Smt. Neelam Handa, Delhi V. ITO, New Delhi

ITA 384/DEL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7891 (ITAT-DELHI)
• Duration Of Justice: 46 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: DHARAMPAL MAINI
• Keywords: Capital asset; Source of fund; Cost of acquisition
• Section: 80C; 54F; 54

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SMT DIVA SINGH , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 384 /DEL/2016 (ASSESSMENT YEAR: 2010 - 11 ) NEELAM HANDA, C - 7/7, GROUND FLOOR, MODEL TOWN - III, DELHI PAN: ABGPH5388D VS. ITO, WARD - 20(4), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. DHARAMPAL MAINI, ADV RE VENUE BY: SH. K. K. JAISWAL, DR DATE OF HEARING 16/03/ 2016 DATE OF PRONOUNCEMENT 13 /05/2016 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT ( A) - 12, NEW DELHI DATED 18.11.2015 FOR THE ASSESSMENT YEAR 2010 - 11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE ORDER PASSED BY THE ASSESSING OFFICER AS UPHELD BY THE CIT(A) ARE PERVERSE TO THE LAW AND TO THE FACTS OF THE CASE, WHILE RESTRICTING THE EXEMPTION CLAIMED U/S 54 OF THE INCOME TAX ACT, 1961, TO THE EXTENT OF RS. 6,00,000/ - . 2. THAT THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT THE BALANCE AMOUNT OUT OF THE SALE CONSIDERATION WAS FURTHER SPENT FOR THE RENOVATION / REPAIRS OF NEW PROPERTY PURCHASED, AS SUCH THE INCOME FROM CAPITAL GAIN WAS DECLARED NIL AFTER CLAIMING DEDUCTION U/S 54 OF THE ACT. 3. THAT THE CIT(A) WAS WRONG WHILE UPHOLD THE ADDITIONS MADE BY THE ASSESSING OFFICER, BECAUSE OF NOT PASSED THE SPEAKING ORDER AFTER TAKING INTO CONSIDERATION THE MATERIAL AVAILABLE ON THE RECORDS. 4. THAT THE RESTRICTION OF THE CLAIM OF DEDUCTION U/S 54 IS FURTHER AGAINST THE LAW AND TO THE FACTS OF THE CASE AS THE ASSESSING OFFICER HAS ALREADY PAGE 2 OF 7 EXAMINED AND VERIFIED THE DETAILS AND SOURCE OF THE INVESTMENT MADE IN THE NEW PROPERTY DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF. 3. ALL THE GROUNDS OF APPEAL ARE AGAINST THE DENIAL OF DEDUCTION O F EXEMPTION U/S 54 OF THE ACT. 4. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS AN INDIVIDUAL WHO FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 237340 / - . DURING THE YEAR, ASSESSEE HAS SOLD ONE HOUSE PROPERTY AT DELHI FOR RS. 15 LACS AND HAS PURCHASE D ANOTHER HOUSE PROPERTY FOR RS. 25 LACS AND CLAIMED EXEMPTION OF CAPITAL GAIN OF RS. 1268491 / - U/S 54 OF THE INCOME TAX ACT. THE SOURCES OF THE FUNDS FOR PURCHASE OF NEW HOUSE WERE STATED BY THE ASSESSEE AS UNDER: - A. RS.2,00,000/ - ON DT.21.11.2010 OUT OF BANK OF MAHARASHTRA SB A/C B. RS.1,00,000/ - ON DT.10.12.2010 OUT OF BANK OF MAHARASHTRA SB A/C C. RS.3,00,000/ - ON DT.124.12.2010 OUT OF BANK OF MAHARASHTRA SB A/C D. RS.19,00,000/ - ON DT. 01.02.2010 OUT OF LOAN FROM ICICI BAN K (DIRECTLY PAID TO SELLER BY THE ICICI BANK) 5. LD ASSESSING OFFICER DENIED THE DEDUCTION U/S 54 OF THE ACT FOR THE REASON THAT OUT OF SALE PROCEEDS OF OLD ASSETS ONLY RS. 6 LACS WAS INVESTED IN THE NEW ASSET AND REMAINING RS. 19 LACS WAS ARRANGED AS LOAN FROM ICICI BANK AND THEREFORE HE RESTRICTED EXEMPTION U/S 54 OF THE ACT TO RS. 6 LACS AND REAMING RS. 668494/ - WERE CHARGED TO TAX AS LONG TERM CAPITAL GAIN. FOR THIS LD ASSESSING OFFICER RELIED UPON THE DECISION OF MUMBAI BENCH OF ITAT IN CASE OF MILAN SA RAD RUPAREL VS. ACIT, 27 SOT 61 (MUM). AGGRIEVED BY THIS ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT(A), WHO DISMISSED THE APPEAL OF THE ASSESSEE HOLDING THAT EXEMPTION U/S 54 IS ALLOWABLE ONLY TO THE EXTENT CAPITAL GAIN IS UTILIZED FOR INVESTMENT IN THE NEW RESIDENTIAL HOUSE PROPERTY. LD CIT(A) ALSO STATED THAT AS AO HAS RELIED UPON THE DECISION OF MUMBAI ITAT WHEREIN IT HAS BEEN HELD THAT WHEN ASSESSEE CONSTRUCTS OR PURCHASE OF RESIDENTIAL HOUSE OUT OF BORROWED HE IS NOT ELIGIBLE FOR DEDUCTION U/S 54F . S HE FURTHER HELD THAT SECTION 54F AND SECTION 54 ARE PARI MATERIAL AND THEREFORE THE RATIO OF THIS JUDGMENT IS APPLICABLE IN THIS CASE ALSO. AGGRIEVED BY THIS ASSESSEE IS IN APPEAL BEFORE US. PAGE 3 OF 7 6. LD AR OF THE APPELLANT SUBMITTED THAT THE SAME ARGUMENT BEFORE US AS SUBMITTED BEFORE THE LOWER AUTHORITIES AND HE PRESSED THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 54 OF THE ACT. 7. LD DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED THAT ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION A S BORROWED FUNDS HAVE BEEN UTILIZED FOR PURCHASE OF NEW HOUSE. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. WE HAVE CAREFULLY PERUSED THE DECISION ON WHICH LD. AO AND CIT (A) HAS RELIED VERY HEAVILY OF MUMBAI BENCH OF TRIBUNAL IN CASE OF MILAN SHARAD RUPAREL V ACIT [2010] 5 ITR (TRIB) 570 (ITAT[MUM]) AND SOME OF THE OBSERVATION OF THAT DECISION ARE AS UNDER : - 14. THE OBJECT OF INTRODUCTION OF THESE SECTIONS IS THAT THE ASSESSEE SHOULD MAKE MORE INVESTMENTS IN RESIDENTIAL HOUSE, ON SALE OF ITS OLD RESIDENTIAL HOUSE OR A LONG - TERM CAPITAL ASSET. IT IS NOT NECESSARY THAT THE SAME FUNDS MUST BE USED IN PURCHASE OF THE NEW RESIDENTIAL HOUSE, BUT, THE FUND SHOULD BE AVAILABLE WITH THE ASSESSEE FOR ITS INVESTMENT IN THE RESIDENTIAL HOUSE. SINCE THE LAW PERMITS UTILISATION OF CAPITAL GAIN WITHIN THE SPECIFIED TIME, THE ASSESSEE MAY USE SUCH FUNDS FOR OTHER PURPOSES A ND MAY FIND RESOURCE FROM OTHER SOURCE FOR INVESTMENT IN TIME. THE LAW DOES NOT EXPECT THAT THE SALE AMOUNT SHOULD BE KEPT IN THE LOCKER AND THE SAME SHOULD BE UTILISED IN PURCHASE OF A RESIDENTIAL HOUSE. NEITHER THE LAW NOR DOES ANY CIRCULAR REQUIRE THE I DENTITY OF THE AMOUNT RECEIVED ON SALE AND UTILISATION FOR THE PURPOSE OF SECTION 54F AND OTHER RELEVANT PROVISIONS. IT IS QUITE LIKELY THAT THE ASSESSEE MAY USE THE MONEY FOR HIS BUSINESS AND DRAW THE AMOUNT FOR INVESTMENT FROM HIS PAST SAVINGS. CONVERSEL Y, HE MAY PLACE SALE PROCEEDS IN LONG - TERM INVESTMENT OTHER THAN WHAT IS PERMITTED UNDER SECTION 54, BUT, ALL THE SAME FIND MONEY FROM THE BUSINESS OR OTHER SOURCES FOR APPROVED INVESTMENT WITHIN THE TIME. SINCE LAW ITSELF PERMITS INVESTMENT IN A NEW PROPE RTY EVEN BEFORE THE SALE OF PROPERTY COVERED BY SECTIONS 54 AND 54F, THE LAW DOES NOT CONTEMPLATE THE IDENTITY OF THE FUNDS ON SALE FOR ITS INVESTMENT. SINCE MONEY HAS NO COLOUR, ALL THAT IS REQUIRED IN COMPLIANCE WITH THE CONDITION OF INVESTMENT WITHIN TH E SPECIFIED TIME. 15. THIS VIEW IS FORTIFIED BY JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF ITO V. K. C. GOPALAN [2000] 162 CTR 566 IN WHICH THEIR LORDSHIPS HAVE HELD THAT IN ORDER TO GET BENEFIT OF SECTION 54, THERE IS NO CONDITION THAT THE ASSESSEE SHOULD UTILISE THE SALE CONSIDERATION ITSELF FOR THE PURPOSE OF ACQUISITION OF NEW PROPERTY . IN THAT CASE, THE CLAIM OF THE ASSESSEE WAS PAGE 4 OF 7 DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT SAME PRICE WAS NOT U TILISED FOR CONSTRUCTION OF THE BUILDING AND IT WAS DEPOSITED IN AN APPROVED BANK. THE ASSESSEE TOOK A PLEA BEFORE THE APPELLATE AUTHORITIES THAT HE HAD COMPLETED THE CONSTRUCTION OF A HOUSE IN CALICUT ON DECEMBER 31, 1983 AT A COST OF RS. 2,98,300, THE CO ST OF THE BUILDING WHICH HE HAD SOLD WAS VALUED AT RS. 40,000. THEREFORE, THE COST OF CONSTRUCTION OF A NEW HOUSE PROPERTY IS MORE THAN THE CAPITAL GAIN, EVEN IF ANY LIABILITY OF CAPITAL GAIN WOULD ARISE FROM THE SALE OF HIS HOUSE. THEIR LORDSHIPS OF THE K ERALA HIGH COURT HAVE EXAMINED THE ISSUE AND HAVE HELD THAT THE WORDING OF SECTION ITSELF WOULD MAKE IT CLEAR THAT LAW DOES NOT INSIST THAT SALE CONSIDERATION OBTAINED BY THE ASSESSEE ITSELF SHOULD BE UTILISED FOR THE PURCHASE OF HOUSE PROPERTY. THE MAIN PART OF SECTION 54 PROVIDES THAT THE ASSESSEE HAS TO PURCHASE A HOUSE PROPERTY FOR THE PURPOSE OF HIS OWN RESIDENCE WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THE DATE ON WHICH TRANSFER OF HIS PROPERTY TOOK PLACE OR HE COULD HAVE CONSTRUCTED HOUSE PROPERT Y WITHIN A PERIOD OF TWO YEARS AFTER THE DATE OF TRANSFER. 16. THIS SIMILAR VIEW WAS AGAIN EXPRESSED BY THE TRIBUNAL IN THE CASE OF MRS. PREMA P. SHAH [2006] 282 ITR (AT) 211 (MUMBAI) ; 100 ITD 60 . IT WAS HELD THAT THERE IS NO REQUIREMENT OF LAW THAT SAME AMOUNT OF SALE CONSIDERATION SHOULD BE UTILISED FOR ACQUISITION OF PROPERTY FOR CLAIMING EXEMPTION UNDER SECTION 54 OF THE ACT . THE TRIBUNAL PLACED RELIANCE UP ON THE ORDER OF THE TRIBUNAL IN THE CASE OF BOMBAY HOUSING CORPORATION [2002] 81 ITD 545 (MUMBAI). BUT, THIS CASE PERTAINS TO THE EXEMPTION CLAIMED UNDER SECTION 54E OF THE ACT AND UNDER SECTION 54E THERE IS NO PROVISION LIKE SUB - SECTION (4) WHICH PUTS A CONDITION PRECEDENT THAT IF THE SALE PROCEEDS IS NOT APPROPRIATED FOR PURCHASE OF THE NEW RESIDENTIAL HOUSE BEFORE THE DUE DATE OF THE FILING OF THE RETURN, THE SAME BE DEPOSITED IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN AND UTILISED IN ACCORDANCE WITH ANY SCHEME NOTIFIED BY THE CENTRAL GOVERNMENT, AS SUCH SECTIONS 54E AND 54F OR SECTION 54, CANNOT BE CONSTRUED IN THE SAME MANNER. SIMILAR IS TH E POSITION WITH REGARD TO SECTION 80C OR 88 IN WHICH FOR CLAIMING BENEFIT UNDER SECTION 80C OR 88 THE ASSESSEE IS REQUIRED TO MAKE CERTAIN INVESTMENT UP TO A PARTICULAR LIMIT IN CERTAIN SCHEMES, AS THESE SECTIONS DOES NOT TALK ABOUT THE INVESTMENT OUT OF A PARTICULAR NATURE OF RECEIPT. 17. IN THE CASE OF DR. P. S. PASRICHA [2008] 20 SOT 468 (MUMBAI), THE TRIBUNAL HAS EXAMINED THE ISSUE WHETHER THE ASSESSEE IS REQUIRED TO INVEST THE SAME RECEIPT WHICH WERE RECEIVED OUT OF THE SALE PROCEEDS. THE TRIBUNAL HAS HELD THAT THE REQUIREMENT OF SECTION 54 IS THAT THE ASSESSEE SHOULD ACQUIRE A RESIDENTIAL HOUSE WITHIN A SPECIFIED PERIOD AND IT IS NOT NECESSARY THAT SAME FUNDS MUST BE UTILISED FOR PURCHASE OF ANOTHER RESIDENTI AL HOUSE. THE REQUIREMENT OF LAW IS THAT THE ASSESSEE SHOULD PURCHASE A RESIDENTIAL HOUSE WITHIN A SPECIFIED PERIOD AND SOURCE OF FUNDS IS QUITE IRRELEVANT. THESE OBSERVATIONS OF THE TRIBUNAL ARE IN THE LIGHT OF THE SPECIFIC FACTS OF PAGE 5 OF 7 THE CASE IN WHICH THE ASSESSEE HAD SOLD THE FLAT FOR A CONSIDERATION OF RS.1,40,00,000 AND AFTER CLAIMING DEDUCTION FOR EXPENSES AND THE COST OF ACQUISITION, THE LONG - TERM CAPITAL GAIN WAS WORKED OUT AT RS. 1,24,02,738. AFTER THE SALE OF THE ABOVE PROPERTY, THE ASSESSEE HAS ACQ UIRED THE COMMERCIAL PROPERTY FOR A TOTAL CONSIDERATION OF RS. 125.28 LAKHS AND GAVE IT ON RENT AND OUT OF THE OTHER FUNDS, THE ASSESSEE HAS PURCHASED TWO RESIDENTIAL FLATS ON WHICH DEDUCTION UNDER SECTION 54(1) WAS CLAIMED. IN THE LIGHT OF THESE FACTS, TH E TRIBUNAL HAS CORRECTLY MADE THE OBSERVATION THAT IT IS NOT NECESSARY THAT THE SAME SALE PROCEEDS SHOULD BE INVESTED IN ACQUIRING A RESIDENTIAL HOUSE, IF THE ASSESSEE HAD OTHER SURPLUS FUNDS, THAT CAN BE INVESTED. ([UNDERLINE AND EMPHASIS SUPPLIED BY US ] 9. HOWEVER NOW THIS ISSUE IS COVERED IN FAVOUR OF THE APPELLANT BY THE DECISION OF HONOURABLE BOMBAY HIGH COURT IN CIT V DR PARISHCA INCOME TAX APPEAL NO. 1825 OF 2009 WHERE IN IT IS HELD THAT IF A NEW HOUSE IS PURCHASED FROM BORROWED FUNDS EVEN THEN THE DEDUCTION U/S 54 OF THE ACT IS ALLOWABLE. HONOURABEL HIGH COURT HAS HELD THAT : - 2.HAVING SEEN THE FINDING OF FACT RECORDED BY THE TRIBUNAL IN PARAGR APH NO. 9, THAT THE ASSESSEE HAD INITIALLY UTILIZED THE SALE PROCEEDS OF SALE OF HIS RESIDENTIAL FLAT FOR PURCHASE OF COMMERCIAL PROPERTIES AND LATER ON HE PURCHASED TWO RESIDENTIAL FLATS WITHIN A PERIOD SPECIFIED IN SUB SECTION (2) OF SECTION 54 OF THE ACT. IN THIS VIEW OF THE MATTER, THE VIEW TAKEN BY TH E TRIBUNAL CA NNOT BE FAULTED. THE APPEAL IS WITHOUT ANY SUBSTANCE. HENCE, THE SAME STANDS DISMISSED IN LIMINE WITH NO ORDER AS TO COSTS. 10. FACTS OF THE CASE DECIDED BY HON. MUMBAI HIGH COURT AND THE CASE BEFORE US ARE NOT DIFFERENT. S. 54 PROVIDES THAT IF AN ASSESSEE HAS LTCG ON TRANSFER OF A RESIDENTIAL HOUSE AND HE PURCHASES OR CONSTRUCTS A RESIDENTIAL HOUSE WITHIN THE SPECIFIED PERIOD THEN THE AMOUNT APPROPRIATED TOWARDS THE NEW HOUSE SHALL BE DEDUCTED FROM THE LTCG. IN THAT CASE THE ASSESSEE SOLD A HOUSE AND USED THE SALE PROCEEDS TO BUY COMMERCIAL PROPERTY. SUBSEQUENTLY (BUT WITHIN THE SPECIFIED PERIOD) HE BORROWED FUNDS AND PURCHASED A NEW HOUSE. THE AO PAGE 6 OF 7 DENIED DEDUCTION U/S 54 ON THE GROUND THAT THE NEW HOUSE HAD BEEN PURCHASED OUT OF BORROWED FUNDS AND NOT OUT OF THE CONSIDERATION RECEIVED FOR THE OLD HOUSE. ON APPEAL, THE TRIBUNAL [20 SOT 468] AND HIGH COURT UPHELD THE CLAIM ON THE G ROUND THAT SECTION 54 OF THE ACT MERELY REQUIRED THE PURCHASE OF THE NEW HOUSE TO BE WITHIN THE SPECIFIED PERIOD. THE SOURCE OF FUNDS FOR THE PURCHASE WAS IRRELEVANT. IN PARA NO 9 OF THE ORDER OF COORDINATE BENCH IT IS HELD IN PARA N O 9 WHICH HAS BEEN APPROVED BY H ON BOMBAY HIGH COURT AS UNDER : - 9. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES AND PROVISIONS OF SECTION 54 OF THE ACT, WE FIND THAT ASSESSEE HAS INITIALLY UTILIZED THE SALE PROCEEDS ON SALE OF ITS RESIDENTIAL FLAT IN COMMERCIAL PROPERTIES AND LATER ON HE PURCHASED TWO RESIDENTIAL FLATS WITHIN A PERIOD SPECIFIED IN SUB - SECTION (2) OF SECTION 54 OF THE ACT, AND THESE FACTS ARE NOT DISPUTED BY THE REVENUE. THE REVENUES MAIN DISPUTE IS T HAT THE SALE PROCEEDS WERE UTILIZED FOR PURCHASE OF A COMMERCIAL PROPERTY AND RESIDENTIAL HOUSE WAS PURCHASED OUT OF THE FUNDS OBTAINED FROM DIFFERENT SOURCES, AS SUCH, THE IDENTITY OF HEADS HAS BEEN CHANGED. WE DO NOT FIND MUCH FORCE IN THIS ARGUMENT AS T HE REQUIREMENT OF SECTION 54 IS THAT THE ASSESSEE SHOULD ACQUIRE A RESIDENTIAL HOUSE WITHIN THE PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH TRANSFER TOOK PLACE. NOWHERE, IT HAS BEEN MENTIONED THAT THE SAME FUNDS MUST BE UTILIZED FOR THE PURCHASE OF THE ANOTHER RESIDENTIAL HOUSE. THE REQUIREMENT OF THE LAW IS THAT, THE ASSESSEE SHOULD PURCHASE A RESIDENTIAL HOUSE WITHIN THE SPECIFIED PERIOD AND SOURCE OF FUNDS IS QUITE IRRELEVANT. [UNDERLINE AND EMPHASIS SUPPLIED BY US] 11. LD. DR COULD NOT DRAW OUR ATTENTION TO ANY CONTRARY DECISION OF HONOURABLE HIGH COURT. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF HONOURABLE BOMBAY HIGH COURT IN C IT V DR PARSICHA ( SUPRA) WHERE IN PARA NO 9 OF THE PAGE 7 OF 7 DECISION OF COORDINATE BENCH IS AP PROVED THAT SOURCES OF FUNDS ARE IRRELEVANT FOR CLAIMING EXEMPTION U/S 54 OF THE ACT , WE ALSO HOLD THAT DESPITE ASSESSEE HAS BORROWED FUNDS FROM ICICI BANK FOR PURCHASE OF NEW HOUSE PROPERTY , SHE IS ENTITLED TO DEDUCTION U/S 54 OF THE INCOME TAX ACT O N CAPITAL GAIN OF RS. 1268494/ - . 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN COURT ON 1 3 /05/2016. - S D / - - S D / - ( DIVA SINGH ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 /05/2016 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI