Mr. Sharad Bhargava HUF, Gurgaon V. ITO, Gurgaon

ITA 3684/DEL/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58878 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 22-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 28-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DK MISHR A
• Section: 54B; 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH :G : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.3684/DEL/2009 ASSESSMENT YEAR : 2006-07 SHARAD BHARGAVA, HUF, M-83, 1 ST FLOOR, SOUTH CITY-1, GURGAON. PAN : AASPB3876D VS. ITO, WARD-5, GURGAON. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ARUN KISHORE, CA REVENUE BY : SHRI D.K. MISHRA, CIT, DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 26 TH JUNE, 2009 FOR ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THAT THE ORDER OF THE LEARNED ITO WARD-5, GURGAON A ND CIT (APPEALS) PANCHKULA ARE ILLEGAL, UNJUST, OPPOSED TO FACTS AND NOT IN CONFORMITY WITH THE PROVISIONS OF IT ACT. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE RS.5,85 ,550/- HAS BEEN WRONGLY ADDED AS LONG TERM CAPITAL GAIN IN A .Y. 2006- 07, WHEN THE SAME IS TAXABLE IN THE ASST. YEAR 2009-10. (II) THAT THE ADDITION HAS BEEN MADE COMPLETELY IGNORIN G THE PROVISION OF SECTION 54(1), 54(2) READ WITH CLAUSE 1 OF THE PROVISO TO SUB CLAUSE 54(2) OF THE IT ACT, 1961. 3. THAT THE ADDITION OF RS.5,85,550/- BE DELETED. ITA NO.3684/DEL/2009 2 2. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE SOLD A RESIDENTIAL HOUSE AND COMPUTED LONG-TERM CAPITAL GAIN OF ` 5,85,550/- WHICH WAS CLAIMED TO BE EXEMPT UNDER THE PROVISIONS OF SECTION 54F. THE EXEMPTION WAS CLAIMED ON THE GROUND THAT A PLOT OF LAND WAS PURCHASED FOR ` 3 LAC ON 23 RD JANUARY,2006 AT BANGALORE AND ` 3 LAC WAS DEPOSITED IN THE CAPITAL GAIN ACCOUNT SCHEME OF SBI O N 28 TH JULY, 2006. THE DUE DATE OF FILING THE RETURN BY THE ASSESSEE IS 31 ST JULY, 2006. LD. ASSESSING OFFICER HAS REJECTED SUCH CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS FAILED TO CONSTRUCT RESIDENTI AL HOUSE WITHIN THE PRESCRIBED LIMIT AS ALLOWED U/S 54F OF THE ACT. IN THIS MANNER, HE HAS WITHDRAWN THE EXEMPTION CLAIMED BY TH E ASSESSEE AND IT HAS BEEN TAXED IN THE YEAR UNDER CONSIDERATION. L EARNED CIT (A) HAS UPHELD THE ORDER OF LD. ASSESSING OFFICER. THE ASSESSEE IS AGGRIEVED, HENCE, IN APPEAL. 3. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED BEFORE US THE FACTS OF THE CASE AS UNDER:- 1) ON 19.11.2005 THE ASSESSEE SOLD A RESIDENTIAL HOUSE AND EARNED LON G TERM CAPITAL GAIN OF RS.585550/-. 2) ON 23.06.2006 THE ASSESSEE PURCHASED RESIDENTIAL PLOT FOR RS.3 LAC. 3) ON 28.07.2006 THE ASSESSEE DEPOSITED RS.3 LAC WITH STATE BANK OF INDI A UNDER THE CAPITAL GAIN SCHEME. 4) IN THE RETURN OF INCOME FOR A.Y. 2006-07, DEDUCTION U/S 54 OF THE ACT CLAIMED FOR ABOVE TWO PAYMENTS OF RS.6 LAC M ADE UPTO 31.07.2006. ITA NO.3684/DEL/2009 3 5) ON 31.12.2008 THE INCOME TAX OFFICER DID NOT ALLOW DEDUCTION AND TAXE D FULL VALUE OF LONG TERM CAPITAL GAIN AT RS.5,85,550/-. 6) IN THE IT RETURN OF A.Y 2009-10 THE APPELLANT PAID F ULL TAX ON CAPITAL GAIN OF A.Y. 2006-07, SINCE HOUSE WAS NOT CONSTRUCTED BY THEM. 7) ON 23.06.2009 CIT APPEALS (PUNCHKULA) CONFIRMED THE ADDITION OF RS. 5,85,550/- 8) ON 07.05.2010 THE ITAT BENCH G DISMISSED THE APPEAL BY IGNORING SEC.54 (2) OF THE ACT. 4. IT WAS SUBMITTED THAT THE ASSESSEE HAD PURCHASED PLOT O N WHICH THE HOUSE WAS TO BE CONSTRUCTED. DUE TO DISPUTE ON THE PLOT OF LAND THE ASSESSEE COULD NOT CONSTRUCT THE HOUSE ON THE SAID LAN D AND IN THE INCOME-TAX RETURN FOR ASSESSMENT YEAR 2009-10, THE ASSESSEE HAS PAID FULL TAX ON THE CAPITAL GAIN FOR ASSESSMENT YEAR 2006-0 7. REFERRING TO THE PROVISIONS OF SECTION 54, THE LEARNED AR SUBMITTED THAT THE EXEMPTION WAS ALLOWABLE TO THE ASSESSEE AS THE ASSESSEE HAD PURCHASED A PLOT. DUE TO CERTAIN DISPUTE THE ASSESSEE CO ULD NOT CONSTRUCT THE RESIDENTIAL HOUSE AND CONSEQUENTLY IN ASSESSM ENT YEAR 2009-10 THE TAX WAS FULLY PAID ON THE LONG-TERM CAPI TAL GAIN OF ASSESSMENT YEAR 2006-07. THEREFORE, HE PLEADED THAT CA PITAL GAIN AS TAXED BY THE ASSESSING OFFICER IN THE YEAR UNDER CONSIDE RATION COULD NOT BE TAXED. 5. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY OBJ ECTED SUCH CONTENTION OF THE ASSESSEE. HE FIRSTLY REFERRED TO CIRC ULAR NO.667 DATED 18 TH OCTOBER, 1993 IN WHICH THE ISSUE WHICH WAS EXAMINED B Y CBDT IS IN THE CASES WHERE THE RESIDENTIAL HOUSE IS CONSTRUCTED W ITHIN THE SPECIFIED PERIOD, THE COST OF SUCH RESIDENTIAL HOUSE CAN BE TAKEN TO INCLUDE THE COST OF THE PLOT ALSO AND IT HAS BEEN OBSER VED BY THE BOARD ITA NO.3684/DEL/2009 4 THAT THE COST OF LAND IS AN INTEGRAL PART OF THE COST OF RESIDENTIAL HOUSE; WHETHER PURCHASED OR BUILT, ACCORDINGLY, IF THE AMOU NT OF CAPITAL GAIN FOR THE PURPOSES OF SECTION 54 AND THE NET CONSIDERATI ON FOR THE PURPOSES OF SECTION 54F IS APPROPRIATED TOWARDS PURCHASE OF PLOT AND ALSO TOWARDS CONSTRUCTION OF A RESIDENTIAL HOUSE THEREON , THE AGGREGATE COST SHOULD BE CONSIDERED FOR DETERMINING TH E QUANTUM OF DEDUCTION U/S 54/54F, PROVIDED THAT ACQUISITION OF PL OT AND ALSO THE CONSTRUCTION THEREON ARE COMPLETED WITHIN THE PERIOD SPECIFIED IN THESE SECTIONS. 6. THE LEARNED DR FURTHER REFERRED TO THE CIRCULAR NO.520 DATED 11 TH AUGUST, 1988, ACCORDING TO WHICH INTRODUCTION OF SUB- SECTION (2) IN SECTION 54 BY FINANCE ACT, 1987 MAKES IT OBLIGATORY ON THE PART OF THE TAX PAYER TO DEPOSIT THE AMOUNT OF CAPITAL GAIN NOT YET UTILIZED FOR THE PURPOSE OF PURCHASE OR CONSTRUCTION OF A RESIDENTIAL HO USE IN ANY BANK IN ACCORDANCE WITH THE SCHEME FRAMED BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE. HE FURTHER REFERRED TO CIRCULAR NO.743 DATED 6 TH MAY, 1996 WHEREIN IT HAS BEEN POINTED OUT THAT THE AMOUNT OF CAPITAL GAIN ALREADY UTILIZED FOR ACQUISITION/CONSTRUCTION OF NEW ASSET TOGETHER WITH THE AMOUNT DEPOSITED IS DEEMED TO BE THE COST OF NEW A SSET AND CONSEQUENTLY THIS AMOUNT IS NOT CHARGEABLE TO CAPITAL GAIN IN THE YEAR OF TRANSFER OF ASSET. THE PROVISIONS OF SECTION 54, 54B , 54D, 54F AND 54G FURTHER PROVIDE THAT IF THE AMOUNT DEPOSITED IS N OT UTILIZED WHOLLY OR PARTLY FOR THE PRESCRIBED PURPOSE, WITHIN THE PERI OD SPECIFIED, THE AMOUNT NOT SO UTILIZED SHALL BE CHARGED U/S 45 AS THE I NCOME OF THE FINANCIAL YEAR IN WHICH THE PERIOD OF 2-3 YEARS (AS P RESCRIBED IN THE RELEVANT SECTION) FROM THE DATE OF TRANSFER OF THE R ESIDENTIAL ASSET EXPIRES. THUS, IT WAS PLEADED BY THE LEARNED DR THAT LEARNED CIT (A) HAS RIGHTLY UPHELD THE ADDITION AND HIS ORDER SHOULD B E UPHELD. ITA NO.3684/DEL/2009 5 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE PURCHASE OF LAND BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THE AMOU NT DEPOSITED IN THE CAPITAL GAIN SCHEME IS ALSO NOT DISPUTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS DISALLOWED THE EXEMPT ION TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE FAILED TO CONSTRUCT A RESIDENTIAL HOUSE WITHIN THE PRESCRIBED TIME UNDER THE SECTION 54 OF THE ACT. IN OUR CONSIDERED OPINION, LD. ASSESSING OFFIC ER COULD NOT MAKE ANY ADDITION IN THIS YEAR AS THE ASSESSEE HAD ACQUIR ED THE PLOT FOR CONSTRUCTION OF HOUSE AND DUE TO SOME PROBLEM THE ASSESSEE COULD NOT CONSTRUCT HOUSE UPON THAT. THE BALANCE AMOUNT WH ICH REMAINED UNUTILIZED WAS ALSO DEPOSITED BY THE ASSESSEE IN CAPITAL G AINS SCHEME ACCOUNT BEFORE THE END OF THE DUE DATE OF FILING TH E RETURN. THEREFORE, THE ENTIRE AMOUNT SHOWN AS CAPITAL GAIN WAS UTILIZED B Y THE ASSESSEE TO MAKE IT ENTITLED FOR DEDUCTION FOR THE YEAR UNDE R CONSIDERATION. THE NON-CONSTRUCTION OF THE HOUSE WITHIN THE PRESCRIBED PE RIOD WILL ENTAIL THE ASSESSEE FOR ASSESSMENT OF THE SAME CAPITAL GAIN IN THE YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF TRA NSFER OF ORIGINAL ASSET EXPIRES. ALL THE CIRCULARS PRODUCED BY THE LEARN ED DR SUPPORT THE CASE OF THE ASSESSEE AND REFERENCE IN THIS REGARD MAI NLY CAN BE MADE TO CIRCULAR NO.743 DATED 6 TH MAY, 1996 WHICH CLEARS THE POSITION. IN A CASE WHERE THE ASSESSEE HAS UTILIZED THE AMOUNT BEFO RE DUE DATE OF FILING THE RETURN IN THE MANNER PRESCRIBED IN SEC TION 54, WHICH INCLUDE THE AMOUNT INVESTED IN RESIDENTIAL PLOT AND T HE AMOUNT DEPOSITED IN CAPITAL GAIN SCHEME, COULD NOT BE TAXED IN THE YEAR IN WHICH THE CAPITAL GAIN HAS ACCRUED TO THE ASSESSEE, BUT IT WILL BE ASSESSABLE ON THE EXPIRY OF THE PERIOD WHICH IN THE PRE SENT CASE IS THREE YEARS I.E., REGARDING CONSTRUCTION OF HOUSE. FO R THE SAKE OF CONVENIENCE, THE TEXT OF THIS CIRCULAR IS PRODUCED BE LOW:- ITA NO.3684/DEL/2009 6 CIRCULAR : CIRCULAR : CIRCULAR : CIRCULAR : NO.743, DATED 6.5.1996. NO.743, DATED 6.5.1996. NO.743, DATED 6.5.1996. NO.743, DATED 6.5.1996. TAXABILITY OF UNUTILISED DEPOSIT UNDER THE CA PITAL GAINS TAXABILITY OF UNUTILISED DEPOSIT UNDER THE CA PITAL GAINS TAXABILITY OF UNUTILISED DEPOSIT UNDER THE CA PITAL GAINS TAXABILITY OF UNUTILISED DEPOSIT UNDER THE CA PITAL GAINS ACCOUNTS SCHEME, 1988 IN THE HANDS OF THE LEGAL HEI RS OF THE ACCOUNTS SCHEME, 1988 IN THE HANDS OF THE LEGAL HEI RS OF THE ACCOUNTS SCHEME, 1988 IN THE HANDS OF THE LEGAL HEI RS OF THE ACCOUNTS SCHEME, 1988 IN THE HANDS OF THE LEGAL HEI RS OF THE ASSESSEE ASSESSEE ASSESSEE ASSESSEE 1. 1.1. 1. UNDER SECTIONS 54, 54B, 54D, 54F AND 54G OF THE IN COME-TAX ACT, 1961, CAPITAL GAIN IS NOT CHARGEABLE TO TAX IF THE A MOUNT OF CAPITAL GAIN OR NET CONSIDERATION HAS BEEN UTILISED FOR SPECIFIED PURPOSES BY THE ASSESSEE WITHIN THE STIPULATED PERIOD LA ID DOWN IN THE RELEVANT SECTION. THESE PROVISIONS ALSO PROVIDE FOR THE DEPOSIT IN SPECIFIED BANKS, ETC., OF THE AMOUNT OF CAPI TAL GAIN WHICH IS NOT UTILISED BY THE ASSESSEE FOR THE ACQUISITIO N OF NEW ASSETS BEFORE THE DATE OF FURNISHING THE RETURN OF INCOM E UNDER SECTION 139(1). THE AMOUNT OF CAPITAL GAIN ALREADY UTIL ISED FOR THE ACQUISITION/CONSTRUCTION OF NEW ASSET TOGETHER WITH AMO UNT DEPOSITED IS DEEMED TO BE THE COST OF NEW ASSET AND, CONSEQUENTLY, THIS AMOUNT IS NOT CHARGEABLE TO CAPITAL G AIN IN THE YEAR OF TRANSFER OF ASSET. THE PROVISIONS OF SECTIO NS 54, 54B, 54D, 54F AND 54G FURTHER PROVIDE THAT IF THE AMOUNT DEPO SITED IS NOT UTILISED WHOLLY OR PARTLY FOR THE PRESCRIBED PUR POSES, WITHIN THE PERIOD SPECIFIED, THE AMOUNT NOT SO UTILISED SHALL B E CHARGED UNDER SECTION 45 AS THE INCOME OF THE FINANCIAL YEAR I N WHICH THE PERIOD OF TWO/THREE YEARS (AS PRESCRIBED IN THE RELEVA NT SECTION) FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET EXPIRES. 2. 2.2. 2. A QUESTION HAS BEEN RAISED REGARDING THE TAXABILITY OF THE UNUTILISED DEPOSIT AMOUNT IN THE CASE OF AN INDIVIDUAL WHO DIES BEFORE THE EXPIRY OF THE STIPULATED PERIOD. 3. 3.3. 3. THE MATTER HAS BEEN CONSIDERED BY THE BOARD AND IT I S CLARIFIED THAT IN SUCH CASES THE SAID AMOUNT CANNOT BE TAXED IN THE HANDS OF THE DECEASED. THIS AMOUNT IS NOT TAXABLE IN THE HANDS OF LEGAL HEIRS ALSO AS THE UNUTILISED PORTION OF THE DEPOSIT DOES NOT PARTAKE THE CHARACTER OF INCOME IN THEIR HANDS BUT IS ONLY A PART OF THE ESTATE DEVOLVING UPON THEM. CIRCULAR : CIRCULAR : CIRCULAR : CIRCULAR : NO. 743, DATED 6-5-1996. 8. IT IS ALSO UNDISPUTED THAT IN THE RETURN FOR ASSESSMENT YEAR 2009- 10 THE ASSESSEE HAS DECLARED THE ENTIRE CAPITAL GAIN. I N THIS VIEW OF THE SITUATION, WE ARE OF THE OPINION THAT THE ADDITI ON HAS WRONGLY BEEN SUSTAINED BY THE LEARNED CIT (A). AS THE ASSESSEE ALREADY SUFFERED TAX ON CAPITAL GAIN IN ASSESSMENT YEAR 2009-10, WHICH IS ALSO IN ITA NO.3684/DEL/2009 7 ACCORDANCE WITH THE LAW, WE DELETE THE ADDITION AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.03.20 12. SD/- SD/- [T.S. KAPOOR] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 16.03.2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES