNT HE HAD ACQUIRED SUBSTANTIAL DOMAIN OVER THE NEW FLAT WITHIN THE SPECIFIED PERIOD OF ONE YEAR AND THEREFORE, BENEFIT OF S. 54 COULD NOT BE DENIED MERELY BECAUSE THE BUILDER FAILED TO HAND OVER POSSESSION OF FLAT TO ASSESSEE WITHIN ONE YEAR OR THE SALE DEED WAS REGISTERED LATER. 5.1.7. IN THE CASE OF CIT VS. SARDARMAL KOTHARI (302 ITR 28 6)(MAD), CIRCULAR NO. 667 CAME UP FOR CONSIDERATION. AFTER DUE CONSIDERATION OF THE CONTENTS OF THE SAID CIRCULAR, IT WAS HELD THAT ASSESSEE HAVING PURCHASED LAND BY INVESTING THE CAPITAL GAINS AND CONSTRUCTED RESIDENTIAL HOUSE AND ALSO PRODUCED COMPLETION CERTIFICATE FROM THE MUNICIPAL AUTHORITY, EXEMPTION UNDER S. 54F I.T.A NO. 2244 /AHD/20 10 & CO NO. 256/AHD/2010 A.Y. 2007 - 08 PAGE NO ITO VS. ANAND ARVIND SHAH 6 COULD NOT BE DENIED ON THE GROUND THAT THE CONSTRUCTION WAS NOT COMPLETED WITHIN THE SPECIFIED PERIOD. 5.1.8. IN THE INSTANT CASE THE CONSTRUCTION OF THE PROPERTY IS THROUGH CO - OPERATIVE SOCIETY AND THE BUILDER. APPELLANT INVESTED A SUM HIGHER THAN THE CAPITAL GAIN WITH A MONTH OF SALE OF THE EXISTING HOUSE PROPERTY. PLOT GOT REGISTERED IN APPELLANT'S NAME. CONSTRUCTION OF THE NEW HOUSE GOT DELAYED FOR REASONS BEYOND THE CONTROL OF THE APP ELLANT, CO.OP. HOUSING SOCIETY AND THE DEVELOPER. NONE OF THE PARTIES TO CONSTRUCTION - APPELLANT, CO.OP. HOUSING SOCIETY, DEVELOPER - RENEGED ON THE AGREEMENT. THEREFORE, IN VIEW OF THE FACTS OF THE CASE, THE CIRCULARS AND THE CASE - LAWS REFERRED TO ABOV E, I HOLD THAT APPELLANT IS ENTITLED T O DEDUCTION / EXEMPTION U/S. 54 . DISALLOWANCE OF THE CLAIM OF RS,. 87,00,429/ - BY THE A. O. STANDS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. WE HAVE HEARD BOTH THE PARTIES. THERE IS NO DISPUTE SO FAR AS BASIC PARTICULARS OF ASSESSEE HAVING EXECUTED THE SALE DEED, INVESTMENTS MADE IN JUNE, 2006 WITHI N ALMOST A MONTH OF THE SALE DE ED FOLLOWED BY CONVEYANCE DEED, GRANT OF CLU CERTIFICATE AND AUDA S PERMISSION ARE CONCERNED. THE REVENUE STRONGLY SUPPORTS THE ASSES SING OFFICER S ACTION AND REASONING NARRATED HEREINABOVE FOR DISALLOWING SECTION 54 DEDUCTION CLAIM. THERE CAN HARDLY BE ANY QUARREL THAT THIS STATUTORY PROVISION ENVISAGES THREE BASIC CONDITIONS TO BE FULFILLED BY THE CLAIMANT ASSESSEE. FIRST ONE IS THA T THE NEW PROPERTY CAN BE PURCHASED WITHIN A PERIOD OF ONE YEAR BEFORE EXECUTING THE SALE DEED. SECOND ONE IS THAT T HE SAME CAN BE PURCHASED WITHIN TWO YEARS AFTER THE SAL E DEED. THIRD AND FINAL CONDITION STIPU LA TE S CONSTRUCTION OF A NEW HOUSE WITHIN THRE E YEARS FROM THE DATE OF TRANSFER. IT HAS COME ON RECORD THAT THE ASSESSEE HAS PAID A GROSS SUM OF RS. 1,15,00,000/ - TO THE BUILDER/HOUSING SOCI ETY. THIS AMOUNT IS ALMOST EQU AL TO THE GROSS SALE PRICE OF RS. I.T.A NO. 2244 /AHD/20 10 & CO NO. 256/AHD/2010 A.Y. 2007 - 08 PAGE NO ITO VS. ANAND ARVIND SHAH 7 1,18,00,000/ - . WE REPEAT THAT CONVEYANCE DEED IN HIS FAVOUR IS DATED 31 - 03 - 2008. THE BUILDER THEREAFTER APPL I ED FOR AUDA S PERMISSION ON 24 - 012 - 2008 WHICH FINALLY CAME ON 15 - 12 - 2009 PRESCRIBING SOME CONSTRUCTION REGULATIONS. WE ARE OF THE VIEW IN THESE FACTS THAT THE SAME HAS TO BE READ APPLICABLE FROM THE DATE OF APPLICATION. THE SAME FALLS WITHIN THREE YEARS OF 11 - 05 - 2006. WE ARE FURTHER OF THE VIEW THAT THE ASSESSEE HAS ALREADY ADVANCED A SUM MUCH MORE THAN THE IMPUGNED CAPITAL GAINS FOR PURCHASING THE RESIDENTIAL HOUSE IN QUESTION. A CO - ORDI NATE BENCH OF THE TRIBUNAL IN ITA 7512/MUM/2013 DECIDED ON 19 - 08 - 2015 ALLOWS A SIMILAR CLAIM OF SECTION 54 DEDUCTION IN CASE INVOLVING SUBSTANTIVE ADVANCES MADE FOR PURCHASING THE HOUSE PROPERTY IN QUESTION BY HOLDING THE SAME TO MEAN AS PURCHASE FOR THE PURPOSE OF THE IMPUGNED DEDUCTION. HON BLE DELHI IN (2000) 245 ITR 727 (DEL) CIT VS. R.L. SOOD ALSO TREADS ON A SIMILAR PATH. SAME IS THE VIEW ADOPTED BY HON BLE BOMBAY HIGH COURT IN (1995) 216 ITR 376 (BOM) CIT VS. MRS HILLA J.B. WADIA. HON BLE APEX COURT IN A LATEST DECISION (2015) 376 ITR 596 (SC) FIBRE BOARDS PVT . LTD VS. CIT HAS DEALT WITH SECTION 54G DEDUCTION AND CONCLUDES THAT ADVANCES GIVEN FOR A NEW ASSETS IN QUESTION AMOUNT TO UTILIZATION OF CAPITAL GAINS. WE DRAW SUPPORT FROM ALL THESE DE CISIONS AND HOLD THAT THE ASSESSEE S ACT OF HAVING MADE SUBSTANT IVE PAYMENT OF R S. 1,15,00,000/ - TO HOUSING SOCIETY/BUILDER (SUPRA) FOLLOWED BY HIS GETTING THE SPECIFIED RESIDENTIAL HOUSE CONSTRUCTED SATISFIES ALL THE NECESSARY CONDITIONS STIPULATED IN SEC TION 54 OF THE ACT. WE FIND NO REASON TO INTERFERE WITH THE CIT(A) S I.T.A NO. 2244 /AHD/20 10 & CO NO. 256/AHD/2010 A.Y. 2007 - 08 PAGE NO ITO VS. ANAND ARVIND SHAH 8 F INDINGS UNDER CHALLENGE. THE REVENUE S SOLE SUBST A N TIVE GROUND FAILS. SO IS THE OUTCOME OF ITS APPEAL ITA 2244/AHD/2010. 6. ASSESSEE S CO NO. 256/AHD/2010 SUPPORTING THE LOWER APPELL ATE FINDINGS HAS BEEN RENDERED INFRUCTUOUS. 7. THE REVENUE S APPEAL ITA 2244/AHD/2010 IS DISMISSED AND ASSESSEE S CO 256/AHD/2010 DISMISSED AS HAVING BECOME IN FRUCT U OUS . ORDER PR ONOUNCED IN THE OPEN C OURT ON 28 - 12 - 2015 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 28 /12 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,