Shri Harkirat Singh, New Delhi V. ACIT, New Delhi

ITA 3241/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52670 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Assessee Lawyers: R K SOOD
• Keywords: Capital asset; Cost of acquisition

Judgement Text

ITA NO. 3241/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3241/DEL/2010 A.Y. : 2006-07 SHRI HA R KIRAT SINGH, C-777, NEW FRIENDS COLONY, NEW DELHI (PAN/GIR NO. : AAAPS5882Q) VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 22(1), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. R.K. SOOD, CA DEPARTMENT BY : SH. SALIL MISHRA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 15.4.2 010 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE PERTAINS TO PARTIAL DISALLOWANCE OF E XEMPTION U/S 54EC OF THE IT ACT. 3. IN THIS CASE DURING THE YEAR ASSESSEE MADE SALE O F PROPERTY AT MAHAVEER ENCLAVE FOR ` 30 LACS AND EARNED LONG TERM C APITAL GAIN OF ` 24,20,000/-. ASSESSEE CLAIMED INVESTMENT OF NHB BO ND AND SOUGHT EXEMPTION U/S 54EC AND AN INVESTMENT OF ` 10 LACS WAS MADE ON 7.6.2005 AND ` 14,20,000/- ON 13.9.2005 IN NHB BOND S. AGREEMENT TO ITA NO. 3241/DEL/2010 2 SELL WAS EXECUTED IN AUGUST, 2005. ASSESSING OFFI CER DID NOT ACCEPT THE INVESTMENT OF ` 10 LACS MADE IN NHB BOND IN JU NE, 2005 U/S 54EC ON THE PLEA THAT THE LONG TERM CAPITAL GAIN ON SALE OF PROPERTY SHOULD BE INVESTED AFTER THE DATE OF REGISTRATION ONLY. THE ASSESSEE CLAIMED THAT ASSESSEE HAS RECEIVED ADVANCE AGAINST SALE OF PROPERTY IN MARCH, 2005 AS FIRST INSTALMENT OF SALES PROCEEDS AND INV ESTED THE SAME IN JUNE, 2005 IN NHB BONDS, WAS NOT ACCEPTED BY THE AS SESSING OFFICER. ASSESSING OFFICER DID NOT GRANT EXEMPTION U/S 54EC WITH RESPECT TO INVESTMENT OF ` 10 LACS IN NHB BOND. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD AS UNDER:- THE ASSESSING OFFICER HAS DENIED EXEMPTION U/S 54E C ON THE PLEA THAT THE MONEY HAS BEEN INVESTED IN NHB B ONDS IN JUNE, 2005 WHEREAS THE PROPERTY HAS BEEN SOLD AN D REGISTERED IN AUGUST, 2005. THE APPELLANTS ARGUME NT IS THAT A SUM OF ` 10 LACS WAS RECEIVED AS ADVANCE, WHI CH HAS INVESTED IN THE NHB BONDS. THIS ARGUMENT OF THE AP PELLANT DOES NOT HOLD GOOD BECAUSE SECTION 54EC TALKS ABOUT THAT IF CAPITAL GAINS ARISES FROM TRANSFER OF LONG TERM CAPIT AL ASSET THEN THE APPELLANT HAS TO INVEST AT ANY TIME WITHIN A PERIOD OF 6 MONTHS AFTER THE DATE OF SUCH TRANSFER, THE WHO LE OR ANY PART OF THE CAPITAL GAINS IN LONG TERM SPECIFIE D ASSET FOR ELIGIBLE DEDUCTION. THE ASSET MUST BE TRANSFERRED IS A PRE CONDITION TO THE ELIGIBILITY OF DEDUCTION UNDER THI S SECTION. WHEN THE REGISTRATION HAS TAKEN PLACE IN AUGUST, 2 005, THE CAPITAL GAINS CANNOT ARISE BEFORE THAT PERIOD AND I F THE CAPITAL GAIN HAS NOT ARISEN WHERE IS THE QUESTION OF ITA NO. 3241/DEL/2010 3 INVESTMENT? SECTION 2(47)(5) OF IT ACT READ WITH SE CTION 53A OF TRANSFER OF PROPERTY ACT STIPULATES THAT TRANSFE R OF IMMOVABLE PROPERTY IS COMPLETE WHEN THE PROPERTY IS REGISTERED. THE ISSUE OF GIVING POSSESSION OF T HE PROPERTY ON JUST 1/3 RD PAYMENT IS NOT IN CONSONANCE WITH HUMAN PROBABILITY. A CERTIFICATE HAS BEEN FURNISHED BE FORE ME STATING THAT 3 OWNERS HAVE TAKEN POSSESSION PRIOR T O THE REGISTRATION OF THE SALE DEED WHICH IS A SELF SERVI NG DOCUMENT AND QUITE ABNORMAL NOT SEEN IN THE TRANSACTI ON OF PROPERTY. THIS PERHAPS HAS BEEN DONE ONLY TO QUAL ITY FOR DEDUCTION U/S 54EC. THERE IS NO MERIT IN THE SUBMIS SION OF THE APPELLANT, HENCE REJECTED. 5. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL B EFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LD. COUNSEL OF THE ASSESSEE CONTENDED THAT THERE IS N O EVASION OF TAX MADE BY THE ASSESSEE. RATHER IT WAS A MOTIVE OF COMPL IANCE WITH LAW THAT ASSESSEE HAS INVESTED ` 10 LACS IN NHB BOND ON THE RECEIPT OF FIRST INSTALMENT OF THE FIRST SALE PROCEEDS. HENCE, HE CL AIMED THAT EXEMPTION U/S 54EC SHOULD BE ALLOWED. 6.1 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6.2 WE HAVE CAREFULLY CONSIDERED THE SUBMISSION. WE CAN GAINFULLY REFER THE PROVISION OF SECTION 54EC IN THIS REGARD. 54EC(1) WHERE THE CAPITAL GAIN ARISES FROM THE TRA NSFER OF A LONG-TERM CAPITAL ASSET (THE CAPITAL ASSET SO TRANSFERRED BEI NG HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET) AND THE ASSESSEE HAS, AT ANY TIME WITHIN A ITA NO. 3241/DEL/2010 4 PERIOD OF SIX MONTHS AFTER THE DATE OF SUCH TRANSFE R, INVESTED THE WHOLE OR ANY PART OF CAPITAL GAINS IN THE LONG-TERM SPECIFIE D ASSET, THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWIN G PROVISIONS OF THIS SECTION, THAT IS TO SAY, (A) IF THE COST OF THE LONG-TERM SPECIFIED ASSET I S NOT LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE O RIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45; (B) IF THE COST OF THE LONG-TERM SPECIFIED ASSET I S LESS THAN THE CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGI NAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF T HE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF ACQUISITION OF THE LONG- TERM SPECIFIED ASSET BEARS TO THE WHOLE OF THE CAPI TAL GAIN, SHALL NOT BE CHARGED UNDER SECTION 45 : 6.3 A READING OF THE ABOVE MAKES IT CLEAR THAT EXEMPT ION UNDER THIS SECTION CAN BE CLAIMED WHEN THE ASSESSEE EARNS CA PITAL GAINS FROM TRANSFER OF LONG TERM CAPITAL ASSET. A VERY STRICT INTERPRETATION OF SECTION WOULD MEAN ONLY AFTER THE SALE HAS BEEN COMP LETE, THAT INVESTMENT UNDER SECTION 54EC CAN BE DONE. HOWEVER , WE FIND THAT IN THE PRESENT CASE ASSESSEE HAS RECEIVED ` 10 LACS IN MARCH, 2005 OUT OF THE GROSS SALE PROCEEDS OF ` 30 LACS. THE RECEIPT OF ` 10 LACS WAS PART OF THE TOTAL RECEIPT AND ASSESSEE IN GOOD FAITH WIT H A MOTIVE OF COMPLIANCE OF LAW HAS INVESTED THE SAME IN NHB BOND TO AVAIL THE EXEMPTION U/S 54EC. THIS ACT OF THE ASSESSEE IS A BONAFIDE. UNDER THE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, ASSESS EE SHOULD BE GRANTED EXEMPTION ON ` 10 LACS U/S 54EC. HENCE, WE SET ASIDE THE ITA NO. 3241/DEL/2010 5 ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSU E IN FAVOUR OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/9/2011. SD/- SD/- [ [[ [I.P. BANSAL I.P. BANSAL I.P. BANSAL I.P. BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 09/9/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES