Appeal Details
Counselvise Citation
[2018] 119 COUNSELVISE.COM (IT) 0697 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
7 month(s) 10 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-11-2018
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Assessment Year
2009-2010
Appeal Filed On
16-04-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D /SMC , NEW DELHI BEFORE SH. N. K. SAINI, HON BLE VICE PRESIDENT AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 2626 /DEL/201 8 : ASSTT. YEAR : 200 9 - 10 ANUR AG TYAGI, S/O R B TYAGI, FLAT NO. 303, SUPER TECH, AVANT GRADE PLOT NO. 1, SECTOR - 5, VAISHALI, GHAZIABAD VS INCOME TAX OFFICER, WARD - 1(1), GHAZIABAD (APPELLANT) (RESPONDENT) PAN NO. AAGPT6848P ASSESSEE BY : SH. ANUP SHARM A , ADV. & SH. SANJAY PRASAR, ADV. REVENUE BY : SH. SURENDRA PAL , SR. DR DATE OF HEARING : 19.09 .201 8 DATE OF PRONOUNCE MENT : 27 .11 .201 8 ORDER PER N. K. SAINI, VICE PRESIDENT : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 09.01.2018 OF LD. CIT(A ), GHAZIABAD . 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE LD. CIT(A), ERRED IN LAW, ON FACTS AND IN SURROUNDING CIRCUMSTANCES IN DISMISSING THE GENUINE APPEAL IN A CURSORY, CASUAL, ABRUPT, ARBITRARY WHIMSICAL AND SUMMARILY MANNER AND THAT TOO IN THE ABSENCE OF APPELLANT OR HIS LD. COUNSEL. 2. THAT IN DOING SO, THE LD. CIT(A) ERRED IN LAW, ON FACTS AND IN SURROUNDING CIRCUMSTANCES IN FAILING TO DISCUSS THE PROS AND CONS OF THE LEGAL AND MERIT ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 2 BASED ISSUES RAISED IN WRITTEN SUBMISSION, THEREBY DISPOSING THE APPEAL IN A SUMMARY MANNER. 3. THAT THE LD. CIT(A) ALSO ERRED IN LAW, ON FACTS AND IN SURROUNDING CIRCUMSTANCES IN FAILING TO APPRECIATE THAT THE CASE INVOLV ES EXEMPTION U/S 54 OF I.T. ACT, WHEREAS THE LD. CIT(A) IN HER WISDOM TREATED THE CASE INVOLVING EXEMPTION U/S 54F OF I.T. ACT BY HOLDING THAT CLAIM OF EXEMPTION U/S 54F IS NOT MAINTAINABLE. 4. THAT IN DOING SO, THE LD. CIT(A) AS WELL AS LD. A.O. ERRED IN LAW, ON FACTS AND IN THE SURROUNDING CIRCUMSTANCES IN FAILING TO TAKE INTO CONSIDERATION THE PROVISION OF SECTION 54 OF I.T. ACT IN RIGHT PERSPECTIVE, WHEREIN WORD PURCHASE OF ANOTHER RESIDENTIAL HOUSE WITHIN ONE YEAR BEFORE THE DATE ON WHICH TRANSFER T OOK PLACE, HAS BEEN MANDATED IN UNEQUIVOCAL MANNER. 5. THAT THE LD. CIT(A) ERRED IN LAW, ON FACTS AND SURROUNDING CIRCUMSTANCES IN FAILING TO APPRECIATE THAT TERM PURCHASE MEANS WHEN THE PURCHASE DEED IS ACTUALLY REGISTERED BEING 23 - 06 - 2007, WHICH IS CLEA RLY WITHIN ONE YEAR BEFORE SALE OF ORIGINAL ASSET ON 30 - 04 - 2008. 6. THAT THE LD. CIT(A) ERRED IN LAW, ON FACTS AND IN SURROUNDING CIRCUMSTANCES IN FAILING TO APPRECIATE THAT THERE NEED NOT BE DIRECT LIVE LINK BETWEEN CAPITAL GAIN AND ITS INVESTMENT BECAUS E REQUIREMENT FOR EXEMPTION IS SATISFIED, IF YET ANOTHER PROPERTY IS ACQUIRED WITHIN PRESCRIBED PERIOD STIPULATED IN SECTION 54 OF I.T. ACT. 7. THE LD. CIT(A) ERRED IN LAW, ON FACTS AND IN SURROUNDING CIRCUMSTANCES IN FAILING TO APPRECIATE THAT THERE IS N O NECESSITY THAT SAME FUNDS MUST BE USED FOR ACQUIRING ANOTHER RESIDENTIAL HOUSE. THE MANDATORY REQUIREMENT FOR EXEMPTION IS SATISFIED IF ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 3 ANOTHER PROPERTY ACQUIRED WITHIN PERIOD PRESCRIBED IN SECTION 54 OF I.T ACT. THAT THE APPELLANT CRAVES LEAVE TO MODIF Y/AMEND OR ADD ANY ONE OR MORE GROUNDS. 3. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE REJECTION OF CLAIM FOR DEDUCTION U/S 54 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 4. FACTS OF TH E CASE IN BRIEF ARE THAT AN ACTION U/S 147 OF THE ACT WAS TAKEN AFTER RECORDING THE REASONS AND A NOTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE BY THE AO ON 21.03.2016. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE RETURN OF INCOME FILED BY HIM ON 17 .12.2009 AT TOTAL INCOME OF RS.5,38,537/ - MAY BE TREATED IN RESPONSE TO THE SAID NOTICE U/S 148 OF THE ACT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD SOLD TWO RESIDENTIAL HOUSES FOR RS.35,00,000/ - EACH ON 30.04. 2008 AT SAMRAT PALACE COLONY, MEERUT IN WHICH HE HAD 50% SHARE. THUS, THE TOTAL SHARE OF THE ASSESSEE IN SALE OF THESE PROPERTIES CAME TO RS.35,00,000/ - . THE ASSESSEE CLAIMED THAT HE HAD PURCHASED A FLAT NO. 3030 AT 3 RD FLOOR, SUPERTECH, AVANT GARDE, VAISH ALI, GHAZIABAD ON 23.06.2007 FOR PURCHASE CONSIDERATION OF RS.17,75,000/ - AND HAD ALSO PURCHASED ANOTHER COMMERCIAL SHOP NO. 12 ON LOWER GROUND FLOOR IN SUPERTECH SHOPPRIX MALL, SECTOR - 5, VAISHALI, GHAZIABAD ON 17.10.2008 FOR PURCHASE CONSIDERATION OF RS.2 5,58,000/ - IN WHICH HE HAD HALF SHARE. THE ASSESSEE FURNISHED VARIOUS DETAILS AND DOCUMENTS WHICH WERE EXAMINED BY THE AO. ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 4 HOWEVER, THE AO MADE THE ADDITION OF RS.12,40,093/ - BY OBSERVING AS UNDER: IN THIS CASE, ALTHOUGH THE REGISTRY OF THE FLAT HAS BEEN D ONE WITHIN ONE YEAR BEFORE, THE WHOLE PAYMENT OF THE FLAT HAS BEEN DONE 4 YEARS AGO I.E. IN F.Y. 2004 - 05. THEREFORE, THE ASSESSEE HAS WRONGLY CLAIMED EXEMPTION U/S 54 OF THE ACT FOR RS. 21,28,200/ - ON PURCHASE OF THIS FLAT FOR F.Y. 2008 - 09. IN VIEW OF THE ABOVE, THE CLAIM OF EXEMPTION U/S 54 OF THE ACT FOR RS. 21,28,200/ - IS HEREBY DISALLOWED. THEREFORE, COMPUTATION OF LONG TERM CAPITAL GAIN IS DONE AS BELOW: ASSESSEE S SHARE IN SALE OF TWO HOUSES (30.04.2008): RS. 35,00,000/ - LESS: INDEXED VALUE AS P ER CHART SUBMITTED BY THE ASSESSEE ( - ) RS. 16,09, 907/ - RS. 18,90,093/ - LESS: INVESTMENT IN CAPITAL GAIN BONDS OF NATIONAL HIGHWAYS ( - )RS. 6,50,000/ - AUTHORITY OF INDIA DT. 30.09.2008 ____ ______ ____ TAXABLE LONG TERM CAPITAL GAIN RS. 12,40,093 6 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: THE ASSESSEE IS A SALARIED EMPLOYEE. FIE HAD FILED RETURN OF INCOME FOR A.Y. 2009 - 10, ON A TOTAL INCOME OF RS. 538537, SHOWI NG INCOME FROM SALARY, INCOME FROM RENT, INCOME FROM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. DURING THE YEAR, ASSESSEE HAD SOLD TWO RESIDENTIAL PROPERTIES AT MEERUT FOR RS. 3500000/ - EACH ON 30/04/2008 HAVING 50% SHARE, HIS SHARE IN THE SALE OF PROPERT IES, THEREFORE, COMES TO RS. 3500000/ - . THEREAFTER, THE ASSESSEE HAD PURCHASED FLAT IN VAISHALI, GHAZIABAD ON 23/06/2007 FOR RS. 1775000/ - AND ALSO COMMERCIAL SHOP IN VAISHALI, GHAZIABAD ON 17/10/2008 FOR RS. 2558000/ - , HAVING 50% SHARE THEREIN. DURING ASS ESSMENT PROCEEDINGS VARIOUS DETAILS AND DOCUMENTS FILED BY THE ASSESSEE WERE EXAMINED ON TEST CHECK BASIS BY THE LD. A.O. THE ASSESSEE HAD CLAIMED EXEMPTION U/S 54F OF I.T. ACT FOR RS. 2128200/ - IN RESPECT OF PURCHASE OF FLAT AT VAISHALI, FOR WHICH THE PUR CHASE DEED WAS REGISTERED ON 23/06/2007. SINCE THE SAID FLAT HAD BEEN PURCHASED WITHIN ONE YEAR OF THE SALE OF ORIGINAL ASSET ON 30/04/2008. THE ASSESSEE IS LAWFULLY ENTITLED TO CLAIM EXEMPTION U/S 54 OF I.T. ACT. HOWEVER THE LD. A.O. IN HIS WISDOM, DISALL OWED CLAIM OF EXEMPTION FOR RS. 2128200 ON TECHNICAL AND ILLOGICAL GROUNDS ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 5 IGNORING THE FACT THAT THOUGH ITS PAYMENT HAD BEEN MADE IN ADVANCE, AS PER SECTION 54(1) OF I.T. ACT, YET THE PURCHASE TOOK PLACE ONLY ON 23/06/2007, THE DATE ON WHICH PURCHASE DEED WAS REGISTERED. ON MERITS THAT AT THE OUTSET, I WOULD LIKE TO ASSERT THAT DISALLOWANCE OF CLAIM FOR EXEMPTION AMOUNTING TO RS. 2128200/ - U/S 54 OF I. T. ACT HAS BEEN MADE ON TECHNICAL AND ILLOGICAL GROUNDS. THAT IN DOING SO, THE LD. A.O., IN A ZEAL TO MA KE ADDITION FOR ADDITION SAKE, HAS CONVERTED A SIMPLE CASE INTO CONTROVERSIAL AND CONTENTIOUS CASE. THAT THE SIMPLE FACT IS THAT THE APPELLANT HAD CLAIMED EXEMPTION U/S 54 OF THE ACT ON PURCHASE OF FLAT NO.303 AT 3 RD FLOOR 'SUPERTECH AVANTI' GARDE, RESIDE NTIAL BUILDING COMPLEX, BUILT BY COMPANY UNDER NAME AND STYLE OF 'M/S SURYA MERCHANTS LTD. DELHI, VIDE SALE DEED DULY REGISTERED ON 23/06/2007. THAT IT WOULD BE SIGNIFICANT TO APPRECIATE WORD 'PURCHASE' HAS ALL ALONG BEEN SPECIFICALLY MENTIONED IN SECTION 54 OF I. T. ACT. THE LD. A.O., HOWEVER, HAS NOT ONLY IGNORED THE ABOVE INSERTION OF WORD 'PURCHASE' IN SECTION 54 OF I.T. ACT ITSELF, BUT ALSO SKIPPED THE WRITTEN SUBMISSION DATED 24/11/2016, 28/11/2016, DEALING EXTENSIVELY THE FACTUAL - LEGAL ASPECTS, PRE SENTED BEFORE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WITHOUT HIS OWN COMMENTS ON THE ISSUES RAISED THEREIN IS REPRODUCED HEREIN BELOW: A. THE COMPUTATION OF LONG TERM CAPITAL GAIN U/S 50C OF I. T. ACT 1961 IS AS UNDER: THAT THE ASSESSEE SALE OF IMMOVABLE PROPERTY (RESIDENTIAL HOUSE NO. 63, 64) ON 30/04/2008, SMART PLACE COLONY, GARH ROAD, MEERUT. SMART PLACE COLONY, GARH ROAD, MEERUT RS. 3500000/ - THAT THE PURCHASE OF PLOT ON 27/03/1987 OF RS. 67500/ - THUS THE INDEX COST AS PER CHART ENCLO SED ( - ) RS. 1609907/ - RS. 1890093/ - THAT THE ASSESSEE PURCHASED FLAT NO. 303, SUPER TECH, AVANT GARD E, VAISHALI AS ON RS. 2128200/ - 23/06/2007 OF ASSESSEE PURCHASED OF CAPITAL GAIN BONDS OF ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 6 NATIONAL HIGH WAYS AUTHORITY OF I NDIA DATED 30/09/2008 RS. 650000/ - RS. NIL THAT THE ASSESSEE PURCHASED FLAT ON 23/06/2007 IS THE PURCHASE PERIOD OF ONE YEAR SINCE THE PURCHASE HAS BEE N MADE MORE THAN ONE YEAR BEFORE AS STIPULATED IN SECTION 54F, CAPITAL GAIN EXEMPTION IS ALLOWABLE FROM A BARE READING OF SECTION 54F. WE FIND THAT SUB - SECTION (1) SHOULD BE READ WITH SUB - SECTION (4), IT CAN BE READ IN ISOLATION BECAUSE THE BENEFITS OF SECTION 54F ARE TO BE ALLOWED ONLY SUBJECT TO THE PROVISIONS OF SUB - SECTION (4) OF THE SAID SECTION. THIS S ECTION ALLOWS THE BENEFIT OF EXEMPTION TO THE INDIVIDUAL OR AN HUF, IN WHICH CASE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSET NOT BEING A RESIDENTIAL HOUSE AND 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 3 YEARS AFTER THE DATE WITH IN ACCORDANCE WITH PROVISIONS LAID DOWN IN THIS SECTION SUB - SECTION (4) FURTHER STATES THAT THE AMOUNT OF NET CONSIDERATION WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN 1 YEAR BEFORE THE DATE OF WHICH TRANSFER OF THE ORIGINAL ASSET TOOK PLACE OR WHICH IS NOT UTILIZED BY HIM FOR PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF THE FILING OF THE R ETURN OF INCOME U/S 139 SHALL BE DEPOSITED BY HIM BEFORE FURNISH SUCH RETURN IN AN ACCOUNT IN ANY BANK OR INSTITUTION AS MAY BE SPECIFIED BY THE CENTRAL GOVERNMENT IF BOTH THESE SUB - SECTION ARE READ IN A CONJUNCTION ONLY ONE INFERENCE IS DRAWN THAT TO AVAI L THE BENEFIT OF 54F, THE ASSESSEE IS REQUIRED EITHER TO PURCHASE A RESIDENTIAL HOUSE OUT OF THE SALE PROCEEDS OR LONG TERM CAPITAL ASSET WITHIN A PERIOD OF 3 YEARS AFTER THAT DATE, CONSTRUCT A RESIDENTIAL HOUSE IN THAT CASE, GAIN SHALL BE COMPUTED AS PER CLAUSE (A) AND (B) OF SUB - SECTION (1). THE OBJECT OF INTRODUCTION OF THESE SECTIONS ARE THAT, ASSESSEE SHOULD MAKE MORE INVESTMENTS IN RESIDENTIAL H OUSE, ON SALE OF ITS OLD RESIDENTIAL HOUSE OR LONG TERM CAPITAL ASSET IT IS NOT NECESSARY THAT THE SAME FUND S MUS T BE USED IN PURCHASING OF THE NEW RESIDENTIAL HOUSE, BUT THE FUND SHOULD BE AVAILABLE WITH THE ASSESSEE FOR ITS INVESTMENT IN RESIDENTIAL HOUSE SINCE THE LAW PERMITS UTILIZATION OF CAPITAL GAIN WITHIN THE SPECIFIED TIME THE ASSESSEE MAY USE SUCH FUND S FOR OTHER PURPOSE AND MAY FIND RESOURCE FROM OTHER SOURCE FOR INVESTMENT IN TIME THE LAW DOES NOT EXPECT THAT THE SALE AMOUNT SHOULD BE KEPT IN THE LOCKER AND THE SAME SHOULD BE UTILIZED IN PURCHASE OF RESIDENTIAL HOUSE NEITHER THE LAW NOR DOES ANY CIRCU LAR REQUIRE THE IDENTITY OF THE AMOUNT RECEIVED ON SALE AND UTILIZATION FOR PURPOSE OF SECTION 54F ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 7 AND OTHER RELEVANT PROVISIONS. IT IS QUITE LIKELY THAT THE ASSESSEE MAY USE THE MONEY FOR HIS BUSINESS AND DRAW AMOUNT FOR INVESTMENT FROM HIS PAST SAVINGS. CONVERSELY HE MAY PLACE SALE PROCEEDS IN LONG TERM INVESTMENT OTHER THAN WHAT IS PERMITTED U/S 54F BUT ALL THE SAME FIND MONEY FROM THE BUSINESS OR OTHER SOURCE FOR APPROVED INVESTMENT WITHIN THE TIME SINCE LAW ITSELF PERMITS INVESTMENT IN A LAW PROPERTY E VEN BEFORE SALE OF PROPERTY COVERED BY SUB - SECTION 54 AND 54F THE LAW DOES NOT CONTEMPLATE THE IDENTITY OF THE FUNDS ON SALE FO R ITS INVESTMENT. SINCE MONEY HAS NO COLOR ALL THAT IS REQUIRED IS COMPLIANCE WITH THE CONDITION OF INVESTMENT. PERIOD OF ONE YE AR AVERAGE LENGTH OR 366 DAYS IN A LEAP YEAR THE ACT DOES NOT LAY DOWN NUMBER OF DAYS, NOR DOES IT STIPULATE FINANCIAL YEAR/CALENDAR YEAR BUT PERIOD OF ONE YEAR BEFORE. IT IS UNDISPUTED THAT THE PERIOD OF ONE YEAR IN RESPECT OF FINANCIAL YEAR MEANS FROM 1 S T APRIL TO 31 ST MARCH. SO IS THE CASE WITH CALENDAR YEAR I.E. FROM 1 ST JAN TO 31 ST DECEMBER. FIRST AND LAST DATE ARE INCLUSIVE IN THE INSTANT CASE YOUR HONOUR SALE AND PURCHASE RESPECTIVELY TOOK PLACE 30/04/2008 AND 23/06/2007 ANY DAY BETWEEN THE TWO DATES INCLUSIVE OF FIRST AND LAST DATE IS WELL WITHIN THE PERIOD OF ONE YEAR. ; B. AS PER COMPUTATION OF INCOME, THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN AT RS. 1890093/ - (ARISING FROM THE SALE OF HOUSE A63 - 64, SAMRAT PALACE COLONY, GARH ROAD, MEERUT FOR SALE CONSIDERATION OF RS. 3500000/ - AS PER SALE DEED DATED 30/04/2008) WHICH HAS BEEN CLAIMED AS EXEMPT U/S 54F OF THE INCOME TAX ACT, 1961 BY MAKING INVESTMENT OF RS. 2128200/ - IN THE PURCHASE OF FLAT NO. 303, SUPERTECH, AVANT GARDE, VAISHALI, GHAZIABAD A S PER REGISTERED SALE DEED DATED 23/06/2007:AND U/S 54EC BY MAKING INVESTMENT IN THE PURCHASE OF NHAI BONDS FOR RS. 650000/ - 30/09/2008. AS PER ABOVE SALE DEED FOR THE PURCHASE OF FLAT THE ASSESSEE HAS MADE PAYMENT IN ADVANCE AS PER SECTION 54(1) OF THE INC OME TAX ACT, 1961 AND THE ASSESSEE HAS, WITHIN A PERIOD OF 1 YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE, PURCHASED A RESIDENTIAL HOUSE IN THIS CASE THE TRANSFER HAS TAKEN PLACE ON 23/06/2007FOR THE PURCHASE OF FLAT I.E. THE DA TE WHEN THE OWNERSHIP WAS TRANSFERRED TO THE ASSESSEE WHICH IS WITHIN ONE YEAR BEFORE THE SALE/TRANSFER OF ABOVE HOUSE. IN THIS CASE IT IS NOT NECESSARY THAT THE SAME AMOUNT WAS TO BE UTILIZED FOR THE PURCHASE OF HOUSE. THUS, THE ASSESSEE HAS MADE PAYMENT IN ADVANCE BUT THE TRANSFER TOOK PLACE ON 23/06/2007. ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 8 THAT THE LD. A.O. ALSO IGNORED VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS UNDER: A . SANJIV LAL V. CIT(2014) 105 DTR 305(SC) B. CHANDRA PEAKSH JAIN V. ACIT (2014) 46 TAXMAN 268(AB) C. CIT V. RASIK LAL (H.U.F) (1989) 177ITR 198 (SC) D . KASTURI V. CIT (2010) 42 DTR 288 (MAD) E. Z ABARCHAND BHANDARI V. ACIT (2013) 58 SOT347 (MUM) (TRIB) BESIDES THE ABOVE JUDICIAL PRONOUNC EMENTS, JURISDICTIONAL FLON'BLE HIGH COURT ALLAHABAD HAS HELD AS UNDER: 'CAPITAL GAI NS - EXEMPTION - ASSESSEE, OWNER OF HOUSE PROPERTY - SALE OF HOUSE PROPERTY - TH AT CONSTRUCTION OF NEW BUILDING WAS STARTED BEFORE SALE OF OLD BUILDING IS IMMATERIAL - ASSESSEE EN TITLED TO EXEMPTION - INCOME TAX ACT, 1961, S. 54'. (COMM ISSIONER OR INCOME TAX V. H.K . KAPOOR (DECD.) 234 ITR 753 (ALL)). SIMILAR QUESTION CAME UP FO R CONSIDERATION BEFORE KARNATAKA HIGH COURT THE DA TE OF SALE OF OLD BUILDING WAS FEBRUARY 09, 1997, ALTHO UGH THE COMMENCEMENT OF CONSTRUCTION STARTED IN 1976 ON THESE FACTS THE HON'BLE K ARNATAKA HIGH COURT HELD AS UNDER: 'THAT IT WAS IMMATERIAL THAT THE CONSTRUCTION OF THE NEW BUILDING WAS STARTED BEFORE THE SALE OF OLD BUILDING'. (CIT V. J. R. SUBRAMANYA BH AT (1987) 165 ITR 571 (KAR.). THAT DESPITE CONCEDING THE FACT THAT THE REGIST RY OF THE FLAT HAD BEEN DONE ON 23 - 06 - 2017 I.E. WITHIN ONE YEAR BEFORE, THE LD. A.O. HE HAS DISALLOWED THE CLAIM ON THE MERE GROUND THAT THE PAYMENT HAD BEEN MADE 4 YEARS AGO, I.E . IN F.Y. 2004 - 05. THAT AT THIS STAGE I WOULD LIKE TO ASSERT THAT MODE OF PAYMENT OF RS. 1775000 DEPICTED IN THE SALE DEED DATED 23 - 06 - 2007 HAD ESCAPE D THE KIND ATTENTION OF LD. A. O . THROUGHOUT THE PERIOD OF ASSESSMENT PROCEEDINGS FOR REASONS UNKNOWN TO THE APPELLANT. FOR FACILITY OF REFERENCE, THE SAME IS REPRODUCED HEREIN BELOW: RS. 50000 - CASH DATED 20 - 02 - 2005. RS. 225000 - BY CHEQUE NO. 413608 DATED 12 - 04 - 2005. RS. 1450000 - BY CHE QUE NO. 291780 DATED 09 - 03 - 2005 DRAWN ON ICICI BANK LTD. AS HOUS ING LOAN. RS. 50000 - BY CHEQUE NO. 291756 DATED 09 - 03 - 2015 DRAWN ON ICICI BANK LTD. AS HOUSING LOAN. ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 9 THAT IT IS WIDELY PREVALENT PRACTICE IN REALITY BUSINESS. THE BUILDER, ON GETTING BOOKING AMOUNT AND ADVANCE INSTALLMENT, GET LOAN SANCTIONED THROUGH THE IR SPONSORED BANK. THE BANK MAKES PAYMENT DIRECTLY TO BUILDER AND THEREAFTER REPAYMENT OF LOAN INTEREST - EMI IS MADE BY THE PURCHASER FOR LONG TIME TO COME. THAT IN THE INSTANT CASE, SANCTIONED AMOUNT OF LOAN OF RS. 1500000 HAD BEEN CREDITED IN BUILDER'S AC COUNT DIRECTLY BY THE BANK, AS SHOWN IN SALE DEED. THAT THE RE - PAYMENT HAD BEEN MADE IN THE SHAPE OF EMI BY THE PURCHASER I.E. APPELLANT. A STATEMENT SHOWING THE RE - PAYMENT OF LOAN THROUGH FOLLOWIN G EMI OBTAINED FROM THE ICICI H OME FINANCE CO LTD. IS ENCL OSED FOR KIND PERUSAL. THUS, YOUR HONOUR WILL FEEL CONVINCED THAT THE CAPITAL GAIN ARISING FROM THE TRANSFER OF LONG TERM CAPITAL ASSET (SUPRA) HAS BEEN INVESTED IN THE PURCHASE OF RESIDENTIAL FLAT (SUPRA) IN THE SHAPE OF VARIOUS EMI WITHIN THE PERIOD STIP ULATED IN SECTION 54 OF I.T. ACT. THUS, IT IS REQUESTED THAT KEEPING OF LITERAL INTERPRETATION, THE EXEMPTION PRAYED FOR IN THE INTEREST OF EQUITY AND JUSTICE. NOW REVERTING TO CONCEPT OF NEXUS TO SALE PROCEEDS, IT HAD BEEN HELD AS UNDER THAT: 'THERE NEED NOT BE A DIRECT OR LIVE LINK BETWEEN THE CAPITAL GAIN AND INVESTMENT. FOR THE PURPOSE OF CLAIMING EXEMPTION U/S 54/54F, THE ASSESSEE MAY UTILIZE THE SALE PROCEEDS FOR SOME OTHER PURPOSE AND REQUIREMENT FOR EXEMPTION IS SATISFIED IF YET ANOTHER PROPERTY IS ACQUIRED WITHIN THE PRESCRIBED TIME AND SUBJECT TO PRESCRIBED CONDITION.' AJIT VASWANI V. DCIT (2001) 117 TAXMAN 123 (DELHI TRIBUNAL) THAT IN ACIT V. DR. P.S. PASRICHA (2008) 20 SOT 468 (MUMBAI TRIBUNAL), THE ASSESSEE TRANSFERRED A RESIDENTIAL PROPERTY FOR RS. 1.40 CRORE. THE SALE CONSIDERATION WAS UTILIZED FOR ACQUIRING A COMMERCIAL PROPERTY THOUGH, THE ASSESSEE ACQUIRED TWO ADJACENT RESIDENTIAL FLATS IN ONE BUILDING WITHIN THE STIPULATED TIME AND CLAIMED EXEMPTION U/S 54. THE A.O. HELD THAT THE SALE CONSI DERATION MUST BE USED FOR RE - INVESTMENT IN RESIDENTIAL HOUSE WHERE, AS THE ASSESSEE HAD ACQUIRED COMMERCIAL PROPERTY OUT OF SALE PROCEEDS, THE EXEMPTION U/S 54 COULD NOT BE ALLOWED. HOWEVER TRIBUNAL HELD THAT: 'THERE IS NO NECESSITY THAT SAME FUNDS MUST B E USED FOR ACQUIRING THE RESIDENTIAL HOUSE AND ACCORDINGLY THE OBJECTION OF THE A.O. WAS OVERRULED. HOWEVER, THE CLAIM FOR EXEMPTION U/S 54 WAS LIMITED TO ONE RESIDENTIAL HOUSE.' ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 10 FURTHERMORE, THE WORD 'PURCHASE' IN SECTION 54 OF I.T. ACT MUST BE INTERPRETE D TO ITS ORDINARY MEANING. THE WORD 'PURCHASE' IS NOT DEFINED UNDER THE ACT AND THEREFORE RESORT TO THE ORDINARY MEANING, AS UNDERSTOOD BY A LAYMAN HAS TO BE MADE. THE CONTEXT DEMANDS NOT A LITERAL INTERPRETATION BUT A LIBERAL AND WIDER INTERPRETATION. THE WORD 'PURCHASE' IN SECTION 54 OF I. T. ACT CLEARLY CONNOTE THE DOMAIN AND CONTROL OF PROPERTY BEING GIVEN INTO THE HANDS OF APPELLANT. BESIDES THE ABOVE, 'DATE OF AGREEMENT TO SELL CANNOT BE TREATED AS DATE OF TRANSFER OF IMMOVABLE PROPERTY, IT SHOULD BE THE DATE ON WHICH DELIVERY OF POSSESSION IS GIVEN AND ALL SALE CONSIDERATION IS RECEIVED.' [SMT. SHAIL MOD LAI V. CIT (2013) TAXMAN.COM 46/28 TAXMAN 298 (H&P)]. THAT IN THE INSTANT APPEAL UNDER CONSIDERATION, THOUGH THE PAYMENT IN INSTALLMENT HAD BEEN MADE IN EARLIER YEAR, THE POSSESSION WAS DELIVERED ONLY ON EXECUTION OF SALE DEED I.E . 23 - 06 - 2007. APART FROM THE ABOVE, THE LD. A.O., HAS MADE ASSESSMENT ON THE TOTAL INCOME OF RS. 1778630/ - INCLUDING TAXABLE LONG TERM CAPITAL GAIN. AS IN THE NOTICE OF DEMAN D U/S 156 OF I. T. ACT, CALCULATION HAVE NOT BEEN MADE, IT IS NOT CLEAR WHETHER ENTIRE INCOME OF RS. 1778630/ - HAS BEEN COMPUTED @ 20% OR ONLY CAPITAL GAIN ONLY. CONCLUSION THAT ON FACTS, IN LAW AND IN SURROUNDING CIRCUMSTANCES, YOUR HONOUR WILL FEEL CONVI NCED THAT EXEMPTION U/S 54 HAS BEEN DENIED, MERELY ON LITERAL INTERPRETATION OF SECTION 51 READ WITH SECTION 54 AND 54F OF I. T. ACT AND THE SAME IS LIABLE FOR DELETION IN THE INTEREST OF EQUITY AND NATURAL JUSTICE BASED ON LIBERAL AND WIDER INTERPRETATION AS PER LAW. PRAYER THAT IS HUMBLY REQUESTED THAT THE IMPUGNED ASSESSMENT ORDER MAY KINDLY BE QUASHED AND IMPUGNED ADDITION MAY KINDLY BE DELETED IN THE INTEREST OF EQUITY AND NATURAL JUSTICE.' 7 . THE LD. CIT(A), HOWEVER, SUSTAINED THE ADDITION BY OBSERVI NG AS UNDER: 5.1 THE APPELLANT HAS CHALLENGED DISALLOWANCE OF CLAIM OF EXEMPTION TO LONG TERM CAPITAL GAIN OF RS.12,40,093/ - . DURING THE COURSE OF APPELLATE PROCEEDINGS APPELLANT ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 11 SUBMITTED THAT HE HAD PURCHASED FLAT NO. 303, SUPERTECH VAISHALI ON 23.06.20 07 AND CLAIMED AS EXEMPTION U/S 54F AGAINST THE SALE OF HOUSES ON 30.04.2008. EXAMINATION OF FACTS REVEALS THAT APPELLANT MADE ALL THE PAYMENT DURING FY 2004 - 05 FOR A SUM OF RS. 17,75,000/ - WHEREAS REGISTRY HAS ONLY DONE ON 23.06.2007. THUS APPELLANT HAD I NVESTED IN THE PROPERTY CLAIMED U/S 54F, BEYOND THE TIME LIMIT PRESCRIBED U/S 54F AND ALSO NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 54F. IN VIEW OF THESE UNDISPUTED FACTS, THE CLAIM OF EXEMPTION U/S 54F IS NOT MAINTAINABLE ACCORDINGLY, THE ADDITION MADE BY THE AO IS UPHELD AND THESE GROUNDS OF APPEAL ARE DISMISSED. 8 . NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE PURCHASED THE RESIDENTIAL HOUSE ONE YEAR BEFORE THE SALE OF THE RESIDENTIAL HOUSE. THEREFO RE, THE LONG TERM CAPITAL GAIN WAS EXEMPT AS PER THE PROVISION OF SECTION 54 OF THE ACT. IT WAS POINTED OUT THAT THE ASSESSEE SOLD THE HOUSE ON 30.04.2008 AND PURCHASED THE FLAT ON 23.06.2007 WHICH WAS FALLING WITHIN ONE YEAR PRIOR TO THE SALE OF THE HOUSE . THEREFORE, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 9 . IN HIS RIVAL SUBMISSIONS, THE LD. SR. DR STRONGLY SUPPORTED THE ASSESSMENT ORDER PASSED BY THE AO AS WELL AS THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) . 10 . W E HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE ALONG WITH ANOTHER CO - OWN ER SOLD TWO RESIDENTIAL PROPERTIES AT MEERUT FOR RS. 35,00,000/ - EACH ON 30.04.2008 AND THE SHARE OF THE ASSESSEE ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 12 WAS RS.35,00,000/ - . IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE PURCHASED A FLAT AT GHAZIABAD ON 23.03.2007 FOR RS.17,75,000/ - AND CLAIMED EXEMPTION U/S 54F OF THE ACT. HOWEVER, THE AO DID NOT AL LOW THE CLAIM OF THE ASSESSEE FOR THE REASONS THAT THE PAYMENTS WERE MADE MUCH PRIOR TO 23.06.2007. ON THE CONTRARY, THE CLAIM OF THE ASSESSEE WAS THAT THE PAYMENTS WERE MADE IN ADVANCE BUT THE SALE DEED WAS EXECUTED ONLY ON 23.06.2007. WE HAVE NOTICED FRO M THE SALE DEED DATED 23.06.2007 THAT THE ASSESSEE MADE THE PAYMENT IN ADVANCE BUT THE SALE DEED WAS EXECUTED VIDE RESOLUTION PASSED IN THE MEETING OF BOARD OF DIRECTORS OF THE VENDOR COMPANY M/S SURYA MERCHANTS LTD. HELD ON 19.06.2007 , PRIOR TO THAT THERE WAS NO SALE DEED AND OWNERSHIP VESTED WITH THE VENDOR. THE ASSESSEE ALTHOUGH MADE THE PAYMENT IN ADVANCE BUT HE BECAME THE OWNER AFTER EXECUTING THE SALE DEED ON 23.06.2007 WHEN BOTH THE VENDOR AND THE VENDEE SIGNED AND EXECUTED THE SALE DEED. THEREFORE, IT IS CLEAR THAT THE ASSESSEE PURCHASED THE HOUSE ONLY ON 23.06.2007 WHICH WAS FALLING IN THE PERIOD ONE YEAR BEFORE THE SALE OF THE RESIDENTIAL PROPERTY ON 30.04.2008. THE PROVISIONS CONTAINED IN SECTION 54 OF THE ACT AS UNDER: 54. [(1)] [SUBJECT TO THE PROVISIONS OF SUB - SECTION (2), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG - TERM CAPITAL ASSET [***], BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESID ENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF [ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRA NSFER TOOK PLACE PURCHASED], OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE [CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA], THEN], INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME - TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE , IT SHALL BE DEALT WITH IN ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 13 ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, ( I ) IF THE AMOUNT OF THE CAPITAL GAIN [IS GREATER THAN THE COST OF [THE RESIDENTIAL HOUSE] SO PURCHASED OR CONSTRUCTED (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET)], THE DIFFERENCE BETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARI SING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE NIL; OR ( II ) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGE D UNDER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE REDUCED BY THE AMOUNT OF THE C APITAL GAIN. [***] [(2) THE AMOUNT OF THE CAPITAL GAIN 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 APPLICAB LE 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 P ERIOD SPECIFIED IN SUB - SECTION (1), THEN, ITA NO . 2626 /DE L/201 8 ANURAG TYAGI 14 ( I ) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND ( II ) THE ASSESSEE SH ALL BE ENTITLED TO WITHDRAW SUCH AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. 11 . FROM THE ABOVE PROVISIONS, IT IS CLEAR THAT THE LONG TERM CAPITAL GAIN IS EXEMPTED IF THE RESIDENTIAL HOUSE PROPERTY IS PURCHASED ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE. IN THIS CASE, THE TRANSFER I.E. THE SALE TOOK PLACE ON 30.04.2008 AND THE RESIDENTIAL HOUSE WAS PURCHASED ON 23.06.2007 WHICH WAS FALLING IN THE PERIOD OF ONE YEAR FROM THE DATE OF SALE. THEREFORE, THE ASSESSEE WA S E NTITLED FOR EXEMPTION U/S 54 OF THE ACT. IN THAT VIEW OF THE MATTER, WE DELETE THE ADDITION MADE BUY THE AO AND SUSTAINED BY THE LD. CIT(A). 1 2 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ( ORDER PRON OUNCED I N THE OPEN COURT ON 27 /11 / 2018 ) SD/ - SD/ - ( SUCHITRA KAMBLE ) (N. K. SAINI) JUDICIAL MEMBER VICE PRESIDENT DATED: 27 /11 /2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR
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