THE ITO 14(3)-4, MUMBAI V. SHRI PRAKSHCHANDRA D. JAIN, MUMBAI

ITA 678/MUM/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9349 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 18-10-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 30-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Tax effect
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEFORE SHRI B.R. JAIN, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 678/MUM/2008 (ASSESSMENT YEAR: 2004-05) INCOME-TAX OFFICER -14(3)-4, EARNEST HOUSE, 5 TH FLOOR, NARIMAN POINT, MUMBAI -400 021 VS. SHRI PRAKASHCHANDERA D JAIN, SHOP NO. 34, 7 TH LANE CORNER, MANGALDAS MARKET, MUMBAI -400 002 PAN: AACPJ 4666 M (APPELLANT) (RESPONDENT) APPELLANT-ASSESSEE BY : SHRI RAKESH RANJAN RESPONDENT-REVENUE BY : SHRI JAYANT BHAT DATE OF HEARING: 18.10.2012 DATE OF PRONOUNCEMENT: 23.11.2012 O R D E R PER VIVEK VARMA, JM: THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) XV, MUMBAI, DATED 27.11.2007. 2. EARLIER THE CASE WAS DISPOSED OFF BY THE COORDINATE BE NCH OF ITAT, MUMBAI, VIDE ORDER DATED 25.06.2010, DISMISSING THE AP PEAL FILED BY THE DEPARTMENT, AS NOT MAINTAINABLE, AS THE TAX EFFE CT WAS FOUND TO BE LESS THEN RS 2.00 LACS. 3. THE ORDER DATED 25.06.2010 WAS RECALLED AS THE DEPAR TMENT POINTED OUT IN MISCELLANEOUS APPLICATION FILED BEFORE THE ITAT, THAT THE TAX EFFECT WAS ACTUALLY RS. 2,57,267, THEREFORE, CBDT CIRCULAR DATED 24.10.2005 WAS NOT ATTRACTED. HENCE, THE PRESENT APPEAL. SHRI PRAKASHCHANDERA D JAIN ITA 678/MUM/2008 2 4. AS PER INSTRUCTION NO. 5/2007 DATED 16.07.2007, THE PARTICULAR INSTRUCTION WITH REFERENCE TO MONETARY LIMIT, WOULD BE UNDER CONSIDERATION, AT THE TIME OF FILING OF APPEAL. THEREFORE, THE ISS UE WITH REGARD TO MONETARY LIMIT NOW STANDS SETTLED ONCE THE MIS CELLANEOUS APPLICATION WAS ADMITTED, WHERE IT WAS MADE KNOWN THAT T HE TAX EFFECT WAS IN EXCESS OF RS. 2,00,000/-. 5. ON MERITS, THE ONLY GRIEVANCE OF THE DEPARTMENT IS ON THE ISSUE THAT THE CIT(A) ALLOWED THE DEDUCTION U/S 54(1), WHICH WAS DISALLOWED BY THE AO. ACCORDING TO THE AO, THE ASSESSEE HAD NEITHE R CONSTRUCTED NOR PURCHASED A NEW RESIDENTIAL HOUSE WITHIN THE PERIOD M ENTIONED IN THE RELEVANT PROVISION. 6. THE CIT(A) IN HIS ORDER, OBSERVED, I HAVE CONSIDERED THE CLAIM OF THE APPELLANT. I FI ND THAT THE AMOUNT PAID BY THE APPELLANT TO THE BUILDER FOR PUR CHASE OF FLAT IS NOT AT ALL UNDER DISPUTE. ALTOGETHER, IT IS DIF FERENT ASPECT THAT THE APPELLANT HAD NEITHER NOT GOT THE POSSESSION OF THE FLAT NOR HE GOT THE TITLE EXECUTED IN HIS FAVOUR. IN FACT, THE FLAT BOOKED BY THE APPELLANT COULD NOT BE CONSTRUCTED DUE TO SOME PROBLEM FACED BY THE BUILDER. BUT, NEVERTHELESS, THE INVES TMENT IN THE NEW FLAT IS VERY MUCH ON RECORD AND AS FAR AS THE A PPELLANT IS CONCERNED THE AMOUNT PAID BY HIM IS CERTAINLY AN OU TGO OUT OF THE SALE CONSIDERATION OF OLD FLAT FOR THE PURPOSE OF INVESTMENT IN FLAT. IN THIS CONNECTION, RELIANCE MAY BE PLACED T O ITAT, MUMBAI ANGELA J. KAZI V. ITO - 10 SOT 139 (MUM.), HEREIN THE HON. ITAT HELD THAT IN ORDER TO DEMONSTRATE THAT THE ASS ESSEE HAS PURCHASED A NEW FLAT, THE ASSESSEE HAS TO PLACE ON RECORD LETTER OF BOOKING OF NEW FLAT, COPY OF CHEQUE TO BUILDER O F NEW FLAT. PLACING RELIANCE ON THE ABOVE DECISION, WHICH HAS G OT BINDING FORCE. I ALLOW THE CLAIM OF THE APPELLANT. 7. BEFORE US, THE DR RELIED ON THE ORDER OF THE AO, WHER EAS THE AR STRONGLY SUPPORTED THE ORDER OF THE CIT(A) AND ALSO REFE RRED TO THE DECISION OF CIT VS HILLA J B WADIA, REPORTED IN 216 ITR 376, WHEREIN, THE HONBLE BOMBAY HIGH COURT HELD, FOR THE REASONS WHICH WE HAVE SET OUT ABOVE, IN OU R VIEW, THE PRESENT CASE FALLS WITHIN THE PROVISIONS OF SECTION 54 IN VIEW OF THE FACT THAT THE ASSESSEE HAD ACQUIRED SUBSTANTIAL DOMAIN OVER THE FLAT IN QUESTION UNDER THE AGREEMENT WITH THE S OCIETY COUPLED WITH THE PAYMENT OF ALMOST THE ENTIRE COST OF CONST RUCTION WITHIN A PERIOD OF TWO YEARS. SHRI PRAKASHCHANDERA D JAIN ITA 678/MUM/2008 3 8. THE AR ALSO RELIED ON CIRCULAR NO. 471 DATED 15.10.1996, WHICH READS, CAPITAL GAINS FROM LONG-TERM CAPITAL ASSET - INVES TMENT IN A FLAT UNDER THE SELF-FINANCING SCHEME OF THE DELHI DEVELO PMENT AUTHORITY - WHETHER TO BE TREATED AS CONSTRUCTION F OR THE PURPOSES OF CAPITAL GAINS 1. SECTIONS 54 AND 54F PROVIDE THAT CAPITAL GAINS A RISING ON TRANSFER OF A LONG-TERM CAPITAL ASSET SHALL NOT BE CHARGED TO TAX TO THE EXTENT SPECIFIED THEREIN, WHERE THE AMOUNT O F CAPITAL GAIN IS INVESTED IN A RESIDENTIAL HOUSE. IN THE CASE OF PURCHASE OF A HOUSE, THE BENEFIT IS AVAILABLE IF THE INVESTMENT I S MADE WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THE DATE ON WHIC H THE TRANSFER TOOK PLACE AND IN CASE OF CONSTRUCTION OF A HOUSE, THE BENEFIT IS AVAILABLE IF THE INVESTMENT IS MADE WITHIN THREE YE ARS FROM THE DATE OF THE TRANSFER. 2. THE BOARD HAD OCCASION TO EXAMINE AS TO WHETHER THE ACQUISITION OF A FLAT BY AN ALLOTTEE UNDER THE SELF -FINANCING SCHEME (SFS) OF THE D.D.A. AMOUNTS TO PURCHASE OR I S CONSTRUCTION BY THE D.D.A. ON BEHALF OF THE ALLOTTE E. UNDER THE SFS OF THE D.D.A., THE ALLOTMENT LETTER IS ISSUED O N PAYMENT OF THE FIRST INSTALMENT OF THE COST OF CONSTRUCTION. T HE ALLOTMENT IS FINAL UNLESS IT IS CANCELLED OR THE ALLOTTEE WITHDR AWS FROM THE SCHEME. THE ALLOTMENT IS CANCELLED ONLY UNDER EXCEP TIONAL CIRCUMSTANCES. THE ALLOTTEE GETS TITLE TO THE PROPE RTY ON THE ISSUANCE OF THE ALLOTMENT LETTER AND THE PAYMENT OF INSTALMENTS IS ONLY A FOLLOW-UP ACTION AND TAKING THE DELIVERY OF POSSESSION IS ONLY A FORMALITY. IF THERE IS A FAILURE ON THE P ART OF THE D.D.A. TO DELIVER THE POSSESSION OF THE FLAT AFTER COMPLET ING THE CONSTRUCTION, THE REMEDY FOR THE ALLOTTEE IS TO FIL E A SUIT FOR RECOVERY OF POSSESSION. 3. THE BOARD HAVE BEEN ADVISED THAT UNDER THE ABOVE CIRCUMSTANCES, THE INFERENCE THAT CAN BE DRAWN IS T HAT THE, D.D.A. TAKES UP THE CONSTRUCTION WORK ON BEHALF OF THE ALLOTTEE AND THAT THE TRANSACTION INVOLVED IS NOT A SALE. UN DER THE SCHEME THE TENTATIVE COST OF CONSTRUCTION IS ALREAD Y DETERMINED AND THE D.D.A. FACILITATES THE PAYMENT OF THE COST OF CONSTRUCTION IN INSTALMENTS SUBJECT TO THE CONDITION THAT THE AL LOTTEE HAS TO BEAR THE INCREASE, IF ANY, IN THE COST OF CONSTRUCT ION. THEREFORE, FOR THE PURPOSE OF CAPITAL GAINS TAX THE COST OF TH E NEW ASSET IS THE TENTATIVE COST OF CONSTRUCTION AND THE FACT THA T THE AMOUNT WAS ALLOWED TO BE PAID IN INSTALMENTS DOES NOT AFFE CT THE LEGAL POSITION STATED ABOVE. IN VIEW OF THESE FACTS, IT H AS BEEN DECIDED THAT CASES OF ALLOTMENT OF FLATS UNDER THE SELF-FIN ANCING SCHEME OF THE D.D.A. SHALL BE TREATED AS CASES OF CONSTRUC TION FOR THE PURPOSE OF CAPITAL GAINS. 9. WE HAVE HEARD THE RIVAL CONTENTION AND WE FIND THAT TH E CIT(A) HAD GIVEN A VERY REASONABLE FINDING ON THE ISSUE. BESIDES T HAT, THE ISSUE IS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH CO URT IN THE CASE OF HILLA J.B. WADIA (SUPRA) AND SO MANY DECISIONS MENTIONED IN THE CASE AND ALSO BY THE CIRCULAR NO. 471, ISSUED BY THE BOARD FOR THE SHRI PRAKASHCHANDERA D JAIN ITA 678/MUM/2008 4 PURPOSE OF DDA FLATS IN DELHI. WE ALSO FIND THAT THE ASSESSEE HAD INVESTED HIS ENTIRE CAPITAL GAINS FOR THE PURCHASE OF FLAT, WH ICH IS NOT DISPUTED BY THE AO. 10. IN THE LIGHT OF THE ABOVE FACTS, AND RESPECTFULLY FOLLOWIN G THE DECISION OF HONBLE BOMBAY HIGH COURT IN HILLA J.B. WADIA AND THE CIRCULAR ISSUED BY THE BOARD, WE SUSTAIN THE ORDER OF TH E CIT(A) AND REJECT GROUNDS NO. 1 & 2. 11. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 23/11/2012. SD/- (B.R. JAIN) ACCOUTANT MEMBER SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATE: 23/11/2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)- XV , MUMBAI. 4) THE CIT CITY-14, MUMBAI, 5) THE D.R. J BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN