ANSHUL T. BHIMJYANI, MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX - 23, MUMBAI

ITA 3373/MUM/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 6025 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 18-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY SINGH
• Assessee Lawyers: DEVENDRA H JAIN
• Keywords: Capital asset; Cost of acquisition; Benefit of exemption; Set aside; Capital Gains
• Section: 143(3); 54F; 54; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3373/MUM/2018 ASSESSMENT YEAR: 2013 - 14 SHRI ANSHUL T. BHIMJYANI, 301, A - WING, TULSI FORTUNE - 2000, B.K.C., BANDRA (EAST), MUMBAI - 400051. VS. PR. CIT - 23, 124, MATRUMANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI - 400007 PAN NO. AABPB4739L APPELLANT RESPONDENT ITA NO. 3374/MUM/2018 ASSESSMENT YEAR: 2013 - 14 SHRI DEVANGT. BHIMJYANI, 301, A - WING, TULSI FORTUNE - 2000, B.K.C., BANDRA (EAST), MUMBAI - 400051. VS. PR. CIT - 23, 124, MATRUMANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI - 400007 PAN NO. AABPB4738M APPELLANT RESPONDENT ASSESSEE BY : MR. DEVENDRA H. JAIN , AR REVENUE BY : MR. SANJAY SINGH , CIT - DR DATE OF HEARING : 09 /10/2018 DATE OF PRONOUNCEMENT: 31/12/2018 ORDER PER N.K. PRADHAN, A.M. THE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE PR. COMMISSIONER OF INCOME TAX - 23 , MUMBAI [IN SHORT P R. CIT ] PASSED U/S 263 OF THE INCOME TAX ACT 1961 (THE ACT). AS SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 2 COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOS E THEM OFF THROUGH A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. FACTS BEING IDENTICAL, WE BEGIN WITH THE CASE OF SHRI ANSHUL T . BHIMJAYANI. 2. THE GROUND OF APPEAL FILED BY THE ASSESSEE READ S AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED PR. COMMISSIONER OF INCOME TAX - 23, MUMBAI HAS ERRED IN HOLDING THAT THE ASSESSMENT ORDER PASSED BY ACIT - 23(1) DATED 21/03/2016 FOR A.Y. 2013 - 14 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND THEREBY CANCELLING THE ASSESSMENT ORDER. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2013 - 14 ON 31.07.2013 DECLARING TOTAL INCOME OF RS.35,10,930/ - . THE ASSESSING O FFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 21.03.2016 ACCEPTING THE SAID RETURN OF INCOME. THE PR. CIT ON PERUSAL OF THE RECORDS OBSERVED THAT THE ASSESSEE HAD SOLD A PROPERTY O N 09.11.2012 SITUATED AT 284, T A H NEE HEIGHTS CO - OPERATIVE SOCIETY LTD ., PETIT HALL, NAPEAN SEA ROAD, MUMBAI IN WHICH HIS SHARE WAS 25% OF THE TOTAL SALE CONSIDERATION WHICH WAS RS.39,00,00,000/ - . THE CAPITAL GAIN TAXABLE IN THE HANDS OF THE ASSESSEE ON THE TRANSFER OF THE ABOVE REFERRED CAPITAL ASSET WAS RS.8,24,38,078/ - . T HE ASSESSEE ALONG WITH THREE OTHER CO - OWNERS NAMELY MR. TULSI BHIMJYANI (FATHER), MRS. LEENA T. BHIMJYANI (MOTHER) AND MR. DEVANG BHIMJYANI (BROTHER) HAD ENTERED INTO A RE - DEVELOPMENT AGREEMENT WITH THE SEA GREEN CO - OPERATIVE SOCIETY ON 23.09.2006 TO DEV ELOP THE SOCIETY AT THEIR OWN COST. AS A CONSIDERATION, THE S OCIETY ADMITTED ALL THE SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 3 FOUR CO - DEVELOPERS INCLUDING THE ASSESSEE AS SOCIETY MEMBER AND ON COMPLETION OF CONSTRUCTION, THESE FOUR MEMBERS WOULD BE ALLOTTED RESIDENTIAL FLATS AS PER THE TERMS OF T HE DEVELOPMENT AGREEMENT. THE ENTIRE COST INCURRED ON THE DEVELOPMENT OF THE SOCIETY WAS ALLOCATED TO ALL FOUR MEMBERS EQUALLY. THIS ALLOCATION WAS CLAIMED AS COST OF CONSTRUCTION OF HOUSE PROPERTY DEDUCTIBLE U/S 54 OF THE ACT BY THE ASSESSEE. THE COST INC URRED ON RE - DEVELOPMENT OF THE SEA GREEN CO - OPERATIVE SOCIETY FROM 23.09.2006 TO 14.06.2014 I.E. THE DATE ON WHICH COMPLETION CERTIFICATE WAS RECEIVED IS AS UNDER: DATE OF SALE 09.11.2012 AMOUNT SPENT BEFORE THE DATE OF SALE RS. 40,07,24,092 TOTAL AMOUNT SPENT UPTO 31.03.2013 WHICH WAS CLAIMED AS COST OF CONSTRUCTION IN RETURN OF INCOME RS. 40,52,70,641 TOTAL AMOUNT AS ON 20.06.2014 (CUMULATIVE OUT OF WHICH RS.2,55,03,992 WAS SPENT AFTER 31.03.2013 WAS NOT CLAIMED IN RO I RS. 43,07,74,633 THE ASSESSEE SUBMITTED BEFORE THE PR. CIT THAT THE ENTIRE COST INCURRED FOR RE - DEVELOPMENT WAS THE COST OF ACQUISITION OF THE RESIDENTIAL FLAT ALLOTTED TO THE ASSESSEE AND THE OTHER THREE MEMBERS OF HIS FAMILY. ALSO IT WAS STATED THAT OUT OF TOTAL EXPENSES FOR CONSTRUCTION CLAIMED IN THE RETURN OF INCOME I.E. (RS.40,52,70,641/ - ), 98.88% WAS INCURRED PRIOR TO THE TRANSFER OF THE CAPITAL ASSET ON WHICH CAPITAL GAIN AROSE. THE COMPLETION CERTIFICATE WAS GRANTED TO THE DEVELOPERS (I.E. ALL THE FOUR MEMBERS OF B HIMJYANI FAMILY) ON THE CONDITION THAT THE PROJECT WOULD BE COMPLETED BY 29.04.2011 I.E. WITHIN THREE YEARS FROM THE DATE OF NOC TO COMMENCEMENT CERTIFICATE ISSUED ON 29.04.2008 I.E. WELL BEFORE THE SALE OF THE CAPITAL ASSET. HOWEVER, THE WORK GOT DELAYED AND SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 4 FINALLY THE COMPLETION CERTIFICATE OF THE SAID DEVELOPMENT WORK WAS RECEIVED ON 20.06.2014. THE ASSESSEE CLAIMED OF THE COST INCURRED ON RE - DEVELOPMENT AS H IS COST OF CONSTRUCTION AND CLAIMED DEDUCTION U/S 54 OF THE ACT. DURING THE PROCEEDINGS U/S 2 63 BEFORE THE PR. CIT, THE AR OF THE ASSESSEE SUBMITTED THAT THE APPELLANT HAD PURCHASED THE RESIDENTIAL PROPERTY ON 02.04.1990 AND SOLD THE SAME ON 09.11.2012, HENCE THE PERIOD OF HOLDING IS 22 YEARS, WHICH IS A LONG TERM CAPITAL ASSET AND INCOME EARNED O N SALE OF SAID FLAT IS LONG TERM CAPITAL GAINS. IT WAS STATED THAT THE ASSESSEE HAD SOLD A RESIDENTIAL FLA T IN WHICH THEY WERE RESIDING T A H NEE HEIGHTS CO - OPERATIVE SOCIETY LTD., PETIT HALL, NAPEAN SEA ROAD, MUMBAI. FURTHER THE ASSESSEE SOLD THE SAID RESIDE NTIAL FLAT ON 09.11.2012 AND CONSTRUCTION OF THE NEW RESIDENTIAL FLAT WERE COMPLETED ON 7 TH JULY, WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER. RELIANCE WAS PLACED BY THE AR ON THE DECISION IN CIT V. SMT. BEENA K. JAIN (1996) 217 ITR 263 (BOM), CIT V. SUBRAMANYAM BHAT (1987) 165 ITR 571 (KARN.), B.B. SARKAR V. CIT (1981) 132 ITR 150 (CAL . ), CIT V. H.K. KAPOOR (DECD) (1998) 234 ITR 753 (ALL.), CIT V. SARDARMAL KOTHARI & ANR . (2008) 302 ITR 286 (MAD.), CIT V. BHARTI MISHRA (41 TAXMANN.COM) . ALSO TH E AR SUBMITTED BEFORE THE PR. CIT THAT REVISION U/S 263 IS NOT TENABLE ON THE ABOVE ISSUE ON ACCOUNT THAT TWO VIEWS ARE POSSIBLE ON IT. IN THIS RESPECT, HE PLACED RELIANCE ON THE DECISION IN CIT V. LIC HOUSING FINANCE LTD. (2014) 367 ITR 458 (BOM), CIT V. GOKULDAS EXPORTS (2011) 333 ITR 458 (KARN) AND CIT V. HONDA SEIL POWER PRODUCTS LTD . (2011) 333 ITR 547 (DEL) . SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 5 HOWEVER, THE PR. CIT WAS NOT CONVINCED WITH THE ABOVE EXPLANATION OF THE ASSESSEE FOR THE REASON THAT THE INVESTMENT MADE BY THE ASSESSEE IN CO NSTRUCTION OF NEW PROPERTY WITHIN THE PERIOD STIPULATED U/S 54, AFTER THE SALE OF EXISTING PROPERTY, IS THE ONLY AMOUNT WHICH IS ENTITLED FOR DEDUCTION U/S 54 OF THE ACT. IN OTHER WORDS, AS PER HIM, THE INVESTMENT IN CONSTRUCTION OF NEW PROPERTY MADE BY TH E ASSESSEE BEFORE THE SALE OF PROPERTY IS DEFINITELY NOT DEDUCTIBLE. THEREAFTER, DISTINGUISHING THE CASE LAWS RELIED ON BY THE AR, THE PR. CIT OBSERVED THAT 98.88% OF THE INVESTMENT CLAIMED BY THE ASSESSEE AS DEDUCTION U/S 54 WAS INCURRED PRIOR TO THE DA TE OF TRANSFER OF THE CAPITAL ASSET. AS PER HIM, UNDER THE PROVISIONS OF SECTION 54 OF THE ACT AND THE CBDT CIRCULAR NO. 471 DATED 15.10.1996, THE AO SHOULD HAVE ALLOWED INVESTMENT MADE AFTER THE DATE OF TRANSFER OF THE CAPITAL ASSET. THE PR. CIT FURTHER O BSERVED THAT IT IS NOT A CASE WHERE TWO VIEWS ARE POSSIBLE BUT A CASE WHERE PROVISIONS OF SECTION 54 AND THE SAID BOARD CIRCULAR WERE NOT COMPLIED WITH. THUS ARRIVING AT A FINDING THAT THE AO ALLOWED THE ENTIRE INVESTMENT AS DEDUCTION EVEN THOUGH INVESTMENT OF RS.10,01,81,023/ - OUT OF THE TOTAL INVESTMENT OF RS.10,13,17,660/ - (CLAIMED IN RETURN OF INCOME) WAS MADE BEFORE THE SALE OF TRANSFER OF THE CAPITAL ASSET. THEREFORE, HOLDING THAT THE ORDER PASSED BY THE AO BEING ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE IN SO FAR AS THE ALLOWANCE OF DEDUCTION U/S 54 IS CONCERNED, WHEREIN THE AMOUNT INCURRED BEFORE THE DATE OF TRANS FER OF CAPITAL ASSET WAS ALLOWED, THE PR. CIT CANCELLED THE ASSESSMENT ORDER AND DIRECTED THE AO TO PASS A FRESH ORDER AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 6 4. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A PAPER BOOK (P/B) , WHICH WAS SUBMITT ED BEFORE THE PR. CIT, CONTAINING (I) REDEVELOPMENT AGREEMENT OF SEA - GREEN CO - OP HOUSING SOCIETY LTD., (II) COMPLETION CERTIFICATE OF CONSTRUCTION, (III) SOURCE AND APPLICATION OF FUNDS OF SALE PROCEEDS OF TANHEE HEIGHT FLAT, (IV) CASE LAWS (A) CIT V. BEEN A K. JAIN (1996) 217 ITR 363 BOMBAY HIGH COURT, (B) SUBHASH SEVARAM BHAVANI V . DEPARTMENT OF INCOME TAX ITA NO. 928/AHD/2012 (ITAT AHMADABAD), (C) CIT V. J.R. SUBRAMANYA BHAT (1987) 165 ITR 571 ( KARN .) , (D) B.B. SARKAR V. CIT (1981) 132 ITR 150 ( CAL .) , (E) CIT V. KAPOOR (DECD.) (1998) 234 ITR 753 ( ALL .) , (F) CIT V. SHRI SARDARMAL KOTHARI (2008) 302 ITR 286 ( MAD .) , (G) DCIT V. DR. CHALASANI MALLIKARJUNA RAO (2016) 75 TAXMANN.COM 270/161 ITD 721 (VISHAKAPATNAM ITAT) (H) CIT V. BHARI MISHRA 41 TAXMANN.COM 50 ( DEL .) , (I) MR. MUSTANIR TEHSILDAR V. ITO ITA NO. 6108/MUM/2017 (ITAT MUMBAI) DATE D 18/12/2017 . THE LD. COUNSEL ALSO FILED A SUPPLEMENTARY P/B CONTAINING (I) NOTICE U/S 263(1) OF THE I.T. ACT 1961 DATED 18.12.2017 FOR AY 2013 - 14 FOR SHRI ANSHUL TULSIDAS B HIMJAYANI, (II) SUBMISSION DATED 09.03.2016 FOR ANSHUL TULSIDAS BHIMJAYANI MADE BEFORE ACIT 23(1), (III) SUBMISSION DATED 11.03.2016 FOR ANSHUL TULSIDAS BHIMJAYANI MADE BEFORE ACIT 23(1), (IV) NOTICE U/S 263(1) OF THE I.T. ACT 1961 DATED 18.12.2017 FOR AY 2013 - 14 FOR SHRI DEVANG TULSIDAS BHIMJAYANI, (V) SUBMISSION DATED 16.01.2015 FOR DEVANG TULSIDAS BHIMJAYANI MADE BEFORE ACIT 23(1), AND (VI) SUBMISSION DATED 09.02.2016 FOR DEVANG TULSIDAS BH IMJAYANI MADE BEFORE ACIT 23(1). SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 7 IT IS STATED BY THE LD. COUNSE L THAT THE DOCUMENTS AT SR. NO. 6,7,9 AND 10 WERE SUBMITTED BEFORE THE AO AND THE PR. CIT. ALSO THE LD. COUNSEL FILES A COPY OF THE DECISION IN THE CASE OF C. ARYAMA SUNDARAM V. CIT (TCA NO. 520 OF 2017) OF MADRAS HIGH COURT, THE ORDER OF THE ITAT D BE NCH, NEW DELHI IN THE CASE OF TARUN JALALI V. DCIT (ITA NO. 2376/DEL/2014 FOR AY 2009 - 10), ITAT CHANDIGARH IN M/S PARAMJIT KAUR V. ITO (ITA NO. 717/CHD/2017 FOR AY 2013 - 14), ITAT VISHAKHAPATNAM BENCH IN DCIT V. DR. CHALASANI MALLIKARJUNA RAO (2016) 75 TAXM ANN.COM 270. 5. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THE AO HAS NOT ALL EXAMINED THE ALLOWABILITY OF DEDUCTION U/S 54 OF THE ACT IN THE LIGHT OF THE CBDT CIRCULAR NO. 471 DATED 15.10.1986. IT IS STATED BY HIM THAT THE TWO PAGE ORDER OF THE AO IS SIL ENT ON THE ABOVE ISSUE. REFERRING TO EXPLANATION 2 TO SECTION 263 INSERTED BY THE FINANCE ACT, 2015 W.E.F. 01.06.2015, THE LD. DR SUBMITS THAT THE PR. CIT HAS RIGHTLY INVOKED THE PROVISIONS OF THE SAID SECTION AND THEREFORE, THE ORDER U/S 263 BE CONFIRMED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISION ARE GIVEN BELOW. THE SHORT QUESTION HERE IS WHETHER A TAXPAYER CAN CLAIM DEDUCTION U/S 54 OF THE ACT, WHERE THE AMOUNT IS INCURRED BEFORE THE DATE OF TRANSFER OF THE CAPITAL ASSET . IN THE INSTANT CASE, AS RECORDED BY THE PR. CIT, 98.88% OF INVESTMENT CLAIMED BY THE ASSESSEE AS DEDUCTION U/S 54 WAS INCURRED PRIOR TO THE DATE OF TRANSFER OF THE CAPITAL ASSET. THE TWO DECISIONS NARRATED INFRA A DDRESS THE PRESENT ISSUE. SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 8 IN THE CASE OF C. ARYAMA SUNDARAM (SUPRA), THE ASSESSEE SOLD A RESIDENTIAL HOUSE PROPERTY FLAT NO. 137, SUNDAR NAGAR, NEW DELHI ON 15.01.2010 IN FAVOUR OF ONE SMT. VANDANA MANCHANDA, FOR A TOTAL CONSIDERATION OF RS.12,50,00,000/ - AND THE TOTAL LONG TERM CAPITAL GAIN THAT AROSE TO THE ASSESSEE WAS RS.10,47,95,925/ - . IN THE MEANWHILE, ON 14.05.2007, THE ASSESSEE PURCHASED THE PROPERTY WITH SUPERSTRUCTURE THEREON AT NO. 138, JOR BAGH, NEW DELHI FOR A TOTAL CONSIDERATION OF RS.15,96,4 6,446/ - . AFTER DEMOLISHING THE EXISTING SUPERSTRUCTURE, THE ASSESSEE CONSTRUCTED A RESIDENTIAL HOUSE AT A COST OF RS.18,73,85,491/ - . THE ASSESSEE CLAIMED ENTIRE LONG TERM CAPITAL GAIN AS EXEMPT FROM TAX U/S 54 OF THE SAID ACT. THE AO HELD THAT ONLY THAT PA RT OF THE CONSTRUCTION EXPENDITURE INCURRED AFTER THE SALE OF THE ORIGINAL ASSET WOULD BE ELIGIBLE FOR EXEMPTION U/S 54 OF THE SAID ACT AND BASED ON RECORDS HELD THAT THE COST OF CONSTRUCTION INCURRED AFTER THE SALE OF THE ORIGINAL ASSET WAS RS.1,14,81,067 / - AND THEREFORE, ALLOWED EXEMPTION OF THE ABOVE SUM AS RELIEF U/S 54 OF THE ACT. IN APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER PASSED BY THE AO. IN FURTHER APPEAL, THE ITAT, OBSERVING THAT THE ASSESSEE IS ENTITLED FOR COST OF CONSTRUCTION IN RESPECT OF RE SIDENTIAL PROPERTY, EVEN THOUGH HE HAS NOT INVESTED IN CAPITAL GAIN ACCOUNTS SCHEME, BUT COMPLIED THE MAIN CONDITION OF THE PROVISIONS OF SECTION 54 OF THE ACT, REMITTED THE MATTER TO THE AO FOR FRESH CONSIDERATION. IN FURTHER APPEAL BY THE ASSESSEE, THE H ONBLE MADRAS HIGH COURT HELD AS UNDER: 22. IT IS AXIOMATIC THAT SECTION 54(1) OF THE SAID ACT DOES NOT CONTEMPLATE THAT THE SAME MONEY RECEIVED FROM THE SALE OF A RESIDENTIAL HOUSE SHOULD BE USED IN THE ACQUISITION OF NEW RESIDENTIAL HOUSE. HAD IT BEEN THE INTENTION OF SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 9 THE LEGISLATURE THAT THE VERY SAME MONEY THAT HAD BEEN RECEIVED AS CONSIDERATION FOR TRANSFER OF A RESIDENTIAL HOUSE SHOULD BE USED FOR ACQUISITION OF THE NEW ASSET, SECTION 54(1) WOULD NOT HAVE ALLOWED ADJUSTMENT AND/OR EXEMPTION IN RESPECT OF PROPERTY PURCHASED O NE YEAR PRIOR TO THE TRANSFER, WHICH GAVE RISE TO THE CAPITAL GAIN OR MAY BE IN THE ALTERNATIVE HAVE EXPRESSLY MADE THE EXEMPTION IN CASE OF PRIOR PURCHASE, SUBJECT TO PURCHASE FROM ANY ADVANCE THAT MIGHT HAVE BEEN RECEIVED FOR THE TRANSFER OF THE RESIDENT IAL HOUSE WHICH RESULTED IN THE CAPITAL GAIN. 23. AT THE COST OF REPETITION, IT IT REITERATED THAT EXEMPTION OF CAPITAL GAIN FROM BEING CHARGED TO INCOME TAX AS INCOME OF THE PREVIOUS YEAR IS ATTRACTED WHEN ANOTHER RESIDENTIAL HOUSE HAS BEEN PURCHASED WITH IN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF TRANSFER OR HAS BEEN CONSTRUCTED WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE RESIDENTIAL HOUSE. IT IS NOT IN DISPUTE THAT THE NEW RESIDENTIAL HOUSE HAS BEEN CONSTRUCTED WITH IN THE TIME STIPULATED IN SECTION 54(1) OF THE SAID ACT. IT IS NOT A REQUISITE OF SECTION 54 THAT CONSTRUCTION COULD NOT HAVE COMMENCED PRIOR TO THE DATE OF TRANSFER OF THE ASSET RESULTING IN CAPITAL GAIN. IF THE AMOUNT OF CAPITAL GAIN IS GREATER THAN THE COST OF THE NEW HOUSE, THE DIFFERENCE BETWEEN THE AMOUNT OF CAPITAL GAIN AND THE COST OF THE NEW ASSET IS TO BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR. IF THE AMOUNT OF CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW RESIDENTIAL HOUSE, INCLUDING THE LAND ON WHICH THE RESIDENTIAL HOUSE IS CONSTRUCTED, THE CAPITAL GAIN IS NOT TO BE CHARGED UNDER SECTION 45 OF THE SAID ACT. 6.1 IN SMT. BEENA K. JAIN (SUPRA), THE ASSESSEE HAD SOLD OFFICE PREMISES ON 23RD JULY, 1987, WHICH RESULTED IN LONG TERM CAPITAL GAINS OF RS.24,05 ,050/ - . PRIOR TO THE SALE SHE HAD ENTERED INTO AN AGREEMENT FOR PURCHASE OF A RESIDENTIAL FLAT WHICH AGREEMENT WAS DATED 4TH SEPTEMBER 1985. THE AGREEMENT WAS FOR PURCHASE OF A FLAT FOR A TOTAL CONSIDERATION SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 10 OF RS.12,26,751/ - . ON THE DATE OF THE AGREEMENT OF SALE, THE ASSESSEE PAID A SUM OF RS.1,35,000/ - AS EARNEST MONEY. THIS AGREEMENT WAS REGISTERED ON 27TH OCTOBER 1985. THE CONSTRUCTION OF THE FLAT WAS FINALLY COMPLETED IN JULY, 1988. THE ASSESSEE PAID THE CONSIDERATION AMOUNT OF RS.10,44,375/ - PLUS RS.4 7,376/ - ON 29TH JULY, 1988, AND SHE WAS PUT IN POSSESSION OF THE SAID FLAT ON 30TH JULY, 1988. THE ASSESSEE CLAIMED THE BENEFIT OF EXEMPTION UNDER SECTION 54F OF THE ACT. THE TRIBUNAL ALLOWED HER EXEMPTION ON RS.11,04,423/ - U/S 54F OF THE ACT. THE HONBLE HIGH COURT AGREED WITH THE ORDER OF THE ITAT AND HELD : UNDER SECTION 54F OF THE INCOME - TAX ACT, IN THE CASE OF AN ASSESSEE IF ANY CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG - TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE, AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE, PURCHASED A RESIDENTIAL HOUSE, THE CAPITAL GAIN SHALL BE DEALT WITH AS PROVIDED IN THAT SECTION. AS PER TH E SECTION CERTAIN EXEMPTION HAS TO BE ALLOWED IN RESPECT OF THE CAPITAL GAINS TO BE CALCULATED AS SET OUT THEREIN. THE DEPARTMENT CONTENDS THAT THE ASSESSEE DID NOT PURCHASE THE RESIDENTIAL HOUSE EITHER ONE YEAR PRIOR TO OR TWO YEARS AFTER THE SALE OF THE CAPITAL ASSET WHICH RESULTED IN THE LONG - TERM CAPITAL GAINS. ACCORDING TO THE DEPARTMENT, THE AGREEMENT FOR PURCHASE OF THE NEW FLAT WAS ENTERED INTO MORE THAN ONE YEAR PRIOR TO THE SALE. HENCE, THE PETITIONER IS NOT ENTITLED TO THE BENEFIT UNDER SECTION 54F . IN OUR VIEW, THE TRIBUNAL HAS RIGHTLY NEGATIVED THIS CONTENTION AND HAS HELD THAT THE NEW RESIDENTIAL HOUSE HAD BEEN PURCHASED BY THE ASSESSEE WITHIN TWO YEARS AFTER THE SALE OF THE CAPITAL ASSET WHI CH RESULTED IN LONG - TERM CAPITAL GAINS. THE TRIBUNAL HAS HELD THAT THE RELEVANT DATE IN THIS CONNECTION IS JULY 29, 1988, WHEN THE PETITIONER PAID THE FULL CONSIDERATION AMOUNT ON THE FLAT BECOMING READY FOR OCCUPATION AND OBTAINED POSSESSION OF THE FLAT. THIS HAS BEEN TAKEN BY THE TRIBUNAL AS THE DATE OF PURCHASE. THE TRIBUNAL HAS LOOKED AT THE SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 11 SUBSTANCE OF THE TRANSACTION AND COME TO THE CONCLUSION THAT THE PURCHASE WAS SUBSTANTIALLY EFFECTED WHEN THE AGREEMENT OF PURCHASE WAS CARRIED OUT OR COMPLETED BY PAYMENT OF FULL CONSIDERATION ON JULY 29, 1988, AND HANDING OVER OF POSSESSION OF THE FLAT ON THE NEXT DAY. 6.2 IN THE INSTANT CASE, THE PR. CIT INVOKE D THE PROVISIONS OF SECTION 263 ON THE REASON THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF REVENUE IN SO FAR AS THE ALLOWANCE OF DEDUCTION U/S 54 IS CONCERNED, THE ASSESSEE HAS MADE THE PAYMENT BEFORE THE DATE OF TRANSFER OF CAPITAL ASSET. WE FIND THAT THE RATIO LAID DOWN IN C. ARYAMA SUNDARAM (SUPRA) AND SMT. BEENA K. JA IN (SUPRA) NARRATED AT 6 AND 6.1 HEREINBEFORE SQUARELY APPLIES TO THE INSTANT CASE. FOLLOWING THE SAME, WE SET ASIDE THE ORDER U/S 263 DATED 23.03.2018 PASSED BY THE PR. CIT. FACTS BEING IDENTICAL, OUR DECISION IN THE CASE OF SHRI ANSHUL T. BHIMJYANI APPLI ES MUTATIS MUTANDIS TO THE CASE OF SHRI DEVANG T. BHIMJYANI. 7. IN THE RESULT, THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/12/2018 SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 31/12/2018 RAHUL SHARMA, SR. P.S. SHRI ANSHUL T. BHIMJYANI & DEVANG T. BHIMJYANI ITA NOS. 3373 & 3374/MUM/2018 12 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI