LATE SHRI NAVINCHANDRA G.PANCHAMIA ( THROUGH HIS LEGAL HEIR SHRI SANDEEP N. PANCHAMIA), MUMBAI V. ITO 21(2)(3), MUMBAI

ITA 5281/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84414 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 30-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: B V JHAVERI
• Section: 54F; 54

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, M UMBAI BEFORE S/SHRI D. KARUNAKAR RAO, (AM) AND AMIT SHUKLA, (JM) . , , ./I.T.A. NO.5281/MUM/2013 ( ! / ASSESSMENT YEAR :2010-11) SHRI SANDEEP N PANCHAMIA LEGAL HEIR OF SHRI NAVINCHANDRA G PANCHMIA, CHAMPAKLAL UDYOG BHAVAN, PLOT NO.105, UNIT NO.203, 2 ND FLOOR, SION (E), MUMBAI-400022 / VS. INCOME TAX OFFICER 21(2)(3)_, ROOM NO.504, C-10, 5 TH FLOOR, PRATYAKSHAKAR BHAVAN, BKC, BANDRA(E), MUMBAI-400051 ( '# / APPELLANT) .. ( $%'# / RESPONDENT) ' ./ &' ./PAN/GIR NO. : AACPP4201G '# ( / ASSESSEES BY SHRI B V JHAVERI $%'# ) ( /REVENUE BY SHRI AKHILENDRA YADAV * ) + / DATE OF HEARING : 3.12.2014 ,-! ) + /DATE OF PRONOUNCEMENT : 17.12.2014 / O R D E R PER AMIT SHUKLA, (JM) THIS APPEAL IS PREFERRED BY THE ASSESSEE CHALLENGIN G THE ORDER DATED 2.5.2013 OF LD. CIT(A)-32, MUMBAI FOR THE ASS ESSMENT YEAR 2010-11. 2. THE SOLE ISSUE RAISED BY THE ASSESSED IN VARIO US GROUNDS OF APPEAL, IS THAT, THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS.59, 70,700/- CLAIMED UNDER SECTION 54 OF THE INCOME TAX ACT, 1961 (THE ACT). I.T.A. NO.5281/MUM/2013 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL, WHO HAD SOLD HIS RESIDENTIAL FLAT ON 26.11.2009 FOR A TOTAL CONSIDERATION OF RS.75,00,000/- AND COMPUTED LONG TERM CAPITAL GAINS (LTCG). AGAINST THE SAID LTCG, THE ASSESSEE H AS CLAIMED DEDUCTION U/S 54 FOR A SUM OF RS.59,70,700/- IN RES PECT OF A PURCHASE OF NEW FLAT AT VADALA FOR WHICH THE AGREEMENT WAS ENTERED INTO BY THE ASSESSEE ON 24.3.2008, WHICH WAS REGISTERED ON 6.5.2008. SINCE THE INVESTMENT MADE IN THE NEW ASSETS WAS BEY OND THE PERIOD OF ONE YEAR BEFORE THE SALE OF THE OLD PROPERTY, TH E AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM OF DEDUCTIO N U/S 54 SHOULD NOT BE WITHDRAWN. IN RESPONSE, THE ASSESSEE SUBMIT TED THAT THOUGH THE AGREEMENT FOR PURCHASE WAS REGISTERED ON 6.5.2 008 BUT THE SAID NEW FLAT WAS UNDER CONSTRUCTION AND THE BUILDER HAS GIVEN POSSESSION OF THE FLAT IN THE NEW BUILDING ONLY ON 1.4.2009 AN D HENCE, THE PURCHASE DATE FOR THE PURPOSE OF SECTION 54 OF THE NEW FLAT SHOULD BE TAKEN FROM 1.4.2009, WHICH FALLS WITHIN ONE YEAR PRIOR TO THE DATE OF SALE OF EARLIER ASSET I.E., FROM 26.11.2009. THE A SSESSEE SUBMITTED THE ENTIRE CHRONOLOGY OF EVENTS AND DETAILS LEADING TO PURCHASE OF THE PROPERTY AND ULTIMATE POSSESSION OF THE PROPERTY. THE SAID DETAILS AND EVENTS HAVE BEEN REPRODUCED BY THE AO IN HIS OR DER AT PAGE 2. HOWEVER, THE AO REJECTED THE ASSESSEES EXPLANATION AND HELD THAT THE ASSESSEE HAS PURCHASED THE NEW FLAT ON 6.8.2005 , WHEN THE I.T.A. NO.5281/MUM/2013 3 AGREEMENT TO PURCHASE THE PROPERTY WAS REGISTERED I N THE NAME OF THE ASSESSEE AND THEREFORE, THE SALE OF THE PROPERT Y ON 26.11.2009 IS BEYOND THE PERIOD OF ONE YEAR AS HE SHOULD HAVE PUR CHASED THE HOUSE WITHIN ONE YEAR BEFORE THE SALE OF THE OLD PR OPERTY. ACCORDINGLY, HE DISALLOWED THE CLAIM OF THE ASSESSE E U/S 54 OF THE ACT. 4. BEFORE THE LD. CIT (A), THE ASSESSEE REITERATED THE ENTIRE FACTS AND THE ENTIRE CHRONOLOGY OF EVENTS AND SUBMITTED T HAT THE FINAL PAYMENT TO THE BUILDER WAS MADE ON 20.5.2008 AND AS SESSEE GOT TEMPORARY POSSESSION ONLY ON 19.12.2008 TO CARRY OU T FINISHING AND FURNISHING OF THE HOUSE AND THE FINAL POSSESSION WA S GIVEN ON 1.4.2009. THE ENTIRE SEQUENCE AND ASSESSEES SUBMI SSIONS HAVE BEEN INCORPORATED BY THE LD CIT (A) IN HIS ORDER FR OM PAGES 4 TO 11 WHICH ALSO CONSISTS OF VARIOUS DECISIONS OF THE TRI BUNAL AS WELL AS HONBLE HIGH COURTS. THE LD. CIT (A) AFTER REFERRI NG TO THE VARIOUS DECISIONS HELD THAT FOR BEING ELIGIBLE FOR DEDUCTIO N U/S 54 OF THE ACT, THE ASSESSEE SHOULD HAVE PARTED WITH SUBSTANTIAL CO NSIDERATION WITH CERTAIN AMOUNT OF DOMAIN/ ENFORCEABLE RIGHTS OVER S UCH ASSET UNDER THE AGREEMENT. IN THIS CASE, THE ASSESSEE HAD ENTE RED INTO AN AGREEMENT WHICH WAS REGISTERED ON 6.5.2008 AND THE ENTIRE SALE CONSIDERATION WAS PAID BY THE ASSESSEE UPTILL 23.5. 2008. THUS, ON THIS DATE THE ASSESSEE HAD ACQUIRED ENFORCEABLE RIG HTS OVER THE FLAT. I.T.A. NO.5281/MUM/2013 4 EVEN IF THE SAID FLAT WAS NOT FULLY COMPLETED ON TH AT DATE AND THE ACTUAL POSSESSION RECEIVED BY THE ASSESSEE WAS MUCH LATTER I.E.,IN APRIL, 2009, THIS WILL NOT QUALIFY THE ASSESSEE F OR THE CLAIM OF DEDUCTION U/S 54 AS IT IS BEYOND THE PERIOD OF ONE YEAR. SINCE THE ASSESSEE HAS SOLD THE FLAT IN NOVEMBER 2009, THEREF ORE, THE PURCHASE OF FLAT IN MAY, 2008 IS BEYOND THE PERIOD OF ONE YE AR. THUS, HE HELD THAT THE AO WAS JUSTIFIED IN DENYING HE DEDUCTION U /S 54 OF THE ACT. 5. BEFORE US, THE LD. COUNSEL SHRI B.V.JHAVERI SUBM ITTED THAT, UNDER THE TERMS OF AGREEMENT AT THE TIME OF PURCHAS E OF FLAT, IT WAS CLEARLY STIPULATED THAT THE POSSESSION OF THE PREMI SES SHALL BE GIVEN TO THE ASSESSEE WHENEVER ALL THE PAYMENT REQUIRED T O BE MADE HAS BEEN MADE BY HIM. THE ASSESSEE HAS MADE SUBSTANTI AL PAYMENT AFTER 23 RD MAY, 2008. HOWEVER, ON THAT DATE THE FLAT WAS STI LL UNDER CONSTRUCTION AND WAS NOT READY TO TAKE POSSESSION. SINCE THE ASSESSEE HAD NO PLACE TO LIVE AND SHIFT TO THE NEW HOUSE, THEREFORE, HE COULD NOT SALE THE OLD FLAT AT THE TIME OF MAKIN G THE PAYMENT OR ON THE DATE OF REGISTRY OF THE AGREEMENT. THE DEVELOP ER COULD ONLY HAND OVER OF THE POSSESSION OF THE FLAT TEMPORARY ON 19. 12.2008 AND FINAL POSSESSION ON 1.4.2009. EVEN IF THE DATE OF 19.12. 2008 IS TO BE TAKEN INTO CONSIDERATION THEN ALSO IT FALLS WITHIN THE PERIOD OF ONE YEAR FROM THE DATE OF SALE. THE ASSESSEE HAS FINALLY SOL D HIS OLD FLAT ON 26.11.2009 AND ACCORDINGLY HE COMPUTED THE LTCG AND ALSO CLAIMED I.T.A. NO.5281/MUM/2013 5 EXEMPTION UNDER SECTION 54 OF THE ACT. IN SUPPORT O F THIS CONTENTION, HE RELIED UPON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S BEENA K JAIN (1996) 217 ITR 363. FOLLOWING THE SAID DECISION OF THE JURISDICTIONAL HIGH COURT, THE MUM BAI BENCH OF THE TRIBUNAL IN THE CASE OF SUNIL DATWANI V/S ITO IN ITA NO.1775/MUM/2008 (AY-2004-05) ORDER DATED 22.9.2 010, THE TRIBUNAL HAS HELD THAT THE PERIOD OF ONE YEAR SHOU LD BE TAKEN FROM THE DATE OF POSSESSION ONLY. SIMILAR VIEW HAS BEEN TAKEN BY THE TRTIBUNAL IN THE CASE OF ITO V/S MRS. ZEBUN A RAN GAWALA IN ITA NO.2090/MUM/2013 (AY-2008-09) ORDER DATED 21.11.20 14. 6. ON THE OTHER HAND, THE LD. DR STRONGLY RELIED O N THE ORDER OF LD. CIT (A) AND SUBMITTED THAT THE DATE OF PURCHASE SHO ULD BE TAKEN FROM 11.3.2008 WHEN THE ASSESSEE HAS BOOKED THE FLAT OR AT THE MOST 23.5.2008 WHEN THE ASSESSEE HAS MADE A SUBSTANTIAL PAYMENT TO THE BUILDER. THUS, THE CLAIM FOR DEDUCTION HAS RIGHTLY BEEN DISALLOWED BY THE AO AND CONFIRMED BY THE LD. CIT (A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. IT IS UNDISPUTED FACT T HAT THE ASSESSEE HAS BOOKED THE FLAT IN TERMS OF AGREEMENT DATED 24.3.20 08 FOR AGGREGATE CONSIDERATION OF RS.75,25,400/-. AS PER THE AGREEME NT, THE ASSESSEE WAS REQUIRED TO MAKE PAYMENT TO THE BUILDER IN ACCO RDANCE WITH THE STAGES OF CONSTRUCTION. AS ON 23.5.2008, THE ASSES SEE HAD MADE I.T.A. NO.5281/MUM/2013 6 SUBSTANTIAL PAYMENT TO THE BUILDER AND THE AGREEMEN T WAS ALSO REGISTERED ON 6.5.2008. ON 19.12.2008, THE DEVELOP ER HANDED OVER THE POSSESSION OF THE FLAT FOR CARRYING OUT RENOVAT ION AND FURNISHING OF THE FLAT. FULL AND FINAL POSSESSION OF THE FLAT WAS GIVEN BY THE BUILDER ON 1.4.2009 AND AFTER THE POSSESSION, THE ASSESSEE WAS REQUIRED TO MAKE THE PAYMENT OF MAINTENANCE MONEY AND OTHER CHA RGES, VAT, PARKING, AND ELECTRICITY CONNECTION ETC. THE A SSESSEE HAD SOLD HIS OLD HOUSE ON 26.11.2009 FOR A CONSIDERATION OF RS.7 5 LAKHS AND COMPUTED THE LTCG AND AGAINST THE SAID CAPITAL GAIN THE ASSESSEE HAS CLAIMED DEDUCTION TO THE EXTENT OF RS.59,70,70 0/-. THE SCHEDULE OF THE PAYMENT FOR THE PURCHASE OF THE FLAT AS SUB MITTED BEFORE THE AUTHORITIES BELOW WAS AS UNDER: AMOUNT IN RS. DATE 2,50,000. 11.3.2008 13,50,000 25.4.2008 9,25,400 13.5.2008 50,00,000 23.5.2008 1,79,195 30.6.2009 SECTION 54 PROVIDES THAT IF THE ASSESSEE HAS EARNED CAPITAL GAIN ARISING FROM TRANSFER OF THE LONG TERM ASSET AND WI THIN A PERIOD OF ONE YEAR OR BEFORE THE TWO YEARS AFTER THE DATE ON WHIC H THE TRANSFER OF LONG TERM ASSET TOOK PLACE, PURCHASES A RESIDENTIAL HOUSE, THEN THE ASSESSEE WOULD BE LIABLE FOR CLAIM OF DEDUCTION. T HE BASIC CRITERIA IS TO BE SEEN IS THAT WHETHER, WITHIN A PERIOD OF ONE YEAR THE ASSESSEE I.T.A. NO.5281/MUM/2013 7 HAS PURCHASED THE HOUSE OR NOT. WHAT IS MEANT BY PU RCHASE OF THE RESIDENTIAL HOUSE WITHIN THE MEANING OF SECTION 54 OR 54F HAD DULY BEEN EXPLAINED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S SMT. BEENA K JAIN (1996) 217 ITR 363 ( BOM), WHEREIN THE ASSESSEE HAD SOLD HER PREMISES ON 23.7.1987 W HICH RESULTED INTO LTCG AND PRIOR TO THE SALE THE ASSESSEE HAD E NTERED INTO AN AGREEMENT FOR PURCHASE OF RESIDENTIAL FLATS VIDE AG REEMENT DATED 4.9.1985. ON THE DATE OF AGREEMENT THE ASSESSEE H AD PAID EARNEST MONEY AND THE AGREEMENT WAS REGISTERED ON 27.10.198 5. THE CONSTRUCTION OF THE FLAT WAS COMPLETED IN JULY 1988 AND THE FULL AND FINAL CONSIDERATION WAS PAID ON 29.7.1988, THE POSS ESSION OF THE SAID FLAT WAS GIVEN ON 30.7.1988. THE ASSESSEE CLAIMED B ENEFIT OF EXEMPTION U/S 54F. THE QUESTION BEFORE THE HONBLE COURT WAS AS UNDER : WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN ALLOWING EXEMPTION OF RS. 11,04,423 UNDER SECTION 54F OF THE INCOME TAX ACT, 1961, CONS IDERING THE DATE OF POSSESSION OF THE NEW RESIDENTIAL PREMISES INSTEAD OF THE DATE OF SALE AGREEMENT AND THE DATE OF REGISTR ATION? AFTER ANALYZING THE PROVISIONS OF SECTION 54F, THE HONBLE COURT HELD THAT THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE R ELEVANT DATE WHICH HAS TO BE TAKEN IN THIS CASE AS 29 TH JULY, 1988, WHEN THE ASSESSEE PAID FULL CONSIDERATION ON THE FLAT AND THE FLAT BE CAME READY FOR OCCUPATION AND THE ASSESSEE HAD OBTAINED THE POSSES SION OF THE FLAT. I.T.A. NO.5281/MUM/2013 8 IN THIS CASE THE DATE OF FINAL PAYMENT AND THE POSS ESSION WAS ALMOST ON THE NEXT DATES. THUS, THE HONBLE HIGH COURT HE LD THAT INSTEAD OF DATE OF SALE OF AGREEMENT THE DATE OF POSSESSION SH OULD BE TAKEN INTO CONSIDERATION. IN THE CASE OF SUNIL DATWANI (SUPRA ), THE TRIBUNAL HELD THAT THE DATE OF POSSESSION OF THE PROPERTY SHOULD BE TAKEN AS THE DATE FOR COMPUTING THE PERIOD OF ONE YEAR FOR CLAIM ING DEDUCTION U/S 54F OF THE ACT. SIMILARLY IN THE CASE OF MRS. ZEB UN A RANGAWALA (SUPRA), THE TRIBUNAL REITERATED THE SAME PROPOSITI ON THAT THE DATE OF POSSESSION IS TO BE TAKEN FOR THE PURPOSE OF COMPUT ING THE PERIOD AS GIVEN IN SECTION 54F. THE PERIOD OF PURCHASE AS ST IPULATED UNDER SECTION 54F IS TO BE SEEN FROM THE POINT THAT THE A SSESSEE IS ABLE TO INVEST THE LTCG FOR THE PURCHASE OF HOUSE PROPERTY WITHIN THE TIME PERIOD PRESCRIBED. IT IS BENEFICIAL PROVISION, THER EFORE, LIBERAL INTERPRETATION HAS TO BE GIVEN SO AS TO GIVE BENEFI T TO THE ASSESSEE. OFTEN, THE AGREEMENT FOR SALE IS ENTERED EARLIER AN D ALSO THE SUBSTANTIAL PAYMENTS ARE BEING MADE BY THE ASSESSEE , BUT THE POSSESSION OF THE FLAT IS NOT GIVEN. ONCE THE POSSE SSION IS NOT GIVEN, THE ASSESSEE CANNOT ENTER INTO THE FLAT OR HOUSE FO R LIVING. HERE, IN THIS CASE THE POSSESSION OF THE FLAT CAN BE SAID TO BE GIVEN BY DEVELOPER ON 19.12.2008, WHEN THE ASSESSEE WAS ALLO WED TO ENTER INTO THE FLAT FOR CARRYING RENOVATION AND FINISHING OF THE FLAT. THUS, IN VIEW OF THE AFORESAID PROPOSITION LAID DOWN IN THE AFORESAID DECISIONS, I.T.A. NO.5281/MUM/2013 9 WE HOLD THAT THE DATE OF PURCHASE OF HOUSE SHOULD B E RECKONED FROM THE DATE ON WHICH THE ASSESSEE GETS POSSESSION OF T HE NEW FLAT. SINCE THE POSSESSION OF THE FLAT WAS GIVEN ON 19.12 .2008 AND THE ASSESSEE HAS SOLD OLD FLAT ON 26.11.2009, WHICH PER IOD FALLS WITHIN THE PERIOD OF ONE YEAR, THEREFORE, IN OUR OPINION, THE ASSESSEE WOULD BE ENTITLED TO CLAIM OF DEDUCTION U/S 54 OF THE ACT. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 17TH DEC, 2014. ,-! . /0 17TH DEC ,2014 - ) 1* 2 SD SD ( . / D. KARUNAKAR RAO) ( / AMIT SHUKLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER * MUMBAI: 17TH DEC,2014. . . ./ SRL , SR. PS ! ' #$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. ( ) / THE CIT(A)- CONCERNED 4. / CIT CONCERNED 5. 451 $6 , + 6 , * / DR, ITAT, MUMBAI CONCERNED 6. 1 7* / GUARD FILE. / BY ORDER, TRUE COPY 8 & (ASSTT. REGISTRAR) + 6 , * /ITAT, MUMBAI