BHARATCHANDRA C. SHAH, MUMBAI V. ADDL CIT RG 16(2), MUMBAI

ITA 6696/MUM/2012

• Counselvise Citation: 669619914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 02-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: HITESH P SHAH
• Keywords: Capital asset
• Section: 54; 143(3); 54F

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , , BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEM BER . / ITA NO. 6696 / MUM./ 2012 ( / ASSESSMENT YEAR : 20 0 9 10 ) MR. BHARATCHANDRA C. SHAH 11/C, SHAHNAZ 90, NEPEANSEA ROAD WALKESHWAR MUMBAI 400 006 .. / APPELLANT V/S ADDL. COMMISSIONER OF INCOME TAX RANG E 16(2), MATRU MANDIR TARDEO ROAD, MUMBAI 400 007 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AAIPS4663D / ASSESSEE BY : MR. HITESH P. SHAH / REVENUE BY : MR. SURENDRA KUMAR / DATE OF HEARING 06 . 01 .201 4 / DATE OF ORDER 15.01.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 29 TH AUGUST 2012 , PASSED BY THE COMMISSIONER (APPEALS) XXVII , MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE MR. BHARATCHANDRA C. SHAH 2 ACT ) FOR THE ASSESSMENT YEAR 2009 10. FOLLOWING GROUNDS H AVE BEEN RAISED BY THE ASSESSEE. 1. THE LD. CITCA) AND THE LD. A.O. ERRED IN REJECTING THE CLAIM OF EXEMPTION OF THE APPELLANT ON ACCOUNT OF FULL UTILIZATION OF THE INVESTIBLE FUNDS IN RESIDENTIAL FLAT BY HIS COMMITMENT MADE WITH THE BUILDER. 2. THE LD. CITCA) AND THE LD. A.O. ERRED IN NOT GRANTING THE FULL RELIEF OF INVESTMENT COMMITMENT MADE BY THE APPELLANT BEFORE THE FILLING OF THE RETURN. 3. THE LD. CITCA) AND THE LD. A.O. ERRED IN NOT APPRECIATING THAT THE COMMITMENT OF FULL PRICE AS AGREED BY THE BUILDER IS AN IMPORTANT ASPECT OF PURCHASE OF FLAT UNDER CONSTRUCTION. 4. THE LD. CITCA) WAS NOT JUSTIFIED IN DISALLOWING THE EXEMPTION ON THE BASIS OF DECISION IN THE CASE OF TARANBIR SINGH SAWHNEY, WHICH IS DISTINGUISHABLE ON FACTS. 5. THE LD. CITCA) AND LD. A.O. ALSO ERRED IN NOT GRANTING THE EXEMPTION OF THAT PART OF THE COST OF FLAT, WHICH INCLUDES STAMP DUTY, V A T, SERVICE TAX AND REGISTRATION CHARGES PAID BY THE APPELLANT . 2 . FACTS IN BRIEF : THE ASSESSEE IS AN INDIVIDUAL WHO HAS FILED HIS RETURN OF INCOME AT ` 5,30,49,512 ON 31 ST JULY 2009. THE RETURN OF INCOME MAINLY CONSISTED OF LONG TERM CAPITAL GAIN O F ` 5,30,45,902 , OUT OF WHICH DEDUCTION UNDER SECTION 54F OF THE ACT TO THE TUNE OF ` 1,60,00,000 WAS ALSO CLAIMED. THE FACTS, AS NARRATED BY THE ASSESSING OFFICER, ARE THAT THE ASSESSEE HAD 50,000 SHARES OF MITUTOYO SOUTH ASIA PVT. LTD., A COMPANY IN WHICH HE WAS EMPLOYED. LATER ON, THE SAID COMPANY DECIDED TO BUYBACK THE SHARES. THE ASSESSEE TRANSFERRED THE SHARES ON 30 TH APRIL 2008. AS A RESULT OF TRANSFER OF SHARES WHICH WAS A LONG TERM CAPITAL ASSET, THE ASSESSEE RECEIVED CONSIDERATION OF ` 7 CRORES WHICH WAS RECEIVED IN THE BANK ACCOUNT OF THE ASSESSEE ON 14 TH MAY 2008. AS A RESULT OF THIS TRANSFER, A LONG TERM CAPITAL GAIN OF ` 6,90,45,902 AR OSE TO THE ASSESSEE. IMMEDIATELY AFTER THE RECEIVING OF MR. BHARATCHANDRA C. SHAH 3 THE SALE CONSIDERATION, THE ASSESSEE INVESTED THE ENTIRE SUM FOR PURCHASE OF UNDER CONSTRUCTION FLAT WITH THE BUILDERS M/S./ SUNSHINE HOUSING DEVELOPMENT LTD. IN THE FOLLOWING MANNER: DATE NAME OF BANK CHEQUE NO AMOUNT ( ` ) 16.05.2008 BANK OF INDIA 302899 6.75 CRORES 23.05.2008 BANK OF INDIA 302900 25 LAKHS 3 . SUBSEQUENTLY, THE AGREEMENT WITH THE SAID BUILDER GOT CANCELLED AND THE ASSESSEE PURSUED FOR REFUND OF THE AMOUNT INVESTED. AFTER HECTIC EFFO RTS, THE ASSESSEE RECEIVED BACK HIS MONEY FROM SUNSHINE HOUSING DEVELOPMENT LTD. IN THE YEAR 2008 AND 2009 IN THE FOLLOWING MANNER: DATE BANK CHEQUE NO. AMOUNT 02.07.2008 BANK OF INDIA 476971 2,25,00,000 09.07.2008 BANK OF INDIA 899421 1,25,00,000 10. 09.2008 BANK OF INDIA 329859 1,00,00,000 15.04.2009 BANK OF INDIA 000019 1,50,00,000 12.06.2009 BANK OF INDIA 795512 1,00,00,000 TOTAL 7,00,00,000 4 . OUT OF THE AFORESAID SUM RECEIVED, PARTICULARLY THE AMOUNT RECEIVED IN THE YEAR 2008 FOR SUMS AGGREGA TING TO ` 4.50 CRORES, THE ASSESSEE OFFERED FOR TAX UNDER THE HEAD LONG TERM CAPITAL GAIN AND PAID ADVANCE TAX OF ` 1,11,13,800. OUT OF THE BALANCE SUM OF ` 2.50 CRORES, THE ASSESSEE INVESTED AN AMOUNT OF ` 1.40 CRORES WITH GREEN VALLEY DEVELOPERS FOR ACQU IRING A RESIDENTIAL FLAT WHICH WAS UNDER CONSTRUCTION. BESIDES THIS, THE ASSESSEE HAS INCURRED INCIDENTAL MR. BHARATCHANDRA C. SHAH 4 EXPENSES LIKE STAMP DUTY, DEVELOPMENT CHARGES, BROKERAGE, ETC., FOR SUMS AGGREGATING TO ` 26,79,674. THUS, A SUM OF ` 1.60 CRORES WAS CLAIMED AS DEDUC TION UNDER SECTION 54F IN THE RETURN OF INCOME. 5 . THE ASSESSING OFFICER NOTED THAT TILL THE DATE OF FILING OF RETURN OF INCOME I.E., AS ON 31 ST JULY 2009, THE ASSESSEE HAD ONLY INVESTED ` 1 CRORE IN THE PURCHASE OF FLAT AND HE HAD NOT DEPOSITED ANY AMOUNT I N THE SPECIFIED ACCOUNTS FOR THE CAPITAL GAINS AS ENVISAGED IN SECTION 54F(4). HE THUS, HELD THAT SINCE THE AMOUNT INVESTED FOR PURCHASING OF NEW FLAT IS LESS THAN THE SALE CONSIDERATION, THEREFORE, THE DEDUCTI ON ALLOWABLE UNDER SECTION 54F W OULD BE ` 98,6 3,700 AND BALANCE AMOUNT OF ` 61,36,000 WAS DISALLOWED. 6 . BEFORE THE LEARNED COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT THE ASSESSEE HAD BONAFIDE INTENTION TO BUY RESIDENTIAL HOUSE ( UNDER CONSTRUCTION ), FROM THE AMOUNT RECEIVED AGAINST THE SALE OF LONG TERM CAPITAL ASSET I.E., SHARES. UNDER THE PECULIAR CIRCUMSTANCES, THE ASSESSEE HAD TO INVEST IN THE RESIDENTIAL FLAT ( UNDER CONS TRUCTION ) AFTER CANCELLING THE AGREEMENT WITH THE EARLIER BUILDER. THIS IS ALSO PROVED BY THE FACT THAT THE ASSESSEE HAS INVEST ED THE AMOUNT WITHIN THE STIPULATED PERIOD OF SECTION 54(1) AND HAS FINALLY TAKEN THE POSSESSION OF THE NEWLY RESIDENTIAL FLAT. ON THESE FACTS, R ELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL, GUWAHATI BENCH , IN RAJESH KUMAR JALAN V/S ITO, [2004] 86 TT J 955 (GUA.) AND JODHPUR BENCH DECISION OF THE TRIBUNAL IN RAJESH KUMAR JAIN V/S ITO, [2004] 86 TTJ 170 (JODH.). THE LEARNED COMMISSIONER (APPEALS), AFTER DISTINGUISHING THE SAID JUDGMENT S , UPHELD THE CONTENTION OF THE ASSESSING OFFICER AND AFTER FOLLOWING THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN TARANBIR MR. BHARATCHANDRA C. SHAH 5 SINGH SAWHN EY V/S DCI T, [2006] 5 SOT 417 (DEL.), UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 7 . BEFORE US, THE LEARNED COUNSEL, AFTER REITERATING THE FACTS, SUBMITTED THAT THE ASSESSEE HAS I NVESTED THE CAPITAL GAIN ARISING OUT OF TRANSFER OF LONG TERM CAPITAL ASSET IN THE CONSTRUCTION OF RESIDENTIAL FLAT WITHIN THE PERIOD OF THREE YEARS. INSOFAR AS THE ASSESSEE IS CONCERNED, IMMEDIATELY AFTER RECEIVING THE MONEY ON 14 TH MAY 2008, HE HAS INVES TED THE ENTIRE MONEY WITH A BUILDER FOR AN UNDER CONSTRUCTION RESIDENTIAL FLAT. DUE TO BONAFIDE REASON THE ASSESSEE HAD TO WITHDRAW THE MONEY FROM THE SAID BUILDER AND INVESTED THE SAME IMMEDIATELY WITH THE ENTIRE BUILDER , F OR A CONSIDERATION OF ` 1.60 CRO RES AND FOR THE BALANCE SUM, THE ASSESSEE HAD PAID THE TAX UNDER LONG TERM CAPITAL GAIN. THUS, THE ASSESSEE HAS FULLY COMPLIED WITH THE PROVISIONS OF SECTION 54F. AS REGARDS APPLICABILITY OF PROVISIONS OF SECTION 54F(4), HE SUBMITTED THAT THERE IS NO VIOLA TION IN THIS CASE, FIRSTLY THE ASSESSEE HAD INVESTED THE ENTIRE MONEY IN THE FIRST INSTANCE FOR THE PURCHASE OF NEWLY CONSTRUCTED FLAT AND SECONDLY , THE INVESTMENT IN FLAT UNDER CONSTRUCTION WAS MADE WITHIN THE PERIOD OF THREE YEARS. THEREFORE, THERE IS NO QUESTION OF DEPOSITING THE AMOUNT IN SPECIFIED CAPITAL GAIN ACCOUNT. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN MUKESH G. DESAI V/S ITO , [2009] 18 DTR (TRIB.) 71 (MUM.), KISHORE H. GALIAYA V/S ITO, [2012] 1 50 TTJ 444 (MUM.) . 8 . ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS), SUBMITTED THAT THERE IS A CLEAR MANDATE OF THE LAW THAT , IF THE ASSESSEE HAS NOT APPROPRIATED THE NET C ONSIDERATION FOR PURCHASE MR. BHARATCHANDRA C. SHAH 6 OF NEW ASSET BEFORE THE DATE OF FURNISHING OF RETURN OF INCOME UNDER SECTION 139, THEN THE ASSESSEE HAS TO DEPOSIT THE SAME UNDER SPECIFIED CAPITAL GAIN ACCOUNT SCHEME. THUS, THE DISALLOWANCE OF DEDUCTION FOR SUCH AMOUNT OF ` 61,3 6,300 IS TO BE CONFIRMED. 9 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS RECEIVED SALE CONSIDERATION ON THE TRANSFER OF LONG TERM CAPITAL ASSET I.E., SALE OF SHARES ON 14 TH MAY 2008. IMMEDIATELY AFTER RECEIVING THE SAID MONEY THAT IS ON 16 TH MAY 2008, THE ASSESSEE HAD INVESTED THE WHOLE OF THE SALE PROCEEDS IN AN UNDER CONSTRUCTION FLAT WITH THE BUILDER. DUE TO SOME BONAFIDE REASONS, THE AGREEMENT WITH THE SAI D BUILDER HAD TO BE CANCELLED AND THE ASSESSEE PURSUE D THE BUILDER TO REFUND THE SAID AMOUNT. A PART OF THE AMOUNT AGGREGATING TO ` 4.50 CRORES WHICH WAS RECEIVED IN THE MONTH OF JULY AND SEPTEMBER 2008 FOR SUMS AGGREGATING TO ` 4.50 LAKHS, FROM THE BUILDE R , THE ASSESSEE HAD OFFERED IT FOR TAX UNDER THE HEAD LONG TERM CAPITAL GAIN. THE BALANCE AMOUNT OF SUMS AGGREGATING TO ` 2.50 CRORES WHICH WAS RECEIVED IN APRIL AND JUNE 2009, THE ASSESSEE INVESTED THE SAME WITH ANOTHER BUILDER FOR ACQUIRING A FLAT WHICH UNDER CONSTRUCTION FOR ` 1.40 CROES ON 11 TH JUNE 2009. THE ASSESSEE HAS ALSO INCURRED STAMP DUTY AND OTHER INCIDENTAL CHARGES OF ` 26,79,674. AS PER THE DETAILS FURNISHED BEFORE US, THE ASSESSEE HAS MADE PAYMENT TO THE SECOND DEVELOPER I.E, GREEN VALLEY DE VELOPERS IN THE FOLLOWING MANNER: DATE BANK CHEQUE NO. AMOUNT 11.06.2009 BANK OF INDIA 283169 10,00,000 18.06.2009 BANK OF INDIA 283170 15,00,000 25.06.2009 BANK OF INDIA 283174 55,00,000 MR. BHARATCHANDRA C. SHAH 7 08.07.2009 BANK OF INDIA 283175 10,00,000 17.07.2009 BANK OF INDIA 283176 10,00,000 16.09.2009 BANK OF INDIA 283208 10,00,000 18.11.2009 BANK OF INDIA 283216 10,00,000 15.06.2011 BANK OF INDIA 283267 5,00,000 17.12.2011 BANK OF INDIA 283283 15,00,000 TOTAL: 1,40,00,000 THE EXPENDITURE INCURRED ON STAMP DUT Y AND OTHER INCIDENTAL EXPENSES WERE AS UNDER: DATE PARTICULARS CHEQUE NO. AMOUNT 17.03.2011 STAMP DUTY 283255 6,84,308 17.03.2011 REGISTRATION 283256 30,105 25.03.2011 SERVICE TAX 52,739 25.03.2011 VAT 1,55,822 11.01.2012 DEVELOPMENT CHARGES 2832 84 4,65,000 CIVIL WORK AS PER ARCHITECTS INVOICE 10,11,700 BROKERAGE 2,80,000 TOTAL: 26,79,674 10 . PROVISIONS OF SUB SECTION (1) OF SECTION 54F PROVIDES THAT , THE CAPITAL GAIN ARISING OUT OF TRANSFER OF ANY LONG TERM CAPITAL ASSET, THE ASSESSEE HAS TO EITHER PURCHASE THE RESIDENTIAL HOUSE WITHIN A PERIOD OF TWO YEARS OR HAS TO CONSTRUCT A RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS FROM THE DATE WHEN THE TRANSFER TOOK PLACE. IN THE PRESENT CASE, THE ASSESSEE HAD INVESTED IN THE CONSTRUCTION OF A R ESIDENTIAL HOUSE WITH THE DEVELOPER AND, THEREFORE, THE PERIOD OF THREE YEARS IS AVAILABLE FOR THE ASSESSEE TO CLAIM DEDUCTION UNDER SECTION 54F FROM MR. BHARATCHANDRA C. SHAH 8 THE DATE OF TRANSFER. I N THE PRESENT CASE, ADMITTEDLY, THE DATE OF TRANSFER OF LONG TERM CAPITAL ASSET IS 14 TH MAY 2008. AT THE FIRST INSTANCE, THE ASSESSEE HAD INVESTED THE ENTIRE SALE CONSIDERATION WITH A BUILDER FOR ACQUIRING A UNDER CONSTRUCTION FLAT , WHICH DISPENSES WITH THE CONDITION OF SECTION 54F(1). HOWEVER, WHEN THE SAID TRANSACTION GOT FAILED, THE A SSESSEE THEREAFTER, HAD IMMEDIATELY AFTER RECEIVING THE MONEY MADE THE INVESTMENT IN ANOTHER FLAT WHICH WAS UNDER CONSTRUCTION IN THE YEAR 2009 2011. THUS, THE INTENTION OF THE ASSESSEE WAS TO IMMEDIATELY INVEST HIS CAPITAL GAIN FROM TRANSFER OF LONG TERM CAPITAL ASSET TOWARDS ACQUIRING OF RESIDENTIAL FLAT AND THERE WAS NO INTENTIONAL DELAY ON THE PART OF THE ASSESSEE FOR NOT APPROPRIATING THE NET CONSIDERATION TOWARDS ACQUIRING THE SAME WHICH IS EVIDENT FROM THE DETAILS AND FACTS NARRATED ABOVE. SECTION 54 PROVIDES EXEMPTION FROM TAXING LONG TERM CAPITAL GAIN IF THE ASSESSEE INVESTS IN ACQUIRING A NEW RESIDENTIAL HOUSE. THE INTENTION OF THE LEGISLATURE IS TO PROVIDE RELIEF TO THE TAXPAYER IN SUCH CASES. IF THE CONDITIONS ARE FULFILLED THEN BENEFIT HAS TO BE GIVEN. SUB SECTION 4 OF SECTION 54F PROVIDES THAT IF THE ASSESSEE IS UNABLE TO APPROPRIATE TOWARDS PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING OF RETURN OF INCOME UNDER SECTION 1 39, HE IS REQUIRED TO DEPOSIT THE SAID AMOUNT IN THE SPECIFIED CAPITAL GAIN ACCOUNT SCHEME. THIS PROVISION IS ONLY TO ENSURE THAT THE ASSESSEE DOES NOT MISUSE THE EXEMPTION PROVIDED IN SECTION 54. THIS SUB SECTION CANNOT BE INFERRED TO DENY THE OTHERWISE LEGITIMATE CLAIM OF EXEMPTION PROVIDED UNDER SECT ION 54(1). IF THE CONDITIONS REQUIRED UNDER SECTION 54(1) ARE NOT FULFILLED, THEN SUB SECTION (4) OF SECTION 54 PROVIDES MECHANISM TO AVAIL THE BENEFIT BY DEPOSITING THE MONEY IN THE SPECIFIC CAPITAL ACCOUNT SCHEME WITHIN A STIPULATED TIME. IN THIS CASE, O NLY CONDITION MR. BHARATCHANDRA C. SHAH 9 WHICH H A S TO BE SEEN IS , WHETHER THE ASSESSEE GOT THE CONSTRUCTED FLAT WITHIN THE PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OR NOT. FROM THE DETAILS, AS INCORPORATED ABOVE, IT CAN BE SEEN THAT THE INVESTMENT UP TO ` 1.20 CRORES HAS BEE N MADE I.E., FROM THE PERIOD 11 TH JUNE 2009 TO 18 TH NOVEMBER 2009, WHICH FALLS WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF 14 TH MAY 2008. BESIDES THIS, WHATEVER AMOUNT HAS BEEN INCURRED ON STAMP DUTY AND INCIDENTAL EXPENSES UP TO 14 TH MAY 2011, I.E. , WITHIN A PERIOD OF THREE YEARS, IS ALSO TO BE ALLOWED AS DEDUCTION. THUS, TO THE EXTENT OF THE AMOUNT INVESTED, IN THE ACQUIRING THE FLAT UP TO THE PERIOD OF 14 TH MAY 2011, THE SAME CAN BE ALLOWED UNDER SECTION 54F INCLUDING STAMP DUTY INCIDENTAL EXPENSE S . THE BALANCE AMOUNT BEYOND THIS PERIOD SHALL BE DISALLOWED. THE ASSESSING OFFICER WILL ACCORDINGLY WORK OUT THE RELIEF. . CONSEQUENTLY, THE GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS PARTLY ALLOWED. 11 . 11. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS PARTLY ALLOWED. 15 TH JANUARY 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JANUARY 2014 SD / - . . P .M. JAGTAP ACCOUNTANT MEMBER SD / - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 15 TH JANUARY 2014 MR. BHARATCHANDRA C. SHAH 10 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITA T, MUMBAI