ITO, CHENNAI V. Shri Gangesan Saseendran, CHENNAI

ITA 2753/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4531 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 14-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 23-09-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: N RAJAGOPALAN
• Keywords: Capital asset
• Section: 54F

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , !.. $ , ) BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.2753/MDS/2016 * * /ASSESSMENT YEAR: 2012-13 THE INCOME TAX OFFICER, CORPORATE WARD-2(R), ROOM NO.513, 5 TH FLOOR, WANAPARTHY BLOCK, 121, M.G.ROAD, CHENNAI-600 034. VS. SHRI GANGESAN SASEENDRAN, NO.17/5, RAGAVENDRA APARTMENTS, AZEEZ NAGAR, 2 ND STREET, KODAMBAKKA, CHENNAI-600 024. [PAN: AKRPS 6077 L ] ( - /APPELLANT) ( ./- /RESPONDENT) - 0 / APPELLANT BY : MR. A.V.SREEKANTH, JCIT ./- 0 /RESPONDENT BY : MR.N.RAJAGOPALAN, CA 0 /DATE OF HEARING : 14.03.2017 0 /DATE OF PRONOUNCEMENT : 26.05.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 22.07.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 6, CHENNAI, IN ITA NO.199/CIT(A)-6/2015-16 FOR THE AY 2012-13 AND RAIS ED THE FOLLOWING GROUNDS: ITA NO.2753/MDS/2016 :- 2 -: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPE ALS) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1. THE CIT(A) ERRED IN DELETING THE DISALLOWANCE M ADE U/S.54F OF THE ACT. 2.2. THE CIT(A) FAILED TO CONSIDER THAT THE ASSESSEE HAD ACQUIRED TWO PROPERTIES ONE ON HIS OWN NAME AND ANOTHER ALONG WITH HIS SPOUSE AND THER EFORE HAS NOT COMPLIED WITH THE MANDATORY REQUIREMENT OF PURCHASING A RESIDENTIAL P ROPERTY. 2.3. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE A SSESSEE HAD REGISTERED THE UNDIVIDED SHARE OF LAND OF THE TWO PROPERTIES ON 30.09.2010 F OR A TOTAL CONSIDERATION OF RS.29,02,000/- AND THAT THE ASSESSEE HAD SOLD HIS S HARES ONLY ON 23.11.2011 WHICH IS MORE THAN A YEAR PRIOR TO THE DATE OF TRANSACTION. 2.4. THE CIT(A) ERRED IN HOLDING THAT THE PROVISIONS ARE TO BE LIBERALLY INTERPRETED AND THUS HAS ENLARGED THE SCOPE OF SEC.54F BY PERMITTING TEL ESCOPING OF TWO INVESTMENTS MADE MORE THAN A YEAR PRIOR TO THE DATE OF TRANSACTION. 2.5. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE A SSESSEE HAD TAKEN POSSESSION OF THE RESIDENTIAL HOUSES ON 15.06.2013 AND BY DELETING TH E DISALLOWANCE MADE U/S.54F, HAS ALLOWED THE ASSESSEE TO ENJOY UNJUST AND UNINTENDED BENEFIT/RELIEF IN COMBINING BOTH THE CONDITIONS, WHERE ACTUALLY ONE OF THE SITUATIONS ON LY COULD BE APPLIED. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT; IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2.0 ALL THE GROUNDS OF THE APPEAL ARE RELATED TO TH E DISALLOWANCE OF CLAIM MADE U/S.54F OF THE INCOME TAX ACT (IN SHORT THE A CT) AMOUNTING TO RS.69,59,260/-. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (IN SHORT AO) FOUND THAT THE ASSESSEE SOL D SHARES IN INDIGO TX PVT. LTD., FOR A CONSIDERATION OF RS.71,68,750/- BY WAY OF TRANSFER AND THE NET SALE CONSIDERATION WAS CLAIMED TO BE 69,15,260/-AND CLAIMED THE ENTIRE SALE CONSIDERATION AS DEDUCTION U/S.54F OF INCOME TAX ACT, TOWARDS THE INVESTMENT IN HOUSE PROPERTY. THE AO DISALLOWED THE CLAIM MADE BY THE ASSESSEE SINCE THE ASSESSEE HAS ENTERED INTO CONTRA CT FOR CONSTRUCTION AGREEMENT PRIOR TO ONE YEAR BEFORE THE SALE OF THE LONG TERM CAPITAL ASSET. AS PER THE DETAILS THE ASSESSEE HAD ENTERED IN TO A GREEMENT FOR CONSTRUCTION ON 06/07/2010 AND DEED OF SALE FOR UND IVIDED SHARE OF LAND WAS DATED 30/09/2010. ITA NO.2753/MDS/2016 :- 3 -: 3.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(APPEALS) AND THE LD.CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE SINCE, THE CONST RUCTION WAS COMPLETED AND TAKEN POSSESSION OF THE PROPERTY WITHIN THREE Y EARS FROM THE DATE OF THE SALE OF THE CAPITAL ASSET. THE LD.CIT(A) RELIE D ON THE HOST OF CASE LAWS INCLUDING THE DECISIONS OF THIS TRIBUNAL AS WELL AS DECISION OF THE JURISDICTIONAL HIGH COURT. THE RELEVANT PARAGRAPH I N PAGE NO.4 OF THE LD.CIT(A) ORDER IS EXTRACTED AS UNDER FOR THE SAKE OF CONVENIENCE AND CLARITY: 5.1 THE MATTER IS CONSIDERED. THE OBJECTION OF THE AO IS THAT THE APPELLANT HAD ENTERED INTO CONSTRUCTION ON 06.07.2010 AND THE DEED OF SALE FOR UNDIVIDED SHARE OF LAND WAS DATED 30.09.2010. THE RESIDENTIAL APARTMENTS WERE COMPLE TED ON 15.06.2013. THE CASE OF THE AO IS THAT THE PERIOD OF RECKONING VIS-A-VIS THE CAP ITAL GAINS IS BEYOND ONE YEAR PRIOR TO THE DATE OF THE CAPITAL GAINS TRANSACTION. WHATEVER MAY BE THE DATE OF CONSTRUCTION AGREEMENT, IT IS NOT DISPUTED THAT THE FLAT WAS TAKEN POSSESSI ON ON 15.06.2013, I.E. WITHIN THREE YEARS FROM THE DATE OF THE CAPITAL GAINS. IN VIEW OF THE FACTS AS THEY EMERGE, I AM OF THE VIEW THAT A LIBERAL INTERPRETATION OF THE STATUTE NEEDS TO BE TAKEN. IN DOING SO, I AM GUIDED BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS: I. HONBLE DELHI HIGH COURTS DECISION IN CIT VS BHART I MISHRA REPOTED IN [2014] TAXMANN.COM 50 (DELHI). II. HONBLE MADRAS HIGH COURT IN THE CASE OF CIT B. SRI SARDARMALKOTHARI REPORTED IN (2008) TMI 30/87. III. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS H.K. KAPOOR [1998] 234 ITR 75. IV. HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS T.R. SUBRAMANYA BHATT REPORTED IN [1987] 165 ITR 571. V. LD. CHENNAI TRIBUNAL IN THE CASE OF SEETHA SUBRAMAN IAN VS ACIT REPORTED IN 59 ITR 94. VI. LD. CHENNAI TRIBUNAL IN THE CASE OF ACIT VS R. VASU IN ITA NO.1656/MDS/2008 DATED 09.07.2010. 6.2 THE HEAD NOTE OF THE HONBLE DELHI HIGH COURTS DECISION IN THE CASE OF BHARTI MISHRA (SUPRA) IS AS UNDER: SECTION 54F OF THE INCOME-TAX ACT, 1961 CAPITAL GAINS EXEMPTION OF IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE (CONSTRUCTION) ASSESSMENT YEAR 2009-10 WHETHER SECTION 54F(1)(III) STIPULATES THAT ASSESSEE SHALL WITHIN A PERIOD IF THREE YEARS AFTER DATE OF SALE OF ORIGINAL ASSET, CONSTRU CT A RESIDENTIAL HOUSE AND IT IS NOT SPECIFIED IN SECTION THAT CONSTRUCTION MUST BEGIN A FTER DATE OF SALE OR ORIGINAL/OLD ASSET. HELD, YES ASSESSEE SOLD SHARES AND INVESTE D SALE CONSIDERATION IN CONSTRUCTION OF HOUSE PROPERTY HE CLAIMED EXEMPTI ON UNDER SECTION 54F ASSESSING OFFICER REJECTED CLAIM FOR BENEFIT UNDER S ECTION 54F ON GROUND THAT CONSTRUCTION OF HOUSE HAD COMMENCED BEFORE DATE OF SALE OF SHARES WHETHER ON LIBERAL INTERPRETATION OF PROVISION, ASSESSEE COULD NOT BE DENIED BENEFIT OF SECTION ITA NO.2753/MDS/2016 :- 4 -: 54F ON GROUND THAT CONSTRUCTION OF HOUSE HAD COMMEN CED BEFORE SALE OF SHARES HELD, YES [PARAS 5 AND 14) IN FAVOUR OF ASSESSEE]. 6.3 SIMILARLY, THE LD. CHENNAI TRIBUNAL IN THE CASE OF SEETHA SUBRAMANIAN (SUPRA) HELD THAT IN ORDER TO GET BENEFIT UNDER SECTION 54F THE ASSES SEE NEED NOT COMPLETE THE CONSTRUCTION OF THE HOUSE AND OCCUPY THE SAME. IT IS ENOUGH IF T HE ASSESSEE ESTABLISHES THAT HE HAS INVESTED THE ENTIRE NET CONSIDERATION. HENCE, THE O VERWHELMING CONSENSUS OF VARIOUS JUDICIAL DECISIONS IS TO ADOPT A BENEFICIAL/LIBERAL INTERPRETATION ON THE CLAIM OF EXEMPTION UNDER SECTION 54F IF THE ASSESSEE IS ABLE TO SUCCES SFULLY DEMONSTRATE THE INVESTMENT. 4.0 APPEARING FOR THE REVENUE, THE LD.DR ARGUED THA T THE ASSESSEE HAS REGISTERED THE UNDIVIDED SHARE OF LAND OF TWO RESID ENTIAL APARTMENTS BEARING NO.404 IN 4 TH FLOOR AND 504 IN 5 TH FLOOR IN BLOCK C-3 ADMEASURING 1231.30 SQ.FT. EACH. AS PER THE SALE DEED ON 30.09 .2010 THE ASSESSEE HAD PAID A CONSIDERATION OF RS.29,02,000/- IN AGGR EGATE FOR BOTH THE FLATS TOWARDS THE UNDIVIDED SHARE OF LAND (UDS) AND THE SHARES WERE TRANSFERRED ON 23.11.2011 WHICH WAS MORE THAN A YEA R PRIOR TO THE DATE OF TRANSFER. AS PER THE PROVISIONS OF SEC.54F OF T HE ACT, THE ASSESSEE REQUIRED TO MAKE INVESTMENT ONE YEAR BEFORE THE DAT E OF TRANSFER OF CAPITAL ASSET OR COMPLETE CONSTRUCTION WITHIN THE T HREE YEARS FROM THE DATE OF TRANSACTION. IN THE ASSESSEES CASE, THE ASSESS EE HAS ENTERED INTO TRANSACTION FOR CONSTRUCTION OF RESIDENTIAL HOUSE M ORE THAN ONE YEAR PRIOR TO THE CAPITAL GAINS TRANSACTION AND HENCE CONTENDE D THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S.54F. ON THE OTHER H AND, THE LD.AR ARGUED THAT THE ASSESSEE HAS COMPLETED THE CONSTRUCTION OF RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF LON G TERM CAPITAL ASSET AND ELIGIBLE FOR DEDUCTION U/S 54F. THE LD AR FURTHER A RGUED THAT THE CONDITION BEFORE ONE YEAR IS APPLICABLE IN THE CASE OF THE PU RCHASE OF THE ASSET BUT NOT FOR CONSTRUCTION. THE LD.AR FURTHER ARGUED THAT THE INTENTION OF THE ITA NO.2753/MDS/2016 :- 5 -: LEGISLATURE TO GIVE TAX BENEFITS IS TO ENCOURAGE T HE INVESTMENTS IN HOUSE PROPERTIES TO ADDRESS THE HOUSING PROBLEMS AND BENE FICIAL PROVISIONS SHOULD BE INTERPRETED LIBERALLY BUT NOT IN BETWEEN THE LINES THE LD.AR SUBMITTED THAT THE LD.CIT(A) HAS RIGHTLY ALLOWED TH E CLAIM U/S.54F AND THERE IS NO VIOLATION OF PROVISIONS. 5.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. THE ASSESSEE HAD SOLD THE SHARES ON 23.11.2011 AND REGISTERED THE UNDIVIDED SHARE OF LAND ON 30.09.2010. THE CONSTRU CTION AGREEMENT WAS DATED 06.07.2010 AND THE ASSESSEE HAS COMPLETED THE CONSTRUCTION WITHIN THE THREE YEARS FROM THE DATE OF THE SALE OF THE SH ARES I.E. ON 15.06.2013. THESE FACTS WERE NOT DISPUTED BY THE REVENUE. AS P ER THE PROVISIONS OF SEC.54F, THE DEDUCTION IS ALLOWED IF FOLLOWING CON DITIONS ARE SATISFIED. (I) IN CASE OF PURCHASE OF ASSET (A) IT SHOULD BE PURCHASED WITHIN ONE YEAR BEFORE THE S ALE OF LONG TERM CAPITAL ASSET. OR (B) IT SHOULD HAVE BEEN ACQUIRED WITHIN TWO YEARS FROM THE DATE OF THE SALE OF THE LONG TERM CAPITAL ASSET OR (II) IN CASE OF CONSTRUCTION, AFTER THAT DATE CONSTRUCT ED A RESIDENTIAL HOUSE WITH IN THREE YEARS FOR THE DATE OF TRANSFER OF CAPITAL ASSET.. 5.1 FOR READY REFERENCE, WE RE-PRODUCE HEREUNDER SE C.54F OF THE ACT WHICH READS AS UNDER: [ CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. 83 54F. (1) 84 [SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHER E, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDE D FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET, N OT BEING A 85 RESIDENTIAL HOUSE ITA NO.2753/MDS/2016 :- 6 -: (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGI NAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR 86 [TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE 85 PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE 87 [CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA] (HERE AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEA LT 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 THE N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHAL L NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET C ONSIDERATION IN R ESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO TH E NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45: 88 [ PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY WHERE (A) THE ASSESSEE, (I) OWNS 89 MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGI NAL ASSET; OR (III) 90 CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NE W ASSET, W ITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE OR IGINAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER THAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS C HARGEABLE UNDER THE HEAD 'INCOME F 5.2 THIS VIEW IS UPHELD BY THE HONBLE DELHI HIGH C OURT IN THE CASE OF CIT-XV V. BHARTI MISHRA IN ITA NO.567/2013 AND THE RELEVANT PART OF THE DECISION IS EXTRACTED AS UNDER: 12. SECTION 54F(1) IF READ CAREFULLY STATES THAT THE A SSESSEE BEING AN INDIVIDUAL OR HINDU UNDIVIDED FAMILY, WHO HAD EARNED CAPITAL G AINS FROM TRANSFER OF ANY LONG- TERM CAPITAL NOT BEING A RESIDENTIAL HOUSE COULD CL AIM BENEFIT UNDER THE SAID SECTION PROVIDED, ANY ONE OF THE FOLLOWING THREE CONDITIONS WERE SATISFIED; (I) THE ASSESSEE HAD WITHIN A PERIOD OF ONE YEAR BEFORE THE SALE, PURCHA SED A RESIDENTIAL HOUSE; (II) WITHIN TWO YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINA L CAPITAL ASSET, PURCHASED A RESIDENTIAL HOUSE AND (III) WITHIN A PERIOD OF THRE E YEARS AFTER THE DATE OF SALE OF THE ORIGINAL ASSET, CONSTRUCTED A RESIDENTIAL HOUSE. 13 . FOR THE SATISFACTION OF THE THIRD CONDITION, IT I S NOT STIPULATED OR INDICATED IN THE SECTION THAT THE CONSTRUCTION MUST BEGIN AFT ER THE DATE OF SALE OF THE ORIGINAL/OLD ASSET. THERE IS NO CONDITION OR REASON FOR AMBIGUIT Y AND CONFUSION WHICH REQUIRES MODERATION OR READING THE WORDS OF THE SAID SUB-SEC TION IN A DIFFERENT MANNER . ITA NO.2753/MDS/2016 :- 7 -: 5.3 IN THE INSTANT CASE, THE ASSESSEE HAS COMPLETED THE CONSTRUCTION OF THE HOUSE WITHIN THREE YEARS FROM THE DATE OF CAPIT AL GAINS AND THE ASSESSEE HAS SATISFIED THE CONDITION FOR ALLOWING D EDUCTION U/S 54F AND CASE IS SQUARELY COVERED BY THE HONBLE DELHI HIGH COURT JUDGMENT CITED SUPRA. THE LD. CIT(A) ALSO ALLOWED THE APPEAL RELYI NG ON THE DECISION OF HONBLE HIGH COURT CITED (SUPRA) AND THE DECISION O F THIS TRIBUNAL IN SEETHA SUBRAMANIAN VS ACIT REPORTED IN 59 ITR 94.THEREFORE , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND THE SAM E IS UPHELD. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! . . $ ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 26 TH MAY, 2017. TLN 0 .$6 76 /COPY TO: 1. - /APPELLANT 4. 8 /CIT 2. ./- /RESPONDENT 5. 6 . /DR 3. 8 ( ) /CIT(A) 6. * /GF