ITO, Agra V. Shri Ajay kumar S/oShriMoti Lal, Agra

ITA 428/AGR/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7080 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 20-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P N AGARWAL
• Keywords: Capital asset; Set aside; Capital Gains
• Section: 54F; 54EC; 64; 54; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 427/AGRA/2009 ASSTT. YEAR : 2006-07 INCOME-TAX OFFICER, VS. SHRI SANJAY KUMAR, 2(4), AGRA. S/O SHRI MOTI LAL, 72, JAIPUR HOUSE, AGRA. (PAN : ABRPK 3391 G) ITA NO. 428/AGRA/2009 ASSTT. YEAR : 2006-07 INCOME-TAX OFFICER, VS. SHRI AJAY KUMAR, 2(2), AGRA. S/O SHRI MOTI LAL, 72, JAIPUR HOUSE, AGRA. (PAN : AAUPK 0330 Q) (APPELLANT) (RESPONDENTS) FOR APPELLANT : SHRI VINOD KUMAR, JR. D.R. FOR RESPONDENT : SHRI P.N. AGARWAL, ADVOCATE ORDER PER P.K. BANSAL, A.M. : SINCE BOTH THESE APPEALS INVOLVE A COMMON ISSUE, THEREFORE, THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. T HE REVENUE IN BOTH THE APPEALS HAS TAKEN THE FOLLOWING COMMON AND EFFECTIVE GROUND OF APPEAL : 1. THAT THE CIT(APPEALS)-I, AGRA HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN ALLOWING THE RELIEF OF RS.14,10,500/- M ADE ON ACCOUNT OF DISALLOWANCE OF INVESTMENT MADE IN PURCHASE OF LAND U/S. 54F OF THE ACT. 1(A). BY DOING SO, THE LD. CIT(A)-I, AGRA HAS FAIL ED TO APPRECIATE THAT THE ASSESSEE HAS NEITHER CONSTRUCTED ANY RESIDENTIA L HOUSE, NOR HAS DEPOSITED ANY AMOUNT UNDER CAPITAL GAIN DEPOSIT SCHEME. 2. FOR THE DISPOSAL OF THIS COMMON GROUND OF APPEAL S, BOTH THE LEARNED AR AND DR AGREED THAT THE FACTS RELEVANT TO THE APPEAL IN THE CASE O F SANJAY KUMAR BE TAKEN. WE, THEREFORE, ARE 2 DISPOSING OF BOTH THESE APPEALS ON THE BASIS OF THE FACTS IN THE CASE OF SHRI SANJAY KUMAR IN ITA NO. 427/AGRA/2009. THE BRIEF FACTS ARE THAT THE ASS ESSEE EARNED TOTAL LONG-TERM CAPITAL GAINS AMOUNTING TO RS.46,81,688/- DURING THE YEAR. OUT OF THIS, HE CLAIMED DEDUCTION U/S. 54F AND 54EC OF THE INCOME-TAX ACT. UNDER SECTION 54F, THE ASSESSEE CLAIMED DEDUCTION FOR RS.14,10,500/-. THE ASSESSING OFFICER NOTICED THAT AS PER PROVISIONS OF SECTION 54F, THE ASSESSEE WAS REQUIRED TO INVEST NET CONSIDERATION IN THE PUR CHASE OF NEW RESIDENTIAL HOUSE WITHIN THE PERIOD OF TWO YEARS FROM THE DATE OF TRANSFER OR IN CONSTRUCTION OF NEW HOUSE WITHIN PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER. THE ASSESSEE HAS NOT PURCHASED THE RESIDENTIAL HOUSE BUT HE PURCHASED A PLOT NO.122 MEASURING 230.76 SQUARE MET ER FROM M/S. ANSAL HOUSING AND CONSTRUCTION LTD. FOR RS.12,19,186/-. THE OTHER EXP ENSES ON STAMPS AND BY WAY OF DEVELOPMENT CHARGES PAID WERE RS.1,91,314/-. THE ASSESSEE CLAIM ED TOTAL SUM OF RS.14,10,500/- EXEMPT U/S. 54F. THE ASSESSEE POINTED OUT TO THE ASSESSING OFFI CER THAT HE HAS APPLIED FOR SANCTION OF MAP WITH AGRA DEVELOPMENT AUTHORITY ON 30.03.2006, BUT COULD NOT START THE CONSTRUCTION, AS THE MAP WAS NOT SANCTIONED. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S. 54F. EVEN THE PROVISION OF SECTION 5 4F(4) WILL NOT ASSIST THE ASSESSEE AS THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE T HE ASSESSING OFFICER. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE EXEMPTION TO THE ASSESSEE BY OBSERVING AS UNDER : I HAVE CONSIDERED THE FACTS AND THE RIVAL CONTENTI ONS AND FIND THAT THE APPELLANTS SHARE IN THE SALE CONSIDERATION OF RS .94,90,000/- WORKS OUT TO RS.46,81,688/- AGAINST WHICH EXEMPTION HAS BEEN CLA IMED AS UNDER : U/S. 54F RS.14,10,500/- U/S. 54EC RS.30,00,000/- RS.44,10,500 THUS, THE ENTIRE SALE CONSIDERATION TO THE EXTENT O F RS.44,10,500/- STANDS INVESTED IN EXEMPT ASSETS. THE APPELLANT IS ENTITLE D FOR EXEMPTION U/S. 54F OF THE 3 ACT IN RESPECT OF THE PLOT OF LAND PURCHASED FOR TH E PURPOSE OF CONSTRUCTION OF RESIDENTIAL PROPERTY. CONSEQUENTLY, THE AO IS DIREC TED TO ALLOW EXEMPTION U/S. 54F OF THE ACT. 3. THE LEARNED DR RELIED ON THE ORDER OF THE ASSESS ING OFFICER WHILE THE LEARNED AR BEFORE US VEHEMENTLY CONTENDED THAT THE ASSESSEE HAS PURCH ASED PLOT AND EVEN PAID DEVELOPMENT CHARGES OF THE PROPERTY WITHIN THE STIPULATED PERIO D. THEREFORE, THE ASSESSEE SHOULD HAVE BEEN ALLOWED EXEMPTION. REFERRING TO SECTION 54F(4), IT WAS POINTED OUT THAT THE ASSESSEE WAS NOT REQUIRED TO DEPOSIT THE MONEY BEFORE DUE DATE OF FU RNISHING THE RETURN IN THE BANK, AS THE ASSESSEE HAD ALREADY UTILIZED THE MONEY DURING THE ASSESSMEN T YEAR TOWARDS PURCHASE OF THE PLOT FOR CONSTRUCTION OF THE RESIDENTIAL HOUSE. ON A QUERY F ROM THE BENCH, HE WAS FAIR ENOUGH TO STATE THAT THE ASSESSEE HAS NOT STARTED THE CONSTRUCTION OR CO MPLETED THE CONSTRUCTION WITHIN THREE YEARS. BUT HE POINTED OUT THAT THE PAYMENT OF THE DEVELOPM ENT CHARGES TO M/S. ANSAL HOUSING AND CONSTRUCTION LTD. IS TOWARDS CONSTRUCTION OF THE RE SIDENTIAL HOUSE. HE RELIED ON THE CBDT CIRCULAR NO. 667 AS WELL AS ON THE FOLLOWING DECISI ONS : (I). SMT. SEETHA SUBRAMANIAN VS. AAC, 59 ITD 94 (I TAT MADRAS) (II). SMT. RANJEET SANDHU VS. DCIT, 133 TTJ (CHD.) 64 (III). CIT VS. SARDAR MAL KOTHARI AND ANOTHER , 30 2 ITR 286 (MAD.) THUS, HE VEHEMENTLY CONTENDED THAT SINCE THE ASSESS EE HAD PURCHASED THE PLOT FOR CONSTRUCTION OF RESIDENTIAL HOUSE, HE MUST BE ALLOWED DEDUCTION AND THE ASSESSEE IS NOT REQUIRED TO COMPLETE THE CONSTRUCTION BEFORE EXPIRY OF THREE YEARS. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TAX AUTHORITIES BELOW AS WELL AS THE CASE LA WS, AS HAVE BEEN RELIED UPON BEFORE US. THE ONLY ISSUE INVOLVED BEFORE US RELATES TO THE EXEMPT ION CLAIMED BY THE ASSESSEE U/S. 54F. SECTION 54F REQUIRES THAT WHERE CAPITAL GAIN ARISES ON THE TRANSFER OF ANY ASSET, NOT BEING A RESIDENTIAL HOUSE, THE ASSESSEE CAN TAKE THE BENEFIT OF EXEMPTI ON OF THE SAID CAPITAL GAIN, PROVIDED THE 4 ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF TRANSFER PURCHASED A RESIDENTIAL HOUSE OR WITHIN A PERIOD OF THREE YEARS AFTER THAT DAY CONSTRUCTED A RESIDENTIAL HOUSE. THE PROVISIONS OF SECTION 54F ARE PARI MATERIA TO THE PROVISIONS OF SECTION 54. THE EXEMPTION UNDER SECTION 54 IS AVAILABLE ON THE TRANSFER OF TH E RESIDENTIAL PROPERTY, WHILE EXEMPTION U/S. 54F ARE AVAILABLE ON THE CAPITAL GAIN ARISING ON THE SA LE OF OTHER ASSETS, NOT BEING THE RESIDENTIAL HOUSE. THE ASSESSEE IN THIS CASE HAS BOUGHT A PLOT FROM M/S. ANSAL HOUSING AND CONSTRUCTION LTD., MEASURING 230.76 SQ. MTRS. FOR RS.12,19,186/- . HE HAS PAID DEVELOPMENT CHARGES ALSO TO M/S. ANSAL HOUSING AND CONSTRUCTION LTD.. THE OTHER EXPENSES ON STAMP DUTY AND DEVELOPMENT CHARGES INCURRED WERE RS.1,91,314/-. THUS, THE ASSE SSEE HAS UTILIZED RS.14,10,500/- OUT OF THE CAPITAL GAIN TOWARDS THE PURCHASE OF THE RESIDENTIA L PLOT, WHICH THE ASSESSEE CLAIMS THAT THE UTILIZATION IS FOR THE CONSTRUCTION OF THE RESIDENT IAL HOUSE. THE LEARNED AR BEFORE US WAS FAIR ENOUGH TO STATE THAT THE CONSTRUCTION WAS NOT START ED WITHIN THE PERIOD OF THREE YEARS AND THE DEVELOPMENT CHARGES PAID TO THE BUILDER TANTAMOUNTS TO THE CONSTRUCTION OF THE HOUSE. WE HAVE GONE THROUGH THE CIRCULAR NO. 667 ISSUED BY THE CBD T DATED 18 TH OCTOBER, 1993. PARA 2 OF THE CIRCULAR READS AS UNDER : THE BOARD HAS EXAMINED THE ISSUE WHETHER, IN CASES WHERE THE RESIDENTIAL HOUSE IS CONSTRUCTED WITHIN THE SPECIFI ED PERIOD, THE COST OF SUCH RESIDENTIAL HOUSE CAN BE TAKEN TO INCLUDE THE COST OF THE PLOT ALSO. THE BOARD ARE OF THE VIEW THAT THE COST OF THE LAND IS AN INTEGRA L PART OF THE COST OF THE RESIDENTIAL HOUSE, WHETHER PURCHASED OR BUILT. ACCORDINGLY, IF THE AMOUNT OF CAPITAL GAIN FOR THE PURPOSES OF SECTION 54 AND THE NET CONSIDERATIO N FOR THE PURCHASES OF SECTION 54F, IS APPROPRIATED TOWARDS PURCHASE OF A PLOT AND ALSO TOWARDS CONSTRUCTION OF A RESIDENTIAL HOUSE THEREON, THE AGGREGATE COST SHO ULD BE CONSIDERED FOR DETERMINING THE QUANTUM OF DEDUCTION UNDER SECTION 54/54F, PROVIDED THAT THE ACQUISITION OF PLOT AND ALSO THE CONSTRUCTION THERE ON ARE COMPLETED WITHIN THE PERIOD SPECIFIED IN THESE SECTIONS. THIS CIRCULAR IN OUR OPINION WILL NOT ASSIST THE AS SESSEE. THE CIRCULAR IS APPLICABLE IN CASE WHERE THE ASSESSEE HAS PURCHASED THE PLOT AND HAS ALSO CO MPLETED THE CONSTRUCTION WITHIN THE SPECIFIED PERIOD U/S. 54F. THIS CIRCULAR STATES THAT UNDER TH ESE CIRCUMSTANCES, THE COST OF PLOT WILL FORM 5 INTEGRAL PART OF THE COST OF CONSTRUCTION OF THE RE SIDENTIAL HOUSE. IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAS NOT EVEN STARTED THE CONSTRUCTION WITH IN THE SPECIFIED PERIOD WHAT TO TALK OF COMPLETION OF CONSTRUCTION WITHIN THE SPECIFIED PER IOD. 5. IN THE CASE OF SMT. SEETHA SUBRAMANIAN VS. AAC ( SUPRA) THE FACTS INVOLVED ARE DIFFERENT FROM THE CASE OF THE ASSESSEE. IN THAT CASE, THE AS SESSEE SOLD HER CAPITAL ASSET FOR A TOTAL CONSIDERATION OF RS.9,76,500/-. SHE DEPOSITED RS.1, 03,000/- IN THE UNITS OF UTI WITHIN SIX MONTHS OF THE SALE AND HAD SPENT RS.8,76,500/- IN THE CONS TRUCTION OF THE RESIDENTIAL HOUSE UPTO 17.03.1989. SHE CLAIMED DEDUCTION U/S. 54F FOR THE ASSESSMENT YEAR 1987-88, AS SHE HAD INVESTED THE ENTIRE CONSIDERATION IN THE CONSTRUCTION OF THE RESIDENTIAL HOUSE WITHIN SPECIFIED PERIOD OF THREE YEARS WHICH EXPIRED ON 16.04.1989. THE ASSESS ING OFFICER ACCEPTED THE CLAIM OF ASSESSEE, BUT CIT INVOKED SECTION 263 AND DIRECTED THE ASSESS ING OFFICER TO RE-EXAMINE THE ASSESSEES CLAIM. WHEN THE MATTER CAME BEFORE THE TRIBUNAL, TH E TRIBUNAL TOOK THE VIEW THAT THE ASSESSEE HAD CONSTRUCTED A SUBSTANTIAL PORTION WITHIN THE ST IPULATED PERIOD. THEREFORE, THE ASSESSEE WAS ENTITLED FOR THE BENEFIT U/S. 54F. AS POINTED OUT B Y US EARLIER, THIS DECISION WILL NOT ASSIST THE ASSESSEE AS IN THE CASE OF THE ASSESSEE, THE ASSESS EE HAD NOT EVEN STARTED THE CONSTRUCTION WHAT TO TALK OF CONSTRUCTION OF A SUBSTANTIAL PORTION WITHI N THE STIPULATED PERIOD. 6. IN THE CASE OF SMT. RANJEET SANDHU VS. DCIT (SUP RA) ALSO, THE FACTS ARE SIMILAR TO THE CASE OF SMT. SEETHA SUBRAMANIAN VS. AAC (SUPRA). IN THIS CASE ALSO, THE ASSESSEE HAD INVESTED FULL SALE CONSIDERATION IN THE PURCHASE OF A PLOT OF LAN D AND THEREAFTER INVESTED RS.10,75,000/- IN THE CONSTRUCTION OF THE BUILDING. UNDER THESE FACTS, TH E TRIBUNAL ALLOWED THE EXEMPTION TO THE ASSESSEE U/S. 54F BY HOLDING THAT THE SECTION DOES NOT PRESCRIBE COMPLETION OF CONSTRUCTION OF THE RESIDENTIAL HOUSE WITHIN THE STIPULATED PERIOD. THI S DECISION WILL ALSO NOT HELP THE ASSESSEE, AS IN THE CASE OF ASSESSEE HE HAS NOT STARTED THE CONSTRU CTION WITHIN THE SPECIFIED PERIOD AT ALL. 6 7. WE HAVE ALSO GONE THROUGH THE DECISION OF HONBL E MADRAS HIGH COURT IN THE CASE OF CIT VS. SARDAR MAL KOTHARI AND ANOTHER (SUPRA). IN THIS CASE ALSO THE ASSESSEE HAD PURCHASED THE PLOT AND SUBSTANTIALLY COMPLETED THE CONSTRUCTION W ITHIN THE SPECIFIED PERIOD, BUT THE CONSTRUCTION WAS NOT FULLY COMPLETED. WHEN THE MATT ER TRAVELED TO THE HIGH COURT, THE HONBLE HIGH COURT TOOK THE VIEW THAT THE ASSESSEE IS ENTIT LED FOR THE EXEMPTION. COMING TO THE FACTS OF THE CASE OF ASSESSEE, IN PITH AND SUBSTANCE, IT IS A FACT THAT THE ASSESSEE HAS NOT STARTED THE CONSTRUCTION WITHIN THE SPECIFIED PERIOD AND THE DE VELOPMENT CHARGES HAVE BEEN PAID TO M/S. ANSAL HOUSING AND CONSTRUCTION LTD. FOR THE DEVELOP MENT OF THE ROAD AND OTHER FACILITIES IN THE COLONY WHERE THE PLOT IS SITUATED AT A PRE-DETERMIN ED RATE DEPENDING ON THE SIZE OF THE PLOT. MERE PAYMENT OF THE DEVELOPMENT CHARGES TO THE BUILDER D OES NOT MEAN THAT THE ASSESSEE HAS STARTED CONSTRUCTION, WHICH IS ESSENTIAL CONDITION FOR CLAI MING EXEMPTION U/S. 54F OF THE I.T. ACT. WE, ACCORDINGLY, SET ASIDE THE ORDER OF CIT(A) AND REST ORE THE ORDER OF ASSESSING OFFICER. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8.4.11. SD/- SD/- (H.S. SIDHU) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 8 TH APRIL, 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY