Sh. Raj Kumar, Jagaron V. CIT III, Ludhiana

ITA 473/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63897 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMAR
• Section: 143(3); 54F; 54; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L. KARWA, VP AND SHRI T.R. SOOD, AM ITA NO. 473/CHD/2012 ASSESSMENT YEAR: 2007-08 RAJ KUMAR V CIT-III H NO. 1754, ST. NO. 6L LUDHIANA HIRA BAGH JAGRAON ACJPK 7613 E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUDHIR SEHGAL RESPONDENT BY: SMT. JYOTI KUMAR DATE OF HEARING: 23.08.201 2 DATE OF PRONOUNCEMENT: 31.08.2012 ORDER PER T.R. SOOD, A.M THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER PASSED U/S 263 OF THE ACT BY THE CIT-III, LUDHIANA. 2. BRIEF FACTS OF THE CASE ARE THAT UPON EXAMINATIO N OF THE ASSESSMENT ORDER THE CIT NOTICED THAT THE ASSESSING OFFICER HAD ALLO WED DEDUCTION U/S 54F OF THE ACT TO THE ASSESSEE WHICH WAS NOT CORRECT. ACCORDI NGLY A SHOW CAUSE NOTICE WAS ISSUED AND THE CONTENTS OF THE NOTICE HAS BEEN REPRODUCED AT PARA 3 WHICH READS AS UNDER:- YOU CLAIMED EXEMPTION U/S 54F AMOUNTING TO RS. 15, 45,075/- OUT OF LONG TERM CAPITAL GAINS AND THE SAME WAS ALLOWED BY THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT U/S 143(3) OF THE ACT. AS PER RECORDS, YOU HAVE MADE PART PAYMENT FOR PURCHASE OF FLAT FROM TH E SOCIETY. THERE IS NOTHING TO SHOW THAT THE POSSESSION OF THE FLAT AND THE CONVEYANCE AS PER THE AGREEMENT WAS MADE IN YOUR FAVOUR BY M/S EMMAR MGF LAND LTD. (THE COMPANY) WITHIN THE PRESCRIBED PERIOD. THE OR IGINAL ASSET WAS SOLD ON 28.7.2006. THE NEW ASSET SHOULD HAVE BEEN PURCH ASED BY 27.7.2008. THEREFORE, THE CONDITIONS OF SECTION 54F WERE NOT F ULFILLED AND EXCESS EXEMPTION WAS ALLOWED TO YOU TO THE EXTENT RS. 15,4 5,075/- WHICH HAS LED TO UNDER ASSESSMENT OF INCOME. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS MAI NLY SUBMITTED THAT EXEMPTION U/S 54F CLAIMED WAS CORRECTLY ALLOWED BEC AUSE THE ASSESSEE HAD 2 MADE AN INVESTMENT IN FLAT UNDER SELF FINANCING SCH EME COVERED BY CIRCULAR NO. 471 DATED 15.10.1986 AND CIRCULAR NO. 672 DATED 16. 12.1993. RELIANCE WAS PLACED ON CERTAIN CASE LAWS. 4. ON EXAMINATION OF THE ABOVE SUBMISSIONS, THE LD. CIT WAS NOT SATISFIED WITH THE SAME BECAUSE THE ASSESSEE HAD REALIZED THE TOTAL SALE CONSIDERATION ON ORIGINAL ASSET ON 28.7.2006 AT RS. 1,37,03,349/-. OUT OF THIS THE ASSESSEE HAD INVESTED A SUM OF RS. 1,13,20,000/- IN NATIONAL HIG HWAY BONDS AND BALANCE AMOUNT OF RS. 15,45,075/- WAS STATED TO HAVE BEEN I NVESTED TOWARDS PURCHASE OF RESIDENTIAL FLAT IN A PROJECT FLOATED BY M/S EMMAR MGF LTD. ACCORDING TO THE LD. CIT THE ASSESSEE WAS REQUIRED TO MAKE INVESTMENT BE FORE 27.7.2009 AND AS PER AGREEMENT DATED 14.3.2008 THE SAID COMPANY AS PER P ARA 21 OF THE AGREEMENT STIPULATED THE POSSESSION OF THE FLAT WOULD BE GIVE N WITHIN A PERIOD OF 36 MONTHS FROM THE DATE OF ALLOTMENT. ON FURTHER QUERY IT WA S ADMITTED BY THE ASSESSEE VIDE LETTER DATED 18.8.2011 THAT NO FURTHER INSTALL MENT HAD BEEN PAID AND THE CONSTRUCTION HAS BEEN STOPPED BECAUSE OF CERTAIN DI SPUTES. ACCORDING TO THE LD. CIT THE ASSESSING OFFICER FAILED TO NOTICE THAT THE POSSESSION OF THE FLAT WOULD BE AVAILABLE ONLY BY 14.3.2011 AND EVEN TODAY I.E. ON THE DATE OF ORDER CONSTRUCTION WAS NOT COMPLETE, THEREFORE, THE PURPOSE FOR WHICH DEDUCTION U/S 54F WAS GIVEN I.E. TO PROMOTE HOUSING WOULD GET DEFEATED. IN THIS REGARD HE ALSO RELIED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PAWAN KUMAR GARG V CIT, ITA NO. 265 OF 2007. HE ALSO OBSERVED THAT CIRCULAR NO. 471 AND 672 WAS SPECIFICALLY ISSUED IN THE CASE OF DDA WHIC H IS A GOVERNMENT ORGANIZATION AND THE SAME COULD NOT BE APPLIED TO T HE PRIVATE BUILDERS. ON THE BASIS OF THESE OBSERVATIONS HE HELD THAT THE ASSES SMENT FRAMED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND DIRECTED THE ASSESSING OFFICER TO WITHDRAWN THE DEDUCTION U/S 54F OF THE ACT. 5 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REFERR ED TO ASSESSMENT ORDER AND SUBMITTED THAT IN THIS CASE THE ASSESSING OFFIC ER HAS SPECIFICALLY MADE ENQUIRY FOR THIS ISSUE OF DEDUCTION U/S 54F OF THE ACT AND REPLIES WERE SUBMITTED 3 ACCORDINGLY AND THE SAME IS CONTAINED IN PARA 2 OF THE ASSESSMENT ORDER. THEN HE REFERRED TO THE CIRCULAR NO. 471 DATED 15.10.198 6 THROUGH WHICH THE BOARD HAD CLARIFIED THAT IN CASE OF FLAT BOOKING UNDER SE LF FINANCE SCHEME OF DDA THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 54 AND 54F OF THE ACT BECAUSE IT WILL NOT MAKE A DIFFERENCE IF THE COST OF CONSTRUCTION WAS A LLOWED TO BE PAID IN INSTALLMENTS TO THE DDA BECAUSE IT CAN BE ASSUMED T HAT DDA WAS MAKING CONSTRUCTION ON BEHALF OF THE ASSESSEE. THIS POSIT ION WAS FURTHER CONSIDERED BY THE BOARD VIDE CIRCULAR NO. 672 DATED 16.12.1993 WH EREIN THE BENEFIT GIVEN IN CASE OF ALLOTMENT MADE BY DDA WAS EXTENDED TO OTHER COOPERATIVE SOCIETIES OR OTHER INSTITUTIONS, THEREFORE, THE ASSESSEE IS CLE ARLY ENTITLED TO DEDUCTION IF MONEY WAS PAID TO THE BUILDER TOWARDS COST OF CONST RUCTION AND THE AMOUNT WAS PAID IN INSTALLMENTS. IN ANY CASE IN THE LIGHT OF CIRCULAR OF THE BOARD THIS WAS ONE OF THE POSSIBLE VIEW AND IF THE ASSESSING OFFICER H AS TAKEN A POSSIBLE VIEW THEN SUCH ORDER CANNOT BE CALLED TO BE ERRONEOUS. IN TH IS REGARD HE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MA X INDIA, 295 ITR 282. HE FURTHER SUBMITTED THAT THE DECISION RELIED ON BY TH E CIT IS TOTALLY DISTINGUISHABLE BECAUSE IN THAT CASE THE ASSESSEE HAD SIMPLY PURCHA SED PLOT AND HAD NOT MADE ANY CONSTRUCTION. 6 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RE FERRED TO PARA 10 OF THE ORDER OF CIT AND POINTED OUT THAT IN THIS CASE THE COMPANY HAS STOPPED THE CONSTRUCTION AND THEREFORE, MERE PAYMENT OF TWO IN STALLMENTS COULD NOT BE CONSTRUED AS THE CONSTRUCTION OF THE HOUSE. HE ALS O STRONGLY SUPPORTED THE ORDER OF LD. CIT. 7 IN THE REJOINDER THE LD. COUNSEL OF THE ASSESSEE POINTED OUT TO PARA 21.1 WHICH HAS BEEN EXTRACTED BY THE LD. CIT WHICH CLEAR LY STATES THE FLATS WAS TO BE GIVEN WITHIN 36 MONTHS SUBJECT TO FORCE MAJEURE. I N THE CASE BEFORE US, THE CONSTRUCTION HAS TO BE STOPPED BY THE BUILDER BECAU SE A PIL WAS FILED IN THE COURT REGARDING CERTAIN ISSUES OF ENVIRONMENT WHICH WAS BEYOND THE CONTROL OF BUILDER AS WELL AS THE ASSESSEE. 4 8 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AND FIND UNDISPUTABLY ISSUES REGARDING ALLOWANCE OF DEDUCTION U/S 54F HAS BEEN DISCUSSED BY THE ASSESSING OFFICER. WE FURTHER FIND THAT THROUGH CI RCULAR NO. 471 IT WAS DECIDED BY THE BOARD AS UNDER: THE BOARD HAVE BEEN ADVISED THAT UNDER THE ABOVE C IRCUMSTANCES, THE INFERENCE THAT CAN BE DRAWN IS THAT THE DDA TAKES U PTO THE CONSTRUCTION WORK ON BEHALF OF THE ALLOTTEE AND THAT THE TRANSAC TION INVOLVED IS NOT A SALE. UNDER THE SCHEME THE TENTATIVE COST OF CONST RUCTION IS ALREADY DETERMINED AND THE DDA FACILITATES THE PAYMENT OF T HE COST OF CONSTRUCTION IN INSTALLMENTS SUBJECT TO THE CONDITION THAT THE A LLOTTEE HAS TO BEAR THE INCREASE, IF ANY, IN THE COST OF CONSTRUCTION. THE REFORE, FOR THE PURPOSE OF CAPITAL GAINS TAX THE COST OF THE NEW ASSET IS THE TENTATIVE COST OF CONSTRUCTION AND THE FACT THAT THE AMOUNT WAS ALLOW ED TO BE PAID IN INSTALLMENTS DOES NOT AFFECT THE LEGAL POSITION STA TED ABOVE. IN VIEW OF THESE FACTS, IT HAS BEEN DECIDED THAT CASES OF ALLO TMENT OF FLATS UNDER THE SELF-FINANCING SCHEME OF THE DDA SHALL BE TREATED A S CASES OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS. THE ABOVE CLEARLY SHOWS THAT THE BOARD HAD ALLOWED THE DEDUCTION U/S 54 AND 54F OF THE ACT IN CASE OF ALLOTMENT OF HOUSE ON INS TALLMENT BASIS BY DDA. SINCE THIS WOULD COVER THE CASES OF DDA, THEREFORE, THE ISSUE WAS FURTHER EXAMINED AND FRESH CIRCULAR NO. 672 HAS BEEN ISSUED ON 16.12.1993 WHICH READS AS UNDER:- 1 ATTENTION IS INVITED TO BOARDS CIRCULAR NO. 471 DATED 15.10.1986. IT WAS CLARIFIED THEREIN THAT CASES OF ALLOTMENT OF FL ATS UNDER THE SELF- FINANCING SCHEME OF THE DDA SHOULD BE TREATED AS CA SES OF CONSTRUCTION FOR THE PURPOSES OF SECTIONS 54 AND 54F OF THE INCO ME-TAX ACT, 1961. THE BOARD HAS SINCE RECEIVED REPRESENTATIONS THAT EVEN IN RESPECT OF ALLOTMENT OF FLATS/HOUSES BY COOPERATIVE SOCIETIES AND OTHER INSTITUTIONS, WHOSE SCHEMES OF ALLOTMENT AND CONSTRUCTION ARE SIM ILAR TO THOSE OF DDA 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 CONSTRUCTION OF FLATS/HOUSES BY THE COOPERATIVE SOCIETIES OR OTHER INSTITUTIONS ARE SIM ILAR TO THOSE MENTIONED IN PARA 2 OF BOARDS CIRCULAR NO. 471, DARTED 15.10.19 86 SUCH CASES MAY ALSO BE TREATED AS CASES OF CONSTRUCTION FOR THE PU RPOSES OF SECTIONS 54 AND 534F OF THE INCOME-TAX ACT. THE ABOVE MAKES IT CLEAR THAT EVEN IF MONEY IS PAID IN INSTALLMENTS EVEN IN CASE OF COOPERATIVE HOUSING SOCIETY OR OTHER INSTITUTION S, EVEN THEN BENEFIT U/S 54F HAS TO BE ALLOWED. 5 9 IN CASE BEFORE US, THE ASSESSEE HAS BOOKED THE FL AT ON 14.3.2008. THE FLAT WAS TO BE ALLOTTED WITHIN 36 MONTHS AS PER CLA USE 1(1) WHICH READS AS UNDER:- 21.1 SUBJECT TO FORCE MAJEURE CONDITIONS AND REASO NS BEYOND THE CONTROL OF THE COMPANY AND SUBJECT TO THE ALLOTTEE NOT BEING IN DEFAULT OF ANY OF THE PROVISIONS OF THIS AGREEMENT AND HAVING COMPLIED WITH ALL PROVISIONS, FORMALITIES, DOCUMENTATION ETC. AND THE TERMS AND CONDITIONS OF THIS AGREEMENT, THE COMPANY PROPOSES TO HAND OVER T HE POSSESSION OF THE APARTMENT WITHIN A PERIOD OF 36 MONTHS FROM THE DAT E OF ALLOTMENT. THE ALLOTTEE AGREES AND UNDERSTANDS THAT THE COMPANY SH ALL BE ENTITLED TO A GRACE PERIOD OF NINETY (90) DAYS, AFTER THE EXPIRY OF 3 MONTHS FOR APPLYING AND OBTAINING THE OCCUPATION CERTIFICATE IN RESPECT OF THE GROUP HOUSING COMPLEX. THE ABOVE CLAUSE IS SUBJECT TO FORCE MAJEURE I.E. B ARRING UNFORESEEN CIRCUMSTANCES THE FLAT WOULD BE ALLOTTED TO THE ASS ESSEE. HOWEVER, THERE WAS UNFORESEEN CIRCUMSTANCE IN THE FORM OF LITIGATION A RISING OUT OF PIL ON ENVIRONMENT ISSUES. THEREFORE, MERELY BECAUSE CON STRUCTION HAS BEEN STOPPED BECAUSE OF UNFORESEEN CIRCUMSTANCES CANNOT LEAD TO CONCLUSION THAT THE DEDUCTION U/S 54 F IS NOT AVAILABLE. 10 WE HAVE ALSO PERUSED THE DECISION OF HON'BLE PUN JAB & HARYANA HIGH COURT IN CASE OF PAWAN KUMAR GARG (SUPRA) AND FIND THAT THE CASE HAS BEEN RIGHTLY DISTINGUISHED BY THE LD. COUNSEL OF THE ASS ESSEE BECAUSE IN THAT CASE THE ASSESSEE HAD MERELY PURCHASED A PLOT AND THERE WAS A CATEGORICAL FINDING BY THE ASSESSING OFFICER AS WELL AS BY THE TRIBUNAL THAT T HE ASSESSEE HAS NOT CONSTRUCTED THE HOUSE THEREFORE, HON'BLE COURT HEL D THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 54F. IN THESE CIRCUMSTAN CES WE FIND NOTHING WRONG IN THE ASSESSMENT ORDER. IN ANY CASE THE VIEW TAKEN B Y THE ASSESSING OFFICER IS ONE OF THE POSSIBLE VIEW AND THE HON'BLE SUPREME CO URT IN THIS REGARD HAS OBSERVED IN THE CASE OF CIT V. MAX INDIA LTD, 295 I TR 282 (S.C) AS UNDER: THE PHRASE PREJUDICIAL TO THE INTEREST OF THE REV ENUE IN SECTION 263 OF THE INCOME-TAX ACT, 1961 HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CA NNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR E XAMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PERMISSIBLE IN LA W AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE RE VENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 6 THEREFORE, IN VIEW OF ABOVE DECISION IT CAN BE SAI D THAT THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEW AND THEREFORE, THE ASSESSMENT ORDER CANNOT BE CALLED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY WE QUASH THE ORDER U/S 263 OF THE ACT. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 31.08.2012 SD/- SD/- (H.L. KARWA) (T.R. SOOD) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 31.08.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 7