Smt. Anjali Bhadoo, Gurgaon V. ITO, Gurgaon

ITA 633/DEL/2016

AI Insights

The case revolves around the denial of exemption from long-term capital gains under section 54 of the Income Tax Act, 1961, by the Assessing Officer (AO) and the CIT (A). The assessee, Smt. Anjali Bhadoo, had sold a property and claimed exemption for the capital gains by investing in a new residential property. The AO denied the exemption on the grounds that the agreement to purchase the new property was signed beyond the one-year period required by section 54. The CIT (A) upheld this decision, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal, referencing a similar case and relevant CBDT circulars, ruled in favor of the assessee, allowing the exemption.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113831 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-09-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 07-02-2016
• Other Referred Cases: Pr.CIT vs. Akshay Sobti (2020) 423 ITR 321 (Delhi)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Capital Gains
• Section: 54; 143(3); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘E’ : NEW DELHI) SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.633/Del./2016 (ASSESSMENT YEAR : 2012-13) Smt. Anjali Bhadoo, vs. ITO, Ward 1 (2), 100, Aspen Greens, Gurgaon. United Nirvana Country, Sector 50, South City – 2, Gurgaon – 122 018 (Haryana). (PAN : ANFPB8301H) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Suraj Bhan Nain, Advocate Shri Mahfuzur Rahman, CA REVENUE BY : Ms. Anita Meena, Sr. DR Date of Hearing : 04.09.2023 Date of Order : 13.09.2023 ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : This appeal by the assessee is directed against the order of the ld. CIT (Appeals)-2, Gurgaon dated 16.11.2015 pertaining to the assessment year 2012-13. 2. Grounds of appeal taken by the assessee read as under :- “1. Under the facts and circumstances of the case, the assessment made by the ld. Assessing Authority u/s 143(3) of the Act and confirmed by ld. CIT(A) is against the facts and bad at law. ITA No.633/Del./2016 2 2. Under the facts and circumstances of the given case, the Ld. Assessing Authority has grossly erred in disallowing the exemption from long term capital gains of Rs.91,73,335/- claimed u/s 54 of the Act in respect of investment in new House Property within prescribed time, which is grossly injudicious, against the facts of the case and bad at law. 3. Under the facts and circumstances of the given case, the Ld. Assessing Authority has grossly erred in holding that the exemption u/s 54 of the Income Tax Act for the relevant AY 2012-13 would be inadmissible as 'Agreement to sell' of new asset was made more than one year ago without considering the facts that conditions to avail benefit were fulfilled as actual possession of new asset was taken within two years, amount of capital gains was invested within two years and construction of the new asset was completed within three years, evidence of which have been placed on record, which is grossly injudicious, against the facts of the case and bad at law. 4. Furthermore, the Ld. Assessing Authority has ignored the fact that as per section 54 of the Income Tax Act , whether the nature of investment is Purchase 'or' Construction, exemption cannot be denied if conditions of either Purchase 'or' Construction are duly fulfilled. 5. Furthermore, the Ld. First Appellate Authority has grossly erred by giving substance value to the words 'Purchasing' and 'Sell' used in the Agreement, without considering the actual nature of the action of investing in new asset.” 3. In this case, AO noted that assessee has sold his immovable property during the relevant financial year and earned long term capital gain of Rs.91,73,335/- which was claimed as exempt under section 54 of the Income-tax Act, 1961 (for short 'the Act'). AO noted that assessee has entered into an Agreement to Purchase the new residential property i.e. ITA No.633/Del./2016 3 A-9/37, Vasant Vihar, New Delhi for Rs.10,00,00,000/- vide Agreement to Sell dated 11.10.2010 which the AO noted is beyond “within one year before”. He further noted that the assessee had sold the property on 11.11.2011 and accordingly she had to purchase the new assets against this sale or to claim exemption u/s 54 of the Act within one year before i.e. from 11.11.2010 till 11.11.2011. But the assessee has entered into an Agreement to Purchase new residential asset on 11.10.2010 which falls beyond the stipulated date i.e. the purchase date did not lie within one year before. So, the AO opined that the claim of exemption u/s 54 of the Act is not admissible. 4. Against the above order, assessee appealed before the ld. CIT (A). Ld. AR for the assessee submitted that the AO had misinterpreted the claim and not appreciated the facts properly; that exemption u/s 54 had been claimed on the ground of construction of a new flat and not on the ground of purchase of a new residential house; that possession of the flat was received on 23.04.2012 which was within the period of 3 years after the date of sale on which capital gain had accrued; that a copy of possession letter and copy of the electricity bill was submitted in support of his contention that the possession had been taken by April 2022; that CBDT circular No.672 & 471 was referred in support of his contention that this was a case of construction and not a case of purchase. Further, it ITA No.633/Del./2016 4 was contended that exemption u/s 54 has been claimed on account of purchase of property and that the actual purchase of new assets has been made within 2 years from the date of sale. Assessee also contended that the word ‘purchase’ has a wide connotation and that purchase date would be the date of allotment letter and not the date of agreement to sell. Ld. CIT (A) noted that assessee had failed to establish that the purchase of house was made within the period as provided in the Income-tax Act in order to be eligible for deduction u/s 54 of the Act. Ld. CIT (A) also noted that even otherwise, from the facts on record, it is evident that the agreement to sell was signed on 06.10.2010 which is a date beyond one year before the date of sale on which capital gains arose and the final registration i.e. sale deed was signed on 27.03.2015 which date is beyond the period of 2 years from the date of sale. Therefore, ld. CIT (A) held that the date of agreement to sell or the date of sale deed is taken to be the date of purchase, in either case the date is beyond the period prescribed u/s 54 of the Act. 4.1 Ld. CIT (A) further noted that the assessee has not taken a ground that this was a construction which was eligible for deduction u/s 54. However, ld. CIT (A) rejected the same also by holding that this was a case of purchase of residential unit and not a case of construction. He noted that assessee’s reliance on CBDT Circular No.672 and 471 is also ITA No.633/Del./2016 5 not tenable. He noted that the CBDT circular is applicable to the case where the terms of allotment are similar to the SFS scheme of DDA. As per this scheme, allotment letter is issued when the first installment is paid. In assessee’s case, as mentioned above, assessee has already paid a sum of Rs.2,80,000/- on various dates starting from the month of March 2010 by the time the agreement to sell was signed. The first installment was paid in March, 2010, however no allotment letter was issued at the time of payment of first installment. In this background, ld. CIT (A) rejected the assessee’s claim. 5. Against this order, assessee is in appeal before us. We have heard both the parties and perused the records. 6. Ld. Counsel for the assessee contended that the issue is covered by the decision of Hon’ble Delhi High Court in the case of Pr.CIT vs. Akshay Sobti (2020) 423 ITR 321 (Delhi). He pleaded that facts are identical and assessee may be allowed the claim of exemption. 7. Per contra, ld. DR for the Revenue disputed that the issue covered by the aforesaid case relied upon by the assessee. He submitted that the same is not applicable to the facts of the present case. 8. Upon careful consideration, we find that Hon’ble Delhi High Court in the case of Akshay Sobti (supra) has held as under :- “ It is an accepted position and is not disputed by the Revenue that the 24 assessee had sold the property at Jor Bagh on December 2t 2011, On the said sale/ the assessee has claimed deduction of ITA No.633/Del./2016 6 capital gains under section 54 of the Act, The assessee was required to purchase a residential house property either one year before, or within two years after the date of transfer of original asset; or within a period of three years after the date he was required to construct a residential house, The Central Board of Direct Taxes in its Circular No. 672 dated December 16, 1993 has made it clear that the earlier Circular No. 471 dated October 15, 1986 in which it was stated that acquisition of flat through allotment by the Delhi Development Authority has to be treated as a construction of flat, would apply to co-operative societies and other institutions. The tax authorities have relied upon the said circular and held that the builder would fall in the category of other institutions and, therefore, booking of the flat with the builder has to be treated as construction of flat by the assessee. In accordance with the said agreement, the assessee was to make payment in instalments and the builder was to construct an unfinished bare shell flat for finishing by the buyers. The possession was granted on March 30, 2013. The lower tax authorities after examining the terms of the agreement the occupation certificate, and the other letters-offer to finalize the details of interiors, have come to a conclusion that the assessee had booked a semi-furnished flat with the builder, namely, DLF Universal Ltd. in the residential group housing complex named as Magnolias DLF Golf Links. Accordingly, the assessee had a window of three years period from December 2t 2011 till December 21, 2014 to construct a house property, calculated from the date of transfer of the original asset. The appellant has claimed deduction on the amount invested till the due date of filing of return under section 139(1) of the Income-tax Act. In this factual background, we do not find any cogent ground to hold that the respondents do not fulfil the conditions laid down under section 54(1) of the Act so as to deny the benefit of the said provision. The apprehension expressed by the learned senior standing counsel for the Revenue is not borne from the facts on record. The provision in question is a beneficial provision for the assessees, who replace the original long-term capital asset by a new one.” 9. Ld. Counsel of the assessee has further made a comparative chart of the case before Hon’ble Delhi High Court and the assessee case as under :- ITA No.633/Del./2016 7 S. No. Particulars Pr.CIT vs. Sh. Akshay Sobti (2020) 423 ITR 321 (Del) A.Y. 2012-13 Anjali Bhadoo (Appellant) A.Y. 2012-13 1 Date of Agreement for construction of residential house with the builder 10.02.2006 11.10.2010 2 Date of sale/transfer of the original asset 21.12.2011 11.11.2011 3 Investment upto due date of filing of return of income u/s 139(1) Rs.4,00,97,217/- (Claim of section 54 from capital gains : Rs.4,00,97,217/-) Rs.1,00,00,000/- (Claim from 54 from capital gains : Rs.91,73,335/-) 4 Date of possession of constructed residential house 30.10.2013 23.04.2012 10. Upon careful consideration, we find that on the touchstone of aforesaid case law, in the present case, the agreement for sale can be construed as agreement of construction. So the assessee has a window upto 11.11.2014 to construct the house property. The date of grant of possession can be construed as completion of construction. Hence, the assessee deserves to succeed on account of construction of house within 3 years of the date of sale/transfer of the original asset. We order accordingly. 11. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 13 th day of September, 2023. Sd/- sd/- (ASTHA CHANDRA) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 13 th day of September, 2023 TS ITA No.633/Del./2016 8 Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT (A)-2, Gurgaon. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.