Smt Lalitha Vishwanath Kotian , Mangalore V. Deputy Commissioner of Income Tax Circle-2(1), Mangalore

ITA 2324/BANG/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7037 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 05-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V. SRINIVASAN
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Condonation of delay; Capital Gains
• Section: 50C; 54F; 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B. R. BASKARAN, ACCOUNTANT MEMBER ITA No.2324/Bang/2018 Assessment Year: 2015-16 Smt. Lalitha Vishwanath Kotian, 11-6-514, Jyothi Building, Maindan Road, Mangaluru – 575 001. PAN : APKPK 1922 Q Vs. The Deputy Commissioner of Income Tax, Circle -2[1], Mangaluru. ASSESSEERESPONDENT Assesseeby:Shri.V. Srinivasan, Advocate Respondent by :Shri.Sankar Ganesh K, CIT(DR)(ITAT), Bengaluru Date of hearing:25.11.2021 Date of Pronouncement:06.12.2021 O R D E R Per N. V. Vasudevan, Vice President: This is an appeal by the assessee against the order dated 23.03.2018 of CIT(A), Mangaluru, relating to Assessment Year 2015-16. 2. There is a delay of 64 days in filing appeal by the assessee which has been explained due to wrong advise given by the assessee’s son to the assessee, who is a lady aged 66 years, who had to depend on his son who lives in USA for all her income tax matters, that the CIT(A) had accepted the assessee’s case for grant of deduction u/s.54F of the Act. The Authorized representative subsequently clarified to the assessee that the required relief was refused and the assessee had to file an appeal against the impugned order. Thereafter the assessee has filed the present appeal with delay of 64 ITA No.2324/Bang/2018 Page 2 of 10 days. We are convinced with the reasons given as above in the application for condonation of delay and accordingly condone the delay in filing appeal. 3. The assessee is an individual. She sold two pieces of industrial land 05.05.2014 for a consideration of 4,70,00,000/-. The first piece was sold for a consideration of Rs.1,70,00,000/- and the second piece was sold for Rs.3,00,00,000/- but the valuation in terms of section 50C of the Income-tax Act, 1961 (hereinafter called ‘the Act’) of the second piece of land was Rs.3.4 Crores. The assessee computed long term capital gain as follows: Sale Consideration Rs. 5,10,00,000/- Less: Indexed Cost of Acquisition Rs.13,62,480/- Gross Total income Rs. 4,96,37,520/- Less : Deduction u/s.54F Rs. 2,43,32,118/- Taxable Capital Gains Rs. 2,53,05,402/- 4. The case of the assessee was selected for limited scrutiny to examine the correctness of deduction claimed u/s.54F of the Act, and statutory notices were issued to the assessee calling for details and the same were furnished from time to time. In course of the assessment proceedings, the assessee produced the details called for and thereupon, the assessee noticed that there was some excess deduction claimed u/s. 54F of the Act having regard to the extent of reinvestment made in the new residential house. Hence, the assessee filed a revised computation of the Capital Gains before the AO, which is summarized as under : ITA No.2324/Bang/2018 Page 3 of 10 Sale Consideration Rs. 5,10,00,000/- Less: Indexed Cost of AcquisitionRs.13,67,336/- Gross Total income Rs. 4,96,32,664/- Less : Deduction u/s.54FRs. 2,00,48,505/- Taxable Capital Gains Rs. 2,95,84,159/- 4. As submitted, in course of assessment proceedings, the AO called upon the assessee to furnish evidences in support of investment made in a new residential house property for claiming deduction u/s.54F of the Act. The assessee filed the copy of the registered agreement for purchase of a new residential flat at Mumbai, dated 09/05/2016 entered into with the developer M/s. Mayfair Housing Private Limited for a sum of Rs.1,86,50,000/-. The assessee also gave the details of the other expenses incurred on payments made to thee builder, registration etc., and together with the aforesaid sum of Rs. 1,86,50,000/-, the total amount came to Rs. 2,00,48,505/-, which was claimed as a deduction. In course of the assessment proceedings, the assessee also filed a copy of the allotment letter dated 02/05/2016 issued by the developer for allotment of the said flat purchased by the assessee. The copy of the bank statements was also produced in support of the payments made for the acquisition of the new flat. 5. The provisions of Sec.54F of the Act, in so far as it is necessary for the present appeal reads thus: “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), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), ITA No.2324/Bang/2018 Page 4 of 10 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 5 [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 section, that is to say,— ............ (2)... (3).... (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset 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 furnishing 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 accordance 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 utilised 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 for 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 (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-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 ITA No.2324/Bang/2018 Page 5 of 10 (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid.” 6. As per provisions of Sec.54F(1) of the Act, the assessee can claim deduction while computing capital gain, if he either (i) purchases a residential house within 2 years from the date of transfer of the capital asset or (ii) constructs a residential house within a period of 3 years from the date of the transfer of the capital asset. The date of transfer of the capital asset in this case was 5.5.2014 and the time for purchasing a residential house would be 4.5.2016 and the time for constructing a residential house would be 4.5.2017. 7. The AO was of the view that the assessee acquired residential flat by entering into agreement with the Developer on 09/05/2016 for acquiring a (new residential flat and has also paid a sum of Rs.1.86 Crores apart from incurring other expenses and there is no dispute on this score. The AO rejected the plea of the assessee that in terms of the aforesaid agreement dated 09/05/2016, the assessee has constructed a new residential flat within a period of three years as provided u/s. 54F of the Act. The AO regarded the acquisition of the aforesaid flat as amounting to purchase of a new flat and he held that the same was purchased on 09/05/2016, which was beyond the period of 2 years from the date of sale of the industrial lands i.e., 05/05/2014 and hence, the assessee had not complied with the conditions for grant of exemption since the purchase was made 5 days after the period of 2 years had expired. 8. As per the provisions of Sec.54F(4) of the Act, if the long term capital gain is not invested in purchase or construction of residential house then net consideration which is not appropriated by the assessee towards the purchase ITA No.2324/Bang/2018 Page 6 of 10 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 furnishing 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 accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf. According to the AO, the Assessee did not deposit the net consideration or unutilized consideration into a capital gain accounts scheme. The AO therefore denied the benefit of deduction to the Assessee u/s.54F of the Act, even on this ground. 9. Aggrieved by the order of the AO denying the benefit of deduction u/s.54F of the Act, the assessee preferred appeal before CIT(A). In so far as the first reason stated by the AO, i.e., the non deposit of the sale consideration received by the assessee in the capital gains account scheme is concerned, it was submitted that the assessee had deposited the sale consideration amounting to Rs.3,05,00,000/- in the capital gains account scheme with Corporation Bank on 18/08/2015. A letter issued by the bank stating that amount was deposited in Capital Gains Account scheme was filed before CIT(A). It was argued that the denial of exemption u/s. 54F of the Act on the ground that the assessee has not made the deposit in the capital gains account scheme was misconceived and the same deserves to be vacated. 10. As far as the second reason given by the AO, viz., that the amount received has not been utilized for purchase of flat within a period of two years from sale of original asset, it was submitted that the assessee has made ITA No.2324/Bang/2018 Page 7 of 10 reinvestment in a new residential flat by entering into agreement with the Developer on 09/05/2016 for acquiring a (new residential flat and has also paid a sum of Rs.1.86 Crores apart from incurring other expenses and there is no dispute on this score. It was submitted that in terms of the aforesaid agreement dated 09/05/2016, the assessee has constructed a new residential flat within a period of three years as provided u/s. 54F of the Act. The AO however regarded the acquisition of the aforesaid flat as amounting to purchase of a new flat and has held that the same was purchased on 09/05/2016, which was beyond the period of 2 years from the date of sale of the industrial lands i.e., 05/05/2014 and hence, the assessee had not complied with the conditions for grant of exemption since the purchase was made 5 days after the period of 2 years had expired. It was submitted that the new flat acquired by the assessee from the builder amounts to construction and there is a time limit of 3 years from the date of sale of the original property and it cannot be regarded as purchase of the new flat having regard to the Board Circular No. 471 dated 15/10/1986, which has not been appreciated by the AO. Thus, it cannot be held that the assessee has not made the reinvestment within the time allowed u/s. 54F of the Act d hence, the denial of exemption on this score is liable to be vacated. 11. With regard to the deposit of net consideration or unutilized consideration received on transfer of capital asset in capital gain scheme account, the CIT(A) agreed with the submission of the Assessee and directed AO to allow deduction u/s.54F of the Act proportionate to the extent the net consideration has been invested in the capital gain scheme account. He also directed the AO to verify the utilization of the funds from the capital gain scheme account and take action in the year in which the period for utilization ITA No.2324/Bang/2018 Page 8 of 10 ends, if the assessee does not utilize the funds as required by law. In this regard the provisions of proviso to Sec.54F(4) provides that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in sub- section (1), then to the extent of non utilization, capital gain will be charged to tax as income of the previous year in which the period of three years from the date of the transfer of the original asset expires. In this case, the AY 2018-19 will be the Assessment year in which the period of 3 years from the date of transfer which is 5.5.2014. 12. With regard to the plea of the assessee that reinvestment in a new residential flat by entering into agreement with the Developer on 09/05/2016 would amount to construction of a residential flat and the assessee would get a period of 3 years from the date of transfer, the CIT(A) held that the flat was already constructed and occupancy certificate obtained on 29.6.2015 and completion certificate dated 16.3.2016 was also issued. Hence, the flat in question cannot be regarded as constructed by the assessee through a builder but has to be regarded as purchase of flat and the period of two of two years 2 years from the date of sale of the industrial lands i.e., 05/05/2014 would expire on 4.5.206 and since the flat was purchased on 9.5.2016, the assessee cannot avail the benefit of deduction u/s.54F(1) of the Act. 13. Aggrieved by the order of the CIT(A) in holding that the flat in question has to be regarded as purchase of residential property and not construction of residential property, the assessee is in appeal before the Tribunal. ITA No.2324/Bang/2018 Page 9 of 10 14. We have considered the rival submissions. In our view, the admitted position is that in Assessment Year 2015-16, there was a transfer of capital asset resulting in accrual of long term capital gain. It is also admitted that the sale consideration had been deposited by the assessee in Corporation Bank within the period contemplated under the provisions of section 54F(4) of the Act. Once the assessee complies with the provisions of deposit in capital gain scheme account as specified under section 54F(4) of the Act, the amount so deposited shall be deemed to be the cost of the new asset and the deduction under section 54F has to be allowed to the assessee. However, under the proviso of section 54F(4), the assessee has to utilize the amount deposited in the capital gain scheme accounts within the period contemplated under section 54F of the Act. Then capital gain can be brought to tax as income of the previous year in which the period of 3 years from the date of transfer of the original asset expires. In the present appeal, the dispute is with regard to the purchase of residential flat by the assessee on 09.05.2016 at Mumbai whether it amounts to purchase of a new asset or construction of a new asset. The date of purchase of the new asset is admittedly on 09.05.2016 which falls within the previous year relevant to Assessment Year 2017-18. The date of transfer is on 05.05.2014 falling within the previous year 2015- 16. In terms of proviso to section 54F(4) of the Act, the non-utilisation of net consideration deposited in the capital gain scheme account can be considered only in Assessment Year 2018-19. We are therefore of the view that the directions given by the CIT(A) holding that the purchase of a new flat will not amount to putting up construction and therefore the benefit of deduction will not be available to the assessee is a finding which is not necessary to be given in the appeal for AY 2015-16. The question whether the acquisition of flat by the assessee would amount to construction or purchase, is a issue ITA No.2324/Bang/2018 Page 10 of 10 which ought to have been left open by the CIT(A) for consideration in AY 2018-19. We leave this issue open for decision in Assessment Year 2018- 19. 15. The learned DR, however submitted that directions may be given to the AO, to take appropriate remedial action in Assessment Year 2018-19. We are of the view that it would be just and appropriate to make an observation that the AO will take appropriate measures as is open to the Revenue in law. With these observations, we allow the appeal of the assessee. 16. In the result, appeal of the assessee is allowed. Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- (B. R. BASKARAN)(N. V. VASUDEVAN) ACCOUNTANT MEMBER VICE PRESIDENT Bangalore, Dated : 06.12.2021. /NS/* Copy to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.