Income-Tax Officer, Bangalore V. Shri. Ravi Narayan Deshpande, Dharwad

ITA 306/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7623 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 10-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K BIJU JT BENGALURU
• Assessee Lawyers: PRATHIBA
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.306/BANG/2017 ASSESSMENT YEAR : 2013-14 THE INCOME TAX OFFICER, WARD 2(1), HUBBALLI. VS. SHRI RAVI NARAYAN DESHPANDE, EKA BILWA, MAHISHI ROAD, MALMADDI, DHARWAD. PAN: ACQPD 3517K APPELLANT RESPONDENT APPELLANT BY : SHRI M.K. BIJU, JT. CIT(DR)(ITAT), BENGALURU RESPONDENT BY : SMT. PRATHIBA, ADVOCATE DATE OF HEARING : 21.08.2017 DATE OF PRONOUNCEMENT : 13.09.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF CIT(APPEALS) INTER ALIA ON THE FOLLOWING GROUNDS:- 1. WHETHER, ON FACT & CIRCUMSTANCES OF THE CASE LD. CIT(A) IS CORRECT IN ALLOWING THE CLAIM OF THE ASSESSEE FO R DEDUCTION U/S. 54F BY RELYING ON THE JUDGMENT OF THE HONBLE ITAT, A BENCH HYDERABAD IN THE CASE OF PRADEEPKUMAR CHOUDHARY VS. DCIT , CIRCLE 1(1), HYDERABAD. 2. WHETHER, ON FACT & CIRCUMSTANCES OF THE CASE LD. CIT(A) IS CORRECT IN ALLOWING THE ASSESSEES CLAIM U/S. 54 F AS THE ASSESSEE HAS NEITHER DEPOSITED THE CAPITAL GAINS IN CAPITAL GAINS DEPOSIT ITA NO.306/BANG/2017 PAGE 2 OF 8 ACCOUNT SCHEME NOR NOT UTILIZED THE CAPITAL GAIN FO R PURCHASE OF NEW ASSET BEFORE THE DUE DATE OF FILING OF RETURN O F INCOME. 2. DURING THE COURSE OF HEARING, THE LD. DR HAS CO NTENDED THAT ASSESSEE HAS NOT ACQUIRED RESIDENTIAL HOUSE DURING THE PRESCRIBED PERIOD. THEREFORE, DEDUCTION U/S. 54F CANNOT BE ALLOWED. B ESIDES, HE HAS ALSO RELIED UPON THE ORDER OF THE AO. 3. IN REBUTTAL, THE LD. COUNSEL FOR THE ASSESSEE HA S INVITED OUR ATTENTION TO THE FACT THAT ASSESSEE HAS ENTERED INTO AGREEMEN T TO ACQUIRE RESIDENTIAL HOUSE WITH THE DEVELOPERS & BUILDERS. BUT UNFORTUN ATELY, THE RESIDENTIAL HOUSE WAS NOT ALLOTTED WITHIN THE SPECIFIED PERIOD. HOWEVER, THE FLAT WAS ALLOTTED TO THE ASSESSEE ON 26.06.2016 AFTER THE PR ESCRIBED PERIOD OF THREE YEARS. THE DELAY IN ACQUIRING THE ASSET WAS NOT ON ACCOUNT OF ASSESSEE AS HE HAS DEPOSITED THE SALE PROCEEDS WITH THE DEVELOP ER WITHIN THE PRESCRIBED PERIOD. THE LD. COUNSEL FOR THE ASSESSE E FURTHER RELIED UPON VARIOUS JUDGMENTS IN SUPPORT OF HIS CONTENTION THAT IF THE ASSESSEE MAKES THE PAYMENT IN TIME AND DELAY IN ALLOTMENT OF FLAT IS ON ACCOUNT OF THE DEVELOPER, THE BENEFIT OF DEDUCTION U/S. 54F CANNOT BE DENIED. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS FILED COPY OF SALE AGREEMENT AND COPY OF THE JUDGMENT OF HON'BLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT V. SAMBANDAM UDAYKUMAR, 251 CTR 317 AND PRINCIPAL CIT V. SRI C. GOPALASWAMY VIDE JUDGMENT DATED 15.12 .2016 , COPY OF WHICH IS PLACED ON RECORD. ITA NO.306/BANG/2017 PAGE 3 OF 8 4. WE HAVE CAREFULLY EXAMINED THE ORDER OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS AND WE FIND THAT UNDISPUTEDLY ASSESSEE HAS MADE PAYMENT OF SALE PROCEEDS WITHIN THE PRESCRIBED PERI OD IN ORDER TO AVAIL THE BENEFIT OF DEDUCTION U/S. 54F OF THE ACT. THE POSS ESSION OF THE FLAT WAS DELAYED FOR DIFFERENT REASONS FOR WHICH THE ASSESSE E CANNOT BE HELD RESPONSIBLE. THE DELAY IN COMPLETING THE CONSTRUCT ION WAS ON ACCOUNT OF VARIOUS REASONS WHICH WERE DULY EXPLAINED. THE CIT (APPEALS) RE- EXAMINED THE ISSUE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS OF HON'BLE JURISDICTIONAL HIGH COURT AND OTHER HIGH CO URTS AND BEING CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, HE DIRECTED THE AO TO ALLOW THE BENEFIT OF DEDUCTION U/S 54F OF THE ACT. THE RELEVANT OBSERVATIONS OF THE CIT(APPEALS) IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 5. IN THE PROCEEDINGS BEFORE ME IN APPEAL, THE A SSESSEE HAS REITERATED THE STAND TAKEN IN GROUNDS OF APPEAL AND STATEMENT OF FACTS. THE ASSESSEE HAS ALSO CONTESTED THE VIEW OF THE AO THAT, THE ASSESSEE OUGHT TO HAVE INVESTED THE SALE PROCEEDS W ITHIN TWO YEARS IN ORDER TO AVAIL THE BENEFIT U/S.54F. ACCORD ING TO THE ASSESSEE THE LAW PROVIDES FOR INVESTMENT IN CONSTRU CTION WITHIN THREE YEARS, NOT TWO YEARS AS HELD BY THE AO. I FIN D THAT, THE ARGUMENT OF THE ASSESSEE IS NOT DEVOID OF SUBSTANCE . COPY OF DEED, FOR SALE OF RESIDENTIAL PLOT, COPY OF AGREEME NT FOR SALE AND AGREEMENT FOR CONSTRUCTION OF NEW PROPERTY, BANK AC COUNT EVIDENCING IN PAYMENTS TO BUILDER ARE FURNISHED TO ME FOR MY PERUSAL. SALE OF PROPERTY BY THE ASSESSEE ON 10/10 /2012 IS NOT IN DISPUTE, AS IT IS EVIDENCED BY A SALE DEED. THE ASS ESSEE, HAVING PAID RS.66,07,217/INCLUDING RS.14,00,000/- PAID BEF ORE DUE DATE OF FILING RETURN BY WAY OF RTGS (RS.4,00,034/- ON 2 7.09.2013 AND RS.10,00,062/- ON 30.09.2013), TO THE DEVELOPER IS ALSO NOT DISPUTED BY THE AO. THE PAYMENTS ARE EVIDENCED BY E NTRIES IN BANK ACCOUNT. AGREEMENT FOR SALE AND CONSTRUCTION D TD 28/01/2012 BETWEEN THE ASSESSEE AND DEVELOPER (MANT RY ALPYNE) IS EVIDENCED BY AN AGREEMENT. COPY OF SALE DEED DTD ITA NO.306/BANG/2017 PAGE 4 OF 8 29/06/2016 EVIDENCING REGISTRATION OF THE NEW FLAT IN THE NAME OF THE ASSESSEE, HIS WIFE SMT. VIDYA DESHPANDE AND SON SHRI. AMOL RAVI DESHPANDE IS FURNISHED TO ME. THE ASSESSEE HAS SOUGHT FOR RELIEF ON THE GROUND THAT, SUBSTANTIAL PART (RS.66, 07,217/-) OF SALE PROCEEDS IS INVESTED IN THE NEW FLAT THAT TOO BEFOR E DUE DATE OF FILING RETURN OF INCOME, WHICH IS HENCE REGISTERED. 6. THE ASSESSEE HAS TAKEN SUPPORT FROM THE DECISI ON OF DELHI HIGH COURT IN THE CASE OF CT VS. RL SOOD AND THAT O F ITAT HYDERABAD IN THE CASE OF PRADEEP KUMAR CHOUDHARY VS . DCIT, CIRCLE-1(1), HYDERABAD. IN THE CASE OF CIT VS. R.L. SOOD (DELHI HIGH COURT), IT HAS BEEN HELD THAT, THE DATE OF AGR EEMENT TO PURCHASE SHOULD BE TAKEN AS THE DATE OF PURCHASE AN D DATE OF REGISTRATION OF SALE DEED FOR PURCHASE IS NOT RELEV ANT. IN THIS CASE, (R.L.SOOD) THE HIGH COURT HAS HELD AS UNDER. THE ASSESSEE HAD PAID CERTAIN AMOUNT OUT OF THE TOT AL CONSIDERATION FOR PURCHASE 0 A FLAT WITHIN THE PERI OD OF ONE YEAR FROM THE DATE OF SALE OF HIS OLD RESIDENTI AL HOUSE. THUS, ON PAYMENT OF A SUBSTANTIAL AMOUNT IN TERMS O F THE AGREEMENT OF PURCHASE DATED 25/09/1981, I.E, WITHIN FOUR DAYS OF THE SALE OF HIS OLD PROPERTY, THE ASSESSEE ACQUIRED SUBSTANTIAL DOMAIN OVER THE NEW RESIDENTIAL FLAT WI THIN THE SPECIFIED PERIOD OF ONE YEAR AND COMPLIED WITH THE REQUIREMENTS OF SECTION 54. MERELY BECAUSE THE BUIL DER FAILED TO HANDOVER POSSESSION OF THE ASSESSEE WITHI N THE PERIOD OF ONE YEAR, THE ASSESSEE COULD NOT BE DENIE D OF THE SAID BENEVOLENT PROVISION. THIS WOULD NOT BE IN CONSONANCE WITH THE SPIRIT OF SECTION 54. 7. THE HON'BLE ITAT 'A' BENCH HYDERABAD IN THE CA SE OF PRADEEPKUMAR CHOUDHARY HAS HELD AS UNDER. 'IN THE ABOVE CASE IT WAS HELD THAT, WHETHER FOR P URPOSE OF SECTION 54F A FLAT WHICH IS NEWLY CONSTRUCTED BY A BUILDER ON BEHALF OF ASSESSEE IS IN NO WAY DIFFERENT FROM A HOUSE CONSTRUCTED- HELD, YES-WHETHER THEREFORE, WHERE AMO UNT OF CONSIDERATION RECEIVED ON TRANSFER WAS INVESTED BY ASSESSEE IN A FLAT CONSTRUCTED BY BUILDER WITHIN 3 YEARS, IT WOULD AMOUNT TO CONSTRUCTION OF A RESIDENTIAL HOUSE FOR PURPOSE OF SECTION 54F AND ASSESSEE WOULD GET BENEF IT OF DEDUCTION FOR PAYMENT MADE WITHIN 3 YEARS- HELD, YE S'. ITA NO.306/BANG/2017 PAGE 5 OF 8 8. AS REGARDS, THE ISSUE OF THE ASSESSEE, HAVING INVESTED THE SALE PROCEEDS IN THE NEW HOUSE PROPERTY IN THE NAME OF HIMSELF WIFE AND SON TO CLAIM DEDUCTION U/S. 54F, THE ASSES SEE HAS RELIED ON THE DECISION OF DELHI HC IN THE CASE OF CIT VS. RAVINDRAKUMAR ARORA (ITA NO. 1106/2011). IN THIS CA SE, THE HON'BLE HIGH COURT OF DELHI HAS HELD AS UNDER. CIT VS. RAVINDER KUMAR ARORA (DELHI HC) - SECTION 54F MANDATES THAT THE HOUSE SHOULD BE PURCHASED BY THE ASSESSEE AND IT DOES NOT STIPULATE THAT THE HOUSE SHOULD BE PURC HASED IN THE NAME OF THE ASSESSEE ONLY. HERE IS A CASE WHERE THE HOUSE WAS PURCHASED BY THE ASSESSEE AND THAT TOO IN HIS NAME AND WIDE'S NAME WAS ALSO INCLUDED ADDITIONALLY. SUCH INCLUSION OF THE NAME OF THE WIFE FOR THE ABOVE-STATED PECULIAR FACTUAL R EASON SHOULD NOT STAND IN THE WAY OF THE DEDUCTION LEGITIMATELY ACCR UING TO THE ASSESSEE. OBJECTIVE OF SECTION 54F AND THE LIKE PRO VISION SUCH AS SECTION 54 IS TO PROVIDE IMPETUS TO THE HOUSE CONST RUCTION AND SO LONG AS THE PURPOSE OF HOUSE CONSTRUCTION IS ACHIEV ED, SUCH HYPER TECHNICALLY SHOULD NOT IMPEDE THE WAY OF DEDUCTION WHICH THE LEGISLATURE HAS ALLOWED. PURPOSIVE CONSTRUCTION I S TO BE PREFERRED AS AGAINST THE LITERAL CONSTRUCTION, MORE SO WHEN E VEN LITERAL CONSTRUCTION ALSO DOES NOT SAY THAT THE HOUSE SHOUL D BE PURCHASED IN THE NAME OF THE ASSESSEE ONLY. SECTION 54F OF T HE ACT IS THE BENEFICIAL PROVISION WHICH SHOULD BE INTERPRETED LI BERALLY IN FAVOUR OF THE EXEMPTION/DEDUCTION TO THE TAX PAYER AND DEDUCTION SHOULD NOT BE DENIED ON HYPER TECHNICAL GROUND. AND HRA PRADESH HIGH COURT IN THE CASE OF LATE MIR GULE, ALI KHAN VS. CIT , (1987) 165 ITR 228 (AP) HAS HELD THAT THE OBJECT OF GRANTING EXEMPTION UNDER SECTION 54 OF THE ACT IS THAT AN AS SESSEE WHO SELLS A RESIDENTIAL HOUSE FOR PURCHASING ANOTHER HO USE MUST BE GIVEN EXEMPTION SO FAR AS CAPITAL GAINS ARE CONCERN ED. THE WORD 'ASSESSEE' MUST BE GIVEN WIDE AND LIBERAL INTERPRET ATION SO AS TO INCLUDE HIS LEGAL HEIRS ALSO. THERE IS NO WARRANT F OR GIVING TOO STRICT AN INTERPRETATION TO THE WORD 'ASSESSEE' AS THAT WOULD FRUSTRATE THE OBJECT OF GRANTING EXEMPTION. WE ALSO FIND JUDGEMENT OF OTHER HIGH COURTS GIVING BENEFIT OF SE CTION 54F(1) OF THE ACT WHEN THE HOUSE OF THE ASSESSEE IS PURCHA SED JOINTLY WITH HIS WIFE. IN THE CASE OF CIT VS. NATRAJAN , (2007) 287 ITR 271 (MAD), THOUGH THIS CASE WAS DECIDED IN RELATION TO SECTION 54 OF THE ACT, THE SAID SECTION IS PARI MATERIAL OF SE CTION 54F(1) OF THE ACT. LIKEWISE, THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. GURNAM SINGH , (2010) 327 ITR 278 TOOK THE SAME ITA NO.306/BANG/2017 PAGE 6 OF 8 VIEW WHILE DISCUSSING THE PROVISIONS OF SECTION 54 OF THE ACT WHICH IS AGAIN PARI MATERIAL OF SECTION 54F(1) OF T HE ACT. 9. IN THE CASE ON HAND, THERE IS NO DENYING THE F ACT THAT, THE SOURCE FOR INVESTMENT IN NEW PROPERTY INCLUDING STA MP DUTY AND REGISTRATION CHARGES HAS GONE FROM THE ACCOUNTS OF THE ASSESSEE ONLY, THAT TOO OUT OF SALE PROCEEDS OF THE OLD PROP ERTY (RESIDENTIAL PLOT), WHICH HAS GIVEN RISE TO LONG TERM CAPITAL GA INS. 10. UNDER THE SUBSTANTIVE PART OF SECTION 54F (1), THE CAPITAL GAINS ARISING FROM THE TRANSFER OF ANY LONG TERM CA PITAL ASSET NOT BEING A RESIDENTIAL HOUSE, SHALL NOT BE SUBJECTED T O THE TAXATION PROVISIONS IF THE ASSESSEE HAD WITHIN THE PERIOD 1 YEAR BEFORE OR 2 YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLA CE, PURCHASED A RESIDENTIAL HOUSE. ALTERNATIVELY, HE SHOULD HAVE CO NSTRUCTED ONE RESIDENTIAL HOUSE IN INDIA WITHIN A PERIOD OF 3 YEA RS. IF THESE CONDITIONS ARE SATISFIED, THE CAPITAL GAIN WILL BE DEALT WITH IN ACCORDANCE WITH CLAUSES (3) AND (B) OF SUB SECTION (1) OF SECTION 54A FROM THE ACT. THERE IS NO DISPUTE ABOUT THE FA CT THAT, THE ASSESSEE IN THIS CASE MADE A TRANSFER OF A LONG TER M CAPITAL ASSET WHICH IS NOT A RESIDENTIAL HOUSE. THERE IS NO DISPU TE ABOUT THE FACT THAT, THERE WAS CAPITAL GAIN ARISING FROM THE SAID TRANSACTION. BUT ACCORDING TO THE AO, THE BENEFIT IS NOT AVAILABLE T O THE ASSESSEE SINCE POSSESSION OF PAYMENTS IS HANDED OVER TO THE ASSESSEE WITHIN TWO YEARS OF SALE. TO APPRECIATE THE REACH O F THE SAID CONTENTION, IT IS NECESSARY TO EXTRACT PROVISO TO S ECTION 54F( 1) WHICH READS AS UNDER: 1. [SUBJECT TO THE PROVISIONS OF SUB-SECTION( 4), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HI NDU UNDIVIDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHI N 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 THREE YEARS AFTER THAT DATE [CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA] (HERE AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET ), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SA Y,- ITA NO.306/BANG/2017 PAGE 7 OF 8 A) IF THE COST OR THE NEW ASSET IS NOT LESS THAN TH E NET CONSIDERATION RESPECT OF THE ORIGINAL ASSET, THE WH OLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTIO N 45: B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NE T CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPIT AL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTI ON 45: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY WHERE (A) THE ASSESSEE,- (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THA N THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSE T; OR 11. IN THE LIGHT OF THE ABOVE DISCUSSION, PROVISI ONS OF LAW, AND THE ABOVE DECISIONS AND IN VIEW OF THE FACT THAT, T HE ASSESSEE HAS INVESTED A SUM OF RS.66,07,217/- OUT OF SALE CONSID ERATION OF RS.70,00,000/- IN THE NEW PROPERTY WHICH IS SINCE R EGISTERED, I HAVE TO TAKE A VIEW THAT, THE ASSESSEE CANNOT BE DE NIED THE BENEFIT OF DEDUCTION U/S. 54F OF THE ACT. ACCORDINGLY, THE DISALLOWANCE IS DISAPPROVED AND THE ADDITION IS DELETED. THE GROUND S ARE ALLOWED. 5. SINCE NO INFIRMITY IS POINTED OUT IN THE ORDER O F THE CIT(APPEALS), WE CONFIRM THE SAME. 6. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF SEPTEMBER, 2017. SD/- SD/- ( JASON P. BOAZ ) ( SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 13 TH SEPTEMBER, 2017. / D ESAI S MURTHY / ITA NO.306/BANG/2017 PAGE 8 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.