ITO 22(3)(2), NAVI MUMBAI V. MAHENDRA H KACHHARA, NAVI MUMBAI

ITA 2454/MUM/2014

• Counselvise Citation: 245419914 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAURYA PRATAT
• Assessee Lawyers: V D PARMAR
• Section: 54

Judgement Text

1 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI- B,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMB ER & SHAKTIJIT DEY,JUDICIAL MEMBER /.ITA NO.2454/MUM/2014, /ASSESSMENT YEAR-2011-12 ITO22(3) NAVI MUMBAI VS MAHENDRA H KACHHARA 339,BIG SPLASH,SECTOR 17,VASHI NEW BOMBAY- 400075 PAN:AACPK9251B ( / APPELLANT) ( / RESPONDENT) /ASSESSEE BY :SHRI V D PARMAR / REVENUE BY :SHRI MAURYA PRATAT / DATE OF HEARING : 06 - 10 -2015 / DATE OF PRONOUNCEMENT : 06 -10-2015 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 27.01.2014 OF CIT(A)-33 ,MUMBAI,THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL. ASSESSEE,AN INDIVIDUAL,COMPANY,ENGAGED IN THE PROFE SSION OF A CHARTERED ACCOUNTANT,FILED HIS RETURN OF INCOME ON 11.09.2011,DECLARING TOTAL INCO ME OF RS. 5.59 LAKHS.THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT ON 18.10.2013,DETE RMINING THE INCOME OF THE ASSESSEE AT RS. 74,82,450/-. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT ALLOWING EXEMPT ION U/S.54 OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD SOLD HIS FLAT FOR A TOTAL CONSIDERATION OF RS.1.15 CRORES ON 16.11.2010,THAT IN THE COMPUTA TION OF INCOME HE HAD COMPUTED LONG TERM CAPITAL GAINS(LTCG)AT RS.69.23 LAKHS,THAT LTCG WAS CLAIMED EXEMPT U/S.54 OF THE ACT ON THE GROUND THAT THE ENTIRE AMOUNT STOOD INVESTED IN PUR CHASE OF A NEW FLAT,THAT THE NEW ASSET WAS PURCHASED ON 16.09.2010.HOWEVER THE AO REJECTED THE CLAIM MADE BY THE ASSESSEE,AS HE WAS OF THE OPINION THAT THE ASSESSEE SHOULD HAVE PURCHASED THE RESIDENTIAL HOUSE BY 15.11.2012 I.E.WITHIN TWO YEARS FROM THE DATE OF TRANSFER OF O RIGINAL ASSET,THAT PAYMENT WERE MADE TO THE DEVELOPERS AFTER EXPIRY OF TWO YEARS FROM THE DATE OF SALE OF OLD FLAT,THAT THE CONSTRUCTION OF THE NEW FLAT WAS COMPLETED BY THE DEVELOPER AFTER TWO Y EARS FROM THE DATE OF SALE OF OLD FLAT BY THE ASSESSEE,THAT THE BUILDING WAS NOT COMPLETE UNTIL 1 5.11.2012,THAT THE OCCUPATION CERTIFICATE WAS RECEIVED IN THE YEAR 2013.HE ASKED THE ASSESSEE AS TO WHY THE EXEMPTION CLAIMED U/S.54 OF THE ACT SHOULD NOT BE DENIED.AFTER CONSIDERING THE SUBM ISSION OF THE ASSESSEE,THE AO HELD THAT THE ASSESSEE HAD RECEIVED THE POSSESSION OF THE NEW FLA T ON 19.07.2013,THAT HE HAD NOT PURCHASED THE NEW ASSET WITHIN TWO YEARS FROM THE SALE OF OLD FLA T,THAT THE BENEFIT OF THREE YEARS OF CONSTRUCTION OF A RESIDENTIAL HOUSE WAS NOT AVAILABLE TO HIM. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM IT WAS CONTENTED THAT IN VESTMENT IN THE NEW ASSET WAS MADE BY 24. 06.2013,THAT THE POSSESSION WAS TAKEN WELL WITHIN T HREE YEARS.HE PRODUCED THE COPIES OF THE AGREEMENT OF PURCHASE AND SALE OF HIS OLD FLAT,AGRE EMENT OF PURCHASE OF NEW FLAT,STATEMENT OF 2 PAYMENT MADE.HE RELIED UPON THE CASES OF BHARATI C KOTHARI(244ITR352)AND R L SOOD(245 ITR 727).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSES SEE AND THE ASSESSMENT ORDER,THE FAA HELD THAT THE ASSESSEE HAD BOOKED A NEW FLAT WITH T HE BUILDER AND AS PER THE AGREEMENT HE HAD TO MAKE PAYMENT IN INSTALLMENTS,THAT THE BUILDE R WAS TO HANDOVER THE POSSESSION OF THE FLAT AFTER CONSTRUCTION,THAT THE ASSESSEE HAD MADE ENTIRE PAYMENT TOWARDS THE NEW RESIDENTIAL FLAT BY 24.06.2013,THAT HE HAD TAKEN PO SSESSION WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF HIS OLD FLAT,THA THE AMOUNT EQUIVALE NT TO THE CAPITAL GAINS ARISING OUT OF THE TRANSFER OF OLD ASSET STOOD INVESTED ON OR BEFORE THE DUE DA TE OF FILING OF RETURN OF INCOME U/S. 139(1)OF THE ACT.HE REFERRED TO THE DATES OF PAYMEN T MADE BY THE ASSESSEE FOR PURCHASING THE NEW ASSET.HE REFERRED TO THE CIRCULAR NO.672 OF THE CBDT DATED 16.12.1993 R.W. CIRCULAR NO.471 DATED 15.10.1986.HE RELIED UPON THE CASES OF SUNDER KAUR SAJJANSINGH GADH (3 SOT 206)AND MRS. HILLA J B WADIA(216ITR376),BHARATI MIS HRA(41TAXMANN.COM.50)AND ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR) RELIED U PON THE ORDER OF THE AO AND THE AUTHORISED REPRESENTATIVE (AR) SUPPORTED THE ORDER OF THE FAA.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE F IND THAT THE AO HAD DENIED THE EXEMPTION U/S. 54 BECAUSE HE WAS OF THE OPINION THAT THE ASSE SSEE HAD NOT CONSTRUCTED THE FLAT WITHIN 2 YRS FROM THE DATE OF TRANSFER OF HIS OLD HOUSE, THAT TH E FAA HAS GIVEN A CATEGORICAL FINDING OF THE FACT THAT THE POSSESSION OF THE NEW ASSET WAS TAKEN WELL WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF SALE OF THE OLD FLAT.HERE WE WOULD LIKE TO REFER TO THE CASE OF HILLA J.B. WADIA (SUPRA). THE HONBLE JURISDICTIONAL HIGH COURT HAS DECIDED THE ISSUE OF EXEMPTION U/S. 54 AS UNDER : SECTION 54 OF THE INCOME-TAX ACT, 1961, HAS TO BE CONSTRUED IN THE CONTEXT OF THE MANNER IN WHICH RESIDENTIAL PROPERTIES ARE NOW BEING CONSTRUCTED IN A CITY LIKE BOMBAY WHERE, LOOKING TO THE COST OF THE LAND, CO-OPERATIVE HOUSING SOCIETIES ARE BEING FORMED FOR CONSTRUCTING A BUILDING IN WHICH FLATS ARE ALLOTTED TO MEMBERS. THIS MUST ALSO BE VIEWED A S A METHOD OF CONSTRUCTING RESIDENTIAL TENEMENTS. WHAT WE HAVE TO SEE IS WHETHER THE ASSES SEE HAS ACQUIRED A RIGHT TO A SPECIFIC FLAT IN SUCH A BUILDING WHICH IS BEING CONSTRUCTED BY THE S OCIETY AND WHETHER HE HAS MADE A SUBSTANTIAL INVESTMENT WITHIN THE PRESCRIBED PERIOD WHICH WILL ENTITLE HIM TO OBTAIN POSSESSION OF THE FLAT SO CONSTRUCTED AND IN WHICH HE INTENDS TO RESIDE. THE MATERIAL TEST IN THIS CONNECTION IS DOMAIN OVER THE FLAT AND INVESTMENT IN IT. CENTRAL BOARD OF DIR ECT TAXES CIRCULAR NO. 471, * DATED OCTOBER 15, 1986, DEALS WITH INVESTMENT IN FLATS UNDER THE SELF -FINANCING SCHEME OF THE DELHI DEVELOPMENT AUTHORITY. THE BOARD HAS STATED IN THE CIRCULAR THA T WHEN AN ALLOTMENT LETTER IS ISSUED TO AN ALLOTTEE UNDER THIS SCHEME ON PAYMENT OF THE FIRST INSTALMEN T OF THE COST OF CONSTRUCTION, THE ALLOTMENT IS FINAL UNLESS IT IS CANCELLED. THE ALLOTTEE, THEREUP ON, GETS TITLE TO THE PROPERTY ON THE ISSUANCE OF T HE ALLOTMENT LETTER AND THE PAYMENT OF INSTALMENTS IS ONLY A FOLLOW-UP ACTION AND TAKING DELIVERY OF POSSESSION IS ONLY A FORMALITY. THE BOARD HAS DIREC TED THAT SUCH AN ALLOTMENT OF A FLAT UNDER THIS SCHEME SHOULD BE TREATED AS A CASE OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS THAT THE ASSESSEE HAD ACQUIRED DOMAIN OVER THE FLAT AND HAD INVESTED ALMOST THE ENTIRE REQUISITE AMOUNT IN IT WITHIN A PERIOD OF TWO YEARS AS PRESCRIBED UNDER SECTION 54. SHE WAS, THEREFORE, ENTITLED TO THE EXEMPTION UNDER SECTION 54. RESPECTFULLY FOLLOWING THE ABOVE AND CONFIRMING THE ORDER OF FAA,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISS ED ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH ,OCTOBER,2015. 6. ,2015 3 SD/- SD/- ( / SHAKTIJIT DEY) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE:06.10.2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR B BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.