ACIT Non Corporate Circle 3, CHENNAI V. Justice T.S.Arunachalam, CHENNAI

ITA 2455/CHNY/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4907 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 09-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P H ARVIND
• Keywords: Cost of acquisition
• Section: 143(3); 54F; 54; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2455/MDS/2017 ( / ASSESSMENT YEAR: 2014-15) THE ASST. COMMISSIONER OF INCOME-TAX, CHENNAI 34. VS JUSTICE T.S. ARUNACHALAM, NEW NO.56/1, VEERABHADRAN STREET, NUNGAMBAKKAM, CHENNAI 600 034. PAN: AAHPA8574C ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI AR.V. SREENIVASAN, JCIT /RESPONDENT BY : SHRI P.H. ARVIND PANDIAN, SR. ADVOCATE, SHRI AMRITH BHARGAV & SHRI HARI SANKAR MANI, ADVOCATES /DATE OF HEARING : 20.12.2017 ! /DATE OF PRONOUNCEMENT : 30.01.2018 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-4, CHENNAI, DATED 21.07.2017 IN ITA NO.180/2016-17/A.Y .2014- 15/CIT(A)-4 FOR THE ASSESSMENT YEAR 2014-15 PASSED U/S.250(6) R.W.S. 143(3) OF THE ACT. 2 ITA NO. 2455/MDS/2017 2. THE REVENUE HAS RAISED FIVE GROUNDS IN ITS APPEA L HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE LD.AO TO THE TUNE OF RS.1,72,35,484/- WITH RESPECT TO THE DISALLOWANCE O F DEDUCTION U/S.54(2) OF THE ACT FOR NOT DEPOSITING THE RESIDUE SALE PROCEEDS IN CAPITAL GAIN SCHEME ACCOUNT WITHIN THE STIPULATED P ERIOD U/S.139(1) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE ASSES SMENT YEAR 2014- 15 ELECTRONICALLY ON 05.02.2016 DECLARING TOTAL INC OME OF RS.65,66,850/-. INITIALLY THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT AND SUBSEQUENTLY SELECTED FOR SCRUTINY UNDE R CASS. FINALLY ASSESSMENT ORDER WAS PASSED U/S.143(3) OF T HE ACT ON 29.12.2016 WHEREIN THE LD.AO WITHDREW THE BENEFIT O F DEDUCTION U/S.54F OF THE ACT BECAUSE THE ASSESSEE HAD NOT DEP OSITED THE RESIDUE SALE PROCEEDS OF RS.1,72,35,494/- IN THE CA PITAL GAINS SCHEME ACCOUNT IN ACCORDANCE WITH SECTION 54(2) OF THE ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD SOLD HI S HOUSE 3 ITA NO. 2455/MDS/2017 PROPERTY ON 15.04.2013 FOR TOTAL SALE CONSIDERATION OF RS.7,50,00,000/-. THE ASSESSEE IN HIS RETURN OF INC OME HAD COMPUTED HIS LONG TERM CAPITAL GAIN AFTER CLAIMING INDEXED COST OF ACQUISITION AT RS.7,01,35,980/-. THEREAFTER HE CLAI MED DEDUCTION U/S.54 OF THE ACT, AN AMOUNT OF RS.6,72,35,494/-. I T WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD UTILIZED RS.5,00 ,00,000/- OUT OF THE TOTAL SALE PROCEEDS FOR PURCHASE OF LAND ON 19.08.2013 LEAVING THE BALANCE AMOUNT OF RS.1,72,35,494/- TO B E INVESTED IN THE CONSTRUCTION OF RESIDENTIAL PROPERTY WITHIN 3 Y EARS FROM THE DATE OF SALE OF THE ORIGINAL ASSET FOR ENJOYING THE BENEFIT OF DEDUCTION U/S.54 OF THE ACT. HOWEVER IT WAS FURTHER OBSERVED BY THE LD.AO THAT THOUGH THE ASSESSEE HAD CONSTRUCTED THE HOUSE WITHIN THE PERIOD OF 3 YEARS FROM THE DATE OF SALE OF THE ORIGINAL ASSET, HAD FAILED TO DEPOSIT THE AMOUNT OF RS.1,72, 35,494/- IN THE CAPITAL GAIN SCHEME ACCOUNT WITH IN THE TIME LIMIT PROVIDED U/S.54(2) OF THE ACT. THEREFORE THE LD.AO WITHDREW THE BENEFIT OF SECTION 54 OF THE ACT TO THE ASSESSEE AND ADDED TO THE LONG TERM CAPITAL GAIN THE AMOUNT OF RS.1,72,35,494/-. 4 ITA NO. 2455/MDS/2017 5. ON APPEAL, THE LD.CIT(A) CITING VARIOUS DECISION S OF HIGHER JUDICIARY ALLOWED THE APPEAL OF THE ASSESSEE IN HIS FAVOUR BY OBSERVING AS UNDER:- 10.1 HAVE GONE THROUGH THE FACTS OF THE CASE AND H AVE ALSO CONSIDERED THE RIVAL SUBMISSIONS. IN VIEW OF THAT, THE CASE IS DISCUSSED AS UNDER. 11. THE ONLY QUESTION THAT NEEDS TO BE ANSWERED IN THE PRESENT CASE OF THE APPELLANT IS THAT WHETHER THE UNUTILISE D AMOUNT OF CAPITAL GAINS AT RS.1,72,35,494/- WHICH WAS NOT APP ROPRIATED TOWARDS CONSTRUCTION OF NEW HOUSE PROPERTY BEFORE T HE DUE DATE FOR FILING OF THE RETURN OF INCOME AS ENVISAGED U/S 139(1) OR WHICH WAS NOT DEPOSITED IN THE NOTIFIED CAPITAL GAI NS ACCOUNT SCHEME BEFORE THE DUE DATE FOR FILING OF THE RETURN OF INCOME AS ENVISAGED U/S 139 (1) OF THE ACT, CAN BE CLAIMED AS DEDUCTION U/S 54 OF THE ACT. IN THE INSTANT CASE, THE LONG TERM C APITAL GAIN WAS AT RS.7,01,35, 980/- OUT OF WHICH THE APPELLANT HAD INVESTED RS.5,55,24,882/-( WRONGLY TAKEN RS, 5,00,00,000/- B Y THE A.O.) TOWARDS PURCHASE OF LAND FOR CONSTRUCTION OF RESIDE NTIAL HOUSE THEREON. THE REMAINING AMOUNT OF LONG TERM CAPITAL GAIN AT RS.1,72,35,494/-WAS NOT UTILISED TOWARDS CONSTRUCTI ON OF NEW HOUSE PROPERTY OR TOWARDS DEPOSIT IN THE NOTIFIED C APITAL GAINS ACCOUNT SCHEME BEFORE THE DUE DATE FOR FILING OF RE TURN OF INCOME UNDER SECTION 139 (1) OF THE ACT. IT WAS CONTENDED BY THE AO THAT SINCE THE APPELLANT HAD FAILED TO COMPLY WITH THE R EQUIREMENTS OF SECTION 54, THE APPELLANT WAS NOT ELIGIBLE TO CLAIM THE DEDUCTION U/S 54 IN RESPECT OF THE AMOUNT WHICH WAS NOT INVES TED IN THE CONSTRUCTION OR DEPOSITED IN THE CAPITAL GAINS ACCO UNT SCHEME PRIOR TO THE DATE OF FILING OF THE RETURN OF INCOME U/S 139 (1) OF THE ACT. ACCORDINGLY, THE AO ALLOWED DEDUCTION OF RS. 5,55,24,882/-(WRONGLY TAKEN BY THE AO AT RS.5,0 0,00,000/-) U/S 54 AS AGAINST THE TOTAL CLAIM OF RS. 6,72,35,49 4/-. 12. DURING THE COURSE OF THE APPELLATE PROCEEDING A ND ALSO BEFORE THE AO, IT WAS CONTENDED BY THE APPELLANT TH AT SINCE THE 5 ITA NO. 2455/MDS/2017 ENTIRE REMAINING AMOUNT OF CAPITAL GAINS AT RS.1,72 ,35,494/- WAS INVESTED IN THE CONSTRUCTION OF THE RESIDENTIAL HOU SE WITHIN THREE YEARS FROM THE DATE OF SALE OF THE ORIGINAL ASSET, AS ENVISAGED U/S 54(1), THE APPELLANT WAS ELIGIBLE FOR DEDUCTION U/S 54 EVEN IF THE UNAPPROPRIATED CAPITAL GAINS WAS NOT DEPOSITED IN T HE CAPITAL GAINS ACCOUNT SCHEME BEFORE THE DATE OF FILING OF R ETURN OF INCOME U/S 139(1) OF THE ACT. IN THIS REGARD, THE A PPELLANT HAS FURNISHED COPY OF THE AGREEMENT FOR CONSTRUCTION OF RESIDENTIAL BUILDING, THE APPROVED MAP OF THE BUILDING AND THE RELEVANT BANK ACCOUNT STATEMENTS TO REFLECT THE AMOUNT WITHDRAWN FOR CONSTRUCTION OF THE RESIDENTIAL HOUSE. I HAVE PERUS ED THE SAME AND IT IS FOUND FROM THE DOCUMENTS THAT THE CONSTRU CTION OF THE RESIDENTIAL HOUSE WAS CARRIED OUT BY THE APPELLANT AND GOT COMPLETED WITHIN THE STIPULATED TIME AS ENVISAGED I N SECTION 54 OF THE ACT. 13. I HAVE ALSO PERUSED THE CASE LAWS RELIED ON BY THE APPELLANT TO SUBSTANTIATE HIS CLAIM THAT HE WAS ELIGIBLE FOR DEDUCTION OF THE ENTIRE AMOUNT OF CAPITAL GAIN WHICH WAS INVESTED IN THE PURCHASE OF LAND AND CONSTRUCTION OF THE RESIDENTIAL HOUSE A S WELL. IN THE REFERRED CASE OF CIT VS SARARMAL KOTHARI & SHANTHIL AL KOTHARI, TCA NOS. 354 AND 355 OF 2008, THE HON'BLE JURISDICT IONAL HIGH COURT HAS HELD AS UNDER: ' THE REQUIREMENT OF THE PROVISION IS THAT THE ASSE SSEE, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER, H AS TO CONSTRUCT A RESIDENTIAL HOUSE IN ORDER TO BECOME ELIGIBLE FOR E XEMPTION.. IN ORDER TO GET THE BENEFIT U/S 54 F, THE ASSESSEE NEEDED NOT COMPLETE THE CONSTRUCTION OF THE HOUSE AND OCCUPY T HE SAME. IT IS ENOUGH IF THE ASSESSEE ESTABLISHES THAT THE ASSESSE E HAD INVESTED THE ENTIRE NET CONSIDERATION WITHIN THE STIPULATED PERIOD. 14. FROM THE ABOVE DECISION OF THE HON'BLE HIGH COU RT, IT IS NOTICED THAT THE REQUIREMENT FOR CLAIMING DEDUCTION U/S 54F/54 IS TO INVEST THE CAPITAL GAINS IN THE CONSTRUCTION OF THE RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET. 6 ITA NO. 2455/MDS/2017 15. THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. K.RAMACHANDRA RAO(2015) 277 CTR 522, HAS HELD, 'AS IS CLEAR FROM SUB-SECTION (4) IN THE EVENT OF THE ASSESSEE N OT INVESTING THE CAPITAL GAINS EITHER IN PURCHASING THE RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54F (1), IF THE ASSESSEE WANTS THE BENEFIT OF SECTION 54 F, THEN HE SHOULD DEPOSIT THE SAID CAPITAL GAIN IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT. IN OTHE R WORDS, IF HE WANTS THE CLAIM OF EXEMPTION FROM PAYMENT OF INCOME TAX BY RETAINING THE CASH, THEN THE SAID AMOUNT IS TO BE I NVESTED IN THE SAID ACCOUNT. IF THE INTENTION IS NOT TO RETAIN CASH BUT TO INVES T IN CONSTRUCTION OR ANY PURCHASE OF THE PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THE REIN; THEN SECTION 54 F (4) IS NOT AT ALL ATTRACTED AND, THEREFORE, THE CONTENTION THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS STIPULATED AND, THEREFORE, HE IS NO T ENTITLED TO THE BENEFIT EVEN THOUGH HE HAS INVESTED THE MONEY IN CO NSTRUCTION, IS ALSO NOT CORRECT. 16. IN THE IMPUGNED ASSESSMENT ORDER, THE ASSESSING OFFICER HAS TAKEN A PLEA THAT SINCE THERE IS NO AMBIGUITY IN TH E SECTION 54, THE RATIO OF JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SULEMAN MERCHANT VS. CIT WAS SQUARELY APPLICABLE TO THE PRESENT CASE OF THE APPELLANT. TO COUNTER THIS OBSE RVATION THE AO, THE APPELLANT HAS RELIED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. VEGETABLES PRODUCTS LT D (1973) 88 ITR 192 WHEREIN IT HAS BEEN HELD THAT IF TWO REASON ABLE CONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE TH AT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED UNLESS T HERE IS DECISION BY THE JURISDICTIONAL HIGH COURT ON THE IS SUE. ACCORDING TO THE APPELLANT, THE DECISION OF THE JURISDICTIONA L HIGH COURT IN THE CASE OF A CIT VS SARARMAL KOTHARI & SHANTHILAL KOTHARI, FAVOURS THE ASSESSEE ON THE ISSUE. 17. THEREFORE, KEEPING III VIEW THE FACTS OF THE CA SE AND THE JUDICIAL PRONOUNCEMENTS, AS DISCUSSED ABOVE, I AM O F THE FIRM 7 ITA NO. 2455/MDS/2017 OPINION THAT THE APPELLANT WAS ELIGIBLE FOR DEDUCTI ON U/S 54 OF THE ACT IN RESPECT OF THE REMAINING AMOUNT AS WELL WHIC H HE HAD NOT DEPOSITED IN THE CAPITAL GAINS ACCOUNT SCHEME BUT H AD INVESTED IN THE CONSTRUCTION OF NEW RESIDENTIAL HOUSE WITHIN TH REE YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET. 6. BEFORE US THE LD.DR ARGUED IN SUPPORT OF THE ORD ER OF THE LD.AO WHILE AS THE LD. AR RELIED ON THE DECISION OF THE LD.CIT(A). THE LD.AR FURTHER CLARIFIED THAT THOUGH THE AMOUNT OF RS.1,72,35,494/- WAS NOT TRANSFERRED TO THE SCHEME ACCOUNT IT WAS HELD IN NATIONALIZED BANK UNTIL IT WAS UTILIZED FOR CONSTRUCTION OF THE BUILDING AND THEREFORE IT WAS ONLY A TECHNIC AL BREACH. THE LD.DR COULD NOT CONTROVERT TO THE SUBMISSION OF THE LD.AR THAT THE AMOUNT REMAINED AS DEPOSIT IN THE NATIONALIZED BANK UNTIL IT WAS UTILIZED FOR THE CONSTRUCTION OF THE RESIDENTIA L HOUSE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIAL ON RECORD. AT THE OUTSET WE FIND THIS ISSUE SQUARELY COVERED BY THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN ITA NO.1167/MDS/2016 VIDE ORDER DATED 15.09.2016 WH EREIN ON THE IDENTICAL SITUATION IT WAS HELD THAT SUCH SMALL TECHNICAL BREACH WILL NOT DISENTITLE THE ASSESSEE THE BENEFIT OF SEC TION 54 OF THE ACT. THE GIST OF THE DECISION IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 8 ITA NO. 2455/MDS/2017 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE D ECISION OF SHRI MADHUVAN PRASAD VS. ITO, SUPRA THE CHENNAI BEN CH OF THE TRIBUNAL HAS ALLOWED THE BENEFIT OF SECTION 54 OF THE ACT BECAUSE THE ASSESSEE HAD FULFILLED ALL THE CONDITIO NS PRESCRIBED UNDER SECTION 54 OF THE ACT BARRING THE DEPOSIT OF THE SALE PROCEEDS IN THE CAPITAL GAIN SCHEME ACCOUNT AS PR ESCRIBED UNDER SECTION 54(2) OF THE ACT. IN THAT DECISION RE LIANCE WAS ALSO PLACED IN THE DECISION OF HONBLE APEX COURT I N THE CASE OF MOTILAL PADAMPAT SUGARMILL CO.LTD. VS. STATE OF UTTAR PRADESH & ORS WHEREIN IT WAS HELD, THAT THUS THERE IS NO PRESUMPTION THAT EVERY PERSON KNOWS THE LAW. IT IS OFTEN SAID THAT EVERYONE IS PRESUMED TO KNOW THE LAW, BUT THAT IS NOT A CORRECT STATEMENT THERE IS NO SUCH MAXIM KNOWN TO T HE LAW. IN THE GIVEN CASE BEFORE US ALSO, IT IS NOT DISPUTED T HAT THE ASSESSEE HAD NOT FULFILLED THE CONDITIONS PRESCRIBE D UNDER SECTION 54 OF THE ACT BARRING THE DEPOSIT OF THE SA LE PROCEEDS IN THE CAPITAL GAIN SCHEME ACCOUNT. MOREOVER, TH E FACTS REVEAL THAT THE ASSESSEE HAD DEPOSITED THE ENTIRE S ALE PROCEEDS IN HIS SAVINGS BANK ACCOUNT MAINTAINED WITH NATIONA LIZED BANK OUT OF WHICH HE HAS CONSTRUCTED HIS HOUSE. THE ONL Y SMALL LACUNA ASSESSEE HAD MADE IS THAT THE ASSESSEE THOUG H HAD PLACED THE ENTIRE SALE PROCEEDS IN THE NATIONALIZED BANK HE HAS NOT TRANSFERRED THE SAME IN THE CAPITAL GAIN SCHEM E ACCOUNT. CONSIDERING THESE FACTS OF THE CASE AND T HE DECISIONS OF THE TRIBUNAL AND THE HONBLE APEX COUR T CITED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT FOR THIS SMALL TECHNICAL LAPSE OF THE ASSESSEE, THE BENEFIT OF SEC TION 54 SHOULD NOT BE DENIED. SECTION 54 OF THE ACT IS A BENEFICIA L PROVISION AND A BENEFICIAL INTERPRETATION HAS TO BE MADE AS F AR AS POSSIBLE FOR GIVING BENEFIT TO THE ASSESSEE. THE AS SESSEE HAD PROCEEDED TO COMPLY WITH THE PROVISIONS OF SECTION 54 OF THE ACT BUT HAS ONLY MADE A SMALL TECHNICAL BREACH WHIC H WE ARE OF THE CONSIDERED VIEW SHOULD NOT DISENTITLE THE AS SESSEE FOR THE BENEFIT OF SECTION 54 OF THE ACT. THEREFORE, WE HEREBY DIRECT THE LEARNED ASSESSING OFFICER TO GRANT THE BENEFIT OF SECTION 54 OF THE ACT TO THE ASSESSEE AND ACCORDINGLY DELETE T HE ADDITION 9 ITA NO. 2455/MDS/2017 MADE BY HIM WHICH WAS FURTHER SUSTAINED BY THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS). 7.1 FURTHER THE LD.CIT(A) HAS ALSO FOLLOWED THE DEC ISIONS OF VARIOUS HIGHER JUDICIARY WHEREIN THE ISSUED IS HELD IN FAVOUR OF THE ASSESSEE IN SIMILAR CIRCUMSTANCES. THEREFORE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD.CIT (A) ON THIS ISSUE. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED ON THE 30 TH JANUARY, 2018 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER '# /CHENNAI, $% /DATED 30 TH JANUARY, 2018 RSR % '( )( /COPY TO: 1. , /ASSESSEE 2. -. /REVENUE 3. / ( )/CIT(A) 4. / /CIT 5. (01 2 /DR 6. 13 /GF