Shri. RMM Athreiya, V. ITO,

ITA 467/BANG/2013

• Counselvise Citation: 46721114 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR PANDA
• Assessee Lawyers: RAMASUBRAMANIYAM
• Keywords: Capital asset; Cost of acquisition
• Section: 54F; 54; 139

Judgement Text

ITA NO.467 OF 2013 R.M.M. ATHREYA BANGALORE PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.467/BANG/2013 (ASSESSMENT YEAR: 2009-10) SHRI R.M.M. ATHREYA NO.10 APOT 1504, L & T SOUTH CITY, ARAKERE BANGALORE 560076 PAN: AALPA 1730 C VS. INCOME TAX OFFICER WARD 10(2) BANGALORE (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI RAMASUBRAMANIYAM, CA DEPARTMENT BY: SHRI BIJOY KUMAR P ANDA, DR DATE OF HEARING: 22/09/2014 DATE OF PRONOUNCEMENT: 26/09/2014 O R D E R PER RAJPAL YADAV, J.M. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LEARNED CIT (A), DATED 28.02.2013 PASSED FOR ASSESS MENT YEAR 2009-10. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSE E ARE NOT IN CONSONANCE WITH RULE 8 OF THE ITAT RULES, THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF, THE GRIEVANC E OF THE ASSESSEE IS THAT, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE DENIAL OF EXEMPTION U/S 54 OF THE INCOME TAX ACT IN RESPECT OF LONG TERM CAPITAL GAIN OF RS.10,66,400/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL. HE HAS FILED HIS RETURN OF INCOME FOR A SSESSMENT YEAR 2009-10 ON 28.08.2009 DECLARING TOTAL INCOME OF RS. 5,66,860/-. ITA NO.467 OF 2013 R.M.M. ATHREYA BANGALORE PAGE 2 OF 9 THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT. A NOTICE U/S 143(2) WAS ISSUED AND SERVED UPON THE AS SESSEE. ON AN ANALYSIS OF THE RECORD, IT REVEALED TO THE ASSES SING OFFICER THAT THE ASSESSEE HAD SOLD A HOUSE PROPERTY ON 1.9.2008 FOR A CONSIDERATION OF RS.95.00 LAKHS. IT WAS A LONG TERM CAPITAL ASSET TO THE ASSESSEE AFTER DEDUCTING THE INDEXED COST OF ACQUISITION AT RS.31,00,209/-. THE ASSESSEE HAS COMPTUED THE NET G AIN AT RS.63,00,209. THE ASSESSEE HAS CLAIMED EXEMPTION U/ S 54EC BY INVESTING A SUM OF RS.18.00 LAKHS IN REC BONDS. HE HAS FURTHER CLAIMED EXEMPTION OF RS.60.00 LAKHS AS INVESTED IN RESIDENTIAL PROPERTY AND THEREFORE, CLAIMED EXEMPTION U/S 54 OF THE INCOME TAX ACT. ACCORDING TO THE ASSESSEE, HE HAD ENTERED INTO AN AGREEMENT WITH L & T FOR PURCHASE OF A FLAT ON 25.1 1.2006 FOR A CONSIDERATIN OF RS.45,92,000/-. THE PAYMENT FOR THI S FLAT WAS MADE AS UNDER: DATE AMOUNT (RS.) 25.11.2006 2,00,000 30.11.2006 7,18,000 28.02.007 9,18,400 31.05.2007 9,18,400 31.08.2007 9,18,400 30.11.2006 6,88,800 28.02.2008 2,29,600 ASSESSING OFFICER DID NOT GRANT EXEMPTION U/S 54 OF THE INCOME TAX ACT ON THE GROUND THAT FLAT WAS AGREED TO BE PU RCHASED ON 25.11.2006 MEANING THEREBY THE FLAT WAS PURCHASED O N 25.11.2006. ACCORDING TO SECTION 54, THE ASSESSEE H AS TO INVEST THE CAPITAL GAIN IN A HOUSE PROPERTY WITHIN ONE YEA R BEFORE THE SALE OF THE CAPITAL ASSET OR AFTER TWO YEARS FROM T HE SALE OF THE CAPITAL ASSET. IN OTHER WORDS, THE WINDOW PERIOD FO R INVESTMENT OF CAPITAL GAIN, IF ANY, ACCRUED TO AN ASSESSEE ON TRA NSFER OF A ITA NO.467 OF 2013 R.M.M. ATHREYA BANGALORE PAGE 3 OF 9 PROPERTY IS OF THREE YEARS I.E. ONE YEAR BEFORE THE TRANSFER OF THE PROPERTY OR TWO YEARS AFTER THE TRANSFER. SINCE THE ASSESSEE HAD AGREED TO PURCHASE THE FLAT ON 25.11.2006, WHICH IS MUCH PRIOR TO THE SALE OF THE PROPERTY I.E. 1.9.2008, THEREFOR E, IT CANNOT BE SAID THAT THE FLAT WAS PURCHASED JUST BEFORE ONE YE AR OF THE SALE OF THE PROPERTY. 3. DISSATISFIED WITH THE ORDER OF THE ASSESSING OFF ICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE LEARNED CIT (A) HAD CALLED FOR A REMAND REPORT. ACCORDING TO THE LEARNE D CIT (A), A SUM OF RS.35,25,600/- WAS PAID WITHIN A PERIOD OF O NE YEAR PRIOR TO SALE OF HOUSE PROPERTY. THE LEARNED CIT (A) HAD CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND THE AS SESSING OFFICER HAS AGREED TO THIS EXTENT. THE OBSERVATION OF THE LEARNED CIT (A) READ AS UNDER: 4.1 THE ASSESSING OFFICER ERRED IN LAW IN DENYING THE EXEMPTION U/S 54 OF THE ACT IN RESPECT OF LONG TERM CAPITAL GAINS OF RS.45,92,000/-. 4.2 THE ASSESSING OFFICER ERRED IN LAW IN TAXING TH E SUM OF RS.45,92,000/- BEING THE LONG TERM CAPITAL G AINS AT NORMAL RATE INTEREST OF 20% AS PER SECTION 112 O F THE ACT. 5. THE ASSESSING OFFICER IN THE REMAND REPORT DATED 18.02.2013 HAS INTIMATED AS FOLLOWS: IN CONNECTION WITH THE REPORT CALLED FOR, I BRING T HE FOLLOWING FACTS FOR THE KIND CONSIDERATION OF THE C IT (A). DURING THE PREVIOUS YEAR, THE ASSESSEE HAS SOLD AN IMMOVABLE PROPERTY CONSISTING OF LAND AND RESIDENTI AL HOUSE. THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 5 4EC AND 54 OF THE ACT. IN THE RETURN FILED THE ASSESSEE HAS CLAIMED EXEMPTION U/S 54EC OF RS.18.00 LAKHS OUT OF THE CAP ITAL ITA NO.467 OF 2013 R.M.M. ATHREYA BANGALORE PAGE 4 OF 9 GAIN OF RS.63,00,209/-. IF THIS IS REDUCED THE BALA NCE IS RS.45,00,209/-. THE ASSESSING OFFICER COULD NOT HAV E ADDED RS.45,92,000/- FOR WITHDRAWING EXEMPTION. THE ONLY REASON FOR WHICH THE EXEMPTION U/S 54 OF THE ACT HAS BEEN WITHDRAWN IS THAT THE INVESTMENTS ARE MADE BY THE A SSESSEE PRIOR TO 1 YEAR OF SALE. THE DETAILS FURNISHED BY T HE ASSESSEE HAVE BEEN EXAMINED. THE FOLLOWING INVESTMENTS ARE W ITHIN ONE YEAR PRIOR TO SALE:- 11/09/2007 RS.25,25,600 02/05/2008 RS.10,00,000 TOTAL RS.35,25,600 ON FACTS THE ASSESSEE IS ELIGIBLE FOR EXEMPTION OF RS.35,25,600/- . 7. PERUSAL OF THE REMAND REPORT SHOWS THAT THE ASSESSING OFFICERS CALCULATION OF THE APPELLANTS CLAIM OF EXEMPTION U/S 54EC AND 54 OF THE ACT IS CORRECT AND AS PER LAW. THEREFORE, THE APPELLANTS CLAIM OF EXEMPTION U/S 54EC AND 54 OF THE ACT IS RESTRICTED TO RS.35,25,600/-. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED . 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT POSSESSION OF THE FLAT BOOKED ON 25.11.2006 WAS HAN DED OVER TO THE ASSESSEE IN MAY, 2008 MEANING THEREBY THE FLAT WAS TRANSFERRED WITHIN THE MEANING OF SECTION 2(47) OF THE INCOME TAX ACT IN MAY, 2008. THIS PERIOD FALLS IN THE WINDOW P ERIOD OF ONE YEAR PRIOR TO THE SALE OF THE LONG TERM CAPITAL ASS ET I.E. THE SALE WAS MADE ON 1.9.2008. THE POSSESSION WAS HANDED OVE R IN MAY, 2008. HE FURTHER CONTENDED THAT THE SALE DEED FOR P URCHASE OF THE FLAT WAS EXECUTED ON 15.10.2009. EVEN IF THE DA TE IS BEING TAKEN AS TRANSFER OF THE FLAT IN THE NAME OF THE AS SESSEE, THEN IT FALLS WITHIN THE WINDOW PERIOD OF TWO YEARS FROM SA LE OF THE LONG TERM CAPITAL ASSET. THEREFORE, WITH BOTH ANGLES, TH E INVESTMENT IN ITA NO.467 OF 2013 R.M.M. ATHREYA BANGALORE PAGE 5 OF 9 THE NEW FLAT OUGHT TO HAVE BEEN ALLOWED AS EXEMPTIO N U/S 54 OF THE INCOME TAX ACT. FOR BUTTRESSING HIS CONTENTIONS , HE PUT RELIANCE ON THE JUDGMENT OF THE HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. J.R. SUBRAMANYA BHAT REPORTED IN 165 ITR 571. HE FURTHER RELIED UPO N THE ORDER OF THE ITAT IN THE CASE OF GOPILAL LADDHA VS. ASSTT. C IT REPORTED IN 62 SOT 59. ON THE OTHER HAND THE LEARNED DR DREW OU R ATTENTION TOWARDS SUB-CLAUSE (2) OF SECTION 54. HE CONTENDED THAT SUB- CLAUSE 2 PROVIDES THE APPROPRIATION OF THE CAPITAL GAIN, MEANING THEREBY THE CAPITAL GAIN ARISEN TO AN ASSESSEE OUGH T TO BE USED FOR THE PURCHASE OF THE NEW RESIDENTIAL HOUSE. THE PAYMENTS MADE BEYOND ONE YEAR PRIOR TO THE SALE OF THE HOUSE IS NOT TO BE CONSIDERED AS USED FOR THE PURCHASE OF THE NEW ASSE T, BECAUSE AT THAT POINT OF TIME, NO CAPITAL GAIN WAS ACCRUED TO THE ASSESSEE, MEANING THEREBY THE CAPITAL GAIN ON SALE OF THE HOU SE PROPERTY WAS NOT USED FOR THE PURCHASE OF THE NEW ASSET. TO THIS EXTENT, ASSESSEE CANNOT CLAIM EXEMPTION U/S 54 OF THE INCOM E TAX ACT. FOR BUTTRESSING HIS CONTENTIONS, HE RELIED UPON THE ORDER OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF VIPIN MALIK (HUF) VS. CIT REPORTED IN 183 TAXMANN 296/33 0 ITR 309. HE ALSO RELIED UPON THE ORDER OF THE ITAT IN THE CA SE OF MILAN SHARAD RUPAREL VS. ACIT REPORTED IN 27 SOT 61 (MUM) AND IN THE CASE OF SMT. KUMUDA VS. DCIT REPORTED IN 18 TAX MANN.COM 265/135 ITD 116. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. ON A PERUSAL OF SECT ION 54, WE ARE OF THE VIEW THAT EXEMPTION U/S 54 ON UTILIZATION OF CAPITAL GAIN FOR PURCHASE OF A RESIDENTIAL HOUSE OR CONSTRUCTION OF A ITA NO.467 OF 2013 R.M.M. ATHREYA BANGALORE PAGE 6 OF 9 RESIDENTIAL HOUSE IS BEING GIVEN IN SUB-SECTION 1. SUB-SECTION 2 PROVIDES A MECHANISM IF THE CAPITAL GAIN WAS NOT AP PROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE R ESIDENTIAL ASSET TOOK PLACE OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF NEW ASSET BEFORE THE DATE OF FURNIS HING THE RETURN OF INCOME U/S 139 SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN IN A SCHEDULED ACCOUNT. THE LANGUAGE OF SECTION NOWHERE SUGGESTS THAT THE SAME GAIN IS TO BE UTILIS ED FOR THE PURCHASE OF NEW ASSET. THE BENEFIT IS AVAILABLE TO THE EXTENT, CAPITAL GAIN WAS USED FOR INVESTMENT IN THE NEW RES IDENTIAL HOUSE. AS FAR AS THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF VIPIN MALIK (HUF) VS. CIT (SUPRA) IS CO NCERNED, THE FACTS ARE QUITE DISTINGUISHABLE. IN THAT CASE THE ASSESSEE HAD SOLD AGRICULTURAL LAND IN SEPTEMBER, 1995. HE HAS P AID A SUM OF RS.6,41,014/- TO A COOPERATIVE SOCIETY FOR PURCHASE OF THE FLAT. THE HON'BLE HIGH COURT HAS NOTICED PAYMENT TO THE C OOPERATIVE SOCIETY FROM 1988 UP TO 31 ST MARCH, 1995. THE DRAW OF LOTS FOR ALLOTMENT OF THE FLAT WAS DRAWN IN SEPTEMBER/OCTOBE R, 1998 I.E. AFTER TWO YEARS OF THE SALE OF THE AGRICULTURAL LAN D. THE LEARNED COUNSEL FOR THE ASSESSEE RAISED AN ARGUMENT THAT TH E AUTHORITIES BELOW MISDIRECTED THEMSELVES IN REQUIRING THAT THE PURCHASE OF THE PROPERTY MUST BE PAID AFTER SELLING OF THE AGRI CULTURAL LAND IN AS MUCH AS THE VERY LANGUAGE OF SECTION 54F CONTAIN S AN EVENTUALITY OF PURCHASE OF THE RESIDENTIAL HOUSE, E VEN BEFORE ONE YEAR OF THE SALE OF THE AGRICULTURAL LAND. THE HON' BLE COURT HAS ALSO OBSERVED THAT THE PROPOSITION AS CANVASSED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS NOT IN QUESTION AND THE SECTION ITSELF SAYS THAT THE PURCHASE OF A NEW RESIDENTIAL HOUSE C AN BE MADE ITA NO.467 OF 2013 R.M.M. ATHREYA BANGALORE PAGE 7 OF 9 EITHER BEFORE ONE YEAR OF THE SALE OF THE AGRICULTU RAL LAND OR AFTER TWO YEARS OF THE SALE OF THE AGRICULTURAL LAND. THE BENEFIT WAS DENIED ON THE FACTS OF THAT CASE THAT PURCHASE OF T HE FLAT IN THE HANDS OF THE ASSESSEE WOULD BE ACCEPTED ON THE DAY WHEN DRAW OF LOTS FOR ALLOTMENT OF FLAT TAKEN PLACE IN THE SO CIETY AND ULTIMATELY ALLOTMENT LETTER WAS ISSUED TO THE ASSES SEE. THIS LETTER WAS ISSUED IN OCTOBER, 1998 WHEREAS THE LAND WAS SO LD IN SEPTEMBER, 1995. THEREFORE, IT WAS HELD THAT INVEST MENT WAS NOT MADE WITHIN A PERIOD OF TWO YEARS FROM THE SALE OF THE AGRICULTURAL LAND AND THEREFORE, THE ASSESSEE IS NO T ENTITLED. THE SECOND REASON ASSIGNED BY THE HON'BLE COURT WAS THA T AGRICULTURAL LAND WAS OWNED BY VIPN MALIK (HUF) AND FLAT WAS NOT PURCHASED IN THE NAME OF HUF, RATHER IT WAS IN THE NAME OF VIPIN MALIK. THUS, THIS AUTHORITY IN A WAY GOES IN FAVOUR OF THE ASSESSEE IN THE PRESENT CASE. IT IS NOT FOR THE PRO POSITION THAT BENEFIT U/S 54 WOULD BE GIVEN ONLY TO THE EXTENT TH E INVESTMENT WAS MADE OUT OF THE SAME AMOUNT OF THE CAPITAL GAIN RESULTED TO THE ASSESSEE. WE ARE NOT CONCERNED WHEN THE PAYMENT S WERE MADE, BECAUSE MERE PAYMENTS DO NOT ENTITLE AN ASSES SEE TO SAY THAT HE HAS ACQUIRED THE PROPERTY. THE APPOINTED DA TE IS THE DATE WHEN THE TRANSACTION OF PURCHASE IS TO BE CONSIDERE D AS A TRANSFER WITHIN THE MEANING OF SECTION 2(47) BETWEE N THE ASSESSEE WHO CLAIMS EXEMPTION U/S 54 AND THE VENDOR WHO HAS SOLD THE PROPERTY NAMELY THE NEW ASSET. IN THE PRES ENT CASE, THE NEW ASSET CAN BE TERMED TO BE ACQUIRED EITHER IN MA Y, 2008 WHEN POSSESSION WAS GIVEN TO THE ASSESSEE OR 15.10. 2009 WHEN ULTIMATE DEED WAS REGISTERED IN FAVOUR OF THE ASSES SEE. THE TRANSFER AS PER SECTION 2(47) FOR PURCHASE OF THE N EW ASSET WOULD BE CONSIDERED AS TAKEN PLACE IN MAY, 2008 OR ITA NO.467 OF 2013 R.M.M. ATHREYA BANGALORE PAGE 8 OF 9 15.10.2009, IT CANNOT BE CONSIDERED FROM THE DATE W HEN THE ASSESSEE MERELY AGREED TO PURCHASE A FLAT WITH L & T. THE HON'BLE DELHI HIGH COURT HAS ALSO CONSIDERED THE CI RCULAR ISSUED BY THE BOARD WHEREBY IF AN ASSESSEE HAD MADE BOOKIN G OF A FLAT WITH DELHI DEVELOPMENT AUTHORITY, ETC., THEN THAT B OOKING WAS CONSIDERED AS THE DATE OF INVESTMENT. WHILE CONSIDE RING THE CIRCULAR, THE HON'BLE COURT HAS OBSERVED THAT THE C BDT CIRCULAR GAVE BENEFIT OF SECTION 54 TO AN ALLOTTEE OF A DDA FLAT. THE SCHEME OF THE DDA WHICH WAS APPROVED BY THE CBDT WAS ON TH E BASIS THAT THE ALLOTMENT LETTER IS ISSUED WHEN PAYMENT OF THE FIRST INSTALLMENT OF THE COST OF CONSTRUCTION IS MADE, TH EN SUCH ALLOTMENT IS FINAL, UNLESS IT IS CANCELLED OR THE A LLOTTEE WITHDRAWS FROM THE SCHEME. THE ALLOTTEE UNDER THE SCHEME OF S ELF FINANCING GETS TITLE ON THE ISSUE OF THE ALLOTMENT LETTER. SH RI VIPIN MALIK SOUGHT THE BENEFIT OF THIS CIRCULAR ON THE GROUND T HAT HE HAS MADE PAYMENT TO A COOPERATIVE SOCIETY. THE HON'BLE COURT HAS OBSERVED THAT THIS CIRCULAR IS NOT APPLICABLE IN TH E ALLEGED PAYMENTS TO THE COOPERATIVE SOCIETY, WHERE DRAW OF LOTS WOULD BE ANNOUNCED LATER ON. 6. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE V IEW THAT THE LEARNED CIT (A) HAS ERRED IN RESTRICTING THE BENEFI T U/S 54 TO THE EXTENT THE PAYMENTS MADE WITHIN A PERIOD OF ONE YEA R FOR PURCHASE OF THE NEW ASSET. THE PURCHASE OF THE NEW ASSET IS TO BE CONSIDERED EITHER AS MAY, 2008 OR 15.10.2009 ON THAT DATE TOTAL INVESTMENT IN THE NEW ASSET IS TO BE TAKEN IN TO CONSIDERATION. THE ASSESSEE HAS COMPUTED THE CAPITA L GAIN ON THIS BASIS AND THEREFORE, HE IS ENTITLED FOR THE EX EMPTION TO THE EXTENT OF THE INVESTMENT MADE IN THE PURCHASE OF NE W ASSET. THE ITA NO.467 OF 2013 R.M.M. ATHREYA BANGALORE PAGE 9 OF 9 ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE EXE MPTION ADMISSIBLE TO THE ASSESSEE. THE ORDER OF THE LEARNE D CIT (A) IS SET ASIDE TO THIS EXTENT. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH SEPTEMBER, 2014. SD/- SD/- (JASON P. BOAZ) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED 26 TH SEPTEMBER, 2014. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE