Devichand Kanthilal Shah, CHENNAI V. ITO, CHENNAI

ITA 3353/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4441 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 15-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: D ANAND
• Keywords: Cost of acquisition
• Section: 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.3353/MDS/2016 ( )( / ASSESSMENT YEAR : 2013-14 SHRI DEVICHAND KANTHILAL SHAH, NO.7, NUNGAMBAKKAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI - 600 034. PAN : AAGPS 1965 A V. THE INCOME TAX OFFICER, NON CORPORATE WARD - 3(4), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI D. ANAND, ADVOCATE -.+, / 0 / RESPONDENT BY : SHRI SUPRIYO PAL, JCIT 1 / 2% / DATE OF HEARING : 01.03.2017 3') / 2% / DATE OF PRONOUNCEMENT : 31.05.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -4, CHENNA I, DATED 19.09.2016 AND PERTAINS TO ASSESSMENT YEAR 2013-14. 2 I.T.A. NO.3353/MDS/16 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 54 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. SHRI D. ANAND, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE SOLD A FLAT AT EASTERN WING BLOCK NO.B, 5 TH FLOOR, BBC SPRING FIELD APARTMENTS, OLD NO.5, EVK SAMPATH ROAD, VEPERY, CHENNAI-7, FOR A TOTAL CONSIDERATION OF ` 72,00,000/-. IN FACT, THE ENTIRE SALE CONSIDERATION WAS RECEIVED ON 20.04 .2012. HOWEVER, THE SALE DEED WAS REGISTERED ONLY ON 06.06 .2012. THE LD.COUNSEL FURTHER SUBMITTED THAT THERE WAS AGREEME NT FOR SALE EXECUTED ON 09.04.2012. AS PER THIS AGREEMENT, THE PHYSICAL POSSESSION OF VACANT FLAT WAS HANDED OVER TO THE PU RCHASER. THEREFORE, UNDER SECTION 2(47) OF THE ACT, THERE WA S A TRANSFER OF PROPERTY EVEN THOUGH THE REGISTRATION OF THE DOCUME NT IS ESSENTIAL PRE-CONDITION FOR TRANSFER OF IMMOVABLE PROPERTY TH E VALUE OF WHICH IS EXCEEDING ` 100/- UNDER THE COMMON LAW. THE ASSESSEE HAS, IN FACT, INVESTED ON 23.04.2012 TO THE EXTENT OF ` 25,00,000/- AND ON 05.05.2012 ANOTHER ` 25,00,000/- AND A SUM OF ` 2,00,000/- WAS INVESTED ON 03.08.2013 IN A NEW FLAT. THE LD.COUNS EL SUBMITTED THAT THE ASSESSING OFFICER, AFTER TAKING INTO CONSI DERATION OF THE SALE 3 I.T.A. NO.3353/MDS/16 DEED DATED 06.06.2012, FOUND THAT AN INVESTMENT WAS MADE BY THE ASSESSEE FOR CONSTRUCTION OF A NEW HOUSE ONLY AFTER THE SALE OF EXISTING PROPERTY, THEREFORE, HE DISALLOWED THE CLA IM OF THE ASSESSEE. 4. SHRI D. ANAND, THE LD.COUNSEL FOR THE ASSESSEE, FURTHER SUBMITTED THAT IN VIEW OF AGREEMENT BETWEEN THE PAR TIES ON 09.04.2012, THERE WAS A TRANSFER OF PROPERTY AS CON TEMPLATED UNDER SECTION 2(47) OF THE ACT READ WITH SECTION 53A OF T HE TRANSFER OF PROPERTY ACT. ACCORDING TO THE LD. COUNSEL, EVEN T HOUGH THE REGISTRATION OF SALE DEED TOOK PLACE ONLY ON 06.06. 2012, THE PHYSICAL POSSESSION WAS HANDED OVER TO THE ASSESSEE ON 09.04 .2012 ITSELF. THEREFORE, IN VIEW OF JUDGMENT OF APEX COURT IN MYS ORE MINERALS LTD. V. CIT (239 ITR 775), THE ASSESSEE HAS TO BE C ONSTRUED AS OWNER OF PROPERTY. IN OTHER WORDS, ACCORDING TO TH E LD. COUNSEL, THE ASSESSEE CONTINUED TO BE IN THE POSSESSION OF PROPE RTY AS A BENEFICIAL OWNER, THEREFORE, THE ASSESSEE IS ENTITL ED FOR EXEMPTION UNDER SECTION 54 OF THE ACT. 5. ON THE CONTRARY, SHRI SUPRIYO PAL, THE LD. DEPAR TMENTAL REPRESENTATIVE, SUBMITTED THAT IT IS AN ADMITTED FA CT THAT THE ASSESSEE SOLD AN IMMOVABLE PROPERTY FOR A TOTAL CON SIDERATION OF 4 I.T.A. NO.3353/MDS/16 ` 72,00,000/-. THE LONG TERM CAPITAL GAIN WAS WORKED TO ` 51,04,741/-. AFTER CLAIMING INDEXATION OF COST OF ACQUISITION, THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54 OF THE ACT ON THE GROUND THAT HE INVESTED IN THE NEW ASSET. ACCORDIN G TO THE LD. D.R., THE PROPERTY WAS, IN FACT, SOLD ON 06.06.2012 AND THE INVESTMENT WAS MADE BEFORE THE DATE OF REGISTRATION OF SALE DEED. THEREFORE, THE ASSESSING OFFICER FOUND THAT WHATEVE R INVESTMENT MADE BY THE ASSESSEE IN THE CONSTRUCTION OF NEW PRO PERTY BEFORE THE EXECUTION OF SALE DEED CANNOT BE ALLOWED AS DED UCTION UNDER SECTION 54 OF THE ACT. THEREFORE, ACCORDING TO THE LD. D.R., THE INVESTMENT MADE BY THE ASSESSEE TO THE EXTENT OF ` 50,00,000/- CANNOT BE ALLOWED AS DEDUCTION WHILE COMPUTING TAXA BLE INCOME UNDER SECTION 54 OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE EXECUTED A REGISTERED SAL E DEED ON 06.06.2012 IN RESPECT OF TRANSFER OF FLAT AT BBC SP RING FIELD APARTMENTS AT OLD NO.5, EVK SAMPATH ROAD, VEPERY, C HENNAI-7. BEFORE EXECUTION OF REGISTERED SALE DEED, THE ASSES SEE HAD ALSO ENTERED INTO AN AGREEMENT FOR SALE ON 09.04.2012. CLAUSE 3 OF SAID 5 I.T.A. NO.3353/MDS/16 AGREEMENT FOR SALE CLEARLY SHOWS THAT THE ASSESSEE HANDED OVER THE PHYSICAL POSSESSION OF PROPERTY TO THE PURCHASE R. NOW THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSES SEE HANDED OVER THE PHYSICAL POSSESSION OF THE PROPERTY TO THE PURC HASER CONSEQUENT TO THE AGREEMENT FOR SALE DATED 09.04.20 12, WHETHER THE GAIN ON TRANSFER OF PROPERTY IS EXEMPTED UNDER INCOME-TAX ACT? 7. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 2(47) OF THE ACT AND SECTION 53A OF TRANSFER OF PRO PERTY ACT. WHEN THERE WAS AN AGREEMENT FOR SALE AND PHYSICAL POSSES SION OF THE PROPERTY WAS HANDED OVER TO THE PURCHASER AND THE P URCHASER IS IN ENJOYMENT OF THE PROPERTY AS HIS OWN, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE WAS TRANSFER OF PROPE RTY UNDER THE INCOME-TAX ACT. THE INCOME-TAX ACT, BEING A SPECIA L ENACTMENT, THE PROVISIONS OF SECTION 2(47) OF THE ACT FOR TRAN SFER OF IMMOVABLE PROPERTY CANNOT BE IGNORED. WE ARE CONSCIOUS OF TH E FACT THAT UNDER THE COMMON LAW, FOR TRANSFER OF IMMOVABLE PROPERTY VALUE OF WHICH IS EXCEEDING ` 100/-, A REGISTERED SALE DEED HAS TO BE EXECUTED. HOWEVER, IN VIEW OF THE SPECIAL PROVISIONS OF SECTI ON 2(47) OF THE ACT, SUCH A REQUIREMENT UNDER THE COMMON LAW, MAY N OT BE APPLICABLE WHILE INTERPRETING SECTION 2(47) OF THE ACT. THEREFORE, 6 I.T.A. NO.3353/MDS/16 EVEN THOUGH THE ASSESSEE EXECUTED REGISTERED SALE D EED ON 06.06.2012, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THERE WAS A TRANSFER OF PROPERTY WITHIN THE MEANING OF SECTIO N 2(47) OF THE ACT ON 09.04.2012 WHEN THE ASSESSEE ENTERED IN TO AN AG REEMENT FOR SALE AND HANDED OVER THE PHYSICAL POSSESSION. IF T HE TRANSFER OF PROPERTY TOOK PLACE ON 09.04.2012, THE PAYMENTS WER E MADE ON 23.04.02012 AND 05.05.2012 ARE AFTER THE SALE OF TH E PROPERTY. 8. EVEN OTHERWISE SECTION 54 OF THE ACT CLEARLY SAY S THAT IF THE ASSESSEE, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSACTION TOOK PLACE, PURCHASED OR WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE, CONSTRUCTED A RESIDENTIAL HOUSE IN INDIA, THEN THE ASSESSEE IS ELIGIBLE FOR DEDUCTI ON UNDER SECTION 54 OF THE ACT. IN THIS CASE, THE INVESTMENT WAS ADMIT TEDLY MADE ONE YEAR BEFORE THE DATE OF SALE OF PROPERTY. IN VIEW OF LANGUAGE EMPLOYED BY PARLIAMENT IN SECTION 54 OF THE ACT, IT IS NOT THE REQUIREMENT THAT THE SALE CONSIDERATION HAS TO BE I NVESTED IN PURCHASE OF PROPERTY. IT IS IMMATERIAL WHETHER THE ASSESSEE INVESTED THE SALE CONSIDERATION IN PURCHASING OF NE W FLAT ON RECEIPT OF THE MONEY AFTER THE DATE OF SALE OR ONE YEAR BEF ORE THE SALE OF PROPERTY. IN THIS CASE, THE ASSESSEE INVESTED THE SALE CONSIDERATION 7 I.T.A. NO.3353/MDS/16 ONE YEAR BEFORE THE SALE OF PROPERTY, THEREFORE, TH E ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 54 OF THE ACT. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE ORDERS OF BOTH THE AUT HORITIES BELOW ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE UNDER SECTION 54 OF THE ACT WHILE COMP UTING TAXABLE INCOME. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 31 ST MAY, 2017 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 31 ST MAY, 2017. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-4, CHENNAI-34 4. PR. CIT-5, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.