DCIT 28(2), NAVI MUMBAI V. RAGHUNATH B KATHURIA, NAVI MUMBAI

ITA 277/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3217 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 12-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V PERAMPULNA
• Keywords: Benefit of exemption
• Section: 143(3); 54

Judgement Text

1 I.T.A. NO.277/MUM/2015 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO. 277/MUM/2015 (ASSESSMENT YEAR : 2011-12) DCIT, 28(2), NAVI MUMBAI VS RAGHUNATH B KATHURIA PROP M/S SAI FOUND, PLOT NO.43, SECTOR 6, SANPADA, NAVI UMBAI 400 705 PAN : AADPK6086H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI V PERAMPULNA RESPONDENT BY NONE DATE OF HEARING : 22-08-2016 DATE OF PRONOUNCEMENT : 24-08-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LD.CIT(A) DT 30-10-2014 PASSED AGAINST THE ASSESSME NT ORDER U/A 143(3) DT 31- 01-2014 FOR A.Y. 2011-12 ON THE FOLLOWING GROUNDS:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT (A) ERRED IN HOLDING THAT THE CONDITION RELATING TO 'CONSTRUCTION' OF FLAT INSTEAD OF CONDITION RELATIN G TO 'BUYING' OF THE FLAT IS APPLICABLE WHILE ALLOWING THE EXEMPTION OF LONG TERM CAPITAL GAIN UNDER SECTION 54 OF THE INCOME TAX ACT, 1961. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT (A) ERRED IN ALLOWING THE EXEMPTION OF L ONG TERM CAPITAL GAIN UNDER SECTION 54 OF THE INCOME TAX ACT , 1961, WHEREIN PURCHASE OF RESIDENTIAL HOUSE IS NOT WITHIN THE PER IOD OF TWO YEARS FROM THE TRANSFER OF ORIGINAL ASSET. 2 I.T.A. NO.277/MUM/2015 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE OF SERVICE OF NOTICE BY RPAD. HOWEVER, WE FIND THAT THE MATTER COULD BE DI SPOSED OF EVEN WITHOUT THE PRESENCE OF THE ASSESSEE. THEREFORE, WE HEARD THE LD. LD. DEPARTMENTAL REPRESENTATIVE AND THE APPEAL IS DISPOSED OF ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 3. THE SOLITARY ISSUE RAISED BY THE REVENUE CHALLENGES THE ACTION OF THE LD.CIT(A) FOR ALLOWING EXEMPTION OF LONG TERM CAPIT AL GAIN (LTCG IN SHORT) CLAIMED BY THE ASSESSEE U/S 54 OF THE ACT. 4. THE BRIEF FACTS AND BACKGROUND OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE SOLD A FLAT FOR RS.1,17,00,0 00 ON 04-03-20111 AND EARNED LTCG OF RS.69,23,238 AND CLAIMED IT AS EXEMP T U/S 54 OF THE ACT ON ACCOUNT OF INVESTMENT IN NEW FLAT AT CHEMBUR, MUMBA I VIDE REGISTERED AGREEMENT DT 07-09-2011 FOR AN AGGREGATE AMOUNT OF RS.1,27,00,932/-. UPTO THE DUE DATE OF RETURN, I.E. 30-09-2011 THE ASSESSE E HAD MADE PAYMENT OF RS.52,58,953. BUT THE ASSESSING OFFICER REJECTED T HE CLAIM OF THE ASSESSEE U/S 54 OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD N OT RECEIVED POSSESSION OF THE SAID FLAT AND CONSTRUCTION WAS STILL INCOMPLETE . IT WAS ALSO NOTED BY THE ASSESSING OFFICER THAT THE PURCHASE OF THE FLAT DEN OTES ABSOLUTE CONTROL OVER THE PROPERTY WHICH THE ASSESSEE DID NOT ACQUIRE AS THE BUILDING WAS NOT COMPLETE. BEING AGGRIEVED, THE ASSESSEE FILED APPE AL BEFORE THE LD.CIT(A) AND MADE EXHAUSTIVE SUBMISSIONS TO SHOW THAT ALL THE CO NDITIONS PRESCRIBED U/S 54 WERE DULY COMPLIED WITH AND THE ASSESSING OFFICER H AS MISUNDERSTOOD THE CASE AND THAT IS WHY BENEFIT OF EXEMPTION U/S 54 WAS WRO NGLY REJECTED BY THE ASSESSING OFFICER UNDER MISCONCEPTION OF LAW AND FA CTS. THE LD.CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND FOUN D FORCE THEREIN; THEREFORE, HE ALLOWED THE EXEMPTION REVERSING THE ACTION OF TH E ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS: 3 I.T.A. NO.277/MUM/2015 2.3 1 HAVE GONE THROUGH THE CONTENTION OF THE APPE LLANT AS WELL AS THAT OF THE A.0. I HAVE PERUSED THE COPIES OF AGREEMENTS PRODUCED BEFORE ME IN REGARD TO THE CLAIM OF DEDUCT ION MADE BY THE APPELLANT U/S.54 OF THE ACT. THE CLAIM OF EXEMPTION WAS PRIMARILY DENIED ON THE GROUND THAT THE APPELLANT FAILED TO T AKE POSSESSION NEW RESIDENTIAL PROPERTY WITHIN TWO YEARS OF SALE OF OL D RESIDENTIAL PROPERTY AND THE BUILDING WAS NOT COMPLETE AS ON 03 03.2013 THE A.O. THROUGHOUT THE ASSESSMENT ORDER WENT ON APPLYI NG THE CONDITION OF PURCHASE OF NEW RESIDENTIAL PROPERTY W ITHIN TWO YEARS OF SALE OF OLD PROPERTY, HOWEVER, SHE OVERLOOKED THE P REVAILING CONDITION OF CONSTRUCTION OF NEW PROPERTY WITHIN THREE YEARS OF SALE OF OLD PROPERTY. IN THE INSTANT CASE, THE APPELLANT SOLD T HE FLAT AT VANMALI OHS, NAVI MUMBAL ON 04.03,2011 FOR A CONSIDERATION OF RS.1,17,00,000 AND CAPITAL GAIN THEREON WAS ARRIVED AT RS.69,23,238/-. THE APPELLANT HAD PURCHASED A NEW F LAT AT VIJAY SHREE KRISHNA HOMES IN NAVI MUMBAI ON 07.09.2011. T HE APPELLANT MADE TOTAL PAYMENT OF RS.52,58,953/- UPTO 30/09/201 1 TO THE BUILDER. AS PER AGREEMENT, THE APPELLANT WAS TO MAK E PAYMENT IN INSTALLMENTS AND BUILDER WAS TO HAND OVER THE POSSE SSION OF THE FLAT AFTER CONSTRUCTION. THUS, IN THE PRESENT CASE, THE CONDITION OF CONSTRUCTION OF NEW HOUSE WITHIN THREE YEARS OF SAL E OF OLD PROPERTY IS APPLICABLE. 2.4 THE APPELLANT HAD SOLD THE PROPERTY ON 04.03.20 11 AND, THEREFORE, HE WAS REQUIRED TO CONSTRUCT A NEW RESID ENTIAL PROPERTY BY 04.03.2014. THE PURPOSE OF SECTION 54 I S TO ALLOW EXEMPTION TO THE ASSESSEE OF LONG TERM CAPITAL GAIN ARISING FROM SALE OF RESIDENTIAL HOUSE IF THE CAPITAL GAIN IS IN VESTED IN CONSTRUCTION OF NEW RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE Y EARS FROM THE DATE OF TRANSFER AND, THEREFORE, IN CASE THE ASSESS EE HAD INVESTED THE CAPITAL GAINS IN CONSTRUCTION OF A NEW RESIDENT IAL HOUSE WITHIN A PERIOD OF THREE YEARS, THIS SHOULD BE TREA TED AS SUFFICIENT COMPLIANCE OF THE PROVISIONS, AND IT IS NOT NECESSARY THAT THE POSSESSION OF THE FLAT SHOULD ALSO BE TAKEN WIT HIN THE PERIOD OF THREE YEARS. IN THE CASE BEFORE ME, WITHIN THE OF T HREE YEARS HE HAD INVESTED RS. 1,03,50,932/- WHICH WAS MORE THAN THE AMOUNT OF CAPITAL GAIN FORMING SUBSTANTIAL PART OF HIS SAL E CONSIDERATION, IN CONSTRUCTION OF NEW RESIDENTIAL HOUSE. THUS, IN MY VIEW, THE CLAIM OF EXEMPTION CANNOT BE DENIED ON THE GROUND THAT THE POSSESSION OF THE FLAT HAD NOT BEEN TAKEN WITHIN THE PERIOD OF THREE YEARS. 4 I.T.A. NO.277/MUM/2015 2.5 THE A.O. HAS TRIED TO DISTINGUISH THE CASE OF T HE APPELLANT AND CBDT CIRCULAR NO.672 DATED 16.12.1933, RELIED UPON BY TH E APPELLANT ON THE GROUND THAT THE SAME IS APPLICABLE TO SPECIFIED AUT HORITIES. IN THIS REGARD, THE RELIANCE IS TO BE PLACED ON THE CASE OF SRNT. SUNDER KAUR SUJAN SINGH GADH (2005) 3 SOT 206, MUMBAI BENC H OF TRIBUNAL, WHEREIN IT WAS HELD THAT THE BUILDER WOUL D FAIL IN THE / CATEGORY OF OTHER INSTITUTIONS AND, THEREFORE, BOOK ING OF THE FLAT WITH THE BUILDER HAS TO BE TREATED AS CONSTRUCTION OF FLAT BY THE ASSESSEE. 2.6 I HAVE GONE THROUGH THE ASSESSMENT ORDER & THE SUBMISSION MADE APPELLANT IN THIS REGARD. IT IS NOT IN DISPUTE THAT THE APPELLANT HAS PURCHASED RESIDENTIAL FLAT A ND HAS INVESTED THE ENTIRE CAPITAL GAIN FOR THE PURCHASE OF SAID FL AT- HOWEVER, THE DISPUTE IS THAT SINCE THE APPELLANT HAS NOT RECEIVE D THE POSSESSION WITHIN THE SPECIFIED PERIOD, THE A.O. HA S DENIED THE EXEMPTION. IT IS ALSO PERTINENT TO NOTE THAT OUT OF THE ENTIRE CAPITAL GAIN OF RS. 69,23,238/- THE APPELLANT HAD INVESTED RS. 52,58,953/- ON OR BEFORE FURNISHING OF RETURN U/S 139(1). WHER EAS THE BALANCE AMOUNT OF RS. 16,64,285/ - WAS NOT DEPOSITED IN CAP ITAL GAIN ACCOUNT FOR MAKING THE PAYMENT FOR SUCH PURCHASESUB SEQUENTLY. I AM OF THE CONSIDERED VIEW THAT MERELY BECAUSE THE APPE11ANT HAS NOT RECEIVED POSSESSION OF FLAT WITHIN THE PRESCRIBED T IME, IT SHOULD NOT BE THE GROUND FOR DISALLOWANCE UNDER SECTION 54 OF THE -ACT AS HELD B Y THE HON'BLE BOMBAY HIGH COURT IN HULA J.B. WADIA CONSIDERING THE FACT THAT ASSESSEE HAS INVESTED A SUM OF RS. 52,58,953/-.HE IS ELIGIBLE FOR DEDUCTION TO THE EXT ENT OF RS. 52,58,953/-ON THE AMOUNT INVOLVED FOR PURCHASE OF F LAT AS AGAINST RS. 69,23,238/- CLAIMED BY APPELLANT. THE A .O. IS, THEREFORE, DIRECTED TO RECOMPUTE THE CAPITAL GAIN A CCORDINGLY. 5. DURING THE COURSE OF HEARING BEFORE US, THE LD.DR S UPPORTED THE ORDER OF THE ASSESSING OFFICER. 6. IT IS NOTED BY US THAT THE ASSESSEE HAD SOLD THE PR OPERTY ON 04- 03-2011 AND, THEREFORE, AS PER SECTION 54, THE ASSE SSEE WAS REQUIRED TO CONSTRUCT A NEW RESIDENTIAL HOUSE BY 04-03-2014 SINCE SECTION 54 ALLOWS EXEMPTION TO AN ASSESSEE OF LONG TERM CAPITA L GAIN ARISING 5 I.T.A. NO.277/MUM/2015 FROM SALE OF RESIDENTIAL HOUSE IF THE AMOUNT OF CAP ITAL GAIN IS INVESTED IN CONSTRUCTION OF NEW RESIDENTIAL HOUSE W ITHIN A PERIOD OF 3 YEARS. THERE IS NO SPECIFIC REQUIREMENT THAT ASS ESSEE SHOULD ALSO OBTAIN THE POSSESSION OF THE SAME WITHIN THE PERIOD OF THREE YEARS. THE EMPHASIS IS UPON THE UTILIZATION OF THE AMOUNT IN PURCHASE / CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE. IT IS N OTED THAT UNDISPUTEDLY, THE ASSESSEE INVESTED A SUM OF RS.1,0 3,50,932 WHICH WAS MORE THAN THE CAPITAL GAIN EARNED BY THE ASSESS EE. IN OUR OPINION, THE LD.CIT(A) RIGHTLY DREW SUPPORT FROM TH E CIRCULAR ISSUED BY THE CBDT NO.672 DT 16-12-1993. IT IS FURTHER NO TED BY US THAT SECTION 54 IS A BENEFICIAL PROVISION INTENDING TO P ROVIDE BENEFITS TO THE ASSESSEE WITH A VIEW TO BOOST INVESTMENT IN HOU SING INFRASTRUCTURE. THUS, WHILE INTERPRETING SUCH PROV ISIONS, AN EFFORT SHOULD BE MADE IN THE DIRECTION SO AS TO FIND OUT H OW THE BENEFIT OF DEDUCTION CAN BE GRANTED AND NOT TO FIND OUT HOW TH E SAME CAN BE DENIED. IN CASE THE ASSESSE HAS FULFILLED THE COND ITIONS IN SUBSTANCE, THEN THE BENEFIT SHOULD NOT BE DENIED ON MERE TECHN ICALITIES. IN OUR VIEW, THE ASSESSEE HAS MADE COMPLIANCE OF THE REQUI SITE CONDITIONS OF SECTION 54 AND, THEREFORE, THE BENEFIT HAS BEEN RIGHTLY GRANTED BY THE CIT(A). NOTHING COULD BE BROUGHT ON RECORD BY THE LD.DR TO NEGATE THE FACTUAL FINDINGS OF THE LD.CIT(A) AND NO CONTRARY JUDGEMENT HAS BEEN BROUGHT TO OUR KNOWLEDGE TO CONT RADICT THE VIEW TAKEN BY THE LD.CIT(A). IN OUR CONSIDERED VIE WS, THE LD.CIT(A) HAS RIGHTLY RELIED UPON THE JUDGMENT OF HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT VS HILLA JB WADIA (1995) 216 ITR 376 (BOM). WE DO NOT FIND ANY JUSTIFICATION TO MAKE ANY INTERFERENCE IN THE ORDER OF THE LD.CIT(A), AND THEREFORE, THE GROUNDS RAISED BY THE REVENUE ARE 6 I.T.A. NO.277/MUM/2015 DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS 24 TH DAY OF AUG, 2016. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 24 TH AUG, 2016 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , H-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES