Sandeep Khosla, V. DCIT,

ITA 509/BANG/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6996 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N BALAKRISHNAN
• Assessee Lawyers: SHREESHKUMAR ESHWAR HEGDE
• Keywords: Capital asset; Benefit of exemption
• Section: 143(3); 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER A ND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO. 509 / BANG/20 1 3 (ASSESSMENT YEAR: 20 08 - 09 ) SHRI SANDEEP KHOSLA, NO.18, 17 TH MAIN, HAL II A STAGE, INDIRANAGAR, BANGALORE. PAN:AFDPK5315A APPELLANT VS. DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 7(1), BANGALORE. RESPONDENT APPELLANT BY: SHRI SHREESHKUMAR ESHWAR HEGDE, CA. RESPONDENT BY: SHRI N.BALAK RISHNAN, JCIT (DR) DATE OF HEARING : 24 - 07 - 2014 . DATE OF PRONOUNCEMENT: 08 - 08 - 2014 . O R D E R PER SMT. P.MADHAVI DEVI, JM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(A) - LTU, BANGALORE, DATED 29 - 01 - 2013 FOR THE AS SESSMENT YEAR 2008 - 09. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF CLAIM OF EXEMPTION U/S 54F OF THE INCOME - TAX ACT, 1961[HEREINAFTER ITA NO . 509/BANG/2013 SHRI SANDEEP KHOSLA. PAGE 2 OF 8 REFERRED TO AS 'THE ACT'] OF THE CAPITAL GAINS ARISING OUT OF SALE OF LONG TERM CAPITAL ASSET . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR ON 24 - 9 - 2008 DECLARING A TOTAL INCOME OF RS.88,11,800/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) O F THE ACT, THE ASSESSEE S CLAIM OF EXEMPTION U/S 54F OF THE ACT WAS EXAMINED BY THE ASSESSING OFFICER (AO). THE ASSESSEE FURNISHED ALL THE REQUIRED DOCUMENTS IN SUPPORT OF HIS CLAIM THAT HE HAS JOINTLY SOLD A SITE NO.147 & 148 BEARING KHATA NO.520 & 521 LO CATED AT RAMAGONDANAHALLI VILLAGE, VARTHUR HOBLI, BANGALORE, FOR A CONSIDERATION OF RS.88,22,000/ - VIDE SALE DEED DATED 26 - 9 - 2007. THE ASSESSEE ARRIVED AT THE CAPITAL GAINS OF RS.87,52,000/ - AND CLAIMED THAT THE SAME WAS UTILIZED FOR CONSTRUCTION OF A HOU SE AT SY. NO.121/2A, AMANIBELLANDUR KHANE VILLAGE, VARTHUR HOBLI, BANGALORE. FROM THE PERUSAL OF THE COPY OF THE PLAN APPROVAL, THE AO OBSERVED THAT THE ASSESSEE HAS GOT THE PLAN APPROVED FOR CONSTRUCTION OF HOUSE ON 3 - 8 - 2005. THEREFORE, HE CAME TO THE C ONCLUSION THAT THE CONSTRUCTION OF HOUSE STARTED IN THE FIRST QUARTER OF THE FINANCIAL YEAR 2006 - 07 AND THEREFORE THE CONSTRUCTION OF THE HOUSE HAS COMMENCED MUCH PRIOR TO THE DATE OF TRANSFER I.E. 1 YEAR S PRIOR TO THE DATE OF TRANSFER. HE HELD THAT AS P ER THE PROVISIONS OF SEC.54F, THE ASSESSEE HAS TO CONSTRUCT A HOUSE WITHIN THREE YEARS AFTER THE DATE OF TRANSFER OF ITA NO . 509/BANG/2013 SHRI SANDEEP KHOSLA. PAGE 3 OF 8 PROPERTY AND THEREFORE CANNOT COMMENCE CONSTRUCTION OF THE HOUSE PRIOR TO THE DATE OF SALE. HE FURTHER OBSERVED THAT THE ASSESSEE HAS NOT COMPLETED THE CONSTRUCTION WITHIN THE STIPULATED TIME AND THAT NO EVIDENCE IS PRODUCED IN THIS REGARD. THUS, HE FORMED AN OPINION THAT THE ASSESSEE S CLAIM IS TOTALLY INCORRECT. SHOW CAUSE NOTICE WAS THEREFORE ISSUED TO THE ASSESSEE TO EXPLAIN AS TO HOW HIS CLAIM U/S 54F IS MAINTAINABLE. THE ASSESSEE , WHILE REITERATING HIS CONTENTIONS, PLACED RELIANCE UPON (I) THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. J.R.SUBRAMANYA BHAT (165 ITR 571) IN SUPPORT OF HIS CONTENTION THAT THE DATE OF COMMENCEMENT OF CONSTRUCTION WAS NOT RELEVANT AS THE LAW HAS STIPULATED ONLY THE TIME - LIMIT FOR COMPLETION OF THE CONSTRUCTION AND ALSO THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF (II) CIT VS. H.K.KAPOOR (234 ITR 753) AND THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF (III) CIT VS. M.VASUDEVAN CHETTIAR (234 ITR 705). THE AO, HOWEVER, DID NOT ACCEPT THE ASSESSEE S CONTENTION AND HELD THAT THE DECISIONS ON WHICH THE ASSESSEE HAS PLACED RELIANCE ARE DISTINGUISHABLE ON FACTS. HE, ACCORDIN GLY, DISALLOWED THE CLAIM U/S 54F OF THE ACT AND BROUGHT THE CAPITAL GAIN TO TAX. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. ITA NO . 509/BANG/2013 SHRI SANDEEP KHOSLA. PAGE 4 OF 8 4. THE LEARNED COUNSEL FO R THE ASSESSEE, SHRI SHREESHKUMAR ESHWAR HEGDE, REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAD COMMENCED THE CONSTRUCTION OF THE HOUSE PRIOR TO THE DATE OF SALE OF THE PROPERTY BUT HAS COMPL ETED THE CONSTRUCTION WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF SALE OF THE PROPERTY AS STIPULATED U/S 54F OF THE ACT. AS REGARDS THE COMMENCEMENT OF CONSTRUCTION PRIOR TO THE DATE OF SALE, BEING ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT, THE LEAR NED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF J.R.SUBRAMANYA BHAT (CITED SUPRA) AS WELL AS IN THE CASE OF CIT VS. SAMBANDAM UDAYKUMAR (345 ITR 389). AS REGARDS COMPLETION OF THE HOUSE WI THIN THREE YEARS FROM THE DATE OF SALE OF PROPERTY, THE STAND OF THE REVENUE HAS BEEN THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE IN SUPPORT OF THE SAME. THE LEARNED COUNSEL FOR THE ASSESSEE FURNISHED BEFORE US COPIES OF THE FIRST ELECTRICITY BILL DAT ED 19 - 6 - 2009 AND INTERNET USAGE BILL ISSUED FOR THE PERIOD 5 - 6 - 2009 TO 4 - 7 - 2009 AND ALSO THE PROPERTY TAX RECEIPT REMITTED TO THE BBMP FOR THE RELEVANT PERIOD AS EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE CONSTRUCTION OF THE HOUSE WAS COMPLETED WITHIN TH REE YEARS FROM THE DATE OF SALE I.E. 26 - 9 - 2007. THE ASSESSEE HAS ALSO PLACED BEFORE US PAYMENTS MADE TO CONTRACTORS AND OTHERS EVIDENCING TOTAL SUM EXPENDED AND ALSO COPIES OF THE ITA NO . 509/BANG/2013 SHRI SANDEEP KHOSLA. PAGE 5 OF 8 BANK STATEMENT WHEREIN THE CAPITAL GAINS HAVE BEEN DEPOSITED AND THEREAFTER UTILIZED FOR THE CONSTRUCTION OF THE HOUSE. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND REITERATED THE STAND OF THE REVENUE THAT THE ASSESSEE WOULD BE ELIGIBLE FOR EXEMPTION U/S 54F OF T HE ACT ONLY IF THE CONSTRUCTION HAD COMMENCED AFTER THE DATE OF SALE OF THE CAPITAL ASSET AND THE CONSTRUCTION IS ALSO COMPLETED WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF SALE OF THE CAPITAL ASSET. 5. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THERE IS NO DISPUTE AS REGARDS THE COMMENCEMENT OF CONSTRUCTION OF THE HOUSE 1 YEAR PRIOR TO THE DATE OF SALE. WHETHER THE ASSESSEE WOULD BE ELIGIBLE FOR EXEMPTION IN SUCH CIRCUMSTANCES HAD COME UP BEFO RE THE JURISDICTIONAL HIGH COURT IN THE CASE OF J.R.SUBRAMANYA BHAT (CITED SUPRA) AS WELL AS IN THE CASE OF CIT VS. SAMBANDAM UDAYKUMAR (CITED SUPRA). THE JURISDICTIONAL HIGH COURT, WHILE CONSIDERING THE ELIGIBILITY OF THE ASSESSEE THEREIN U/S 54F OF THE ACT IN THE CASE OF SAMBANDAM UDAYKUMAR (CITED SUPRA) , HAS HELD THAT SEC.54F, BEING A BENEFICIAL PROVISION FOR PROMOTING CONSTRUCTION OF RESIDENTIAL HOUSE, HAS TO BE CONSTRUED LIBERALLY FOR ACHIEVING THE PURPOSE FOR WHICH IT WAS INCORPORATED IN THE STATUTE. IT WAS HELD THAT ONCE IT IS DEMONSTRATED THAT CONSIDERATION RECEIVED ON TRANSFER OF THE PROPERTY HAS BEEN ITA NO . 509/BANG/2013 SHRI SANDEEP KHOSLA. PAGE 6 OF 8 INVESTED EITHER IN PURCHASE OR IN CONSTRUCTION OF A RESIDENTIAL HOUSE, EVEN THOUGH THESE TRANSACTIONS ARE NOT COMPLETE IN ALL RESPECTS AND AS REQUIR ED UNDER LAW, THE SAME WOULD NOT DISENTITLE THE ASSESSEE FROM THE BENEFIT OF EXEMPTION U/S 54F OF THE ACT. IN THIS CASE, IT WAS HELD THAT EVEN THOUGH THE CONSTRUCTION WAS NOT COMPLETED WITHIN THREE YEARS AS CERTAIN WORK LIKE FLOORING, ELECTRICAL FITTINGS, FITTINGS OF DOORS ETC., WERE STILL PENDING, SINCE THE REGISTERED SALE DEED WAS EXECUTED SHOWING THE TRANSFER OF PROPERTY IN ASSESSEE S FAVOUR AND THE ASSESSEE WAS IN POSSESSION AND OCCUPATION OF THE SAID PROPERTY, THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF EXEMPTION U/S 54F OF THE ACT. IN THE CASE OF J.R.SUBRAMANYA BHAT (CITED SUPRA) THE JURISDICTIONAL HIGH COURT HAS HELD THAT THE DATE OF COMMENCEMENT OF CONSTRUCTION OF THE NEW BUILDING WAS IMMATERIAL AND SINCE THE ASSESSEE HAD CONSTRUCTED THE BUILDING WITHIN TWO YEARS FROM THE DATE OF SALE OF THE OLD BUILDING, HE WAS ENTITLED TO RELIEF U/S 54F OF THE ACT. SIMILAR VIEW WAS EXPRESSED BY THE ALLAHABAD HIGH COURT IN THE CASE OF H.K.KAPOOR (CITED SUPRA). IN VIEW OF THE SAME, WE ARE CONVINCED THAT THE ASSES SEE IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT EVEN THOUGH CONSTRUCTION OF THE HOUSE COMMENCED PRIOR TO THE DATE OF SALE PROVIDED HE HAS COMPLETED THE CONSTRUCTION WITHIN THE STIPULATED PERIOD OF THREE YEARS FROM THE DATE OF SALE. ITA NO . 509/BANG/2013 SHRI SANDEEP KHOSLA. PAGE 7 OF 8 6. IN SUPPORT OF THE C ONTENTION THAT THE CONSTRUCTION WAS COMPLETED WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF SALE, THE ASSESSEE HAD SUBMITTED THAT THE BILLS RELATING TO ELECTRICITY AND INTERNET USAGE WHICH ARE PLACED AT PAGES 36 TO 41 OF THE PAPER BOOK FILED BEFORE US. FROM THE ELECTRICITY BILL, PLACED AT PAGE 36 OF THE PAPER BOOK, IT IS NOTICED THAT THE PREVIOUS READING OF THE METER IS 0 WHICH PROVES THAT THIS IS THE FIRST BILL OF ELECTRICITY CONSUMED BY THE ASSESSEE AT THE RESIDENTIAL HOUSE CONSTRUCTED BY THE ASSES SEE. THE BILL IS DATED 10 - 6 - 2009 . AT PAGES 37 TO 41 IS THE TELEPHONE BILL OF THE ASSESSEE WHEREIN THE BILL IS DATED 6 - 7 - 2009 AND THE PREVIOUS READING IS SHOWN AS NIL . AT PAGE 39 WE FIND THE MODEM ACTIVATION CHARGES ALSO INCLUDED IN THIS BILL WHICH, AC CORDING TO THE ASSESSEE, PROVES THAT THE INSTALLATION OF THE TELEPHONE WAS DONE ON 6 TH JULY 2009 . A T PAGE 42 IS THE PROPERTY TAX PAID RECEIPT WHEREIN T HE DATE OF RECEIPT IS 22 - 12 - 2009 AND THE PROPERTY TAX IS LEVIED FOR THE YEAR 2008 - 09. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, ALL THESE GO TO SHOW THAT THE ASSESSEE WAS ALREADY IN OCCUPATION AND POSSESSION OF THE SAID PROPERTY AND WITHOUT SUBSTANTIAL COMPLETION OF THE CONSTRUCTION, THE ASSESSEE COULD NOT HAVE ENTERED THE PROPERTY AND UTILIZED THE SERVICES OF ELECTRICITY AS WELL AS TELEPHONE. WE FIND THAT THE ASSESSEE HAS PLACED THE ELECTRICITY AS WELL AS INTERNET BILL BEFORE THE CIT(A) AND THE COPIES OF THE PROPERTY TAX RECEIPT WERE NOT FILED BEFORE EITHER OF THE AUTHORITIES BELOW. IN OUR OPINIO N, THESE DOCUMENTS GO TO ITA NO . 509/BANG/2013 SHRI SANDEEP KHOSLA. PAGE 8 OF 8 PROVE THAT THE ASSESSEE HAD, IN FACT, COMPLETED THE CONSTRUCTION WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF SALE OF THE PROPERTY. HOWEVER, IN OUR OPINION, THESE DOCUMENTS HAVE NOT BEEN VERIFIED BY THE AUTHORITIES BELOW AND THEREFORE, THE ISSUE NEEDS TO BE REMITTED TO THE FILE OF THE AO FOR VERIFICATION OF THESE DETAILS FILED BY THE ASSESSEE. IN VIEW OF THE SAME, WE REMIT THE ISSUE BACK TO THE FILE OF THE AO ONLY TO EXAMINE THE VERACITY AND AUTHENTICITY OF THE DOCUMENTS FILE D BY THE ASSESSEE AND IF THE DOCUMENTS ARE FOUND TO BE GENUINE, THEN THE AO IS DIRECTED TO ALLOW EXEMPTION U/S 54F OF THE ACT. IN THE RESULT, THE ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 8 TH OF AUGUS T, 2014. SD/ - SD/ - (JASON P BOAZ) (SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE