ASSISTANT COMMISSIONER OF INCOME TAX-23(3), MUMBAI V. VISHAL DILIP SANKHE, MUMBAI

ITA 4376/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5165 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 13-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Keywords: Capital asset; Share purchase agreement; Cost of acquisition; Fair market value; Benefit of exemption
• Section: 54F; 56(2); 54; 56; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO. 4376/MUM/2017 ASSESSMENT YEAR : 2012-13 ASST. COMMISSIONER OF INCOME TAX-23(3), MUMBAI VS. SHRI VISHAL DILIP SANKHE, 901, LIBRA TOWER, HILL ROAD, BANDRA (W), MUMBAI [PAN : AEBPS7758E] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJEEV GUBGOTRA, DR RESPONDENT BY : SHRI RITU KAMAL KISHORE, AR DATE OF HEARING : 20-11-2018 DATE OF PRONOUNCEMENT :30 -01-2019 O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-34 , MUMBAI, DATED 30-03-2017 AND IT PERTAINS TO AY 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO. 4376/MUM/2017 : 2 : 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS INCORRECT IN HOLDING THAT THE INCOME FRO M SALE OF SHARES OF PRIVILEGE BREWERIES PVT. LTD. (PBPL) IS T O BE TAXED AS CAPITAL GAINS, INSTEAD OF INCOME FROM OTHER SOURCES , AS RIGHTLY HELD BY THE ASSESSING OFFICER.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE WRONG MENTIONI NG OF SECTION 56(2)(V) BY THE ASSESSING OFFICER CAN BE CORRECTED U/S. 292B OF THE IT ACT AND THE INCOME IS TO BE ASSESSED U/S 56( 2)(VII)(A) OF THE IT ACT.' 3. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE SALE PRICE FOR SHARES OF PBPL OF RS. 2.8 CRORES RECEIVED BY THE ASSESSEE WAS NOT JUSTIFIED FROM ITS FINANCIAL PERFORMANCE AND WAS WI THOUT ADEQUATE BASIS FOR VALUATION AS THE P&L FOR PBPL FO R FY 2009- 10, FY 2010-11 AND FY 2011-12 SHOWED INCOME OF RS. 20,000/-, NIL AND NIL RESPECTIVELY; AND SIZE OF BAL ANCE SHEET FOR FY 2O09-10, FY 2010-11 AND FY 2011-12 WAS RS. 1,00,000, RS. 16,15, 87 5/- AND RS. 3,76,329/- RESP ECTIVELY, AND IN THE ABSENCE OF ANY QUANTITATIVE VALUATION PR OVIDED BY THE ASSESSEE FOR THE LETTER OF INTENT FOR BEER MANU FACTURING FACILITY ISSUED BY STATE EXCISE AUTHORITY TO MANUFA CTURE 2,50,000 HECTA LITRE PER ANNUM.' 4. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING BENEFIT U/S 54F TO THE ASS ESSEE, AS THE INCOME AGAINST WHICH THE BENEFIT WAS CLAIMED WAS IN COME FROM OTHER SOURCES AS RIGHTLY TREATED BY THE ASS ESSING OFFICER, INSTEAD OF CAPITAL GAINS AS TREATED BY THE ASSESSEE.' 4A.'WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AN D CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A ) HAS ERRED IN ALLOWING BENEFIT U/S. 54F TO THE ASSESSEE, AS TH E REGISTERED SALE DEED FOR NEW ASSET WAS EXECUTED ON 30.01.2014 I.E. AFTER TWO YEARS FROM THE DATE OF SALE OF ORIGINAL ASSET B Y THE ASSESSEE, AND FURTHER IN THE ABSENCE OF ANY EVIDENC E GIVEN BY THE ASSESSEE REGARDING DATE OF COMPLETION OF PAYMEN T FOR NEW ASSET AND DATE OF POSSESSION OF NEW ASSET AS PER TH E PRESCRIBED TIME LIMIT U/S. 54F OF THE I. I.T. ACT.' 4B.'WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AN D CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A ) FAILED TO APPRECIATE THAT THE ASSESSEE HAS MADE SUBSTANTIAL P AYMENT OF RS. 2.25 CRORES TO THE DEVELOPER ON 23.12.2011 EVEN BEFORE THE ITA NO. 4376/MUM/2017 : 3 : LETTER OF ALLOTMENT WAS SIGNED ON 27.01.2012 AND TH ERE IS NO MENTION OF THESE PAYMENTS EVEN ON THE REGISTERED SA LE AGREEMENT DATED 30.01.2014, HENCE, IT CANNOT BE ASC ERTAINED WHETHER THE PAYMENTS WERE ACTUALLY MADE FOR THE PUR CHASE OF NEW RESIDENTIAL PROPERTY AND THUS, THE BENEFIT U/S. 54F IS NOT ALLOWABLE.' 4C. 'WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS A ND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A ) HAS ERRED BY ALLOWING BENEFIT U/S. 54F TO THE ASSESSEE, AS TO TAL PAYMENT OF RS. 55 LAKHS MADE ON 24.01.2012 AND 26.09.2012 F OR THE NEW ASSET, WAS NOT OUT OF THE SHARE TRANSFER PROCEE DS RECEIVED BY THE ASSESSEE, AND HENCE NOT ELIGIBLE FOR BENEFIT U/S. 54F OF THE IT ACT.' 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, ALTER , AMEND AND MODIFY ANY OR ALL GROUNDS OF APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN (LTCG) FROM SHARES OF PRIVILEGE BR EWERIES PVT. LTD., @ RS. 5,600/- PER SHARE HAVING FACE VALUE OF RS. 10/- PER SHARE. THE ASSESSEE HAD COMPUTED LTCG BY CL AIMING INDEXED COST OF ACQUISITION AT RS. 75,626/- AND THEREA FTER, CLAIMED DEDUCTION U/S. 54F OF THE INCOME TAX ACT, 1961 (ACT) IN RESPECT OF RE-INVESTMENT OF SALE CONSIDERATION FOR PURCHASE OF RESIDENTIAL HOUSE PROPERTY. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO CA LLED UPON THE ASSESSEE TO FURNISH NECESSARY DETAILS IN SUP PORT OF ITA NO. 4376/MUM/2017 : 4 : LTCG COMPUTED IN RESPECT OF SALE OF SHARES OF PRIVILE GE BREWERIES PVT. LTD. IN RESPONSE, ASSESSEE HAS FILED COMPLETE DETAILS ALONG WITH SHARE PURCHASE AGREEMENT, AS PER W HICH ASSESSEE HAS SOLD ITS 50% SHARE HOLDING IN PRIVILEGE BREWERIES PVT. LTD., TO PRIVILEGE INDUSTRIES LTD., FOR A CONSIDERA TION OF RS. 2,80,00,000/-. THE SAID AGREEMENT WAS ENTERED INTO O N 18- 03-2010 BUT THE PAYMENT FOR TRANSFER OF EQUITY SHARES H AS BEEN RECEIVED ON 23-12-2011. THE ASSESSEE HAD FURTH ER ASKED TO PRODUCE A COPY OF BALANCE SHEET ALONG WITH FINANCIA L STATEMENT OF PRIVILEGE BREWERIES PVT. LTD. THE AO AFTER CONSIDERING THE RELEVANT SUBMISSIONS AND FINANCIAL STA TEMENTS OF THE ASSESSEE OBSERVED THAT THE PRICE FOR WHICH THE SH ARES OF PRIVILEGE BREWERIES PVT. LTD., SOLD TO PRIVILEGE INDUS TRIES LTD., IS NOT REAL INTRINSIC VALUE OF SHARES AS TOTAL BALANCE SHEET OF PRIVILEGE BREWERIES PVT. LTD., IS LESS THAN RS. 16,15, 875/- AND THE COMPANY DOES NOT HAVE ANY BUSINESS ACTIVITIES FOR THE YEAR UNDER CONSIDERATION. THE AO FURTHER OBSERVED THAT THERE WAS NO JUSTIFICATION FOR THE FAIR MARKET VALUE OF THE SHARE S OF PRIVILEGE BREWERIES PVT. LTD., AS ON THE DATE OF TRANS ACTION OF SALE OF SHARES. IN VIEW OF THE ABOVE, AO CONCLUDED THAT ASSESSEE HAD RECEIVED THE SUM WITHOUT ANY CONSIDERATIO N AND THAT THE SUM RECEIVED FROM PRIVILEGE BREWERIES PVT. LTD ., IS ITA NO. 4376/MUM/2017 : 5 : ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOU RCES AS PER THE PROVISIONS OF SECTION 56(2)(V) OF THE ACT. T HE AO FURTHER OBSERVED THAT SINCE INCOME FROM SALE OF SHAR ES HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURC ES, THE QUESTION OF ALLOWING DEDUCTION CLAIMED U/S. 54F TOW ARDS RE-INVESTMENT OF SALE CONSIDERATION FOR PURCHASE OF RE SIDENTIAL HOUSE PROPERTY DOES NOT ARISE AND HENCE DENIED THE BE NEFIT OF DEDUCTION CLAIMED U/S. 54F OF THE ACT. 3.1. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE FILE D AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), ASSESSEE HAS FILED ELABORATE W RITTEN SUBMISSIONS WHICH HAVE BEEN REPRODUCED AT PARA 4.2 IN PAGE NOS. 4 TO 8 OF THE ORDER OF LD. CIT(A). THE SUM AND SUBSTANCE OF ARGUMENTS OF ASSESSEE BEFORE CIT(A) ARE THAT TRANSFE R OF EQUITY SHARES OF PRIVILEGE BREWERIES PVT. LTD., NEEDS TO BE ASSESSED UNDER THE HEAD INCOME FROM CAPITAL GAINS B UT NOT UNDER THE HEAD INCOME FROM OTHER SOURCES AS CLAIMED BY THE AO AS THE SHARE PURCHASE AGREEMENT CLEARLY ESTABLISHE S THE FACT THAT ASSESSEE HAS TRANSFERRED ITS 100% HOLDING IN TH E SAID COMPANY TO ANOTHER COMPANY FOR A CONSIDERATION. THE ASSESSEE FURTHER CONTENDED THAT PRIVILEGE BREWERIES PVT. LTD., ITA NO. 4376/MUM/2017 : 6 : IS HOLDING AN ASSET WHICH IS HAVING VALUE AS PER WHI CH THE COMPANY HAS OBTAINED A LETTER OF INTENT FROM GOVERNMENT OF MAHARASHTRA FOR SETTING UP AND MANUFACTURE OF ALCOHOLIC BEER. IT WAS FURTHER CONTENDED THAT PURCHASE AND SALE OF SHARE S BETWEEN THE ENTITIES IS A DECISION TAKEN BY THE PARTIES F OR THE REASONS BEST KNOWN TO THEM. THE AO CANNOT QUESTION THE BUSINESS DECISION TAKEN BY THE ENTITIES AS LONG AS THE GENUINENESS OF THE TRANSACTION IS NOT IN DOUBTFUL. IN TH IS CASE, AO NEVER DOUBTED THE GENUINENESS OF THE TRANSACTIO NS BUT ONLY QUESTIONED THE TRANSACTIONS FOR THE SAKE OF CHAR GING HIGHER PREMIUM, WHICH IS NOT PERMISSIBLE. THE ASSESS EE ALSO ARGUED ON THE ISSUE OF DEDUCTION CLAIMED U/S. 54F OF THE ACT. 5. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF AS SESSEE AND ALSO RELIED UPON CERTAIN JUDICIAL PRECEDENTS, HEL D THAT AO WAS ERRED IN APPLYING THE PROVISIONS OF SECTION 56(2) (V) OF THE ACT AS FROM THE FACTS GATHERED, DURING THE COURSE OF THE PROCEEDINGS, IT WAS CLEARLY PROVED THAT THE TRANSACTIONS BETWEEN THE PARTIES DOES NOT FALL WITHIN THE PURVIEW OF SECTION 56(2)(V) OF THE ACT. LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAS ENTERED INTO SHARE PURCHASE AGREEMENT WI TH PRIVILEGE INDUSTRIES LTD., FOR TRANSFER OF HIS HOLDING IN PRIVILEGE ITA NO. 4376/MUM/2017 : 7 : BREWERIES PVT. LTD., FOR WHICH CONSIDERATION HAS BEEN AGREED BY THE PARTIES. THE AO HAS QUESTIONED THE TRANSFER OF S HARES MERELY FOR THE REASON THAT THE PRICE CHARGED FOR TRANSF ER OF EQUITY SHARES IS NOT REPRESENTING REAL INTRINSIC VALUE OF THE SHARES. BUT FACT REMAINS THAT ASSESSEE HAS PRODUCED NECESSARY DETAILS TO PROVE THAT THE COMPANY IS HAVING A LETTER OF INTENT FROM GOVERNMENT OF MAHARASHTRA FOR MANUFACTURI NG OF ALCOHOLIC BEER, WHICH IS HAVING A POTENTIAL BUSINE SS. BECAUSE OF THIS, THE PURCHASER AGREED TO TAKE OVER THE BUSINESS. INSOFAR AS THE DEDUCTION CLAIMED U/S. 54F OF THE ACT, LD. CIT(A) OBSERVED THAT AS PER THE DETAILS FURNISH ED BY THE ASSESSEE, THE ASSESSEE HAS PURCHASED A FLAT OUT OF THE SALE PROCEEDS OF SHARES OF PRIVILEGE BREWERIES PVT. LTD., AND WHEN THE DATE OF TRANSFER OF SHARES AND DATE OF INVESTMENT IN RESIDENTIAL HOUSE PROPERTY IS CONCERNED, THE INVESTMEN TS MADE BY THE ASSESSEE IN THE RESIDENTIAL HOUSE IS FALL WITHI N THE PERIOD OF TWO YEARS AS PRESCRIBED UNDER THE ACT. LD. CIT(A) FURTHER OBSERVED THAT IN CASE OF PURCHASE OF FLAT, THE DATE OF ALLOTMENT SHALL BE CONSIDERED FOR THE PURPOSE OF DECID ING THE DATE OF ACQUISITION OF THE NEW ASSET BUT NOT THE DATE OF AGREEMENT. IN THIS CASE, THE ASSESSEE HAS BEEN ALLOTTED A FLAT BY WAY OF LETTER OF ALLOTMENT DT. 27-01-2012. ON THAT DA TE, ITA NO. 4376/MUM/2017 : 8 : ASSESSEE HAS MADE SUBSTANTIAL PAYMENT FOR ACQUISITION OF THE FLAT. THEREFORE, THERE IS NO REASON FOR THE AO TO DENY THE BENEFIT OF EXEMPTION U/S. 54F. THE RELEVANT OBSERVATIO NS OF LD. CIT(A) ARE EXTRACTED BELOW: 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E APPELLANT'S SUBMISSIONS. IT IS SEEN THAT THE APPELLANT AND HIS WIFE WERE EACH HOLDING 5000 EQUITY SHARES OF RS.10/- PER SHARE IN M/S PRIVILEGE BREWERIES PVT. LTD.(EARLIER KNOWN AS SAMEGH BREWERI ES AND DISTILLERIES PVT. LTD.) AGGREGATING TO 10000 SHARES WHICH CONSTITUTED THE TOTAL AUTHORIZED AND PAID UP CAPITAL OF THE SAI D COMPANY. M/S PRIVILEGE BREWERIES PVT. LTD. WAS HOLDING LETTER OF INTENT ISSUED BY THE STATE EXCISE AUTHORITY TO SET UP BEER MANUFACTU RING FACILITY OF 2,50,000 HECTALITRE PER ANNUM. AS PER THE SHARE TRA NSFER AGREEMENT DATED 18.03.2010, THE APPELLANT AND HIS W IFE HAD ENTERED INTO AN AGREEMENT WITH M/S PRIVILEGE INDUST RIES LTD. TO TRANSFER THESE 10000 SHARES ALONG WITH MANAGEMENT C ONTROL OF THE COMPANY FOR A CONSIDERATION OF RS. 5,60,00,000/-. T HE TRANSFER WAS TO BE DEEMED AS COMPLETED ONLY ON RECEIPT OF FULL C ONSIDERATION AS PER THE TERMS OF THE SHARE TRANSFER AGREEMENT. 4.4 THE APPELLANT, ON COMPLETION OF THE TRANSFER OF SHARES, HAD SHOWN HIS SHARE OF THE SALES CONSIDERATION AS CAPIT AL GAINS WHICH WAS TREATED AS INCOME FROM OTHER SOURCES BY THE ASS ESSING OFFICER ON THE GROUND THAT THE FINANCIALS OF M/S PRIVILEGE BREWERIES PVT. LTD. DID NOT JUSTIFY THE TRANSFER OF ITS SHARES AT SUCH A HIGH PRICE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE AMOUNT R ECEIVED BY THE APPELLANT WAS WITHOUT ANY CONSIDERATION AND HENCE T REATED THE SAME AS INCOME FROM OTHER SOURCES BY INVOKING THE P ROVISIONS OF SECTION 56(2)(V) OF THE ACT. 4.5 I FIND THAT THERE IS A SHARE TRANSFER AGREEMENT ON RECORD BY WHICH THE APPELLANT AND HIS WIFE AGREED TO TRANSFER THE SHARES HELD BY THEM IN M/S PRIVILEGE BREWERIES PVT. LTD. ALONG WITH MANAGEMENT CONTROL OF THE COMPANY TO M/S PRIVILEGE INDUSTRIES LTD. FOR A CONSIDERATION OF RS. 5,60,00,000/-. THE AMOUNT RECE IVED BY THE APPELLANT PURSUANT TO THIS AGREEMENT CANNOT , THERE FORE, BE SAID TO BE WITHOUT ANY CONSIDERATION AS IT WAS RECEIVED ON ACC OUNT OF TRANSFER OF SHARES ALONG WITH MANAGEMENT CONTROL OF THE COMP ANY. THE PURCHASE OF SHARES OF M/S PRIVILEGE BREWERIES PVT. LTD. IS ALSO REFLECTED IN THE AUDITED ACCOUNTS OF M/S PRIVILEGE INDUSTRIES LTD. REGARDING THE ASSESSING OFFICER'S VIEW THAT THE FIN ANCIALS OF M/S ITA NO. 4376/MUM/2017 : 9 : PRIVILEGE BREWERIES PVT. LTD. DID NOT JUSTIFY THE T RANSFER OF ITS SHARES AT SUCH A HIGH PRICE, THE FACT OF THE COMPANY HOLDI NG LETTER OF INTENT ISSUED BY THE STATE EXCISE AUTHORITY TO SET UP BEER MANUFACTURING FACILITY OF 2,50,000 HECTA LITRE PER ANNUM WHICH IS A VALUABLE ASSET CANNOT BE IGNORED. THE SALES CONSIDERATION RECEIVED WAS, THEREFORE, NOT WITHOUT ANY BASIS OR JUSTIFICATION. 4.6 THE PROVISIONS OF SECTION 56(2)(V) OF THE A CT READS AS UNDER: '(2) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GE NERALITY OF THE PROVISIONS OF SUB-SECTION (1), THE FOLLOWING INCOME S, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FRO M OTHER SOURCES', NAMELY: (I).. (II). (V) WHERE ANY SUM OF MONEY EXCEEDING TWENTY-FIVE TH OUSAND RUPEES IS RECEIVED WITHOUT CONSIDERATION BY AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY FROM ANY PERSON ON OR AFTER THE 1S T DAY OF SEPTEMBER, 2004 BUT BEFORE THE 1ST DAY OF APRIL, 20 06, THE WHOLE OF SUCH SUM'. THE APPELLANT HAD RECEIVED THE CONSIDERATION DURING THE RELEVANT PREVIOUS YEAR. FROM A PLAIN READING OF THE PROVISIO NS OF SECTION 56(2)(V) OF THE ACT REPRODUCED ABOVE, IT IS APPAREN T THAT THE APPELLANT'S TRANSACTION DOES NOT TALL WITHIN THE PU RVIEW OF SECTION 56(2)(V) AS THE APPELLANT HAD RECEIVED THE SUM OF M ONEY FOR TRANSFER OF SHARES AND THE SUM OF MONEY WAS ALSO NOT RECEIVE D WITHIN THE SPECIFIED TIME PERIOD. THE SHARES OF M/S PRIVILEGE BREWERIES PVT. LTD. HELD BY THE APPELLANT WAS A CAPITAL ASSET. THE GAIN S ARISING ON TRANSFER OF A CAPITAL ASSET WILL HAVE TO BE TREATED AS INCOME FROM CAPITAL GAINS. IN VIEW OF ALL THESE FACTS, THE ACTI ON OF THE ASSESSING OFFICER IN TREATING THE CONSIDERATION RECEIVED FROM SALE OF EQUITY SHARES AS INCOME FROM OTHER SOURCES U/S 56 OF THE A CT INSTEAD OF AS CAPITAL GAINS IS DELETED. THE APPELLANT'S GROUND OF APPEAL IS ALLOWED. 5.1 THE APPELLANT HAD ALSO CLAIMED DEDUCTION U/S.5 4 AT RS.2,79,24,374/-. THE A.O. HELD THAT SINCE THE INCO ME WAS TAXED U/S.56 UNDER THE HEAD 'INCOME FROM OTHER SOURCES', THE QUESTION OF ALLOWING DEDUCTION U/S.54F DID NOT ARISE. WITHOUT P REJUDICE TO THIS STAND, THE AO OBSERVED THAT THE SALE DEED FOR PURCH ASE OF THE NEW PROPERTY FOR RS. 3,14,17,000/- WAS EXECUTED ON 30.0 1.2014 WHICH WAS AFTER 2 YEARS FROM THE DATE OF SALE OF THE ORIG INAL ASSET AS THE AGREEMENT FOR TRANSFER OF SHARES BETWEEN THE APPELL ANT AND M/S PRIVILEGE INDUSTRIES LTD. WAS ENTERED INTO ON 18.03 .2010. THE AO ITA NO. 4376/MUM/2017 : 10 : RELIED ON THE JUDGEMENT OF THE HON'BLE SUPREME COUR T IN THE CASE OF SURAJ LAMPS & INDUSTRIES PVT LTD. VS STATE OF HARYA NA 340 ITR 1 (SC) AND DISALLOWED THE APPELLANT'S CLAIM OF DEDUCT ION U/S 54F OF THE ACT. 5.2. IN THE COURSE OF APPELLATE PROCEEDINGS, THE T HE APPELLANT HAD MADE SUBMISSIONS AS BELOW: RE: THE LD. AO'S ACTION OF DENYING EXEMPTION U/S. 5 4F OF THE ACT ON ACCOUNT OF INVESTMENT MADE IN NEW RESIDENTIA L HOUSE (GROUND NOS. 2 & 3). 17. THE LD. AO IN PARA 4.9 OF THE IMPUGNED ORDER HA S STATED THAT SINCE THE INCOME IS TAXED UNDER SECTION 56 UND ER THE HEAD 'INCOME FROM OTHER SOURCES', THE QUESTION OF ALLOWI NG DEDUCTION U/S. 54F DOES NOT ARISE. 18. AS STATED ABOVE, THE INCOME ACCRUED ON TRANSFER OF SHARES HAS TO BE TAXED UNDER THE HEAD 'LONG TERM CAPITAL G AIN' AND UNDER NO CIRCUMSTANCES, THE SAME CAN BE ASSESSED UN DER ANY CLAUSES OF SUB-SECTION (2) OF SECTION 56 UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 19. THE AO ALSO STATED IN PARA 4.9 THAT WITHOUT PRE JUDICE THE APPELLANT HAS PURCHASED AN ASSET I.E., NEW RESIDENT IAL HOUSE AT RS. 3,14,17,000/- ON 30.01.2014 AS SALE DEED WAS EXECUTED ON 31.01.2010, WHICH IS AFTER 2 YEARS FROM THE DATE OF SALE OF ORIGINAL ASSET ON THE GROUND THAT THE SH ARE TRANSFER AGREEMENT WAS EXECUTED ON 18.03.2010. THEREFORE, AC CORDING TO THE LD. AO, THE EXEMPTION U/S. 154 AS THE APPELL ANT HAS NOT PURCHASED THE FLAT WITHIN 2 YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET. 20. IN THIS RESPECT FT IS SUBMITTED THAT THE LD. AO FAILED TO APPRECIATE THAT THE TRANSFER OF SHARE WILL BE COMPL ETED ON THE DATE OF RECEIPT OF FULL CONSIDERATION WHICH IS SPEC IFICALLY MENTIONED IN PARA 1.3 OF THE SHARE TRANSFER AGREEME NT. THE COPY OF SHARE TRANSFER AGREEMENT PLACED AT PAGE NO. 5 TO 10 OF PAPER BOOK. ON PERUSAL OF SHARE TRANSFER AGREEMENT, YOUR HONOUR WILL APPRECIATE THAT IN PARA 1.3 IT HAS BEEN SPECIFICALLY RECITED AS UNDER- 'COMPLETION OF TRANSFER MEANS THE DATE OF RECEIPT O F FULL CONSIDERATION AS DEFINED IN CLAUSE NO. 4' 21. ALTHOUGH THE SHARE TRANSFER AGREEMENT WAS EXECU TED ON 18.03.2010, THE APPELLANT RECEIVED THE ENTIRE CONSI DERATION FOR ITA NO. 4376/MUM/2017 : 11 : TRANSFER OF SHARES DURING THE PREVIOUS YEAR RELEVAN T TO THE AY 2012-13 AND THEREFORE, THE SHARES WERE TRANSFERRED DURING THE PREVIOUS YEAR RELEVANT TO THE A Y 2012-13. THIS FAC T IS EVIDENT FROM THE BANK PASSBOOK OF THE ASSESSEE, THE BANK ST ATEMENT OF M/S. PRIVILEGE INDUSTRIES LTD. AND THE CHART SHO WING THE DATE WISE PAYMENT RECEIVED FROM PRIVILEGE INDUSTRIE S LTD. AND CORRESPONDING INVESTMENT MADE FOR BOOKING AND ALLOT MENT OF NEW RESIDENTIAL HOUSE WHICH ARE PLACED AT PAGE NOS. 12 TO 14 OF PAPER BOOK. ON PERUSAL OF PAGE NO. 13 OF THE PAP ER BOOK, YOUR HONOUR WILL APPRECIATE THAT THE APPELLANT HAD MADE THE INVESTMENT OF RS. 2,80,00,000/- FOR BOOKING AND ALL OTMENT OF NEW RESIDENTIAL HOUSE BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. THEREFORE, IT IS SUBMITTED THAT THE AO'S CO NTENTION THAT THE APPELLANT HAS MADE INVESTMENT IN NEW RESIDENTIA L HOUSE AFTER THE EXPIRY OF TWO YEARS FROM THE DATE OF TRAN SFER OF ORIGINAL ASSET IS INCORRECT AND SINCE, THE INVESTME NT HAS BEEN MADE IMMEDIATELY AFTER THE DATE OF TRANSFER AND BEF ORE THE DUE DATE OF FILING THE RETURN OF INCOME, THE APPELLANT HAS FULFILLED THE CONDITION LAID DOWN IN SECTION 54F AND THEREFOR E, IS ENTITLED TO GET EXEMPTION OF ENTIRE CAPITAL GAIN OF RS. 2,79 ,24,3747- CLAIMED IN THE RETURN OF INCOME. 22. IN PARA 4.10 AND 4.11, THE AO HAS RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SURAJ LAMP S AND INDUSTRIES PVT. LTD. VS. STATE OF HARYANA REPORTED IN 340 ITR 1 (SC) AND DISALLOWED THE CLAIM OF DEDUCTION U/S. 54F . IN THIS RESPECT IT IS SUBMITTED THAT IN THE CASE OF SURAJ LAMPS AND INDUSTRIES PVT. LTD. (SUPRA), THE HON'BLE SUPRE ME COURT WAS DEALING WITH SECTION 54 OF THE TRANSFER OF PROP ERTY ACT AND NOT SECTION 54 OF THE INCOME TAX ACT, 1961. IN THIS CASE, SUPREME COURT DEALT WITH TRANSACTIONS OF IMMOVABLE PROPERTY OF THE NATURE OF 'GPA-SALES' OR 'SA/GPA/WILL TRANSF ERS'. THE SUPREME COURT WAS NEVER CONSIDERED THE ISSUE OF ALL OW ABILITY OF DEDUCTION U/S. 54/54F IN RESPECT OF INVESTMENT M ADE FOR BOOKING AND ALLOTMENT OF NEW RESIDENTIAL HOUSE. THE REFORE, THE AO'S ACTION OF PLACING RELIANCE ON THE DECISION OF SURAJ LAMP AND INDUSTRIES PVT. LTD. (SUPRA) IS MISPLACED. 23. THE ASSESSING OFFICER OVERLOOKED THE FACT THAT UNDER INCOME TAX FOR THE PURPOSE OF DEDUCTION U/S 54 OR U/S 54F HOLDING OF LEGAL TITLE IS NOT NECESSARY. IF THE TAX PAYER PAYS OR CONSIDERATION OF SUBSTANTIAL PORTION OF IT, BEFORE THE DUE DATE OF FILLING RETURN U/S THE EXEMPTION U/S 54F IS AVAILAB LE, EVEN IF POSSESSION IS HANDED OVER AFTER THE STIPULATED PERI OD OR THE SALE DEED IS REGISTERED LATER ON. THE ASSESSING OFF ICER HAS ITA NO. 4376/MUM/2017 : 12 : DENIED EXEMPTION U/S 54F ON THE GROUND THAT THE APP ELLANT HAS CLAIMED THE SAME WITHOUT HAVING ACTUAL POSSESSI ON OF THE PROPERTY AS WE/I AS WITHOUT HAVING REGISTRATION OF THE SAID PROPERTY IN HIS NAME. THE ASSESSING OFFICER DENIED THE EXEMPTION U/S. 54F BECAUSE THE POSSESSION AND REGIS TRATION OF THE RESIDENTIAL FLAT ARE LACKING. IN THIS REGARD, RELIANCE IS PLACED ON CBDT CIRCULAR NO 471 DT. 15/10/86 WHICH PERMITS CASES OF ALLOTMENT OF FLATS UNDER THE DDA SCHEME TO BE TREATED AS CASES OF CONSTRUCTION F OR THE PURPOSES OF CAPITAL GAINS AND THEREFORE, INVESTMENT OF CAPITAL GAIN IN PURCHASE OF DDA FLAT IN THE FORM OF FIRST I NSTALLMENT OF PRICE OF FLAT WITHIN TWO YEARS OF SALE OF ORIGINAL PROPERTY WOULD ENTITLE ASSESSEE TO CLAIM EXEMPTION IN RESPECT OF C APITAL GAIN EVEN THOUGH CONSTRUCTION OF FLAT WAS NOT COMPLETED WITHIN TWO YEARS. 24. IN CIT V. MRS. HILLA J.B. WADIA [1995] 216 ITR 376 (BOM.), IT WAS OBSERVED THAT THE BOARD HAD STATED IN CIRCUL AR NO. 471, DATED 15-10-1986 THAT WHEN AN ALLOTMENT LETTER IS I SSUED TO AN ALLOTTEE UNDER THIS SCHEME ON PAYMENT OF THE FIRST INSTALLMENT OF THE COST OF CONSTRUCTION, THE ALLOTMENT IS FINAL UNLESS IT IS CANCELLED. THE ALLOTTEE, THEREUPON, GETS TITLE TO T HE PROPERTY ON THE ISSUANCE OF THE ALLOTMENT LETTER AND THE PAYMEN T OF INSTALLMENTS IS ONLY A FOLLOW-UP ACTION AND TAKING DELIVERY OF POSSESSION IS ONLY A FORMALITY. THE BOARD HAS DIREC TED THAT SUCH AN ALLOTMENT OF FLAT UNDER THIS SCHEME SHOULD BE TREATED AS COST OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS. 25. FURTHER, THE CBDT HAS ISSUED CIRCULAR NO. 672 D ATED 16.12.1993, WHICH READS AS UNDER- '1. ATTENTION IS INVITED TO BOARD'S CIRCULAR NO. 47 1, DATED 15- 10-1986. IT WAS CLARIFIED THEREIN THAT CASES OF ALL OTMENT OF FLATS UNDER THE SELF-FINANCING SCHEME OF THE DELHI DEVELO PMENT AUTHORITY (DDA) SHOULD BE TREATED AS CASES OF CONST RUCTION FOR THE PURPOSES OF SECTIONS 54 AND 54F OF THE INCOME-T AX ACT. THE BOARD HAS SINCE RECEIVED REPRESENTATIONS THAT EVEN IN RESPECT OF ALLOTMENT OF FLATS/HOUSES BY CO-OPERATIVE SOCIET IES AND OTHER INSTITUTIONS, WHOSE SCHEMES OF ALLOTMENT AND CONSTR UCTION ARE SIMILAR TO THOSE OF DELHI DEVELOPMENT AUTHORITY, A SIMILAR VIEW SHOULD BE TAKEN. 2. THE BOARD HAS CONSIDERED THE MATTER AND HAS DECI DED THAT IF THE TERMS OF THE SCHEMES OF ALLOTMENT AND CONSTR UCTION OF FLATS/HOUSES BY THE COOPERATIVE SOCIETIES OR OTHER INSTITUTIONS ARE SIMILAR TO THOSE MENTIONED IN PARA 2 OF BOARD'S CIRCULAR NO. ITA NO. 4376/MUM/2017 : 13 : 471, DATED 15-10-1986 (SI. NO. 428), SUCH CASES MAY ALSO BE TREATED AS CASES OF CONSTRUCTION FOR THE PURPOSES O F SECTIONS 54 AND 54F OF THE INCOME-TAX ACT.' 26. THE ABOVE TWO CIRCULARS (DATED 15-10-1986 AND 1 6-12- 1993) WERE EXPLAINED IN MRS. SEETHA SUBRAMANIAN V. ACIT [1996] 59 ITD 94 (MAD. - TRIB.) WITH THE FOLLOWING OBSERVATIONS: 'THE ASSESSEE ALSO RELIED UPON CERTAIN CIRCULARS IS SUED BY THE CBDT. ONE OF THE CIRCULARS WAS [CIRCULAR NO. 471, D ATED 15TH OCTOBER, 1986. THIS WAS ISSUED BY THE CBDT CLARIFYI NG THE POSITION THAT WHERE AN ASSESSEE ACQUIRES A FLAT BY AN ALLOTMENT UNDER THE SELF-FINANCING SCHEME OF THE DE LHI DEVELOPMENT AUTHORITY, THE ALLOTMENT ITSELF IS SUFF ICIENT COMPLIANCE FOR GETTING THE BENEFIT UNDER SECTION 54 F, EVEN THOUGH THE ASSESSEE HAS NOT PAID ALL THE INSTALMENT S DUE UNDER THE SAID SCHEME. LATER BY ANOTHER CIRCULAR NO . 672, DATED 16TH DECEMBER, 1993, THE CBDT HAS ISSUED CLAR IFICATION EXTENDING THE SAME BENEFITS FOR ACQUISITION OF HOUS ES OR FLATS ON ALLOTMENT UNDER SIMILAR SCHEMES. THEREFORE IT WA S CONTENDED THAT THE INTENTION OF THE LEGISLATURE WAS TO INVEST IN THE ACQUISITION OF A RESIDENTIAL HOUSE AND COMPLETI ON OF CONSTRUCTION OR OCCUPATION IS NOT REQUIRED. WE FIND FORCE IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE. T HE SAID INTENTION IS VERY CLEAR FROM THE TWO CIRCULARS ISSU ED BY THE CBDT, WHERE IT WAS HELD THAT AN ASSESSEE IS ENTITLE D TO THE BENEFIT OF SECTIONS 54 AND 54F, IF AN ASSESSEE GETS AN ALLOTMENT UNDER THE SELF-FINANCING SCHEME AND PAYS THE FIRST INSTALMENT OF THE COST OF THE CONSTRUCTION. FROM TH AT IT IS CLEAR THAT IN ORDER TO GET THE BENEFIT UNDER SECTION 54F THE ASSESSEE NEED NOT COMPLETE THE CONSTRUCTION OF THE HOUSE AND OCCUPY THE SAME.' 27. THE ABOVE TWO CIRCULARS WERE APPLIED IN THE CAS E OF SMT. SHASHI VERMA [224 ITR 106 (MP)] AND IT WAS HELD THA T :- 'SECTION 54 OF THE INCOME-TAX ACT, 1961 - CAPITAL G AINS - PROFITS ON SALE OF PROPERTY USED FOR RESIDENTIAL HOUSE - AS SESSMENT YEAR 1982-83 - WHETHER UNDER GOVERNMENT SCHEDULES CONFINING TO TWO YEARS' PERIOD FOR CONSTRUCTION AND HANDING OVER POSSESSION THEREOF IS IMPOSSIBLE AND UNWORKABL E UNDER SECTION 54 AND, THUS, IF SUBSTANTIAL INVESTMENT IS MADE IN CONSTRUCTION OF HOUSE, IT SHOULD BE DEEMED THAT SUF FICIENT STEPS HAVE BEEN TAKEN SATISFYING REQUIREMENT OF SECTION 5 4 - HELD, YES,' ITA NO. 4376/MUM/2017 : 14 : 28. IN THE CASE OF SMT. BRINDA KUMAR [114 TAX/VAN 266 (DEL)] IT WAS HELD THAT 'SECTION 54 OF THE INCOME-TAX ACT, 1961 - CAPITAL G AINS - PROFIT ON SALE OF PROPERTY USED FOR RESIDENTIAL HOUSE - AS SESSMENT YEAR 1970-71 -WHETHER PURCHASE OF A FLAT IN MULTI-S TOREYED BUILDING AMOUNTS TO CONSTRUCTION OF BUILDING WITH IN MEANING OF SECTION 54(1) FOR THE PURPOSE OF CLAIMING EXEMPT ION - HELD, YES' 29. SIMILARLY, IN THE CASE OF R L SOOD [108 TAXMAN 227 (DEL)] IT WAS HELD THAT 'SECTION 54 OF THE INCOME-TAX ACT, 1961 - CAPITAL G AINS - PROFITS ON SALE OF PROPERTY USED FOR RESIDENCE - ASSESSMENT YEAR 1982- 83 - WHETHER ON PAYMENT OF SUBSTANTIAL AMOUNT IN TE RMS OF PURCHASE AGREEMENT WITHIN FOUR DAYS OF SALE OF HIS OLD HOUSE, ASSESSEE ACQUIRED SUBSTANTIAL DOMAIN OVER NEW RESID ENTIAL FLAT WITHIN SPECIFIED PERIOD, IT COULD BE SAID THAT ASSESSEE COMPLIED WITH REQUIREMENTS OF SECTION 54 - HELD, YE S - WHETHER MERELY BECAUSE BUILDER FAILED TO HAND OVER POSSESSI ON OF FLAT WITHIN SPECIFIED PERIOD, ASSESSEE COULD BE DENIED B ENEFIT OF BENEVOLENT PROVISION OF SECTION 54 - HELD, NO'. 30. MOREOVER, IN THE CASE OF BALRAJ [123 TAXMAN 290 (DEL)] IT WAS HELD THAT - 'SECTION 54 OF THE INCOME-TAX ACT, 1961 - CAPITAL G AINS - PROFITS ON SALE OF PROPERTY USED FOR RESIDENTIAL HOUSE - AS SESSMENT YEAR 1975-76 - WHETHER SECTION 54 SPEAKS OF PURCHAS E ONLY AND FOR AVAILING BENEFIT UNDER THIS SECTION, IT IS NOT NECESSARY THAT ASSESSEE SHOULD BECOME OWNER OF PROPERTY - HEL D, YES - WHETHER, WHERE ASSESSEE PAID A SUM AT TIME OF ENTER ING INTO AN AGREEMENT FOR PURCHASE OF A PROPERTY WITHIN A YE AR FROM SALE OF ANOTHER PROPERTY, HE WOULD BE ENTITLED TO B ENEFIT PROVIDED UNDER SECTION 54 EVEN THOUGH THERE WAS NO REGISTRATION WITHIN SAID PERIOD - HELD, YES' 31. FURTHER, IN THE CASE OF DR. L N NAGDA [2111TR 8 04 (BOM)] IT WAS HELD THAT - 'SECTION 54 OF THE INCOME-TAX ACT, 1961 - CAPITAL G AINS - PROFITS ON SALE OF PROPERTY USED FOR RESIDENTIAL HOUSE - AS SESSMENT ITA NO. 4376/MUM/2017 : 15 : YEAR 1975-76 -WHETHER SECTION 54 SPEAKS OF PURCHASE ONLY AND FOR AVAILING BENEFIT UNDER THIS SECTION, IT IS NOT NECESSARY THAT ASSESSEE SHOULD BECOME OWNER OF PROPERTY - HEL D, YES - WHETHER, WHERE ASSESSEE PAID A SUM AT TIME OF ENTER ING INTO AN AGREEMENT FOR PURCHASE OF A PROPERTY WITHIN A YE AR FROM SALE OF ANOTHER PROPERTY, HE WOULD BE ENTITLED TO B ENEFIT PROVIDED UNDER SECTION 54 EVEN THOUGH THERE WAS NO REGISTRATION WITHIN SAID PERIOD - HELD, YES' 32. SIMILARLY, IN THE CASE OF A S KHAJANCHI [163 TA XMAN 426 (MP)J IT WAS HELD THAT 'SECTION 54F OF THE INCOME-TAX ACT, 1961 - CAPITAL GAINS - EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE - WHETHER WHERE AN ASSESSEE POSSESSED A RESIDENTIAL H OUSE ALREADY ON DATE OF TRANSFER OF ORIGINAL ASSET WHICH IS SUBJECTED TO CAPITAL GAIN, ASSESSEE WOULD NOT BE ENTITLED TO EXEMPTION CONTAINED IN SECTION 54F ON GROUND OF PURCHASE OF N EW ASSET - HELD, YES - WHETHER BENEFITS OF SECTION 54F CANNOT BE DENIED TO ASSESSEE EVEN IF TRANSFER OF NEW ASSET IN FAVOUR OF ASSESSEE IS NOT EVIDENCED BY A REGISTERED DEED - HELD, YES'. 33. FURTHER, THE HON'BLE ITAT, MUMBAI 'SMC' BENCH I N THE CASE OF RAJEEV B. SHAH VS. ITO IN ITA NO. 262/MUM/2015 V IDE ORDER DATED 08.07.2016 HAS HELD THAT THE ASSESSEE I S ENTITLED TO GET EXEMPTION U/S. 54F WHEN HE HAS MADE SUBSTANT IAL PAYMENT FOR CONSTRUCTION OF RESIDENTIAL HOUSE WITHI N A PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER OF ORIGINAL AS SET DESPITE THE FACT THAT HE HAS NOT REGISTERED THE AGREEMENT IN HI S NAME AND GOT THE POSSESSION OF THE FLAT WITHIN 3 YEARS. THE COPY OF DECISION OF HON'BLE TRIBUNAL IS PLACED AT PAGE NO. 112 TO 116 OF PAPER BOOK. 34. SINCE, THE APPELLANT HAS MADE PAYMENT OF RS. 2,62,50,000/- FOR ACQUISITION OF FLAT NO. 3004 DURI NG THE PREVIOUS YEAR RELEVANT TO THE AY 2012-13 AND THE OR IGINAL ASSET WAS SOLD IN THE SAME YEAR AND BALANCE PAYMENT OF RS.17,50,000/-WAS MADE BEFORE THE DUE DATE OFF/LING THE RETURN OF INCOME, THE APPELLANT IS ENTITLED TO GET EXEMPTION U/S. 54F AS CLAIMED IN THE RETURN OF INCOME. 35. IN VIEW OF THE ABOVE, THE APPELLANT PRAYS YOUR HONOUR TO ALLOW DEDUCTION OF RS. 2,79,24,374/- U/S. 54F AS CL AIMED BY THE APPELLANT IN HIS RETURN OF INCOME. ITA NO. 4376/MUM/2017 : 16 : 5.4. I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E APPELLANT'S SUBMISSIONS. SINCE E GAINS ARISING ON TRANSFER OF T HE SHARES OF M/S PRIVILEGE BREWERIES PVT. LTD. HAS BEEN TO BE INCOME FROM CAPITAL GAINS, THE ALLOWABILITY OF DEDUCTION U/S 54F IS BEI NG ADJUDICATED. 5.5 THE RELEVANT PORTION OF THE PROVISIONS OF SECTION 54F OF THE ACT READS AS UNDER: 54 F. (1) [SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDE D FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPI TAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ON E YEAR BEFORE OR [TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TOOK PL ACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONS TRUCTED, A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOL LOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN T HE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CA PITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER S ECTION 45: THERE IS NO DISPUTE THAT THE ASSET TRANSFERRED IS A LONG TERM CAPITAL ASSET. THE ASSET TRANSFERRED IS ALSO NOT A RESIDENT IAL HOUSE. OUT OF THE CAPITAL GAINS OF RS.2,79,24,374/- ARISING FROM THE TRANSFER OF SHARES, THE APPELLANT HAD INVESTED IN A NEW RESIDEN TIAL HOUSE I.E., FLAT NO.3004 ON 30TH FLOOR IN 'C' WING IN 'METROPOL IS'. THE APPELLANT HAD MADE PAYMENTS OF RS. 2,62,50,000/- TO M/S HOUSI NG DEVELOPMENT AND INFRASTRUCTURE LTD. TOWARDS THIS IN VESTMENT DURING THE RELEVANT PREVIOUS YEAR ITSELF. AN AMOUNT OF RS. 17,50,0007- WAS ALSO PAID ON 26.09.2012 WHICH WAS BEFORE THE DUE DA TE OF FILING OF RETURN. THE APPELLANT'S CLAIM OF DEDUCTION U/S 54F OF RS.2,79,24,374/- IS, THEREFORE, PRIMA FACIE ALLOWAB LE AS PER THE PROVISIONS OF SECTION 54F OF THE ACT. 5.6 THE ASSESSING OFFICER DISALLOWED THE CLAIM FOR DEDUCTION U/S 54F BY OBSERVING THAT THE SALE DEED FOR PURCHASE OF THE NEW PROPERTY FOR RS. 3,14,17,000/- WAS EXECUTED ON 30.01.2014 WH ICH WAS AFTER 2 YEARS FROM THE DATE OF SALE OF THE ORIGINAL ASSET AS THE AGREEMENT FOR TRANSFER OF SHARES BETWEEN THE APPELLANT AND M/ S PRIVILEGE INDUSTRIES LTD. WAS ENTERED INTO ON 18.03.2010. IT IS SEEN THAT EVEN THOUGH THE SHARE TRANSFER AGREEMENT WAS ENTERED INT O ON ITA NO. 4376/MUM/2017 : 17 : 18.03.2010, AS PER THE TERMS OF THE AGREEMENT THE T RANSFER WAS TO BE DEEMED AS COMPLETED ONLY ON RECEIPT OF FULL CONSIDE RATION WHICH WAS RECEIVED DURING THE RELEVANT PERIOD UNDER CONSIDERA TION. THE AO HAD ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SURAJ LAMPS AND INDUSTRIES PVT. LTD. VS. STATE O F HARYANA REPORTED IN 340 ITR 1 (SC) IN DISALLOWING THE APPEL LANT'S CLAIM OF DEDUCTION U/S. 54F WHICH IS MISPLACED AS IN THAT CA SE THE HON'BLE SUPREME COURT WAS DEALING WITH SECTION 54 OF THE TR ANSFER OF PROPERTY ACT REGARDING TRANSACTIONS OF IMMOVABLE PR OPERTY OF THE NATURE OF 'GPA-SALES' OR 'SA/GPA/WILL TRANSFERS' AN D NOT SECTION 54 OF THE INCOME TAX ACT, 1961. 5.7 IT IS ALSO SEEN THAT PRIOR TO REGISTRATION OF T HE AGREEMENT FOR SALE ON 30.01.2014, A LETTER OF ALLOTMENT FOR BOOKING OF FLAT NO.3004 ON 30TH FLOOR IN 'C' WING IN 'METROPOLIS' STOOD ISSUED TO THE APPELLANT BY THE DEVELOPER, M/S HOUSING DEVELOPMENT AND INFRA STRUCTURE LTD. ON 27.01.2012 WHICH FALLS WITHIN THE PRESCRIBED TIM E LIMIT FOR CLAIMING DEDUCTION U/S 54F. THE VARIOUS COURTS HAVE CONSISTENTLY HELD THAT SECTION 54F IS A BENEFICIAL SECTION AND T HAT ITS PROVISIONS ARE TO BE CONSTRUED LIBERALLY. IN THE INSTANT CASE, A SPECIFIC FLAT, I.E., FLAT NO.3004 ON 30TH FLOOR IN 'C' WING IN 'METROPOL IS' HAD BEEN ALLOTTED TO THE APPELLANT VIDE LETTER OF ALLOTMENT DATED 27.01.2012 FOR WHICH SUBSTANTIAL PAYMENT HAD ALSO BEEN MADE WITHIN THE PRESCRIBED TIME LIMIT U/S 54F. IN THE CASE OF ACIT VS SANJAY KUMATH IN I.T.A.NO. 448/IND/2013 AND C.O.NO.83/IND/2013, T HE HON'BLE ITAT INDORE HELD THAT ALL THE RIGHTS IN THE FLAT WE RE DULY ACQUIRED BY THE ASSESSEE ON THE DATE WHEN HE WAS GIVEN LETTER O F ALLOTMENT WHICH CLEARLY DESCRIBED THE PRECISE NUMBER OF FLAT SO ALLOTTED TO HIM. THAT AS PER THE PROVISIONS OF SECTION 2(47) (II), ' TRANSFER' IN RELATION TO CAPITAL ASSETS INCLUDED THE EXTINGUISHMENT OF ANY R IGHT THEREIN. THAT THIS LETTER OF ALLOTMENT EXTINGUISHED THE RIGHTS OF BUILDER IN THE SAID FLAT IN FAVOUR OF THE ASSESSEE IN RESPECT OF THIS F LAT AND BY SIGNING THE LETTER OF ALLOTMENT, THE ASSESSEE AGREED TO BUY THE SAME AND FOR WHICH PAYMENT WAS ALSO MADE ACCORDING TO THE LETTER OF ALLOTMENT. CBDT'S CIRCULAR NO. 4781 DATED 15.10.1986 AND CIRCU LAR NO.672 DATED 16.12.1993 ALSO STATES THAT 'THE ALLOTTEE GET S TITLE TO THE PROPERLY ON THE ISSUE OF THE ALLOTMENT FETTER AND T HE PAYMENT OF INSTALMENT IS ONLY A FOLLOW UP AND TAKING THE DELIV ERY OF POSSESSION IS ONLY A FORMALITY.' THE HON'BLE BOMBAY - :- COURT IN THE CASE OF CIT VS. HILLA J.B. WADIA [1995] 216 ITR 376 (BOM) HAD H ELD THAT IF ASSESSEE HAS ACQUIRED SUBSTANTIAL DOMAIN OVER NEW H OUSE AND HAS MADE SUBSTANTIAL PAYMENT TOWARDS COST OF CONSTRUCTI ON WITHIN A PERIOD SPECIFIED U/S. 54, THEN ASSESSEE CAN BE SAID TO HAVE COMPLIED WITH REQUIREMENTS FOR CLAIMING EXEMPTION U/S 54. IN THE INSTANT CASE ALSO, THE APPELLANT HAD ACQUIRED SUBSTANTIAL DOMAIN OVER THE NEW PROPERTY BY WAY OF THE LETTER OF ALLOTMENT AND HAD ALSO MADE THE ITA NO. 4376/MUM/2017 : 18 : SUBSTANTIAL PAYMENT FOR THE COST OF THE NEW FLAT WI THIN THE PERIOD SPECIFIED U/S 54F OF THE ACT. IN VIEW OF THESE FACT S AND THE LEGAL POSITION ON THE ISSUE AS DISCUSSED, IT IS MY CONSID ERED OPINION THAT THE APPELLANT IS ENTITLED TO CLAIM DEDUCTION U/S 54 F IN RESPECT OF THE INVESTMENT IN THE NEW PROPERTY. THE ASSESSING OFFIC ER IS DIRECTED TO ALLOW THE APPELLANT'S CLAIM OF DEDUCTION U/S 54F OF THE ACT. THE APPELLANT'S GROUNDS OF APPEAL ON THIS ISSUE ARE ALL OWED. 6. LD. DR SUBMITTED THAT LD. CIT(A) ERRED IN DELETING THE ADDITIONS MADE BY THE AO TOWARDS COMPUTATION OF LTCG FRO M SALE OF SHARES AND CONSEQUENT DEDUCTION CLAIMED U/S. 54F OF THE ACT, WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAS FAI LED TO JUSTIFY THE PRICE CHARGED FOR TRANSFER OF EQUITY S HARES WITH NECESSARY EVIDENCE, WHICH REPRESENTS INTRINSIC VALUE OF SHARES. LD. DR FURTHER SUBMITTED THAT ASSUMING FOR A MOMENT BUT NO T ACCEPTING THAT TRANSFER OF EQUITY SHARES FALLS UNDER TH E HEAD CAPITAL GAINS BUT THE INVESTMENT MADE IN PURCHASE OF RESIDENTIAL HOUSE IS CLEARLY OUTSIDE THE PROVISIONS O F SECTION 54F AS THE ASSESSEE HAS MADE INVESTMENTS BEYOND TWO YE ARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET, CONSEQUEN TLY NOT ELIGIBLE FOR DEDUCTION U/S. 54F. 7. LD. AR ON THE OTHER HAND STRONGLY SUPPORTING THE ORDE R OF LD. CIT(A) SUBMITTED THAT LD. CIT(A) HAS APPRECIATED THE FACTS IN THE LIGHT OF EVIDENCES FURNISHED DURING THE COURSE OF APPELLATE PROCEEDINGS TO DELETE ADDITIONS MADE BY THE AO ITA NO. 4376/MUM/2017 : 19 : TOWARDS COMPUTATION OF LTCG AND EXEMPTION CLAIMED U/S. 54F OF THE ACT. LD. AR FURTHER SUBMITTED THAT MERELY FOR THE REASON THAT ASSESSEE HAS TRANSFERRED ITS SHARES FOR A H IGHER PRICE WHEN COMPARED TO FACE VALUE, IT DOES NOT MEAN THA T THE WHOLE TRANSACTION IS SHAM, MORE PARTICULARLY WHEN THE TRANSACTIONS BETWEEN THE PARTIES IS GENUINE, WHICH IS SUPPORTED BY A VALID SHARE PURCHASE AGREEMENT. LD. AR FURTHER SUBMITTED THAT INSOFAR AS EXEMPTION CLAIMED U/S. 54F, IT IS SETTLED POSITION OF LAW THAT FOR THE PURPOSE OF REC KONING DATE OF INVESTMENT, THE DATE OF ALLOTMENT SHALL BE CONS IDERED BUT NOT THE DATE OF AGREEMENT. IN THIS CASE, ASSESSEE HA S ALLOTTED A FLAT VIDE ALLOTMENT LETTER DT. 27-01-2012 AND O N THAT DATE, ASSESSEE HAS MADE SUBSTANTIAL AMOUNT TOWARDS PURCHASE OF FLAT. SUBSEQUENT AGREEMENT IS A MERE FORM ALITY BUT THE TITLE AND INTEREST IN THE PROPERTY WILL PASS ON TO THE BUYER, THE MOMENT THE DEVELOPER ALLOTS THE FLAT BY ISSUIN G A LETTER OF ALLOTMENT. LD. CIT(A) HAS APPRISED THE FACTS. IN THE LIGHT OF ABOVE FACTS AND HIS ORDER SHOULD BE UPHELD. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. THERE IS NO DISPUTE WITH REGARD TO THE FACT ITA NO. 4376/MUM/2017 : 20 : THAT ASSESSEE TRANSFERRED ITS SHARE HOLDING IN PRIVILE GE BREWERIES PVT. LTD., TO PRIVILEGE INDUSTRIES LTD., THROU GH A SHARE PURCHASE AGREEMENT DT. 18-03-2010. THE ASSESSE E HAS AGREED TO TRANSFER EQUITY SHARES HAVING FACE VALUE OF RS. 10/- @ RS. 5600/- PER SHARE. AS PER THE SHARE PRICE AGREE MENT, TRANSFER WILL COMPLETE AS AND WHEN THE TRANSFEREE MAKE S THE FULL PAYMENT TOWARDS PURCHASE OF SHARES. IT IS ALSO A N ADMITTED FACT THAT ASSESSEE HAS FILED NECESSARY DETAILS I N ORDER TO PROVE THAT THE COMPANY POSSESSES A LETTER OF INTENT ISS UED BY THE GOVERNMENT OF MAHARASHTRA FOR MANUFACTURE OF ALCOHOLIC BEVERAGES. THEREFORE, WE ARE OF THE CONS IDERED VIEW THAT THERE IS NO MERIT IN THE FINDINGS OF THE LD.AO THAT TH E ASSESSEE HAS RECEIVED THE SUM FOR TRANSFER OF SHARES VIZ., WITHOUT ANY CONSIDERATION, WHICH IS ASSESSABLE TO TAX U NDER THE HEAD INCOME FROM OTHER SOURCES AS PER THE PROVIS IONS OF SECTION 56(2)(V) OF THE ACT. LD. CIT(A) AFTER CONSIDER ING THE RELEVANT FACTS HAS RIGHTLY HELD THAT CONSIDERATION RECEI VED FOR TRANSFER OF EQUITY SHARES ON PRIVILEGE BREWERIES PVT. LTD., IS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM CAPITAL G AINS BUT NOT UNDER THE HEAD INCOME FROM OTHER SOURCES AS CONSIDERED BY THE LD.AO. ITA NO. 4376/MUM/2017 : 21 : 8.1. COMING TO THE EXEMPTION CLAIMED U/S. 54F OF THE ACT, AO DENIED THE BENEFIT OF EXEMPTION MAINLY FOR TWO REAS ONS. ACCORDING TO THE AO, INVESTMENTS MADE IN NEW HOUSE PRO PERTY IS BEYOND A PERIOD OF TWO YEARS FROM THE DATE OF TRA NSFER OF ORIGINAL ASSET AND ALSO THE ASSESSEE IS NOT HAVING AN Y LEGAL TITLE OVER THE PROPERTY, THEREFORE, NOT ELIGIBLE FOR EX EMPTION U/S. 54F. AO HAS RELIED UPON THE RATIO OF HON'BLE SU PREME COURT IN THE CASE OF SURAJ LAMPS AND INDUSTRIES PVT. LTD ., VS. STATE OF HARYANA [340 ITR 1] (SC), WHEREIN IT WAS HELD THAT SALE OF IMMOVEABLE PROPERTY CAN BE MADE ONLY BY A R EGISTERED INSTRUMENT AND AGREEMENT OF SALE DOES NOT CREATE ANY IN TEREST OR CHARGE ON SUCH PROPERTY. WE FIND THAT ASSESSEE HA S FILED COMPLETE DETAILS IN RESPECT OF PURCHASE OF NEW HOUSE PROPERTY AS PER WHICH ASSESSEE HAS BEEN ALLOTTED A FLAT BY WAY OF ALLOTMENT LETTER DT. 27-01-2012. ALTHOUGH THE AGREEMENT FOR SALE HAS BEEN REGISTERED ON 30-01-2014, THE FACT REMA INS THAT WHEN THE BUILDER HAS ALLOTTED A FLAT BY WAY OF AN ALLO TMENT LETTER AND ASSESSEE HAS MADE SUBSTANTIAL AMOUNT OF CONSIDERATION FOR ACQUISITION OF PROPERTY, THE RIGHT A ND INTEREST IN THE PROPERTY PASSED ON TO THE PURCHASER AS ON THE DA TE OF ISSUE OF ALLOTMENT LETTER BUT NOT ON THE DATE OF REGISTRATI ON OF AGREEMENT. THIS PROPOSITION HAS BEEN REITERATED BY V ARIOUS ITA NO. 4376/MUM/2017 : 22 : HON'BLE HIGH COURTS AND TRIBUNALS, WHEREIN IT WAS HEL D THAT EVEN ASSESSEE ACQUIRES SUBSTANTIAL DOMAIN, OVER NEW H OUSE AND HAS MADE SUBSTANTIAL PAYMENT TOWARDS COST OF CONSTRUCTION WITHIN A SPECIFIED PERIOD UNDER THE PROVIS IONS OF SECTION 54F OF THE ACT, THEN MERELY FOR THE REASON THAT AGREEMENT TO SALE HAS BEEN REGISTERED ON SUBSEQUENT DAT E CANNOT BE A REASON FOR REJECTION OF EXEMPTION CLAIMED U/S. 54F. LD. CIT(A) HAS ALLOWED THE CLAIM AFTER CONSIDE RING THE RELEVANT FACTS AND ALSO FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MRS. HILLA J.B. WADIA [216 ITR 376] (BOM). THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN THE FINDINGS RECORDED BY THE LD. CIT(A) WHILE ALLOWING THE BENEFIT OF DEDUC TION CLAIMED U/S. 54F AS THE SAID PROVISION IS A BENEFICI AL PROVISION, WHICH NEEDS TO BE INTERPRETED LITERALLY W HEN ALL OTHER CONDITIONS ARE FULFILLED AND MERELY FOR THE REAS ON THAT AGREEMENT TO SALE IS NOT REGISTERED, THE BENEFIT CANNOT BE DENIED TO THE ASSESSEE. HENCE, WE ARE INCLINED TO UPH ELD THE FINDINGS OF LD. CIT(A) AND REJECT THE GROUNDS TAKEN B Y THE REVENUE. ITA NO. 4376/MUM/2017 : 23 : 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF JANUARY, 2019 SD/- SD/- (JOGINDER SINGH) (G. MANJUNATHA) VICE PRESIDENT ACCOUNTANT MEMBER /MUMBAI; /DATED : 30 TH JANUARY, 2019 TNMM / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ! ( ) / THE CIT(A), MUMBAI 4. ! / CIT, MUMBAI 5. $%&'( , *'( + , / DR, ITAT, MUMBAI 6. &,-. / GUARD FILE / BY ORDER, //TRUE COPY// / (DY./ASST. REGISTRAR) *'( +, / ITAT, MUMBAI