Mrs Kamala Ajmera, New Delhi V. ITO, New Delhi

ITA 347/DEL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0680 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 23-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Cost of acquisition; Benefit of exemption
• Section: 54F; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT & SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO.347/DEL/2017 ASSESSMENT YEAR: 2013-14 MRS. KAMALA AJMERA, 27, CHITRAKOOT APARTMENT, EAST ARJUN NAGAR, DELHI. V. ITO, WARD-55(1), NEW DELHI. TAN/PAN: AIAPA 1026G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K. SAMPATH, ADV. RESPONDENT BY: SHRI AMIT JAIN, SR.D.R. DATE OF HEARING: 21 06 2018 DATE OF PRONOUNCEMENT: 17 09 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 04.11.2016 PASSED BY THE CIT(A)-19, NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3) FOR THE ASSESSMENT YEAR 2013-14. THE ONL Y GROUND RAISED BY THE ASSESSEE READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AS SESSING OFFICER IN NOT ALLOWING DEDUCTION U/S.54/54F OF THE INCOME TAX ACT , 1961 ON ACCOUNT OF LONG TERM GAINS ON SALE OF PROPERTY AND THEREBY MAKING AN ADDITION OF RS.77,21,957/-. THE ORDER BEING ARBI TRARY, ERRONEOUS AND UNLAWFUL MUST BE QUASHED WITH DIRECTIONS FOR AP PROPRIATE RELIEF. I.T.A. NO.347/DEL/2017 2 2. THE FACTS IN BRIEF QUA THE ISSUE ARE THAT, ASSES SEE IS AN INDIVIDUAL AND HAS CLAIMED LONG TERM CAPITAL GAIN O F RS.77,21,957/- AS EXEMPT U/S.54 OF THE ACT. THE ASS ESSEE HAD SOLD ONE RESIDENTIAL PLOT SITUATED AT JAIPUR FO R A CONSIDERATION OF RS.77,75,000/-, AGAINST WHICH THE ASSESSEE HAS CLAIMED COST OF ACQUISITION AT RS.53,043/-, RES ULTING INTO LONG TERM CAPITAL GAIN OF RS.77,21,957/-. THE ASSES SING OFFICER NOTED THAT ASSESSEE HAS CLAIMED EXEMPTION O F LONG TERM CAPITAL GAIN U/S.54 ON ACCOUNT OF INVESTMENT M ADE IN TWO RESIDENTIAL PROPERTIES, VIZ., A-1501 AND A-1602 , TOWER AAON, GH-4/B, GH-4/B, SECTOR 45, NOIDA FOR A CONSIDERATION OF RS.44,13,775/- AND RS.42,39,275/-, RESPECTIVELY. THE ASSESSEE BEFORE THE ASSESSING OFF ICER HAD MADE AN ALTERNATIVE CLAIM OF 54F, IF THE SAID CLAIM IS NOT AVAILABLE U/S 54; HOWEVER, THE LEARNED ASSESSING OF FICER OBSERVED THAT EXEMPTION U/S.54F IS NOT AN ADMISSIBL E. THE REASON BEING THE ASSESSEE HAS PURCHASED TWO RESIDEN TIAL PROPERTIES AT TWO DIFFERENT FLOORS AND ARE NOT ADJOI NING. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH PURCHASE DEED AND COST OF ACQUISITION AND ALL THE OTHER RELE VANT DETAILS, IN RESPONSE TO WHICH IT WAS STATED THAT SHE HAS INH ERITED THE PROPERTY WHICH WAS PURCHASED WAY BACK ON 15 TH NOVEMBER, 1983 FOR RS.2,490/-, AND THEREAFTER A DWELLING UNIT WAS CONSTRUCTED IN THE PROPERTY. THE COPY OF THE PURCHA SE DEED DATED 15.11.1983 WAS FURNISHED AND ALL THE REQUISIT E DETAILS AS REQUIRED WERE ALSO FURNISHED. THE ASSESSING OFFI CER THEREAFTER SOUGHT INFORMATION U/S. 133(6) FROM THE PURCHASER I.T.A. NO.347/DEL/2017 3 OF THE PROPERTY AND IN RESPONSE, IT WAS CONFIRMED B Y HIM THAT HE HAD PURCHASED ONLY PLOT AND CONSTRUCTION IS UNDE RGOING ON IT. AFTER DETAILED DISCUSSION, THE ASSESSING OFF ICER DEDUCED FOLLOWING FACTS:- IN VIEW OF THE ABOVE, THE FOLLOWING FACTS EMERGE: THE PROPERTY SOLD BY THE ASSESSEE IS A PLOT ONLY; THIS HAS DULY BEEN CONFIRMED BY THE PURCHASER; THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO PROV E THAT ANY CONSTRUCTION ACTIVITY WAS CARRIED OUT ON THE SAID P LOT; THE ONLY EXPENDITURE INCURRED IN FY 2001-02 IS IN R ELATION TO THE CONVERSION OF THE PROPERTY IN FREE-HOLD; THE ASSESSEE ACQUIRED TWO FLATS VIDE TWO DIFFERENT ALLOTMENT LETTERS FROM M/S. PRATEEK BUILDTECH (INDIA) PVT. LTD.; THE BUILDER IN COMPLIANCE TO NOTICE ISSUED U/S.133( 6) HAS AFFIRMED THAT THE TWO FLATS CANNOT BE CONVERTED INTO ONE UNI T, AS CLAIMED BY THE ASSESSEE IN REPLY DATED 26.10.2015 REPRODUCED A BOVE. 2.1 INCOME TAX INSPECTOR WAS ALSO DEPUTED BY THE ASSESSING OFFICER TO MAKE INQUIRY WITH REGARD TO TW O PROPERTIES PURCHASED, WHO IN HIS REPORT SUBMITTED T HAT BOTH THE FLATS ARE LOCATED IN BLOCK A ON TWO DIFFERENT F LOORS AND AT TWO DIFFERENT ENDS AND BOTH THE FLATS ARE SEPARATED BY AN OPEN SPACE WHICH CANNOT BE CONVERTED INTO A DUPLEX AND T HE PROJECT IS STILL NOT COMPLETED. THIS REPORT WAS DUL Y CONFRONTED TO THE ASSESSEE. LEARNED ASSESSING OFFICER AFTER CO NSIDERING THE ENTIRE MATERIAL FACTS ON RECORD OBSERVED THAT, FIRSTLY, THE CONSTRUCTION OF THE PROPERTY WHICH HAS BEEN PURCHAS ED HAS NOT BEEN COMPLETED; SECONDLY , TWO FLATS ARE NOT ADJACENT TO EACH OTHER SO AS TO CONVERT INTO ONE UNIT; THIRDLY , THERE IS NO WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE BUIL DER TO I.T.A. NO.347/DEL/2017 4 THE EFFECT THAT TWO FLATS WILL BE GROUPED TOGETHER; AND LASTLY , THE PROVISO TO SECTION 54F MAKES IT EXPLICITLY CLEAR THAT THE EXEMPTION IS ALLOWABLE ONLY IF THE ASSESSEE HAS ACQ UIRED ONE RESIDENTIAL PROPERTY ONLY. IN SO FAR AS RELIANCE PL ACED BY THE ASSESSEE ON THE DECISION OF HON'BLE DELHI HIGH COUR T IN THE CASE OF GITA DUGGAL, REPORTED IN (2013) 257 CTR 208 , HE HELD THAT THE SAID DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND THE SLP WAS FILED. HE ALSO NOTED THA T BY THE FINANCE ACT, 2014 AMENDMENT HAS BEEN BROUGHT WHEREB Y IT HAS BEEN MADE CLEAR THAT EXEMPTION SHALL BE AVAILAB LE IF THE ASSESSEE ACQUIRED ONE RESIDENTIAL PROPERTY ONLY. TH IS MAKES IT CLEAR THAT THE LEGISLATURE INTENTION WAS TO ALLOW T HE EXEMPTION IN RESPECT OF ONE RESIDENTIAL PROPERTY ON LY. ACCORDINGLY, HE DENIED THE CLAIM OF EXEMPTION U/S.5 4F TO THE ASSESSEE. 3. LD. CIT (A) TOO HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER AFTER DETAILED REASONING. SUM AND SUBSTANCE OF HIS REASON CAN BE SUMMARIZED IN THE FOLLOWING MANNER:- FIRSTLY, THE BENEFIT OF SECTION 54F WITH RESPECT TO ONE HOUSE PROPERTY IS THOUGH APPLICABLE W.E.F. 1 ST APRIL, 2015 (ASSESSMENT YEAR 2015-16), HOWEVER, HE HELD THAT SU CH AN AMENDMENT IS CLARIFICATORY IN NATURE AND WILL AP PLY RETROSPECTIVELY, BECAUSE THE INTENTION OF THE LEGIS LATURE WAS TO PROVIDE BENEFIT OF ONE RESIDENTIAL HOUSE IN INDIA AND AMENDMENT HAS BEEN BROUGHT ONLY WITH THE INTENTION TO CLARIFY THE CONTROVERSY GOING ON IN TH E JUDICIAL FORUM. WHILE COMING TO THIS CONCLUSION, HE HAS I.T.A. NO.347/DEL/2017 5 REFERRED TO VARIOUS JUDGMENTS OF HON'BLE SUPREME COU RT INCLUDING THAT OF THE SPECIAL BENCH JUDGMENT IN THE CASE OF ITO VS. SUSHILA M. JHAVERI, REPORTED IN 107 ITD 327. SECONDLY, HE DISTINGUISHED THE JUDGMENT OF GEETA DUGGAL (SUPRA) ON THE GROUND THAT TWO FLATS PURCHAS ED WERE ADJACENT TO EACH OTHER WHICH IN THE PRESENT CA SE IS NOT APPLICABLE, BECAUSE THEY ARE NOT ADJACENT AND AR E AT TWO DIFFERENT FLOORS, AND THEREFORE, SUCH A BENEFIT IS NOT AVAILABLE TO THE ASSESSEE AS THE TWO PROPERTIES ARE DISTINCT FROM EACH OTHER. LASTLY, THE PROPERTY PURCHASED HAS NOT BEEN COMPLET ED WITHIN THE PRESCRIBED PERIOD OF THREE YEARS. 4. AFTER HEARING BOTH THE PARTIES AT LENGTH AND ON PERUSAL OF THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDE RS, WE FIND THAT ASSESSEE HAS MADE THE CLAIM OF EXEMPTION OF LO NG TERM CAPITAL GAIN U/S.54 ON THE GROUND THAT THERE WAS A SALE OF HOUSE PROPERTY BUT LATER ON SHE HAS MADE AN ALTERNA TIVE CLAIM U/S.54F WHICH WAS BASED ON THE BACKGROUND OF THE INQUIRY MADE BY THE ASSESSING OFFICER WHEREIN IT WA S FOUND THAT THE PROPERTY WHICH WAS SOLD WAS A RESIDENTIAL PLOT AND NOT HOUSE PROPERTY. IT IS AN UNDISPUTED FACT THAT T HE PROCEEDS OF THE LONG TERM CAPITAL GAIN HAS BEEN INVESTED IN PURCHASE OF TWO FLATS, VIZ., A-150 AND A-162 IN ONE PARTICUL AR TOWER AAON FOR A CONSIDERATION OF RS.44,13,775/- AND RS.42,39,275/- RESPECTIVELY. THE ASSESSEE HAS BEEN DENIED ENTIRE EXEMPTION U/S.54F ON THE GROUND THAT, FIRSTLY , TWO FLATS I.T.A. NO.347/DEL/2017 6 WERE DIFFERENTLY LOCATED AND CANNOT BE CONVERTED IN TO ONE RESIDENTIAL HOUSE AND THEREFORE, SAME CANNOT BE CON SIDERED AS ONE HOUSE FOR THE PURPOSE OF ALLOWABILITY OF DED UCTION; AND SECONDLY , THE CONSTRUCTION OF THE TOWER WAS NOT COMPLETED WITHIN THE PERIOD OF 3 YEARS. LD. CIT (A) HAS DENIE D THE EXEMPTION U/S.54F EVEN WITH RESPECT TO ONE FLAT ALS O ON THE GROUND THAT CONSTRUCTION OF THE TOWER HAS NOT BEEN COMPLETED WITHIN THE PRESCRIBED PERIOD OF THREE YEARS AND ASS ESSEE HAS NOT PURCHASED ONE RESIDENTIAL HOUSE BUT TWO, THEREF ORE, THE ENTIRE EXEMPTION CANNOT BE GIVEN. IN THE DETAILED O RDER OF THE LD. CIT (A), HE HAS OBSERVED THAT EARLIER THE PHRAS E USE IN SECTION 54F WAS THAT ASSESSEE HAS PURCHASED OR HAS CONSTRUCTED A RESIDENTIAL HOUSE AND THE AMENDMENT BROUGHT IN THE STATUTE AMENDING A RESIDENTIAL HOUS E TO ONE RESIDENTIAL HOUSE HAS BEEN BROUGHT W.E.F. 1 ST APRIL, 2014, AND THEREFORE, SUCH AN AMENDMENT BEING CLARIFICATORY IN NATURE HAS TO BE GIVEN RETROSPECTIVE EFFECT. CATENA OF JUD GMENTS INCLUDING OF HIGH COURTS AND TRIBUNAL WHICH HAS BEE N NOTED BY THE LD. CIT (A) IN THE IMPUGNED ORDER WHEREIN TH E WORD RESIDENTIAL HOUSE HAS BEEN INTERPRETED TO MEAN MO RE THAN ONE RESIDENTIAL HOUSE AND HE OBSERVED THAT SUCH AN INTERPRETATION WAS BASED ON THE REASONING THAT IF T HE LEGISLATURE INTENDED TO RESTRICT THE INVESTMENT TO ONLY ONE HOUSE PROPERTY THEN INSTEAD OF USING THE WORD A, LEGISLATURE SHOULD HAVE USED THE WORD ONE. SUCH AN INTERPRETA TION WAS BASED ON THE CONTROVERSIES WHERE ASSESSEE HAS PURCH ASED TWO FLATS WHICH WERE SITUATED ADJACENT TO EACH OTHER OR SIDE BY I.T.A. NO.347/DEL/2017 7 SIDE AND THE FLATS WERE PURCHASED WITH INTENTION OF TREATING AS ONE. HERE, IN THIS CASE, IT IS AN UNDISPUTED FACT T HAT BOTH THE FLATS PURCHASED BY THE ASSESSEE WERE ON TWO DIFFERE NT STOREYS AND WERE NOT ADJACENT TO EACH OTHER NOR COULD HAVE B EEN JOINED TO FORM ONE DWELLING UNIT. WITHOUT GOING INTO THE INTERPRETATION AS TO WHETHER A RESIDENTIAL HOUSE WOULD MEAN ONE HOUSE OR PLURAL HOUSE, BECAUSE IN THE CASE OF GITA DUGGAL (SUPRA) HON'BLE DELHI HIGH COURT HAVE INTERP RETED THAT A RESIDENTIAL HOUSE CAN BE CONSTRUED TO TWO UNIT ON LY IF THEY HAVE BEEN PURCHASED TO BE USE AS ONE AND ARE ADJACEN T TO EACH OTHER AND IF THERE IS AN ADJACENT FLAT WITH COM MON FACILITIES, THEN SAME CAN BE CONSTITUTED TO BE A R ESIDENTIAL HOUSE AND THEREFORE, ASSESSEE IS ENTITLED TO THE B ENEFIT U/S.54/54F. HOWEVER, SUCH AN INTERPRETATION CANNOT BE STRETCHED SO AS TO HOLD THAT TWO DIFFERENT RESIDENT IAL FLATS WHICH ARE NOT ADJACENT AND SEPARATED WITH SPACE AND ON TWO DIFFERENT STOREYS SO AS TO CONSTITUTE A RESIDENTIA L HOUSE. UNDER THESE FACTS AND CIRCUMSTANCES, EXEMPTION IF A T ALL WHICH CAN BE CLAIMED BY THE ASSESSEE IN TERMS OF SE CTION 54F WOULD BE ONLY WITH RESPECT TO ONE OF THE FLAT ONLY. THIS IS ALSO DULY SUPPORTED BY THE JUDGMENT OF HON'BLE PUNJAB & HA RYANA HIGH COURT IN THE CASE OF PAVAN ARYA VS. CIT, REPOR TED IN (2011) 11 TAXMANN.COM 312. 5. NOW COMING TO THE ISSUE, WHETHER EXEMPTION CAN BE DENIED ON THE GROUND THAT TOWER ON WHICH THE FLATS WERE PURCHASED WERE NOT FOUND TO BE COMPLETED WITHIN THE PERIOD OF THREE YEARS. ON THE PERUSAL OF THE IMPUGNED ASSE SSMENT I.T.A. NO.347/DEL/2017 8 ORDER, IT IS SEEN THAT ITI HAS REPORTED THAT THE LI FT WAS NOT INSTALLED AND THE PROJECT IS STILL NOT COMPLETED, H OWEVER IF THE ASSESSEE HAS MADE THE ENTIRE INVESTMENT IN THE PURC HASE OF THE FLAT AND SUBSTANTIAL CONSTRUCTION HAS BEEN COMP LETED AND MERELY BECAUSE LIFT HAS NOT BEEN INSTALLED IT CANNO T BE HELD THAT BENEFIT OF EXEMPTION SHOULD BE DENIED TO THE A SSESSEE. SECTION 54F IS A BENEFICIAL PROVISION GIVING BENEFI T TO THE ASSESSEE WHO HAS INVESTED THE LONG TERM CAPITAL GAI N FOR A PURCHASE OF RESIDENTIAL HOUSE. THE ASSESSEE HAS MAD E THE ENTIRE PAYMENT AND FLAT HAS BEEN IN COMPLETE POSSES SION OF THE ASSESSEE AND SIMPLY BECAUSE CERTAIN FINISHING W ORK HAS NOT BEEN DONE IT CANNOT BE HELD THAT EXEMPTION U/S. 54F SHOULD BE DENIED. ACCORDINGLY, WE HOLD THAT ASSESSE E IS ENTITLED FOR EXEMPTION OF SECTION 54F ON THE HIGHER AMOUNT INVESTED IN THE FLAT AMOUNTING TO RS.44,13,775/- AN D ASSESSING OFFICER IS DIRECTED TO ALLOW EXEMPTION U/ S.54F FOR THIS AMOUNT AND THE BALANCE WOULD BE LIABLE FOR TAX ATION UNDER LONG TERM CAPITAL GAIN. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2018. SD/- SD/- [G.D. AGRAWAL] [AMIT SHUKLA] PRESIDENT JUDICIAL MEMBER DATED: 17 TH SEPTEMBER, 2018 PKK: