Tarun Jalali, Delhi V. DDIT, New Delhi

ITA 2376/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3546 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUMANT CHADHA CA SUMIT JAIN
• Keywords: Benefit of exemption
• Section: 54F; 54

Judgement Text

ITA NO. 2376/DEL/2014 ASSESSMENT YEAR 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 2376/DEL/2014 ASSESSMENT YEAR: 2009-10 TARUN JALALI, 250, SUPREME ENCLAVE, MAYUR VIHAR, PHASE-I, DELHI-110091 (PAN: ADLPJ7506J) VS DDIT, CIRCLE-3(1), INTERNATIONAL TAXATION, NEW DELHI. APPELLANT BY S/SHRI SUMANT CHADHA, CA SUMIT JAIN, CA RESPONDENT BY SHRI AMIT JAIN, SR. DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER DATED 27.02.2014 PASSED BY THE LD. COMMISSION ER OF INCOME TAX(A)-XXIX, NEW DELHI FOR ASSESSMENT YEAR 2 009-10. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE S OLD A FLAT OWNED BY HIM VIDE AGREEMENT TO SALE DATED 30.09.201 0. AS PER THE ASSESSEE, HE HAD ENTERED INTO SALE CUM CONSTRUC TION AGREEMENT DATED 20.11.2007 WITH M/S SKYLINE CONSTRU CTION AND HOUSING PVT. LTD. FOR PURCHASE OF FLAT NO. A-304, S KYLINE DATE OF HEARING 20.11.2017 DATE OF PRONOUNCEMENT 12.02.2018 ITA NO. 2376/DEL/2014 ASSESSMENT YEAR 2009-10 2 MAGNOLIA, BANGALORE AND HAD MADE PAYMENT AMOUNTING TO RS. 57,14,699/- TOWARDS THE PURCHASE OF THIS NEW RESIDE NTIAL HOUSE ON DIFFERENT DATES RANGING FROM 18.5.2007 TO 15.4.2 011. IT WAS THE ASSESSEES CONTENTION BEFORE THE ASSESSING OFFI CER THAT THE NEW RESIDENTIAL PROPERTY WAS ACQUIRED VIDE SALE DEE D DATED 20.04.2011 WHICH WAS WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF SALE FOR THE OLD RESIDENTIAL PROPERTY AND S INCE THE CONSTRUCTION OF THE NEW HOUSE HAD BEEN COMPLETED WI THIN THE PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF THE OLD RESIDENTIAL PROPERTY, REQUIREMENTS OF SECTION 54 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE ACT') WERE F ULFILLED. IT WAS ALSO CONTENDED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT ALTHOUGH THE CONSTRUCTION WAS STARTED PRIOR TO THE DATE OF SALE OF OLD PROPERTY, THE SAME WAS IMMATERIAL AS THE CONSTR UCTION WAS COMPLETED WITHIN A PERIOD OF THREE YEARS FROM THE D ATE OF SALE. THE ASSESSEE ALSO CONTENDED BEFORE THE ASSESSING OF FICER THAT IN THE ALTERNATIVE EVEN IF IT WAS TO BE CONSIDERED AS PURCHASE OF NEW HOUSE, HE HAD MADE SUBSTANTIAL INVESTMENT TOWARDS PURCHASE OF NEW HOUSE DURING THE YEAR UNDER CONSIDERATION AND F URTHER THAT THE AGREEMENT TO BUY A NEW HOUSE WAS WITHIN A PERIO D OF ONE YEAR FROM THE DATE OF SALE OF OLD HOUSE, AND, THERE FORE, THE ITA NO. 2376/DEL/2014 ASSESSMENT YEAR 2009-10 3 ASSESSEE WAS ELIGIBLE FOR EXEMPTION U/S 54 NOTWITH STANDING THE FACT THAT THE BUILDER HAD FAILED TO HAND OVER THE P OSSESSION OF THE FLAT TO THE ASSESSEE WITHIN THE STIPULATED PERIOD. HOWEVER, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE CASE OF THE ASSESSEE DID NOT FALL WITHIN THE PRECINCTS OF SECTION 54 OF THE ACT AS NO ALLOTMENT OR AGREEMENT WAS MADE WITHIN THE STIPULAT ED PERIOD OF ONE YEAR FROM THE DATE OF SALE OF THE OLD PROPERTY AND FURTHER NO SUBSTANTIAL PAYMENTS WERE MADE TOWARDS THE COST OF NEW ASSET AND ONLY AN AMOUNT OF RS. 34,54,371/- WAS PAID DURI NG THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER PROCEED ED TO ADD BACK THE AMOUNT OF EXEMPTION CLAIMED BY THE ASSESSE E U/S 54 AND AMOUNTING TO RS. 33,18,000/- TO THE INCOME OF T HE ASSESSEE. 2.1 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE COMMISSIONER OF INCOME TAX(A) WHO PARTLY ALLOWED TH E ASSESSEES APPEAL BY HOLDING THAT THE ASSESSEE WAS ENTITLED TO BENEFIT OF SECTION 54 IN VIEW OF THE JUDGMENT OF THE HONBLE A LLAHABAD HIGH COURT IN THE CASE OF H.K. KAPUR 234 ITR 753(ALLAHAB AD) WHEREIN IT WAS HELD THAT THE AGREEMENT TO CONSTRUCTION BEIN G DATED PRIOR TO THE DATE OF TRANSFER OF OLD ASSET WAS ULTIMATELY FOR ALLOWING THE BENEFIT OF EXEMPTION U/S 54 OF THE ACT. HOWEVER, T HE LD. COMMISSIONER OF INCOME TAX(A) ALSO NOTED THAT THE A MOUNT OF ITA NO. 2376/DEL/2014 ASSESSMENT YEAR 2009-10 4 CAPITAL GAIN NOT UTILISED FOR THE CONSTRUCTION OF N EW HOUSE UPTO THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE ACT SHOULD HAVE BEEN DEPOSITED IN THE NOTIFIED CAPITAL GAIN ACCOUNT SCHEME BEFORE FILING OF RETURN OF INCOME WHICH WAS NOT SO DONE BY THE ASSESSEE. THE LD. COMMISSIONER OF INCOME TAX(A) FURTHER NOTED THAT THE ASSESSEE HAD APPROPRIATED RS. 7,62,674/- ONLY TOWAR DS THE CONSTRUCTION OF NEW FLAT AFTER DATE OF TRANSFER OF OLD ASSET AND, THEREFORE, THE ASSESSEE WAS ENTITLED TO DEDUCTION U /S 54 ONLY IN RESPECT OF PAYMENT OF RS. 7,62,674/-. 2.2 NOW, THE ASSESSEE IS IN APPEAL BEFORE THE ITA T AGAINST THE PARTIAL CONFIRMATION OF DISALLOWANCE BY THE LD. COM MISSIONER OF INCOME TAX(A) AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE TH E CIT (A) HAS ERRED IN NOT ALLOWING REBATE U/S 54 FOR INVESTM ENT MADE IN RESIDENTIAL HOUSE PRIOR TO DATE OF SALE OF HOUSE. 2. THAT THE LEARNED CIT (A) HAS ERRED IN NOT ALLOW ING CLAIM OF RS. 26,91,697/- MADE PRIOR TO SALE OF HOUSE IN S PITE OF ACCEPTING THAT THE ASSESSEE WAS ENTITLED TO CLAIM U /S 54. IT IS PRAYED THAT THE CLAIM OF ASSESSEE FOR EXEMPTI ON U/S 54 MAY KINDLY BE ACCEPTED. 3. LD. AR FILED WRITTEN SUBMISSIONS AND ALSO SUBMIT TED BEFORE THE BENCH THAT ALTHOUGH THE ASSESSEE HAD MADE PAYME NTS OF RS. 57,14,699/- TOWARDS THE NEW RESIDENTIAL HOUSE, THE AMOUNT OF RS. 5,06,415/- PAID ON 18.05.2007 AND RS. 6 LAKH PA ID ON ITA NO. 2376/DEL/2014 ASSESSMENT YEAR 2009-10 5 11.3.2008 WERE AMOUNTS FOR WHICH NO DEDUCTION WAS B EING CLAIMED IN THE RETURN OF INCOME. IT WAS FURTHER SU BMITTED THAT TWO OTHER PAYMENTS VIZ. RS. 7,62,674/- PAID ON 22.1 0.2008 AND RS. 11,53,913/- PAID ON 15.04.2011 HAD BEEN CLAIMED TOWARDS DEDUCTION AND DEDUCTION HAD BEEN ALLOWED ON THESE T WO AMOUNTS BY THE DEPARTMENT. IT WAS FURTHER SUBMITTED THAT O NLY TWO AMOUNTS ON WHICH THE DEDUCTION HAD NOT BEEN ALLOWED WERE: RS. 12 LAKH PAID ON 20.06.2008 AND RS. 14,91,697/- PAID ON 22.08.2008. IT WAS SUBMITTED THAT THESE PAYMENTS W ERE MADE PRIOR TO THE DATE OF SALE OF NOIDA PROPERTY FOR WHI CH DEDUCTION WAS CLAIMED IN THE RETURN OF INCOME BUT WAS DISALLO WED IN THE ASSESSMENT. IT WAS ALSO SUBMITTED THAT THE OBSERVA TION OF THE LD. COMMISSIONER OF INCOME TAX(A) IN RESPECT OF THESE T WO PAYMENTS AS HAVING NOT BEEN DEPOSITED IN THE CAPITAL GAINS A CCOUNT SCHEME WAS INCORRECT AS THESE AMOUNTS WERE ACTUALLY EXPEND ED BY THE ASSESSEE PRIOR TO THE DATE OF SALE OF PROPERTY AND, THEREFORE, THERE WAS NO REQUIREMENT FOR HAVING DEPOSITED THIS AMOUNT IN THE CAPITAL GAINS ACCOUNT SCHEME. RELIANCE WAS PLACED O N THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF COMMISSIONER OF INCOME TAX(A) VS BHARTI MISHRA REPO RTED IN 265 CTR 374 WHEREIN IT WAS HELD THAT SECTION 54F(1)(III ) DOES NOT ITA NO. 2376/DEL/2014 ASSESSMENT YEAR 2009-10 6 SPECIFY THAT CONSTRUCTION MUST BEGIN AFTER THE DATE OF SALE OF OLD ASSET AND FURTHER THAT ON LIBERAL INTERPRETATION OF THE PROVISIONS, THE ASSESSEE COULD NOT BE DENIED BENEFIT OF SECTION 54F ON THE GROUND THAT CONSTRUCTION OF HOUSE HAD COMMENCED BEF ORE SALE OF ASSET. 4. IN RESPONSE, THE LD. SR. DR PLACED RELIANCE ON T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE HON' BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS BHARTI MISHRA (SUPRA) HAS OBSERVED THAT SUB-SECTION 4 OF S ECTION 54F PRESCRIBES APPROPRIATION OF SALE CONSIDERATION OF O RIGINAL ASSET TOWARDS PROVISION OF NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE OF TRANSFER OF ORIGINAL ASSET, TWO YEARS FROM THE DATE OF TRANSFER OR CONSTRUCTION OF NEW IN-HOUSE PROPERTY, WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL RECEIPT BUT THE ACT DOES NOT PRESCRIBE ANY CONDITION AS TO THE DATE OF COMME NCEMENT OF CONSTRUCTION OF HOUSE PROPERTY WHICH MAY BE COMMENC ED EVEN BEFORE THE DATE OF TRANSFER OF ORIGINAL RECEIPT. SIMILARLY, THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF COMMIS SIONER OF INCOME TAX VS J.R. SUBRAMANYA BHAT REPORTED IN 165 ITR 571 ITA NO. 2376/DEL/2014 ASSESSMENT YEAR 2009-10 7 (KAR.) HAD EXPRESSED SIMILAR VIEW AND HAD HELD THAT INVESTMENT MADE TOWARDS CONSTRUCTION OF HOUSE PROPERTY PRIOR T O THE DATE OF TRANSFER SHOULD ALSO BE ELIGIBLE AS DEDUCTION FOR T HE PURPOSE OF SECTION 54 OF THE ACT. ACCORDINGLY, RESPECTFULLY F OLLOWING THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT AND THE H ON'BLE KARNATAKA HIGH COURT AS AFOREMENTIONED, WE ARE OF T HE VIEW THAT PROVISIONS OF SECTION 54F DO NOT PRESCRIBE ANY COND ITION AS TO THE DATE OF COMMENCEMENT OF CONSTRUCTION OF NEW HOUSE P ROPERTY, MEANING THEREBY THAT THE CONSTRUCTION OF HOUSE PROP ERTY MAY BE COMMENCED EVEN BEFORE THE DATE OF TRANSFER OF ORIGI NAL ASSET. HOWEVER, IT SHOULD BE COMPLETED WITHIN THREE YEARS AFTER THE DATE OF TRANSFER OF ORIGINAL ASSET. ON THE FACTS OF THI S CASE, WE FIND THAT THE CONSTRUCTION OF HOUSE PROPERTY HAD BEEN CO MPLETED WITHIN THREE YEARS FROM THE DATE OF TRANSFER AND AC CORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR E XEMPTION U/S 54F IN RESPECT OF THE TWO DISPUTED AMOUNTS VIZ. RS. 12 LAKH PAID ON 20.06.2008 AND RS. 14,91,697 PAID ON 22.08.2008 WHI CH WERE EXPENDED PRIOR TO THE DATE OF TRANSFER OF ORIGINAL ASSET. WE ALLOW THE GROUND RAISED BY THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ITA NO. 2376/DEL/2014 ASSESSMENT YEAR 2009-10 8 ORDER PRONOUNCED IN THE OPEN COURT ON 12.02.2018. SD/- SD/- (N.K. SAINI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 12 TH FEBRUARY 2018 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR