Kavyanbhai Surendrabhai Huttheesing, Ahmedabad V. The Income Tax Officer, Ward-5(2)(3), Ahmedabad

ITA 2899/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5938 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 08-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Capital asset; Source of fund; Cost of acquisition
• Section: 54F; 54

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO. 2899/AHD/2016 / ASSESSMENT YEAR: 2012-13 KAYVANBHAI SURENDRABHAI HUTTHEESING [KAYVANBHAI SURENDRABHAI SHETH] SAMYAK, NR. EMERALD HONDA SHOW ROOM, AMBAWADI AHMEDABAD 380015. PAN : ACJPS 9493 C VS ITO, WARD-5(2)(3) NEHRU BRIDGE CORNER AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI DHINAL SHAH, AR REVENUE BY : SMT.ANUPAMA SINGLA, SR.DR / DATE OF HEARING : 15/02/2018 /DATE OF PRONOUNCEMENT : 07/03/2018 O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A), AHMEDABAD-5 DATED 2.9.2016 PASSED FOR TH E ASSTT.YEAR 2012- 13. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPELLATE TRIBUN AL) RULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. I N BRIEF THE GRIEVANCE OF THE ASSESSEE REVOLVES AROUND TWO FOLD ISSUES VIZ . THE LD.CIT(A) HAS ERRED IN CONFIRMING RE-OPENING OF THE ASSESSMENT, A ND (B) THE LD.CIT(A) HAS ERRED IN RESTRICTING DEDUCTION UNDER SECTION 54 F OF THE ACT TO THE EXTENT OF RS.30 LAKHS AND NOT GRANTING AGAINST FULL INVESTMENT. AS FAR AS ITA NO.2899/AHD/2016 - 2 - RE-OPENING OF THE ASSESSMENT IS CONCERNED THE LD.CO UNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND OF APPEAL, HENCE, IT IS R EJECTED. 3. WITH REGARD TO SECOND ISSUE, BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 21.3.201 3 DECLARING TOTAL INCOME AT RS.9,85,610/-. IT EMERGES OUT FROM THE R ECORD THAT THE ASSESSEE HAD SOLD LAND ALONG WITH CO-OWNERS. HE WAS HAVING 1/6TH SHARE. THE AO AFTER GRANTING DEDUCTION OF EXPENSES CONSIDERED NET CONSIDERATION OF THE LAND IN THE SHARE OF ASSESSEE AT RS.59,14,747/- . ACCORDING TO THE ASSESSEE, HE HAS PURCHASED A RESIDENTIAL HOUSE WITH IN TWO YEARS JOINTLY WITH HIS SON SHRI SHRAVANBAHI KAYANBHAI SHETH FOR A CONSIDERATION OF RS.75 LAKHS. HIS SON HAS CONTRIBUTED RS.5.00 LAKHS AND REST WAS PAID BY THE ASSESSEE. CALCULATION OF RS.75 LAKHS CONSISTS FOLLOWING AMOUNTS: (A) UTILISATION OF SALE CONSIDERATION BY THE ASSESSEE : RS.30 LAKHS (B) CONTRIBUTION OF JOINT-OWNER : RS.5 ALKSH (C) LOAN FROM ICICI BANK IN THE NAME OF ASSESSEE : R S.40 LAKHS TOTAL : RS.75 LAKHS THE LD.AO HAS GRANTED BENEFIT UNDER SECTION 54F TO THE EXTENT OF RS.30 LAKHS, BUT DID NOT GRANT WITH REGARD TO SET O FF OF LOAN AMOUNTS. IN OTHER WORDS, ASSESSEE CLAIMED SET OFF OF CAPITAL GA IN ARISEN ON SALE OF LAND AGAINST THE LOAN AMOUNT TREATING AS UITILISATI ON OF CAPITAL GAIN FOR PURCHASE OF A HOUSE. THIS PLEA OF THE ASSESSEE HAS BEEN REJECTED BY THE LD.REVENUE AUTHORITIES BELOW. ITA NO.2899/AHD/2016 - 3 - 4. THE LD.COUNSEL FOR THE ASSESSEE WHILE TAKING US THROUGH IMPUGNED ORDER OF THE LD.CIT(A) HAS CONTENDED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE FOLLOWING DECISIONS: I) ITO VS. KC. GOPAL, 170 TAXMANN 591 (KER) II) CIT VS. KAPILKUMAR AGARWAL, 382 ITR 56 (P&H) III) J.V.KRISHNA RAO VS. DCIT, 54 SOT 44 (HYD.ITAT) IV) MUNEERKHAN VS. ITO, 54 SOT 504 (HYD.ITAT) V) BOMBAY HOUSING CORPN VS. ACIT, 81 ITD 545 (ITAT) 5. HE TOOK US THROUGH SECTION 54F OF THE INCOME TAX ACT AND CONTENDED THAT SECTION 54 MAINLY POSTULATE TWO COND ITIONS VIZ. (A) CAPITAL GAIN MUST AROSE AS A RESULT OF TRANSFER OF ANY ASSETS OTHER THAN RESIDENTIAL HOUSE, AND (B) THE ASSESSEE SHOULD PURC HASE NEW ASSET FOR RESIDENTIAL PURPOSES WITHIN TWO YEARS OR SHOULD CON STRUCT RESIDENTIAL HOUSE WITHIN THREE YEARS. THE ASSESSEE IN THE PRES ENT CASE HAS FULFILLED BOTH THE ABOVE CONDITIONS, INASMUCH AS LONG TERM CA PITAL GAIN HAS ARISEN AS A RESULT OF SALE OF LAND AND THE ASSESSEE HAS PU RCHASED NEW ASSET BEING RESIDENTIAL HOUSE FOR RS.70 LAKHS. HE ALSO P OINTED OUT THAT SO FAR AS SUB-CLAUSE (A) IN SECTION 54F IS CONCERNED, IT P ROVIDED FOR MODE OF CALCULATION OF EXEMPTION OF LONG TERM CAPITAL GAIN. IT CONTEMPLATES THAT IF COST OF NEW ASSET IS MORE THAN THE NET CONSIDERA TION, THEN WHOLE OF CAPITAL GAIN IS EXEMPT. IN THE PRESENT CASE, COST OF NEW ASSET IN THE HANDS OF THE ASSESSEE IS RS.70 LAKHS AS AGAINST NET CONSI DERATION OF RS.59,14,747/- FALLING TO THE SHARE OF THE ASSESSEE . THEREFORE, WHOLE OF LONG TERM CAPITAL GAIN OF RS.29,72,370/- IS EXEMPT. 6. THE LD.DR ON THE OTHER HAND RELIED UPON THE ORDE R OF THE LD.CIT(A). HE CONTENDED THAT ORDER OF THE LD.CIT(A) IS BASED ON THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF MILAN SHARAD RUPAREL, 27 ITA NO.2899/AHD/2016 - 4 - SOT 61. SHE FURTHER CONTENDED THAT THE ASSESSEE AV AILED LOAN FROM BANK AND PURCHASED RESIDENTIAL HOUSE. HE HAS NOT USED T HAT VERY AMOUNT FOR THE PURCHASE OF HOUSE. 7. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. THIS ISSUE HAS BEEN CONSIDERED I N VARIOUS CASES AS RELIED UPON BY THE LD.COUNSEL FOR THE ASSESSEE. WE DEEM IT PERTINENT TO TAKE NOTE OF HEAD-NOTE OF DECISION RENDERED BY HON BLE KERALA HIGH COURT AS WELL AS HONBLE PUNJAB AND HARYANA HIGH CO URT CITED SUPRA, WHICH READS AS UNDER: SECTION 54 OF THE INCOME-TAX ACT, 1961 - CAPITAL GA INS - PROFIT ON SALE OF PROPERTY USED FOR RESIDENTIAL PURPOSES -ASSESSMENT YEAR 1984-85 - WHETHER ENTITLEMENT OF EXEMPTION UNDER SECTION 54 R ELATES TO COST OF ACQUISITION OF NEW ASSET IN NATURE OF A HOUSE PROPE RTY FOR PURPOSE OF OWN RESIDENCE WITHIN SPECIFIED PERIOD AND IT IS NOT NEC ESSARY THAT CONSIDERATION RECEIVED ON SALE OF PROPERTY AS SUCH SHOULD BE UTILISED FOR CONSTRUCTION OF NEW BUILDING - HELD, YES SECTION 54F OF THE INCOME-TAX ACT, 1961 - CAPITAL G AINS - EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE (CONDITI ONS PRECEDENT) - ASSESSMENT YEAR 2009-10 -WHETHER SECTION 54F NOWHER E ENVISAGES THAT SALE CONSIDERATION OBTAINED BY ASSESSEE PROM ORIGIN AL CAPITAL ASSET IS MANDATORILY REQUIRED TO BE UTILIZED FOR PURPOSES OF MEETING COST OF NEW ASSET - HELD, YES - WHETHER, THEREFORE, WHERE INVES TMENT MADE BY ASSESSEE, ALTHOUGH NOT ENTIRELY SOURCED FROM CAPITA L GAIN, BUT, WAS WITHIN STIPULATED TIME AND MORE THAN CAPITAL GAIN EARNED B Y HIM, ASSESSEE WAS ENTITLED TO EXEMPTION UNDER SECTION 54F -HELD, YES [PARAS 14 & 19] [IN FAVOUR OF ASSESSEE] 8. IN THE CASE OF CIT VS. KAPIL KUMAR AGARWAL (SUPR A) THE ASSESSEE HAS PURCHASED PROPERTY FOR RS.3.32 CRORES. HE HAS SOLD SHARES AND CAPITAL GAIN OF RS.1.3 CRORE ARISEN. PROPERTY WAS PURCHASED AFTER AVAILING LOAN FROM EMPLOYER, AND CAPITAL GAIN ARISEN ON ACCO UNT OF SALE OF SHARES WAS CLAIMED UNDER SECTION 54F QUA THE LOAN AMOUNT UTILIZED FOR ITA NO.2899/AHD/2016 - 5 - PURCHASE OF NEW HOUSE. THIS CONTENTION OF THE ASSE SSEE WAS NOT ACCEPTED BY THE AO AS WELL AS CIT(A). HOWEVER, ON APPEAL, THE TRIBUNAL HAS REVERSED FINDING OF BOTH THE AUTHORITI ES. THE HONBLE HIGH COURT HAS NOTICED THE FINDING OF THE TRIBUNAL AND T HEREAFTER UPHELD IT. THE FINDING OF THE HONBLE HIGH COURT IN PARA-15 CO NTAINING FINDING OF THE TRIBUNAL READS AS UNDER: 15. IT HAS BEEN CATEGORICALLY RECORDED BY THE TRIB UNAL THAT THE ASSESSEE HAD MADE INVESTMENT IN BETWEEN FEBRUARY 2008 UPTO A UGUST 2008 I.E. WELL WITHIN THE STIPULATED PERIOD. THE PROPERTY WAS PURCHASED FOR RS.3.32 CRORES WHEREAS THE SHARES WHICH WERE SOLD HAD RESUL TED IN CAPITAL GAIN OF RS. 1.93 CRORES. THE INVESTMENT WAS MORE THAN THE C APITAL GAIN EARNED BY HIM. THE RELEVANT FINDING READS THUS: 'IN THE PRESENT CASE, THE FIRST DATE OF CAPITAL GAI N IS NOVEMBER 8, 2008. THE ASSESSEE CAN ACQUIRE A HOUSE WITHIN A PERIOD NO VEMBER 8, 2007 UPTO NOVEMBER 2010 I.E. ONE YEAR PRIOR TO TRANSFER OF OR IGINAL CAPITAL ASSETS AND TWO YEARS AFTER THE TRANSFER OF CAPITAL ASSETS. THE ASSESSEE HAD MADE VESTMENT IN BETWEEN FEBRUARY 2008 UPTO AUGUST 2008 I.E. WELL WITHIN PERIOD. LEARNED ASSESSING OFFICER HAS ALSO NOT DISP UTED ABOUT THE INVESTMENT MADE BY THE ASSESSEE. HIS GRIEVANCE IS T HAT INVESTMENT WAS MADE AFTER TAKING LOAN FROM THE EMPLOYER AND THEREF ORE, ASSESSEE CANNOT CLAIM BENEFIT UNDER SECTION 54F(1) QUA THE LOAN AMOU NT UTILIZED FOR PURCHASING OF THE NEW HOUSE. HON'BLE KERALA HIGH CO URT IN THE CASE OF ITO V. KC GOPALAN (SUPRA) HAS HELD THAT IN SECTION 5 4, THERE IS NOCONDITION THAT ASSESSEE SHOULD UTILIZE THE SALES CONSIDERATION ITSELF FOR THE PURPOSE OF ACQUISITION OF NEW PROPERTY. SIMILAR ARE THE OTHER ORDERS OF THE ITAT RELIED UPON BY THE ASSESSEE. ON PERUSAL OF SECTION 54F(1) AND SUB SECTION (4), IT REVEALS THAT THESE SECTIONS DO TO PUT ANY RESTRICTION THAT ONLY CAPITAL GAIN WOULD BE UTILIZED FOR PURCHASE OF THE NEW HOUSE. THE LAW PERMITS UTILIZATION OF CAPITAL GAIN WITHIN THE SPECIFIED TIME, THE ASSESSEE MAY USE SUCH FUNDS FOR OTHER PURPOSES AND MAY FIND RESOURCES FROM OTHER SOURCE FOR INVESTMENT IN TIME. THE SECTI ON PROVIDES INVESTMENT IN A HOUSE PRIOR TO ONE YEAR OF THE TRAN SFER OF LONG TERM CAPITAL ASSETS. IT WILL MAKE IT CLEAR THAT IF THE T RANSFER HAS NOT TAKEN PLACE THEN FROM WHERE THE FUNDS WOULD COME FOR MAKING THE INVESTMENT. THE INVESTMENT MUST BE FROM SOME OTHER SOURCES AND WHEN ASSESSEE WOULD RECEIVE SALES CONSIDERATION ON TRANSFER OF A LONG T ERM CAPITAL ASSETS, HE WILL CLAIM SET OFF OF THE CAPITAL GAINS AGAINST THE INVESTMENT ALREADY MADE ITA NO.2899/AHD/2016 - 6 - FOR THE PURPOSE OF EXEMPTION UNDER SECTION 54F. LEA RNED DR HAS RELIED UPON AN ORDER OF THE ITAT REPORTED IN SHER MOHAMMAD V. DY. CIT (INV.) [2009] 27 SOT 61 (JODH.URO). IN THAT CASE, THE I TAT HAS HELD THAT IF INVESTMENT WAS MADE OUT OF LOAN AMOUNT THEN EXEMPTION UNDER SECTION 54F(1) WILL NOT BE AVAILABLE. IN THE OPINIO N OF THE ITAT, THE ASSESSEE HAS TO DEMONSTRATE SOURCE OF FUNDS, IF INV ESTMENT WAS MADE BY THE ASSESSEE FROM HIS OWN SOURCE AND NOT FROM LOAN TAKEN FROM THE BANK THEN EXEMPTION WOULD BE AVAILABLE. IN OUR OPINION, THE SECTION DOES NOT PUT ANY SUCH RESTRICTION. HON'BLE KERALA HIGH COURT HAS EXPLAINED THE POSITION. SIMILARLY, IN A SERIES OF OTHER ORDERS, A T THE END OF ITAT, IT HAS BEEN HELD THAT THERE IS NO CONDITION THAT ASSESSEE SHOULD UTILIZE THE SALES CONSIDERATION ONLY FOR THE PURPOSE OF ACQUISITION O F NEW PROPERTY. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT LE ARNED REVENUE AUTHORITIES HAVE ERRED IN HOLDING THAT ASSESSEE IS NOT ENTITLED FOR EXEMPTION UNDER SECTION 54F(1) OF THE INCOME TAX ACT , 1961 FOR A SUM OF RS. 121,32,636/-. THE INVESTMENT OF THE ASSESSEE IS MORE THAN THE CAPITAL GAIN EARNED BY HIM. THEREFORE, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE ADDITION OF RS. 121,32,636/- IN THE TOTA L INCOME OF THE ASSESSEE UNDER THE HEAD 'LONG TERM CAPITAL GAIN. 9. A PERUSAL OF THE ABOVE WOULD INDICATE THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF HONBLE PUNJAB & HARYANA HIGH COURT CITED SUPRA. A PERUSAL OF COMPUTATION OF INCOME MADE BY THE LD.AO ON PAGE NO.8 OF THE ASSESS MENT ORDER WOULD INDICATE THAT THE LD.AO TOOK NET SALE CONSIDERATION FALLING TO THE SHARE OF ASSESSEE AT RS.59,14,747/-. THE INDEXED COST OF AC QUISITION IN THE HANDS OF ASSESSEE WAS COMPUTED AT RS.29,42,376/-. THUS, NET LTCG WORKED OUT IN THE HANDS OF ASSESSEE IS OF RS.29,72,370/- I .E. (RS.59,14,747 MINUS RS.29,42,376). THE LD.AO GRANTED BENEFIT OF SET OFF AS UNDER: CAPITAL GAIN X COST OF NEW ASSET NET SALE CONSIDERATION THE COST OF NEW ASSET WAS TAKEN AT RS.30 LACS ONLY AND IN THIS, SET OFF WAS GRANTED UPTO RS.15,07,606/-. THE BALANCE I.E. TOTA L CAPITAL GAIN : ITA NO.2899/AHD/2016 - 7 - RS.29,72,370 MINUS RS.15,07,606 = RS.14,64,764/- HA S BEEN TAXED AT THE RATE OF 20%. I ALLOW THIS APPEAL AND DIRECT THE AO TO TAKE COST OF NEW ASSET AT RS.70 LAKHS INSTEAD OF RS.30 LAKHS AND CAL CULATE THE AMOUNT OF CAPITAL GAIN, IF ANY. IN OTHER WORDS, THERE WILL B E NO CAPITAL GAIN FOR TAX IN THE HANDS OF ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH, 2018. SD/- (RAJPAL YADAV) JUDICIAL MEMBER