SANJAY SHARMA, CHENNAI V. ASST CIT 26(1), MUMBAI

ITA 3782/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7861 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 17-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income
• Section: 54F; 54

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALE BENCH, MUMB AI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.3782/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) MR. SANJAY SHARMA C/O. ROBUST HOTELS P. LTD. 365, ANNA SALAI, TENYAMPET, CHENNAI - 600018 / VS. THE ASSISTANT COMMISSIONER OF INCOME TAX 26(1) 6 TH FLOOR, K.G.MITTAL HOSPITAL BUILDING, CHARNI ROAD, MUMBAI - 400002 ./ ./ PAN/GIR NO. ARVPS9380F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 24.03.2017 /DATE OF PRONOUNCEMENT:. 31.03.2017 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEEHAS FILED THE PRESENT APPEAL AGAINST TH E ORDER DATED 30.04.2014 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-28, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y.2010- 11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- ASSESSEE BY: SHRI KIRITSANGHVI REVENUE BY: SMT. JYOTHILAKSHMINAYAK ITA NO.3782.M.14 A.Y. 2010-11 2 1. THE LD. COMMISSIONER OF INCOME TAX HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER ASSESSING THE INCOME OF THE ASSESSEE AT RS.2,41,21,150/- INSTEAD OF RS.66,10,765/- AS DECLARED BY THE APPELLANT IN HIS RETURN OF INCOME. 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED FACTS AND IN LAW BY CONFIRMATION OF DENIAL OF DEDUCTION U/S.54 AMOUNTING TO RS.1,74,03,119/- OF T HE INCOME TAX ACT, 1961 AS RIGHTFULLY CLAIMED BY THE APPELLANT ON MAKING SUBSTANTIAL PAYMENT OUT OF CAPITAL GAINS TOWARDS ACQUISITION OF RESIDENTIAL HO USE PROPERTY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED HIS RETURN OF INCOME ON 25.12.2010 DECLARING TOTAL INCOME TO THE TUNE OF RS.66,10,765/-. THE ASSESSEE WAS EMPLOYED WITH JUNIPER HOTELS PVT. LTD. FROM 01.04.2009 TO 31.05.2009 AND ROBUST HOTELS PVT. LTD, FROM 01.0 4.2009 TO 31.03.2010. APART FROM TAXABLE SALARY INCOME OF RS.79,03,912/-. THE ASSESSEE HAS SHOWN INCOME FROM HOUSE PROPERTY (-) RS.11,93,147/-. TH E CASE WAS SELECTED FOR SCRUTINY. NOTICE U/S. 143(2) OF THE INCOME TAX ACT , 1961 ( IN SHORT THE ACT) DATED 27.08.2011 WAS ISSUED AND SERVED UPON THE ASSESSEE. NOTICES DATED 19.11.2012 AND 12.02.2013 U/S.142(1) AND QUES TIONNAIRE WERE ISSUED AND DULY SERVED UPON THE ASSESSEE. AT THE TIME OF ASSESSMENT, THE ASSESSEE ALSO SHOWED INTEREST INCOME AMOUNTING TO RS.2,944/- WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE ALSO SHOW ED THE LEAVE ENCASHMENT TO THE TUNE OF RS.4,04,320/- AND CLAIMED EXEMPT U/S .10(10AA) OF THE ACT. THE LEAVE ENCASHMENT WAS ALLOWABLE TO THE EXTENT OF RS.3 LAKHS FOR A.Y.2010-11. THEREFORE AN AMOUNT OF RS.1,04,320/- WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE SOLD THE FLAT AT BANDRA, MUMBAI FOR A CONSIDERATION OF RS.4,30,00,000/-. THE ASSESSEE SH OWED LONG TERM CAPITAL ITA NO.3782.M.14 A.Y. 2010-11 3 GAIN TO THE TUNE OF RS.1,74,03,119/-. THE ASSESSEE CLAIMED THE SAID LONG TERM CAPITAL GAIN AS EXEMPT ON ACCOUNT OF PURCHASE OF ANOTHER FLAT AT LOWER PAREL IN A PROJECT CALLED ORBIT TERRACES AS A GREEMENT ENTERED INTO ON 30.07.2010 AND CLAIMED THE DEDUCTION U/S.54 OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE SOLD THE FLAT ON 03.02.2010 AND TENTATIVE AGREED DATE OF POSSESSION WAS 30.06.2013 WHICH WORKS OUT THREE YEARS AND FOUR MONTHS WHICH WAS NOT EXEMPTED U/S.54 OF THE ACT HENCE, THE SAID INCOME WAS ADDED TO THE INCOME OF THE ASSESSEE . FEELING AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONF IRMED THE SAID ORDER, HENCE THE ASSESSEE HAS FILED THE PRESENT APPEAL BEF ORE US. ISSUE NO.1 & 2:- 4. ISSUE NO.1 AND 2 ARE INTERCONNECTED, THEREFORE, ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION. INFACT BOTH THE ISSUES ARE IN CONNECTION WITH THE PLEA OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS WRONGLY DISALLOWED THE LONG TERM CAPITAL GAIN TO THE TUNE OF RS.1,74,03,11 9/- AS NOT EXEMPTED U/S.54 OF THE ACT. THE REPRESENTATIVE OF THE ASSES SEE HAS ARGUED THAT THE ASSESSEE SOLD THE FLAT AT BANDRA, MUMBAI FOR A SUM OF RS.4,30,00,000/- AND RECEIVED THE CAPITAL GAIN TO THE TUNE OF RS.1,74,03 ,119/-. THE ASSESSEE PURCHASED AN ANOTHER FLAT AT LOWER PAREL BY VIRTUE OF AGREEMENT DATED 30.07.2010 AND CLAIMED EXEMPTION U/S.54 OF THE ACT. IT IS ALSO ARGUED THAT THE ASSESSING OFFICER HAS TAKEN INTO CONSIDERATION THE TENTATIVE DATE OF POSSESSION 30.06.2013 WRONGLY AND ILLEGALLY WHEREAS THE AGREEMENT WAS REGISTERED ON 30.07.2010 HENCE THE ASSESSEE IS ENTI TLED FOR EXEMPTION U/S.54 OF THE ACT AND ALSO PLACED RELIANCE UPON THE LAW SE TTLED IN [2012] 19 ITA NO.3782.M.14 A.Y. 2010-11 4 TAXMANN.COM 17 (KAR.), HONBLE HIGH COURT OF KARNAT AKA IN CASE TITLED AS COMMISSIONER OF INCOME TAX VS. SAMBANDAMUDAYKUMAR. HOWEVER, ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESENTAT IVE HAS STRONGLY RELIED UPON THE ORDER OF CIT(A) IN QUESTION. IN VIEW OF T HE ARGUMENT ADVANCED BY THE PARTIES AND PERUSING THE RECORD CAREFULLY, IT I S NOT IN DISPUTE THAT THE ASSESSEE SOLD THE FLAT AT BANDRA, MUMBAI IN A SALE CONSIDERATION OF RS.4,30,00,000/- ON 03-02-2010. THE ASSESSEE RECEI VED THE LONG TERM CAPITAL GAIN TO THE TUNE OF RS.1,74,03,119/- AND CL AIMED AS EXEMPTED U/S.54 OF THE ACT. THE ASSESSING OFFICER DECLINED THE CLA IM OF THE ASSESSEE ON THE GROUND THAT IN VIEW OF THE AGREEMENT THE TENTATIVE DATE OF POSSESSION WAS 30.06.2013. THE ASSESSING OFFICER TOOK THE PERIOD I NTO CONSIDERATION BETWEEN THE DATE OF SALE ON 03.02.2010 AND TENTATIV E DATED OF POSSESSION ON 30.06.2013 AND FOUND THE PERIOD TO THE EXTENT OF TH REE YEARS AND FOUR MONTHS AND ACCORDINGLY DECLINED THE CLAIM OF THE ASSESSEE. IT IS NOT IN DISPUTE THAT AN AMOUNT HAS ALREADY BEEN PAID ON 30.07.2010 TOWAR DS INVESTMENT IN NEW ASSETS. THE ALLOTMENT LETTER DATED 08.02.2010 AND THE AGREEMENT DATED 30.07.2010 AND PAYMENT ON 30.07.2010 ARE ALSO NOT I N DISPUTE. HOWEVER THE SAID AGREEMENT SPEAKS ABOUT THE TENTATIVE DATE OF P OSSESSION ON 30.06.2013 WHICH FALLS OUTSIDE THE SPECIFIED PERIOD OF 3 YEARS . THE CONSTRUCTION OF THE FLAT STILL CONTINUES AND INCOMPLETED BECAUSE FLOOR , ELECTRICAL FITTING ETC. ARE YET TO BE COMPLETED. THE OBJECT OF ENACTING SECTIO N 54 OF THE ACT IS TO ENCOURAGE THE INVESTMENT IN RESIDENTIAL BUILDING WH ETHER COMPLETED OR NOT AND THIS CONTROVERSY HAS BEEN ADJUDICATED IN CASE [ 2012] 19 TAXMANN.COM 17 (KAR.), HONBLE HIGH COURT OF KARNATAKA IN CASE TIT LED AS COMMISSIONER OF INCOME TAX VS. SAMBANDAMUDAYKUMAR AND IN CASE OF TH E COMMISSIONER OF ITA NO.3782.M.14 A.Y. 2010-11 5 INCOME TAX, BANGLORE VS. SMT. B.S.SHANTHAKUMARI. I N CASE SMT. B.S.SHANTHAKUMARI (SUPRA) IT IS SPECIALLY HELD THA T:- THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CI T V. SMT. B.S.SHANTHAKUMAR (2015) 233 TAXMAN 347 (KARNATAKA) HELD THAT THE WORDS USED IN THE SECTIONED ARE PURCHASED OR CONSTR UCTED. FOR SUCH PURPOSE, THE CAPITAL GAIN REALIZED SHOULD HAVE BEEN INVESTED IN A RESIDENTIAL HOUSE. THE CONDITION PRECEDENT FOR CLA IMING BENEFIT UNDER THE SAID PROVISION IS THE CAPITAL GAIN REALIZED FRO M SALE OF CAPITAL SHOULD HAVE BEEN PARTED BY THE ASSESSEE AND INVESTE D EITHER IN PURCHASING A RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE. IF AFTER MAKING THE ENTIRE PAYMENT, MERELY BECAUSE A REGISTERED SALE DEED HAD NOT BEEN EXECUTED AND REGISTERED IN FAVOUR OF THE ASSESSEE BEFORE THE PERIOD STIPULATED, HE CANNOT BE DENIED T HE BENEFIT OF SECTION 54F OF THE ACT. SIMILARLY, IF HE HAS INVESTED THE MONEY IN CONSTRUCTION OF A RESIDENTIAL HOUSE, MERELY BECAUSE THE CONSTRUCTION WAS NOT COMPLETE IN ALL RESPECTS AND IT WAS NOT A F IT CONDITION TO BE OCCUPIED WITHIN THE PERIOD STIPULATED, THAT WOULD N OT DISENTITLE THE ASSESSEE FROM CLAIMING THE BENEFIT UNDER SECTION 54 F OF THE ACT. 5. FROM THE ABOVE IT IS EVIDENT THAT THE CLAIM OF D EDUCTION IS ALLOWABLE BASED ON THE INVESTMENT OF LTCG AND NOT BASED ON CO MPLETENESS OF THE ASSET IN QUESTION. WHILE THE PAYMENT OF THE GAINS TO THE BUILDER IS IN THE HAND OF THE ASSESSEE, THE COMPLETENESS OF CONSTRUCT ION AND THE IF ANY IS ATTRIBUTABLE TO THE BUILDER. ITA NO.3782.M.14 A.Y. 2010-11 6 6. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCE S AND IN VIEW OF THE ABOVE MENTIONED LAW, WE ARE OF THE VIEW THAT THE CI T(A) HAS WRONGLY CONFIRMED THE ADDITION OF RS.1,74,03,119/- WHICH IS LIABLE TO BE TREATED AS LONG TERM CAPITAL GAIN AND ENTITLED TO BE EXEMPTED U/S.54 OF THE ACT. THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE ASS ESSMENT BY ALLOWING THE ADDITION AS EXEMPT TO THE TUNE OF RS.1,74,03,119/- AS LONG TERM CAPITAL GAIN. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2017 . SD/- SD/- (D.KARUNAKARA RAO) (AMARJIT SINGH) ! / ACCOUNTANT MEMBER ' #! /JUDICIAL MEMBER MUMBAI; DATED : 31 ST MARCH, 2017 MP MP MP MP / 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// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI