ITO, NCE 22(2), Chennai V. T Jayakumar, Chennai

ITA 243/CHNY/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7433 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 19-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R V AROON PRASAD
• Assessee Lawyers: P RAJASEKHARAN CA
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . , , BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./I.T.A. NO.243/CHNY/2018 / ASSESSMENT YEAR : 2013-2014. INCOME TAX OFFICER, NON CORPORATE WARD 22(2) TAMBARAM, CHENNAI 600 045. VS. SHRI. T. JAYAKUMAR, NO.6/91, DR. RAMADOSS STREET, MEDAVAKKAM, CHENNAI 600 100. [PAN AJYPJ 5553E] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. R.V. AROON PRASAD, JCIT. $%! ' # /RESPONDENT BY : SHRI. P. RAJASEKHARAN, C.A. & ' ' () /DATE OF HEARING : 11-07-2018 *+ ' () /DATE OF PRONOUNCEMENT : 12-07-2018 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER: IN THIS APPEAL FILED BY THE REVENUE, WHICH IS DI RECTED AGAINST AN ORDER DATED 28.09.2017 OF LD. COMMISSION ER OF INCOME TAX (APPEALS)-10, CHENNAI, IT IS AGGRIEVED THAT LD. CO MMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM OF EXEMPTION U/S.54F INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE AC T) ON LONG TERM ITA NO.243/CHNY/2018 :- 2 -: CAPITAL GAINS ARISING FROM TRANSFER OF A PROPERTY THROUGH THREE GENERAL POWER OF ATTORNEYS, TWO OF WHICH WERE DATED 07.05 .2012 AND ONE DATED 07.06.2012. 2. LD. COUNSEL FOR THE REVENUE SUBMITTED THAT ASSESSEE HAD SOLD A PROPERTY BELONGING TO HIM THROUGH EXECUTION OF POWER OF ATTORNEYS IN FAVOUR OF ONE M/S. ANU BUILDERS INDIA PRIVATE LIMITED ON 07.05.2012 AND 07.06.2012. AS PER THE LD. DEPARTME NTAL REPRESENTATIVE, ASSESSEE RECEIVED THE PROPERTY THRO UGH INHERITANCE ON DEATH OF HIS FATHER, ALONGWITH HIS MOTHER AND THREE SISTERS. SUBMISSION OF THE LD. DEPARTMENTAL REPRESENTATIVE WAS THAT TH IS PROPERTY MEASURING 89 CENTS, LOCATED AT MEDAVAKKAM WAS SOL D BY THE ASSESSEE TO ONE M/S. ANU BUILDERS INDIA PRIVATE LIM ITED THROUGH EXECUTION OF THE ABOVE MENTIONED POWER OF ATTORNEY, AFTER OBTAINING RELEASE DEED FROM THREE OF HIS SISTERS, FOR A CONS IDERATION OF D2,04,34,000/-. AS PER THE LD. DEPARTMENTAL REPRES ENTATIVE, ASSESSEE HAD CLAIMED EXEMPTION OF D1,17,41,700/- U/S.54F OF THE ACT FOR REINVESTMENT MADE IN A NEW RESIDENTIAL HOUSE. CONT ENTION OF THE LD. DEPARTMENTAL REPRESENTATIVE, WAS THAT CONDITIONS S TIPULATED U/S.54F OF THE ACT WERE NOT SATISFIED BY THE ASSESSEE. HIS SUBMISSION WAS THAT BUILDER SHRI. ARUNACHALAM MASTERY DID NOT COMPLETE THE CONSTRUCTION WITHIN 06.05.2015, BEING OUTER LIMIT FOR GRANT OF D EDUCTION U/S.54F OF ITA NO.243/CHNY/2018 :- 3 -: THE ACT. AS PER THE LD. DEPARTMENTAL REPRESENTATIV E, FIRST OF THE POWER OF ATTORNEYS HAVING BEING EXECUTED ON 07.05.2012, ASSESSEE OUGHT HAVE COMPLETED CONSTRUCTION OF THE BUILDING BY 06. 05.2015 FOR CLAIMING THE EXEMPTION. CONTENTION OF THE LD. DEPAR TMENTAL REPRESENTATIVE WAS THAT DESPITE ASSESSEE FAILING TO MEET THIS CONDITION, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD ALLOWED THE CLAIM RELYING ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RL SOOD, 245 ITR 727 . AS PER THE LD. DEPARTMENTAL REPRESENTATIVE, ASSESSEE WAS NOT ENTITLED TO CLAIM THE BENEFIT OF SECTION 54F OF THE ACT AND LD. COMMISSIONER OF INCO ME TAX (APPEALS) FELL IN ERROR IN DIRECTING THE LD. ASSESSING OFFICE R TO ALLOW SUCH CLAIM. 3. PER CONTRA, LD. AUTHORISED REPRESENTATIVE STRONGLY SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS). 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUT ED THAT CONSIDERATION ON THE SALE OF THE LAND WAS RECEIVED BY THE ASSESS EE, ON EXECUTION OF THREE GENERAL POWER OF ATTORNEY IN FAVOUR OF M/S. A NU BUILDERS INDIA PVT. LTD. ON 07.05.2012 AND 07.06.2012. IT IS ALSO NOT DISPUTED THAT ASSESSEE HAD INVESTED A SUM OF D1,17,41,700/- FOR C ONSTRUCTION OF A ITA NO.243/CHNY/2018 :- 4 -: NEW RESIDENTIAL HOUSE AND HAD PAID SUCH AMOUNT TO THE BUILDER SHRI. ARUNACHALAM MASTERY. THE PAYMENTS WERE ADMITTEDLY MADE BY THE ASSESSEE BEFORE 06.05.2015. SECTION 54F (1) OF THE ACT WHICH IS APPOSITE HERE IS REPRODUCED HEREUNDER:- 54F CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL A SSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. 1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WH ERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER O F ANY LONG- TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE ( HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AN D THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE TWO YEARS A FTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE (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 SA Y,-- (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN T HE 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 N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL G AIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO TH E NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 4 5: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY WHERE- (A) THE ASSESSEE,- (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THA N THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSE T ; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN TH E NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANS FER OF THE ORIGINAL ASSET ; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TR ANSFER OF THE ORIGINAL ASSET; AND ITA NO.243/CHNY/2018 :- 5 -: (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER T HAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS CHARGEABLE UNDER THE HEAD ''INCOME FROM H OUSE PROPERTY''. EXPLANATION FOR THE PURPOSES OF THIS SECTION,-- 'NET CONSIDERATION', IN RELATION TO THE TRANSFER OF A CAPITAL ASSET, MEANS THE FULL VALUE OF THE CONSIDERATION RE CEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS REDUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCL USIVELY IN CONNECTION WITH SUCH TRANSFER. THE OUTER LIMIT FOR CONSTRUCTING A NEW RESIDENTIAL HOUSE IS THREE YEARS FROM THE DATE OF TRANSFER OF THE ASSET GIVING RISE TO THE CAPITAL GAINS AND SUCH DATE IN THE CASE BEFORE US WAS 06.05.2015 . ASSESSEE HAD MADE PAYMENT OF D1,17,41,700/- PRIOR TO THE DATE. REASON WHY LD. ASSESSING OFFICER DENIED THE CLAIM OF DEDUCTION U/S .54F OF THE ACT WAS THAT THE CONSTRUCTION WAS NOT COMPLETED. ASSESSEE HAD CLEARLY MENTIONED BEFORE THE LD. ASSESSING OFFICER THAT NO N COMPLETION OF THE CONSTRUCTION WAS DUE TO THE FAILURE OF THE BUILDER AND NOT ANY FAULT OF IT. THUS, ASSESSEE HAD DONE WHAT ALL HE COULD DO WITHIN THE TIME LIMIT ALLOWED U/S.54F OF THE ACT FOR CONSTRUCTING A NEW R ESIDENTIAL HOUSE. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD RELIED ON THE FOLLOWING PARA IN THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF R L SOOD (SUPRA) WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THE INSTANT CASE, ADMITTEDLY, THE ASSESSEE HAD PAID CERTAIN AMOUNT OUT OF THE TOTAL CONSIDERATION FOR T HE PURCHASE OF THE FLAT WITHIN THE PERIOD OF ONE YEAR FROM THE DATE OF SALE OF HIS OLD RESIDENTIAL HOUSE. THUS , ON ITA NO.243/CHNY/2018 :- 6 -: PAYMENT OF A SUBSTANTIAL AMOUNT IN TERMS OF THE AGREEMENT OF PURCHASE DATED SEPTEMBER 25, 1981, I.E ., WITHIN FOUR DAYS OF THE SALE OF HIS OLD PROPERTY, T HE ASSESSEE ACQUIRED SUBSTANTIAL DOMAIN OVER THE NEW RESIDENTIAL FLAT WITHIN THE SPECIFIED PERIOD OF ONE YEAR AND COMPLIED WITH THE REQUIREMENTS OF SECTION 54 OF THE ACT. MERELY BECAUSE THE BUILDER FAILED TO HAND OVER POSSESSION OF THE FLAT TO THE ASSESSEE WITHIN THE P ERIOD OF ONE YEAR, THE ASSESSEE CANNOT BE DENIED THE BENE FIT OF THE SAID BENEVOLENT PROVISION. THIS WOULD NOT BE IN CONSONANCE WITH THE SPIRIT OF SECTION 54 OF THE ACT . REALISING THE PRACTICAL DIFFICULTY FACED BY THE ASS ESSEES IN SUCH SITUATIONS, THE CENTRAL BOARD OF DIRECT TAX ES ISSUED CIRCULAR NO. 471, DATED OCTOBER 15, 1986, CLARIFYING THAT WHEN THE DDA ISSUES THE ALLOTMENT L ETTER TO AN ALLOTTEE UNDER ITS SELF-FINANCING SCHEME, ON PAYMENT OF THE FIRST INSTALMENT OF THE COST OF CONSTRUCTION, THE ALLOTTEE GETS TITLE TO THE PROPER TY AND SUCH ALLOTMENT SHOULD BE TREATED AS COST OF CONSTRU CTION FOR THE PURPOSE OF CAPITAL GAINS. ON THE SAME ANALO GY, THE ASSESSEE HAVING BEEN ALLOTTED THE FLAT ; HE HAV ING PAID A SUBSTANTIAL AMOUNT TOWARDS ITS COST WITHIN T HE STIPULATED PERIOD OF ONE YEAR, HE CANNOT BE DENIED THE BENEFIT OF THE SAID SECTION BECAUSE THE FLAT PURCHA SED BY HIM HAD COME INTO HIS FULL DOMAIN WITHIN THE PER IOD OF ONE YEAR, THOUGH THE SALE DEED IN HIS FAVOUR WAS REGISTERED SUBSEQUENTLY. CONSIDERING THE FACTS BEFORE US, WE ARE OF THE OPI NION THAT ASSESSEE HAD SATISFIED THE CONDITIONS SET OUT IN SECTION 54F OF THE ACT. THE QUESTION OF INVESTING THE CAPITAL GAINS IN AN ACCOU NT OPENED UNDER CAPITAL GAINS ACCOUNT SCHEME, BECOMES IRRELEVANT TH E MOMENT ASSESSEE COMPLETED THE PROCESS OF INVESTING IN THE NEW RESIDENTIAL HOUSE WITHIN THE TIME ALLOWED IN SECTION 54(1) OF T HE ACT. IN THE CIRCUMSTANCES, LD. COMMISSIONER OF INCOME TAX (APPE ALS) WAS JUSTIFIED ITA NO.243/CHNY/2018 :- 7 -: IN ALLOWING THE CLAIM. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S). 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DI SMISSED. ORDER PRONOUNCED ON THURSDAY, THE 12TH DAY OF JULY, 2018, AT CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) / JUDICIAL MEMBER ( . '#'$ ) (ABRAHAM P. GEORGE) % &' / ACCOUNTANT MEMBER - ' / CHENNAI . / DATED: 12TH JULY, 2018. KV / ' $(0 1 2 1 ( / COPY TO: 1 . ! / APPELLANT 3. & 3( ( ) / CIT(A) 5. 167 $(8 / DR 2. $%! / RESPONDENT 4. & 3( / CIT 6. 79 :' / GF