Smt.Anupama Nagesh, Bangalore V. Income Tax Officer, Bangalore

ITA 2288/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8453 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 22-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K S NAGESH
• Keywords: Capital asset; Cost of acquisition
• Section: 54F; 54; 2; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH - SMC B BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 2288 /BANG/201 6 (ASSESSMENT YEAR : 20 12 - 13 ) SMT. ANUPAMA NAGESH, NO.768, 36 TH CROSS, 4 TH T BLOCK, JAYANAGAR, BANGALORE - 560 041 PAN AAJPN 3347F VS. INCOME TAX OFFICER, WARD 7(2)(1), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI K.S. NAGESH, C.A. RESPONDENT BY : SHRI AR.V.SREENIVASAN, JCIT (D.R) DATE OF H EARING : 23.02.2017. DATE OF P RONOUNCEMENT : 31.03 . 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DT.20.08.2016 OF CO MMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2012 - 13. 2. THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN THIS APPEAL HOWEVER , THE ONLY ISSUE INVOLVED IS REGARDING DISALLOWANCE OF CLAIM UNDER SECTION 54F OF 2 ITA NO. 2288 /BANG/ 2016 THE INCOME TAX ACT, 1961 (IN S HORT 'THE ACT') IN RESPECT OF THE CAPITAL GAINS WHICH WAS DEPOSITED IN CAPITAL GAIN ACCOUNT. 3. THE ASSESSEE IS AN INDIVIDUAL AND SOLD IMMOVABLE PROPERTY ON 30.01.2012 FOR A CONSIDERATION OF RS.1 CRORE. THE ASSESSEE PURCHASED A PLOT AT J.P. NAGAR ON 16.2.2012 FOR A CONSIDERATION OF RS.35 LAKHS. THE TOTAL COST OF ACQUISITION OF PLOT IS RS.37,70,690 INCLUDING REGISTRATION CHARGES AND STAMP DUTY. THE ASSESSEE DEPOSITED THE NET CONSIDERATION OUT OF RS.1 CRORE IN CAPITAL GAIN ACCOUNT SCHEME WITH THE IND IAN OVESEAS BANK AND CLAIMED EXEMPTION UNDER SECTION 54 FOR LONG TERM CAPITAL GAIN ARISING FROM SALE OF IMMOVABLE PROPERTY. THE ASSESSING OFFICER NOTED THAT THE CAPITAL GAIN ACCOUNT SHOWS THE BALANCE OF RS.62,15,502 AS ON 29.02.2012 AND THE ASSESSEE HAS N OT WITHDRAWN AND UTILIZED ANY AMOUNT TILL DATE FROM THE CAPITAL GAIN ACCOUNT. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAS NOT COMPLETED THE CONSTRUCTION OF RESIDENTIAL HOUSE ON OR BEFORE 30.01.2015 AS REQUIRED UNDER SECTION 54 AND THEREFORE THE ASSESSING OFFICER PROPOSED TO DISALLOW THE LONG TERM CAPITAL GAIN OF RS.87,13,115 CLAIMED UNDER SECTION 54 OF THE ACT. THE ASSESSING OFFICER AFTER CONDUCTING THE ENQUIRY AND VERIFICATION OF THE STATUS OF THE NEW ASSET DISALLOWED THE CLAIM OF THE ASSES SEE UNDER SECTION 54 OF THE ACT. AS PER THE 3 ITA NO. 2288 /BANG/ 2016 ASSESSING OFFICER, THE ASSESSEE HAS NOT UTILIZED THE CAPITAL GAIN TILL THE STIPULATED PERIOD OF THREE YEARS EXPIRED ON 31. 0 1.2015. T HE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE CIT (APP EALS) BUT COULD NOT SUCCEED. 4. BEFORE THE TRIBUNAL, THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED THAT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE INVESTED PART CONSIDERATION FOR PURCHASE OF THE PLOT IN J.P. NAGAR FOR CONSTRUCTION OF HOUSE AND THE BALANCE AMOUNT WAS DEPOSITED IN THE CAPITAL GAIN ACCOUNT AND THEREFORE THE ASSESSEE HAS SATISFIED THE CONDITION UNDER SECTION 54 / 54F OF THE ACT FOR CLAIMING THE EXEMPTION. THUS THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT ONCE THE ASSESSEE H AS COMPLIED WITH THE CONDITION AS PROVIDED UNDER SECTION 54/54F THEN THE ASSESSING OFFICER CANNOT DISALLOW THE CLAIM OF THE ASSESSEE. HE HAS FURTHER POINTED OUT THAT THE ASSESSEE HAS FINALLY OFFERED THE CAPITAL GAIN IN THE ASSESSMENT YEAR 2013 - 14 AND THER EFORE THE CAPITAL GAIN CANNOT BE ASSESSED IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LEARNED AUTHORISED REPRESENTATIVE HAS POINTED OUT THAT SINCE THERE WAS A DISPUTE ON THE PROPERTY IN J.P NAGAR AND THEREFORE THE ASSESSEE COULD NOT CARRYOUT THE CONST RUCTION ON THE SAID PLOT AND ACCORDINGLY THE ASSESSEE HAS OFFERED THE CAPITAL GAIN IN THE 4 ITA NO. 2288 /BANG/ 2016 ASSESSMENT YEAR 2013 - 14. HE HAS FILED THE COPY OF THE RETURN OF INCOME ALONG WITH THE STATEMENT OF INCOME SHOWING THE CAPITAL GAIN OFFERED TO TAX. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT WHEN THE ASSESSEE HAS FAILED TO INVEST THE CAPITAL GAIN IN PURCHASE OF NEW HOUSE PROPERTY WITHIN THE PERIOD STIPULATED AS PER PROVISIONS OF SECTION 54 & 54F THEN THE ASSESSEE CANNOT CLAIM TH E BENEFIT OF SECTION UNDER THE SAID PROVISION. HE HAS FURTHER CONTENDED THAT EVEN IN CASE THE ASSESSEE HAS DEPOSITED THE AMOUNT IN CAPITAL GAIN ACCOUNT THE SAID AMOUNT IS TO BE CONSIDERED AS PER THE PROVISIONS OF SECTION 54 OF THE ACT. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS SOLD IMMOVABLE PROPERTY ON 30.1.2012 FOR A CONSIDERATION OF RS.1 CRORE. THE AMOUNT WA S DEPOSITED IN CAPITAL GAIN ACCOUNT. HOWEVER THE ASSESSEE HAS THEN UTILIZED A SUM OF RS.37,70,690 FOR PURCHASING A PLOT OF LAND IN JP NAGAR FOR CONSTRUCTION OF HOUSE. SINCE THE TIME PERIOD OF THREE YEARS AS PROVIDED UNDER THE PROVISIONS OF SECTION 54 & 5 4F FOR CONSTRUCTION OF HOUSE WAS EXPIRED DURING THE PENDENCY OF THE ASSESSMENT PROCEEDINGS THEREFORE , THE ASSESSING OFFICER DENIED THE CLAIM OF 5 ITA NO. 2288 /BANG/ 2016 THE ASSESSEE UNDER SECTION 54/54F OF THE ACT. IT IS PERTINENT TO NOTE THAT IN CASE THE ASSESSEE COULD NOT INVE ST THE AM O UNT FOR PURCHASE OF NEW RESIDENTIAL HOUSE OR CONSTRUCTION OF NEW RESIDENTIAL HOUSE BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME, THE AMOUNT SHALL BE DEPOSITED BY HIM IN THE CAPITAL GAIN ACCOUNT FOR AVAILING THE DEDUCTION UNDER SECTION 54/54 F OF THE ACT. FOR READY REFERENCE SECTION 54F IS REPRODUCED AS UNDER : 54F. (1) [SUBJECT TO THE PROVISIONS OF SUB - SECTION (4), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFE R OF ANY LONG - TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (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 PURCHASE D, 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 FOLLOWING PROVISIONS OF THIS SECTI ON, THAT IS TO SAY, ( A ) IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; ( B ) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET 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 N EW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45 : [ PROVIDED THAT NOTHING CONTAINED IN THIS SUB - SECTION SHALL APPLY WHERE ( A ) THE ASSESSEE, ( I ) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR ( II ) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANS FER OF THE ORIGINAL ASSET; OR ( III ) ONSTRUCTS 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 THAN THE ONE RESIDE NTIAL 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, 6 ITA NO. 2288 /BANG/ 2016 'NET CONSIDERATION, IN RELATION TO THE TRANSFER OF A CAPITAL ASSET, MEANS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS REDUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER. (2) WHERE THE ASSESSEE PURCHASES, WITHIN THE PERIOD OF [TWO YEARS] AFTER THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET, OR CONSTRUCTS, WITHIN THE PERIOD OF THREE YEARS AFTER SUCH DATE, ANY RESIDENTIAL HOUSE, THE INCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', OTHER THAN THE NE W 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 CASE MAY BE, CLAUSE ( B ), OF SUB - SECTION (1), SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' RELATING TO LONG - TERM CAPITAL ASSETS OF THE PREVIOUS YEAR IN WHICH SUCH RESIDENTIAL HOUSE IS PURCHASED OR CONSTRUCTED. (3) WHERE THE NEW ASSET IS TRANSFERRED WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF ITS PURCHASE OR, AS THE CASE MAY BE, ITS 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 OF SUCH NEW ASSET AS PROVIDED IN CLAUSE ( A ) OR, AS THE CASE MAY BE, CLAUSE ( B ), OF SUB - SECTION (1) SHALL BE DEEMED TO BE INCOME CH ARGEABLE UNDER THE HEAD 'CAPITAL GAINS' RELATING TO LONG - TERM CAPITAL ASSETS OF THE PREVIOUS YEAR IN WHICH SUCH NEW ASSET IS TRANSFERRED.] [(4) THE AMOUNT OF THE NET CONSIDERATION WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW A SSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139 , SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR F URNISHING THE RETURN OF INCOME UNDER SUB - SECTION (1) OF SECTION 139 ] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCO RDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL 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 AMOUNT, IF ANY, ALREADY UT ILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB - SECTION IS NOT UTILISED WHOLLY OR PARTLY F OR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB - SECTION (1), THEN, ( I ) THE AMOUNT BY WHICH ( A ) 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 THE NEW ASSET AS PROVIDED IN CLAUSE ( A ) OR, AS THE CASE MAY BE, CLAUSE ( B ) OF SUB - SECTION (1), EXCEEDS 7 ITA NO. 2288 /BANG/ 2016 ( B ) THE AMOUNT THAT WOULD NOT HAVE BEE N 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 - SECTION (1) BEEN THE COST OF THE NEW ASSET, SHALL BE CHARGED UNDER SECTION 45 AS INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND ( II ) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW THE UN UTILISED AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. AS PER PROVISO TO SUB - SECTION (4) OF SECTION 54F IF THE AMOUNT DEPOSITED IN CAPITAL GAIN ACCOUNT IS NOT UTILIZED WHOLLY OR PARTLY FOR PURCHASE OR CONSTRUCTION OF NEW ASSET WITHIN THE PERIOD SPECI FIED IN SUB - SECTION (1) THEN THE AMOUNT OF CAPITAL GAIN SHALL BE CHARGED UNDER SECTION 45 AS INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF THE ASSET EXPIRED. THE PERIOD OF THREE YEARS IN THE CASE OF THE ASSESS EE EXPIRES ON 31.1.2015 THEREFORE AMOUNT OF CAPITAL GAIN WHICH WAS NOT UTILIZED BY THE ASSESSEE BUT WAS DEPOSITED IN THE CAPITAL GAIN ACCOUNT SHALL BE CHARGED TO CAPITAL GAIN IN THE PREVIOUS YEAR 2014 - 15 AND A.Y. 2015 - 16. THUS FROM THE PLAIN READING OF T HE PROVISIONS OF SECTION 54 & 54F IT IS CLEAR TH A T ONCE THE AMOUNT HAS BEEN DEPOSITED IN THE CAPITAL GAIN ACCOUNT AND SUBSEQUENTLY THE ASSESSEE COULD NOT UTILIZE THE SAID AMOUNT FOR PURCHASE OF NEW ASSET THEN THE SAID AMOUNT SHALL BE CHARGED TO CAPITAL GAI N AS INCOME FOR THE PREVIOUS YEAR IN WHICH THE PERIOD OF 8 ITA NO. 2288 /BANG/ 2016 THREE YEARS AS PROVIDED UNDER SUB - CLAUSE (1) EXPIRED. THE CONSEQUENCE OF NON - UTILISATION OF THE CAPITAL GAIN WITHIN PERIOD OF THREE YEARS WOULD LEAD TO ASSESSMENT OF THE CAPITAL GAIN TO TAX IN THE A SSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE THREE YEARS EXPIRES. THEREFORE IT IS NEITHER THE DISCRETION OF THE ASSESSEE NOR THE DISCRETION OF THE ASSESSING OFFIC ER TO ASSESS THE SAID AMOUNT TO CAPITAL GAIN TAX IN THE ASSESSMENT YEAR OTHER T HAN THE YEAR AS PROVIDED IN SECTION 54/54F AND PARTICULARLY AS PER PROVISO TO SUB - SECTION (4) OF THE SAID SECTION SO LONG THE AMOUNT IS DEPOSITED IN CAPITAL GAIN ACCOUNT . THUS THE ADDITION MADE BY THE ASSESSING OFFICER FOR THE YEAR UNDER CONSIDERATION IS NOT SUSTAINABLE AND THE SAME IS DELETED. HOWEVER THE ASSESSING OFFICER IS AT LIBERTY TO ASSESS THE CAPITAL GAIN AS PER THE PROVISION OF SECTION 54/54F OF THE ACT. 7. IN THE RESULT, THE ASSESSEE'S APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MAR., 201 7 . SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 31 .03 .2017. *REDDY GP 9 ITA NO. 2288 /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 A PPELLATE TRIBUNAL BANGALORE.