Shri Umesh Premchandani, Thane V. Assistant Commissioner of Income Tax 2 (1), Bhopal

ITA 681/Ind/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3796 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 30-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINITA DUBEY
• Keywords: Capital asset; Question of law; Cost of acquisition; Competent authority; TDS; Capital Gains
• Section: 143(3); 54F; 142(1); 192; 139(1); 139(4); 43; 13; 22; 54; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.681/IND/2018 ASSESSMENT YEAR: 2013-14 SHRI UMESH PREMCHANDANI, CH. 2/5 ACRES, KOTHARI COMPUND, CHITALSAR, MANPADA THANE, MAHARASHTRA / VS. AC IT - 2 ( 1 ) BHOPAL ( APPELLANT ) ( RE VENUE ) PAN: AD MPP2590B APPELLANT BY CA HITESH CHIMNANI RE VENUE BY S MT. VINITA DUBEY , SR. DR DATE OF HEARING: 15.09.2010 DATE OF PRONOUNCEMENT: 06 . 1 1 .20 20 / O R D E R PER MANISH BORAD, A.M: THIS APPEAL AT THE INSTANCE OF ASSESSEE PERTAINING TO A.Y. 2013-14 IS DIRECTED AGAINST THE ORDER OF COMMISSION ER OF INCOME TAX(APPEALS)-1, BHOPAL, (IN SHORT CIT), DATED 23. 05.2018 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME T AX ACT SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 2 1961(HEREINAFTER CALLED AS THE ACT) FRAMED ON 15. 03.2016 BYACIT- 2(1),BHOPAL. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1.THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LD. CIT(A) ERRED IN MAINTAINING THE DISALLOWANCE OF RS. 75,83,229/- MADE BY THE AO U/S 54F OF THE I.T. ACT. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODIFY , OR DELETE ANY OF THE GROUNDS OF APPEALS BEFORE OR DURING THE COURSE OF A RGUMENTS. 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE REC ORDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL HAVING DISTRIBUTORSHIP OF HINDUSTAN UNILEVER LTD. ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 30.09.2013 U/S 139(4) DECLARING TOTAL INCOME AT RS. 1,62,51,730/-. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND NOTICE U/S 1 43(2) WAS ISSUED ON 04.09.2014 FOLLOWED BY ISSUANCE OF QUESTIONNAIRE U/ S 142(1) ON 13.10.2015. DURING THE COURSE OF ASSESSMENT PROCEE DINGS LD. A.O OBSERVED THAT THERE WAS A TRANSACTION OF SALE OF PROPERTY DURING THE YEAR. ASSESSEE HAS EARNED LONG TERM CAPITAL GA IN AND EXEMPTION U/S 54F OF THE ACT AT RS. 1,06,95,941/- WAS CLA IMED ON ACCOUNT OF UTILIZING THE SALE CONSIDERATION TO GIVE ADVA NCE FOR PURCHASE OF RESIDENTIAL HOUSE AT BHOPAL AND THANE FO R A CONSIDERATION SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 3 OF RS. 1,97,12,200/-. ON EXAMINING THE DETAILS LD. A.O OBSERVED THAT BEFORE FILING OF RETURN OF INCOME FOR ASSESSME NT YEAR 2013-14 ASSESSEE HAD INVESTED RS. 39,28,746/- ONLY AND REMA INING AMOUNT WAS NOT DEPOSITED IN THE CAPITAL GAIN DEPOSIT ACCOU NT SCHEME. LD. A.O TAKING THE BASIS OF RS.39,28,746/- AS AN INVEST MENT IN RESIDENTIAL HOUSE BEFORE THE DUE DATE COMPUTED THE ELIGIBLE AMOUNT FOR DEDUCTION U/S 54F OF THE ACT AT RS.31,12,173/- AND FURTHER OBSERVING THAT THE PROPERTY PURCHASED WAS IN JOINT NAME OF ASSESSEE AND HIS WIFE THE CLAIM U/S 54F WAS RESTRIC TED TO RS.15,56,356/-. ACCORDINGLY AFTER DISALLOWING THE CLAIM U/S 54F MADE BY THE ASSESSEE AT RS. 91,39,555/-, THE INCOME WAS ASSESSED AT RS.2,14,40,520/-. 4. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A) AND PARTLY SUCCEEDED. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE WAS NOT FULLY SATISFIED. WITH REGARD T O LD. A.OS OBSERVATION THAT THE PROPERTY WAS JOINTLY OWNED, LD . CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE THAT SINCE NO AMOUNT WAS INVESTED BY HIS WIFE FOR PURCHASE OF PROPERTY THE ASSESSEE IS ELIGI BLE FOR EXEMPTION U/S 54F. LD. CIT(A) THUS ALLOWED THE CLAIM U/S 54F OF THE ACT AT SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 4 RS.31,12,712/- AND CONFIRMED THE REMAINING DISALLOW ANCE OF RS.75,83,229/- OBSERVING AS FOLLOWS:- 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, ASSESSMENT ORDER, REMAND REPORT AND THE SUBMISSIONS MADE BY THE APPELLANT. 6. DURING THE COURSE OF ASSESSMENT, THE A.O. NOTICE D THAT THE APPELLANT HAD CLAIMED DEDUCTION U/S 54F AMOUNTING TO RS.10,95,941/- ON TRANSFER OF A PLOT FOR A CONSIDER ATION OF RS.1,35,00,000/-. THE DEDUCTION WAS CLAIMED ON PURC HASE OF A FLAT FOR A TOTAL VALUE OF RS. 1,97,12,200/-. THE PAYMENT WAS MADE ON DIFFERENT DATES FROM 04.04.2013 TO 09.10.20 14. THE APPELLANT HAD MADE PAYMENT OF RS.39,28,746/- BEFORE THE DUE DATE OF FILING OF RETURN. THE APPELLANT HAD NOT MAD E ANY DEPOSIT IN THE SPECIAL BANK ACCOUNT UNDER THE CAPITAL GAINS ACCOUNTS SCHEME AS REQUIRED U/ S 54F(4) OF THE ACT. THEREFOR E, THE A.O. RESTRICTED THE AMOUNT OF DEDUCTION TO RS. 31,12,173 /- WHICH WAS PROPORTIONATE AMOUNT BASED ON THE AMOUNT INVEST ED IN THE FLAT BEFORE THE DUE DATE OF FILING OF RETURN. FURTH ER, AS THE PROPERTY WAS PURCHASED IN THE JOINT NAME OF THE APP ELLANT AND HIS WIFE, THE DEDUCTION WAS REDUCED BY 50 AND ONLY RS.15,56,356/- WAS ALLOWED U/S 54F. 7. DURING THE COURSE OF APPEAL, THE A.R. VIDE LETTE R DATED 09.05.2018 SUBMITTED THAT THE ISSUE OF DEPOSITING T HE BALANCE CONSIDERATION IN CAPITAL GAINS ACCOUNT SCHEME WAS N OT SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 5 PRESSED. IN VIEW OF THE SAME, THE DECISION OF THE A .O. IN RESTRICTING THE AMOUNT OF DEDUCTION TO RS. 31,12,17 3/ - WHICH WAS BASED ON THE AMOUNT OF RS. 39,28,746/- INVESTED IN THE FLAT BEFORE THE DUE DATE OF FILING OF RETURN AS THE APPE LLANT HAD NOT FULFILLED THE MANDATORY REQUIREMENT OF SECTION 54F( 4) AND DID NOT MAKE ANY DEPOSIT IN THE SPECIAL BANK ACCOUNT UNDER THE CAPITAL GAINS ACCOUNTS SCHEME IS UPHELD AND CONFIRMED. 8. IN GROUND NO. 2 IT HAS BEEN REQUESTED THAT THE P AYMENT MADE TO BUILDER AT RS.39,28,746/- SHOULD BE ALLOWED IN F ULL. IT IS OBSERVED THAT THE A.O._HAS DETERMINED THE PROPORTI ONATE DEDUCTION AS PER THE PROVISION OF SECTION 54F(1)(B) . ACCORDINGLY, THE DEDUCTION AMOUNT CAME TO RS. 31,12,173/-. I FIN D NO INFIRMITY IN THE COMPUTATION MADE BY THE A.O. THIS GROUND IS THEREFORE, REJECTED. 9. ANOTHER ISSUE IN GROUND NO. 2 TO BE DECIDED IS W HETHER THE DEDUCTION SHOULD BE ALLOWED IN FULL OR RESTRICTED T O 50 IN VIEW OF JOINT OWNERSHIP WITH WIFE OF THE NEW HOUSE. IT HAS BEEN ARGUED THAT THE DETERMINATION OF PROPORTIONATE DEDUCTION U/S 54F(1)(B) RS. 31,12,173/- SHOULD BE ALLOWED IN FULL AS THE EN TIRE INVESTMENT WAS MADE BY APPLICANT AND THE CO OWNER H AS NOT MADE ANY INVESTMENT IN THIS FLAT. 10. IT IS OBSERVED THAT THE ENTIRE INVESTMENT BEFOR E SUBMISSION OF RETURN WAS MADE BY THE APPELLANT. IN SUPPORT OF PAYMENTS THE ACCOUNT OF M/S. K.D. REALITY PVT. LTD., WHERE T HE APPELLANT IS A DIRECTOR, HAS BEEN FILED SHOWING WITHDRAWAL OF RS. 10,00,000/- AND DEPOSITING SAME BY CHEQUE WITH THE BUILDER. THE REMAINING PAYMENTS ARE CLAIMED TO HAVE BEEN MAD E FROM SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 6 HIS BANK ACCOUNTS AND IN SUPPORT, THE BANK STATEMEN TS OF HDFC BANK AND CKP CO-OPERATIVE BANK HAVE BEEN FILED . COPY OF LEDGER ACCOUNT OF T. BHINJANI REALITY PVT. LTD. IN THE BOOKS OF APPELLANT HAS ALSO BEEN FILED. 11. A PERUSAL OF THE DETAILS FILED SHOW THAT THE AP PELLANT HAS MADE PAYMENT OF RS. 39,28,746/- BEFORE THE DUE DATE OF RETURN. THE COPY OF ACCOUNT OF T. BHINJANI REALITY PVT. LTD . SHOWS SAME PAYMENT BY WAY OF JOURNAL ENTRY IN THE NAME OF MS. POOJA PREMCHANDANI ALSO. HOWEVER, NO DEDUCTION HAS BEEN C LAIMED BY THE APPELLANT IN RESPECT OF THIS PAYMENT. THE EN TIRE PAYMENT OF RS. 39,28,746/- CONSIDERED FOR DEDUCTION U/S 54F HAS BEEN MADE BY THE APPELLANT. THEREFORE, THE APPELLANT WAS ENTITLED TO FULL DEDUCTION OF PROPORTIONATE AMOUNT COMPUTED U/ S 54F(1)(B) OF RS. 31,12,173/-. AS NO INVESTMENT MADE BY THE WI FE HAS BEEN CLAIMED U/S 54F, THE A.O. WAS NOT JUSTIFIED IN RESTRICTING THE DEDUCTION TO 50 MERELY FOR REASON OF JOINT OWNE RSHIP OF THE NEW HOUSE ALONG WITH WIFE. THE A.O. IS THEREFORE, D IRECTED TO ALLOWED DEDUCTION U/S 54F OF RS. 31,12,173/- AS AGA INST DEDUCTION OF RS.15,56,356/- ALLOWED BY HIM. ACCORDI NGLY, OUT OF DISALLOWANCE OF EXCESS CLAIM OF DEDUCTION U/S 54F O F RS. 91,39,585/- MADE BY THE A.O., DISALLOWANCE OF RS. 75,83,229/- IS SUSTAINED. THE APPELLANT SHALL GET RELIEF OF RS.15,56,356/ -. 12. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 7 5. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE FINDING OF LD. CIT(A) CONFIRMING THE DISALLOWANCE O F DEDUCTION U/S 54F AT RS.75,83,299/-.. 6. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED AND REFERRED TO THE FOLLOWING WRITTEN SUBMISSION:- BACKGROUND AND BRIEF FACTS OF THE CASE: THE ASSESSEE IS AN INDIVIDUAL HAVING DISTRIBUTORSHI P OF HINDUSTAN UNILEVER LTD. ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 30. 09.2013 U/S 139(4) ,DECLARING TOTAL INCOME AT RS. 1,62,51,730/- .HIS CASE WAS SELECTED FOR SCRUTINY. (THE CORRECT FIGURE OF RETUR NED INCOME IS RS 1,23,00,940 AS PER PARA 4 OF ASSESSMENT ORDER COM PUTATION) DURING THE YEAR UNDER CONSIDERATION THE APPLICANT A SSESSEE SOLD HIS OLD CO OWNED PLOT FOR A TOTAL CONSIDERATION OF RS. 2,25,00,000/-. HIS SHARE IN THE SAID PLOT WAS 60%, AND SO HIS SHA RE OF SALE CONSIDERATION CAME OUT TO RS 135,00,000/- THIS SALE AGREEMENT OF THE PLOT WAS REGISTERED IN M ARCH 2013 AND THUS THE CAPITAL GAIN AROSE IN AY2013-14 AS UNDER: ASSESSEES SHARE OF SALE CONSIDERATION RS 1,35,00,0 00/- LESS- INDEXED COST OF ACQUISITION RS 28,04,059/ - LONG TERM CAPITAL GAIN RS 1,06,95,941/- CLAMED EXEMPT IN THE RETURN U/S 54F RS 1,06,95,941/ - SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 8 THE ASSESSEE IN ORDER TO CLAIM EXEMPTION U/S 54F, W AS REQUIRED TO INVEST AN AMOUNT OF RS 1,35,00,000/- BEFORE 31/03/2 015 TOWARDS PURCHASE OF ANOTHER RESIDENTIAL HOUSE. THE ASSESSEE HAD ENTERED IN A PURCHASE AGREEMENT OF A FLAT FOR RS. 1,97,12,200/- ON 22/5/14 AND ALSO MADE PART PAYMENT S AMOUNTING TO RS 39,28,746 BEFORE THE DUE DATE OF FI LING RETURN U/S 139(1) PAGE 2 OF ASSESSMENT ORDER TOTAL OF SL.NO. 1 TO 4. UPTO 31.03.2015, THE ASSESSE HAD MADE TOTAL PAYMENT S TOWARDS PURCHASE OF FLAT AS UNDER: DATE AMOUNT REFERENCE 04.04.2013 10,00,000 PG 2 OF ASSESSMENT ORDER 30.04.2013 15,00,000 PG 2 OF ASSESSMENT ORDER 31.05.2013 13,18,072 PG 2 OF ASSESSMENT ORDER 19.06.2013 1,10,674 PG 2 OF ASSESSMENT ORDER UPTO DUE DATE U/S 139(1) SUB TOTAL RS 39,28,746 9.10.2014 11,83,200 STAMP DUTY PG 2 AO 9.10.2014 32,100 REGISTRATION FEE IN F.Y.2014 - 15 (AY.15-16 ) PAYMENTS MADE TO BUILDER 85,28,960 AS PER 26AS OF ASSESSEE WHERE TDS @1% U/S 194IA HAS BEEN DEDUCTED BY ASSESSEE OF THE BUILDER (NOW ENCLOSED) TOTAL UPTO 31.03.2015 1,36,73,006 AGAINST 1,35,00,000 WHICH WAS REQUIRED UNDER LAW. THE APPLICANT, THUS RIGHTLY CLAIMED THE EXEMPTION U/S 54F ON THE SALE OF PLOT IN HIS RETURN FILED ON 30.09.2015. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE EXPLAINED THE CIRCUMSTANCES DUE TO WHICH HE WAS REA SONABLY SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 9 PREVENTED TO MAKE DEPOSIT BALANCE AMOUNT OF RS.95,7 1,254/- (1,35,00,000 39,28,746) IN CAPITAL GAIN ACCOUNT S CHEME 1988 WITHIN 6 MONTHS FROM THE DATE OF REGISTRY OF OLD PL OT OWING TO HIS MONEY STUCK WITH ANOTHER BUILDER OF BHOPAL (MR SHYA M MANOHAR AGRAWAL) WHOSE PROJECT GOT STUCK UP (PG 2 OF PB ALO NG WITH PG 10,11 OF PB BEING BANK ACCOUNTS DEPICTING A PAYMENT OF 2 CR TOWARDS PURCHASE OF FLAT IN BHOPAL WHICH WAS STUCK DUE TO ENCROACHMENT /PERMISSION HASSLES OF THE BUILDER) AL SO PG 12,13 OF PB FOR ACCOUNTS WITH BHOPAL BUILDER. THE LD AO DISALLOWED THE PROPORTIONATE CLAIM U/S 54 F ON THE GROUND THAT THE BALANCE AMOUNT OF RS 95,71,254 WAS NOT DEPOSITED IN THE CAPITAL GAIN ACCOUNT BEFORE THE DU E DATE OF RETURN. HE THUS CALCULATED PROPORTIONATE DEDUCTION ONLY TO THE EXTENT OF RS 39,28,746 WHICH WAS DEPOSITED BEFORE THE DUE DATE O F FILING RETURN U/S 139(1). THE PROPORTIONATE CLAIM BY AO WORKED OU T AT RS 31,12,173 (PG 4 OF ASSESSMENT ORDER) THE AO RAISED ANOTHER OBJECTION THAT THE NEW FLAT I S ACQUIRED JOINTLY WITH WIFE, MS POOJA PREMCHANDANI. IN THIS REGARD, IT WAS EXPLAINED THAT ENTIRE INVESTMENT WAS MADE IN FLAT F ROM THE INDIVIDUAL FUNDS OF APPLICANT . THE CO-OWNER POOJA PREMCHANDANI HAD NOT INVESTED AN Y OF HER OWN MONEY IN THIS FLAT. SHE IS ONLY THE TITLE OWNER WITHOUT INVESTMENT. FURTHER, ON THE BASIS OF JOINT OWNERSHIP GROUND THE AO DISALLOWED 50% OF 31,12,173 AND RESTRICTED THE CLAIM OF EXEMPTION U/S 54F TO RS 15,56,356/- (AGAINST RS 1,06,95,941 AS CLAIME D ) THE LD CIT(A) THOUGH ALLOWED RELIEF OF RS 15,56,356 /- VIDE PGS 4 AND 5 OF HIS ORDER DATED 23.05.2018, HE MAINTAINED THE SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 10 DISALLOWANCE OF RS 75,83,229/- OWING TO NON-DEPOSIT OF AMOUNT UNDER CAPITAL GAIN ACCOUNT SCHEME. THE PRESENT APPEAL LIES AGAINST THE ORDER DATED 23. 05.2018 OF LD. CIT (A)-1, BHOPAL FOR THE ASSESSMENT YEAR 2013-14. GROUND THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN MAINTAINING THE DISALLOWANC E OF RS. 75,83,229/- MADE BY THE LD. AO U/S 54F OF THE I.T. ACT. (EXEMPTION CLAIMED U/S 54F RS 1,06,95,941 CLA IM RESTRICTED BY LD AO TO 15,56,356 ADDITION MADE BY AO RS 91,39,585 FURTHER RELIE F BY CIT(A) 15,56,356 THEREFORE NET DISPUTED DISALLOWANCE = RS 75,83,229/ - WHICH IS UNDER APPEAL BEFORE HONBLE ITAT} TO AVAIL THE EXEMPTION U/S 54F THE APPLICANT QUALIF IED ALL THE NECESSARY CONDITIONS: INVESTMENT OF NET SALES CONSIDERATION IN THE PURCHA SE OF NEW RESIDENTIAL HOUSE COMPLETED WITHIN TWO YEARS FROM T HE DATE OF TRANSFER. THE NEW UNIT PURCHASED IS ALSO REGISTERED WITH SUB REGISTRAR, BEFORE COMPETENT AUTHORITY. THE EVIDENCES ARE PLACED ON RECORD. ON THE BASIS OF ABOVE, EXEMPTION AS CLAIMED SHOULD BE ALLOWED. FOLLOWING ARE THE CIRCUMSTANCES UNDER WHICH EXEMPTI ON IS NOT AVAILABLE UNDER SECTION 54F OF THE INCOME TAX ACT, 1961 1. THE ASSESSEE OWNS MORE THAN 1 RESIDENTIAL HOUSE PRO PERTY AS ON THE DATE OF TRANSFER OF THE ORIGINAL ASSETS. HOWEVER TH E RESIDENTIAL HOUSE PROPERTY BOUGHT FOR CLAIMING EXEMPTION UNDER SECTIO N 54F IS EXEMPTED FROM THE SAME. 2. THE ASSESSEE PURCHASES ADDITIONAL RESIDENTIAL HOUSE WITHIN A PERIOD OF ONE YEAR FROM THE DATE OF TRANSFER OF ORIGINAL A SSET. THE NEW ASSET PURCHASED FOR CLAIMING EXEMPTION UNDER SECTION 54F IS EXEMPTED FROM THE SAME. 3. THE ASSESSEE CONSTRUCTS ADDITIONAL RESIDENTIAL HOUS E WITHIN A PERIOD OF THREE YEAR FROM THE DATE OF TRANSFER OF ORIGINAL ASSET. THE NEW ASSET CONSTRUCTED FOR CLAIMING EXEMPTION UNDER SECTION 54 F IS EXEMPTED FROM THE SAME. SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 11 IT IS MOST RESPECTFULLY SUBMITTED THAT SECTION 54F BEING A BENEFICIAL PROVISION , PURPOSIVE INTERPRETATION MAY VERY KINDLY BE ADOPTED AND THE NON-COMPLIANCE OF DEPOSIT UNDER CAPITAL GAIN SCHEME ACCOUNT, WHICH IN THE PRESENT CASE IS D UE TO BONA FIDE REASONS BEYOND THE CONTROL OF THE ASSESSEE, B E NOT TAKEN TO BE FATAL FOR THE CLAIM MADE U/S 54F . RELIANCE I S PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F SANJEEV LAL V. CIT 365 ITR 389 (SC) THE HON'BLE SUPREME COURT IN THE CASE OF SANJEEVLAL ( SUPRA ) HAS LAID DOWN THE PURPOSIVE INTERPRETATION OF SECTI ON 54 TO GIVE A LIBERAL APPROACH TO THE ASSESSEE WHO CLEARLY INTENDED TO CLAIM BENEFIT OF SECTION 54. THEIR LORDSHIPS HELD T HAT SECTION 54 IS A BENEFICIAL PROVISION AND IS TO BE CONSTRUED KEEPING IN VIEW THE INTENTION OF THE LEGISLATURE TO GIVE RELIE F IN THE MATTER OF PAYMENT OF TAX ON THE LONG-TERM CAPITAL GAIN, RE LEVANT OBSERVATION OF THEIR LORDSHIPS READS AS UNDER: '22. IN ADDITION TO THE FACT THAT THE TERM 'TRANSFE R' HAS BEEN DEFINED UNDER SECTION 2(47) OF THE ACT, EVEN IF LOO KED AT THE PROVISIONS OF SECTION 54 OF THE ACT WHICH GIVES REL IEF TO A PERSON WHO HAS TRANSFERRED HIS ONE RESIDENTIAL HOUS E AND IS PURCHASING ANOTHER RESIDENTIAL HOUSE EITHER BEFORE ONE YEAR OF THE TRANSFER OR EVEN TWO YEARS AFTER THE TRANSFER, THE INTENTION OF THE LEGISLATURE IS TO GIVE HIM RELIEF IN THE MAT TER OF PAYMENT OF TAX ON THE LONG-TERM CAPITAL GAIN. IF A PERSON, WHO GETS SOME EXCESS AMOUNT UPON TRANSFER OF HIS OLD RESIDENTIAL PREMISES AND THEREAFTER PURCHASES OR CONSTRUCTS A NEW PREMIS ES WITHIN THE TIME STIPULATED UNDER SECTION 54 OF THE ACT, TH E LEGISLATURE DOES NOT WANT HIM TO BE BURDENED WITH TAX ON THE LO NG-TERM CAPITAL GAIN AND, THEREFORE, RELIEF HAS BEEN GIVEN TO HIM IN RESPECT OF PAYING INCOME-TAX ON THE LONG-TERM CAPIT AL GAIN. THE INTENTION OF THE LEGISLATURE OR THE PURPOSE WIT H WHICH THE SAID PROVISION HAS BEEN INCORPORATED IN THE ACT, IS ALSO VERY CLEAR THAT THE ASSESSEE SHOULD BE GIVEN SOME RELIEF . THOUGH IT HAS BEEN VERY OFTEN SAID THAT COMMON SENSE IS A STR ANGER AND AN INCOMPATIBLE PARTNER TO THE INCOME-TAX ACT AND I T IS ALSO SAID THAT EQUITY AND TAX ARE STRANGERS TO EACH OTHE R, STILL THIS SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 12 COURT HAS OFTEN OBSERVED THAT PURPOSIVE INTERPRETAT ION SHOULD BE GIVEN TO THE PROVISIONS OF THE ACT. IN THE CASE OF OXFORD UNIVERSITY PRESS V. CIT [2001] 3 SCC 359 THIS COURT HAS OBSERVED THAT A PURPOSIVE INTERPRETATION OF THE PRO VISIONS OF THE ACT SHOULD BE GIVEN WHILE CONSIDERING A CLAIM F OR EXEMPTION FROM TAX . IT HAS ALSO BEEN SAID THAT HARMONIOUS CONSTRUCTION OF THE PROVISIONS WHICH SUB-SERVE THE OBJECT AND PURPOSE SHOULD ALSO BE MADE WHILE CONSTRUING ANY OF THE PROVISIONS OF THE ACT AND MORE PARTICULARLY WHEN ON E IS CONCERNED WITH EXEMPTION FROM PAYMENT OF TAX. CONSIDERING THE AFORE STATED OBSERVATIONS AND THE PRINCIPLES WI TH REGARD TO THE INTERPRETATION OF STATUTE PERTAINING TO THE TAX LAWS, ONE CAN VERY WELL INTERPRET THE PROVISIONS OF SECTION 54 RE AD WITH SECTION 2(47) OF THE ACT, I.E., THE DEFINITION OF ' TRANSFER', WHICH WOULD ENABLE THE APPELLANTS TO GET THE BENEFIT UNDE R SECTION 54 OF THE ACT.' EVEN IN CASE OF SUNAYANA DEVI VS ITO,(2017) 67 ITD 135 (KOLKATA) HELD THAT THE EXEMPTION U/S 54F CANNOT BE DENIED IF THE MONEY WAS NOT KEPT IN CAPITAL GAINS ACCOUNT UND ER SECTION 54F(4) OF THE ACT. (PG. 165 TO PG. 171 OF P APERBOOK 2) RELIANCE IS ALSO PLACED ON OTHER CASE LAWS SUBMITTE D ON THE BENCH FOR KIND CONSIDERATION PLEASE INCLUDING: ASH OK KAPASIWALA V ITO 63 TAXMANN.COM 284 (AHD), CIT V. K RAMCHANDRA RAO 56 TAXMANN.COM 163 (KARNATAKA). VE NKATA DILIP KUMAR V CIT 111 TAXMANN.COM 180 (MADRAS HIGH COURT)-LATEST ORDER DATED 5.11.2019- PGS 160-164 OF PB2 SINCE THE ASSESSEE HAS FULFILLED THE CONDITIONS AS MENTIONED IN THE SECTION 54F AND IS NOT HIT BY ANY OF THE NEGATI VE CONDITIONS,IT IS PRAYED THAT THE DISALLOWANCE OF RS 75,83,229 AS MAINTAINED BY THE LD CIT(A) BE VERY KINDLY BE DE LETED IN FULL. 7. LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT T HE ISSUE RAISED IN THIS APPEAL THAT DEPOSITING THE SALE CONS IDERATION IN THE CAPITAL GRAIN ACCOUNT WITH SCHEDULED BANK IS NOT MA NDATORY IF THE SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 13 SUBSTANTIVE CONDITION IS FULFILLED I.E. THE ASSES SEE HAS PURCHASED WITHIN 2 YEARS OR CONSTRUCTED RESIDENTIAL HOUSE WIT HIN 3 YEARS FROM THE DATE OF SALE AND HAS UTILIZED THE SALE CONSIDER ATION TO PURCHASE/CONSTRUCT THE RESIDENTIAL HOUSE IS SQUAREL Y COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF CO-ORDINA TE BENCH OF KOLKATTA IN THE CASE OF SUNAYANA DEVI V/S ITO (SUPRA), (2017) 67 ITD 135, CO-ORDINATE BENCH OF CHANDIGARH IN THE CASE OF MRS. SEEMA SABHARWAL V/S ITO (SUPRA) ITA NO.272/CHD/2017 ORDER DATED 5.2.2018, WHEREIN BOTH THE TRIBUNALS HAVE REL IED ON THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. K. RAMACHANDRA RAO (2015) 56 TAXMANN.COM 163. 8. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEMEN TLY ARGUED AND SUPPORTING THE FINDING OF LD. CIT(A) AND ALSO RELIED ON THE FINDING OF HON'BLE HIGH COURT BOMBAY IN THE CAS E OF HUMAYUN SULEMAN MERCHANT VS. CHIEF COMMISSIONER OF INCOME T AX (2016) 387 ITR 421(BOMBAY). 9. IN REJOINDER LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F HUMAYUN SULEMAN MERCHANT VS. CHIEF COMMISSIONER OF INCOME T AX (SUPRA) WILL SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 14 NOT BE APPLICABLE ON THE ASSESSEE SINCE HON'BLE SUP REME COURT IN THE CASE OF SANJEEV LAL V/S CIT (SUPRA) 365 ITR 389 HAS LAID DOWN THE PURPOSE OF INTERPRETATION OF SECTION 54 HOLDING THAT LIBERAL APPROACH SHOULD BE GIVEN TO THE ASSESSEE WHO CLEARL Y INTEND TO CLAIM THE BENEFIT OF SECTION 54. HON'BLE APEX COUR T FURTHER HELD THAT SECTION 54 IS A BENEFICIAL PROVISION AND IS TO CONSIDER KEEPING IN VIEW THE INTENTION OF THE LEGISLATURE TO GIVE RE LIEF IN THE MATTER OF PAYMENT OF TAX ON THE LONG TERM CAPITAL GAIN. 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RE CORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE JUD GMENTS AND DECISIONS REFERRED BY BOTH THE PARTIES. THE SOLE G RIEVANCE OF THE ASSESSEE IS AGAINST THE FINDING OF LD. CIT(A) CONFI RMING THE DISALLOWANCE OF RS.75,83,299/- U/S 54F OF THE ACT. WE OBSERVE THAT ON 22.2.2008 THE PROPERTY WAS PURCHASED FROM TRIMUR TI ENTERPRISES, THANE AND ASSESSEE HAVING 60% SHARE OF THE PROPERTY MADE AN INVESTMENT AT RS.18,13,950/-. THIS PROPERT Y WAS SOLD IN MARCH, 2013 FOR A CONSIDERATION OF RS. 2,25,00,000/ -, THE ASSESSEE BEING 60% OWNER RECEIVED THE SALE CONSIDERATION OF RS. 1,35,00,000/-. LONG TERM CAPITAL GAIN IS COMPUTED A T RS. SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 15 1,06,95,941/-. TO THIS EXTENT OF THE CASE PURCHASE COST, SALE CONSIDERATION RECEIVED AND LONG TERM CAPITAL GAIN T HERE IS NO DISPUTE AT THE END OF BOTH THE PARTIES. AFTER RECEI VING THE SALE CONSIDERATION ASSESSEE IN ORDER TO CLAIM THE BENEFI T OF PROVISIONS OF SECTION 54F OF THE ACT AT RS. 1,06,95,941/- FIRSTLY PLANNED TO PURCHASE HOUSE PROPERTY AT BHOPAL AND GAVE ADVANCE OF RS. 2,00,00,000/- TO A BUILDER NAMELY ALARK BUILDER & D EVELOPER AND MR. SHYAM MANOHAR AGRAWAL. FEW MONTHS LATER DUE TO SOME LEGAL LITIGATION THE PROJECT OF MR. SHYAM MANOHAR AGRAWAL CAME TO HALT. THE AMOUNT SO ADVANCED BY THE ASSESSEE WAS SUBSEQUE NTLY REALIZED DURING THE FINANCIAL YEAR 2013-14 TO FINANCIAL YEAR 2015-16. THE MOMENT ASSESSEE CAME TO KNOW ABOUT THE DISPUTE IN T HE PROJECT OF BHOPAL, HE IN ADDITION TO BHOPAL PROPERTY PLANNED T O PURCHASE A DUPLEX FLAT AT THANE FROM T BHIMJYANI REALTY PRIVAT E LIMITED. HE GAVE ADVANCE ON 4.4.2013 AT RS. 10 LAKHS FOR THE SA ME. UP TO THE DATE OF FILING OF RETURN OF INCOME FOR ASSESSMENT Y EAR 2013-14 ON 30.09.2013 ASSESSEE HAD PAID RS. 39,27,746/- AS ADV ANCE TOWARDS RESIDENTIAL PROPERTY AT THANE. THE REMAINING AMOUNT OF PURCHASE CONSIDERATION AT RS. 85,28,960/-, STAMP DUTY AT RS. 11,83,200/- SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 16 AND REGISTRATION FEES AT RS. 32,100/- WERE PAID ON 9.10.2014 AT THE TIME OF THE SIGNING THE PURCHASE DEED. THUS UP TO 10.10.14 ASSESSEE HAD PAID RS. 1,36,73,006/- AS PURCHASE CON SIDERATION FOR THE RESIDENTIAL PROPERTY AT THANE AS AGAINST RS. 1, 35,00,000/- OF HIS SHARE OF SALE CONSIDERATION FROM SALE OF PROPER TY WHICH GAVE RISE TO LONG TERM CAPITAL GAIN OF RS. 1,06,95,941/-. 11. NOW THE POINT OF DISPUTE BEFORE THE LOWER AUTHORIT IES IS MAINLY WITH REGARD TO PAYMENT FOR PURCHASE OF RESIDENTIAL HOUSE PROPERTY AT THANE AFTER THE DUE DATE OF FILING OF RETURN OF INCOME WHICH IN THIS CASE RS. 97,44,260/-. THE TOTAL PURCHASE CONSI DERATION IS RS. 1,36,73,006/- AND ADVANCE AMOUNT PAID BEFORE FILING THE RETURN OF INCOME IS RS. 39,28,746/-. BOTH THE LOWER AUTHORIT IES AFTER REFERRING TO THE PROVISIONS OF SECTION 54F OF THE A CT HAVE OBSERVED THAT THE ASSESSEE IN ORDER TO CLAIM EXEMPTION/DEDUC TION U/S 54F OF THE ACT FROM THE GAIN ARISING FROM TRANSFER OF CERT AIN CAPITAL ASSETS OTHER THAN A RESIDENTIAL HOUSE SHOULD NOT BE CHARGE D TO TAX IF THE SALE CONSIDERATION IS INVESTED IN A RESIDENTIAL HOU SE BY WAY OF PURCHASE BEFORE ONE YEAR OR WITHIN TWO YEAR AFTER T HE DATE ON WHICH THE TRANSFER TOOK PLACE OR WITHIN 3 YEARS FROM THE DATE OF TRANSFER SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 17 HAS CONSTRUCTED RESIDENTIAL HOUSE. THERE IS ONE MOR E CONDITION WHEREIN IF THE ASSESSEE IS NOT ABLE TO APPLY THE SA LE CONSIDERATION FOR PURCHASE OF NEW RESIDENTIAL HOUSE BEFORE THE DU E DATE OF FILING OF RETURN OF INCOME THEN SUCH SALE CONSIDERATION IN VI EW OF SECTION 54F(4) OF THE ACT SHALL DEPOSIT THE UNUSED SALE CON SIDERATION IN A CAPITAL GAIN ACCOUNT WITH THE AUTHORIZED BANKS AS N OTIFIED BY THE CENTRAL GOVERNMENT. IN THE INSTANT CASE LD. CIT(A) OBSERVED THAT THE ASSESSEE AFTER HAVING PAID AN ADVANCE SUM OF RS . 39,28,746/- HAS NOT DEPOSITED THE REMAINING AMOUNT IN A CAPITAL GAIN ACCOUNT BEFORE MAKING THE FINAL PAYMENT OF RS. 97,44,260/-. LD. CIT(A) THUS HELD THAT SINCE THE ASSESSEE HAS VIOLATED THE PROVI SIONS OF SECTION 54F(4) OF THE ACT AND HAS NOT DEPOSITED THE AMOUNT IN CAPITAL GAIN ACCOUNT THE ASSESSEE SHOULD BE DENIED THE BENEFIT O F EXEMPTION/CAPITAL GAIN U/S 54F OF THE ACT AT RS. 7 5,83,299/-. 12. NOW THE QUESTION BEFORE US IS THAT IN A SITUATION WHERE THE ASSESSEE HAS UTILIZED THE SALE CONSIDERATION IN PUR CHASE OF RESIDENTIAL HOUSE WITHIN TWO YEARS AFTER THE DATE O F SALE OF ORIGINAL CAPITAL ASSET OR CONSTRUCTED A RESIDENTIAL HOUSE WI THIN THREE YEARS FROM THE DATE OF SALE OF PROPERTY WHETHER IT IS MAN DATORY FOR THE SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 18 ASSESSEE TO DEPOSIT THE UN UTILIZED SALE CONSIDERAT ION AS ON THE DUE DATE OF FILING RETURN OF INCOME IN A CAPITAL GAIN A CCOUNT NOTIFIED BY THE CENTRAL GOVERNMENT U/S 54F(4) OF THE ACT TILL T HE PAYMENT FOR PURCHASE/CONSTRUCTION OF NEW RESIDENTIAL HOUSE. 13. TO EXAMINE THIS ISSUE WE WOULD FIRST LIKE TO REPRO DUCE THE PROVISIONS OF SECTION 54F WHICH READS AS FOLLOWS:- 54F. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, TH E CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET, NOT BEING A RESIDEN TIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSE E HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER T OOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SE CTION, THAT IS TO SAY, (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHAL L NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO TH E NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45 : PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY WHERE (A) THE ASSESSEE, (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER TH AN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN TH E NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET; O R (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL AS SET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER THAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS C HARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 19 'NET CONSIDERATION', IN RELATION TO THE TRANSFER OF A CAPITAL ASSET, MEANS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS REDUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCL USIVELY IN CONNECTION WITH SUCH TRANSFER. (2) WHERE THE ASSESSEE PURCHASES, WITHIN THE PERIOD OF TWO YEARS AFTER THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET, OR CONSTRUCTS, WITH IN THE PERIOD OF THREE YEARS AFTER SUCH DATE, ANY RESIDENTIAL HOUSE, THE INCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', OTHER THAN THE NEW ASSET, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDE R SECTION 45 ON THE BASIS OF THE COST OF SUCH NEW ASSET AS PROVIDED IN CLAUSE (A), OR, AS TH E CASE MAY BE, CLAUSE (B), OF SUB- SECTION (1), SHALL BE DEEMED TO BE INCOME CHARGEABL E UNDER THE HEAD 'CAPITAL GAINS' RELATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOU S YEAR IN WHICH SUCH RESIDENTIAL HOUSE IS PURCHASED OR CONSTRUCTED. (3) WHERE THE NEW ASSET IS TRANSFERRED WITHIN A PER IOD OF THREE YEARS FROM THE DATE OF ITS PURCHASE OR, AS THE CASE MAY BE, ITS CONSTRUCTION, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDE R SECTION 45 ON THE BASIS OF THE COST OF SUCH NEW ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAUSE (B), OF SUB-SECTION (1) SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER T HE HEAD 'CAPITAL GAINS' RELATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOUS YEAR IN WH ICH SUCH NEW ASSET IS TRANSFERRED. (4) THE AMOUNT OF THE NET CONSIDERATION WHICH IS NO T APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN O NE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139 , SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTI ON (1) OF SECTION 139 ] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN , AND UTILISED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFIC ATION IN THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT ; AND, FOR THE PURPOSES OF SUB-SECTION (1), THE AMOUNT, IF ANY , ALREADY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THEN, (I) THE AMOUNT BY WHICH (A) THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TR ANSFER OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF THE NEW ASSET AS PROVI DED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAUSE (B) OF SUB-SECTION (1), EXCEEDS SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 20 (B) THE AMOUNT THAT WOULD NOT HAVE BEEN SO CHARGED HAD THE AMOUNT ACTUALLY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF TH E NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1) BEEN THE COST OF THE NEW ASSET, SHALL BE CHARGED UNDER SECTION 45 AS INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE OR IGINAL ASSET EXPIRES; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW TH E UNUTILISED AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. EXPLANATION.[OMITTED BY THE FINANCE ACT, 1992, W.E .F. 1-4-1993.] 14. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT SINCE THE ASSESSEE HAS UTILIZED THE TOTAL SALE CONS IDERATION FOR THE PURCHASE OF NEW HOUSE PROPERTY WITHIN TWO YEARS FRO M THE DATE OF TRANSFER OF ORIGINAL ASSET AND SUBSTANTIVE CONDITIO N HAS BEEN FULFILLED, NO ADVERSE ACTION SHOULD HAVE BEEN TAKEN BY THE LD. A.O FOR NOT FULFILLING THE PROCEDURAL REQUIREMENT I.E. DEPOSITING THE UNUTILIZED SALE CONSIDERATION IN CAPITAL GAIN ACCOU NT FRAMED BY THE CENTRAL GOVERNMENT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S 139 OF THE ACT. 15. LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT TH E DECISIONS OF CO-ORDINATE BENCH KOLKATTA IN THE CASE OF SUNAYANA DEVI V/S ITO (SUPRA) AND THE DECISION OF CO-ORDINATE BENCH OF CHANDIGAR H IN THE CASE OF MRS. SEEMA SABHARWAL V/S ITO (SUPRA) ARE SQUARELY APPLICABLE IN THE CASE OF THE ASSESSEE AND THE ISSU ES RAISED HEREIN SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 21 WERE HELD IN FAVOUR OF ASSESSEE BY BOTH THE CO-ORDI NATE BENCHES. LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT IN BOTH THE ABOVE REFERRED DECISIONS RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. K. RAMACHANDRA RAO (SUPRA) . 16. ON THE OTHER HAND IN THE JUDGMENT OF HON'BLE BOMBA Y HIGH COURT IN THE CASE OF HUMAYUN SULEMAN MERCHANT VS. CIT (SUPRA) RELIED BY LD. DEPARTMENTAL REPRESENTATIVE, THE HON' BLE COURT HAS SPECIFICALLY HELD THAT THE PART OF THE SALE CONSIDE RATION WHICH HAVE NOT BEEN INVESTED EITHER IN PURCHASE/CONSTRUCTION O F HOUSE HAVE TO BE DEPOSITED IN THE SPECIFIED ACCOUNT BEFORE THE DU E DATE OF FILING OF RETURN OF INCOME U/S 139(1) OF THE ACT. THE HON'BL E BOMBAY HIGH COURT FURTHER HELD THAT IN THE PRESENT FACTS THE PROVISION OF SECTION 54F(4) OF THE ACT ARE VERY CLEAR. THERE IS NO AMBIGUITY. THUS THERE IS NO OCCASION TO APPLY LIBERAL/BENEFICIAL CO NSTRUCTION WHILE INTERPRETING THE SECTION AS CONTENDED BY THE APPELL ANT. 17. WE FIND THAT HON'BLE HIGH COURT OF KARNATAKA IN TH E CASE OF CIT V/S K. RAMACHANDRA RAO (SUPRA) ON EXAMINING THE FACTS OF THE SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 22 CASE IN THE LIGHT OF THE PROVISIONS OF SECTION 54F( 1) & 54F(4) OF THE ACT HAS HELD AGAINST THE REVENUE AND THE RELEVANT E XTRACT IS REPRODUCED BELOW:- SUB SECTION (4) IS ATTRACTED ONLY TO A CASE WHERE THE SALE CONSIDERATION IS NOT UTILIZED EITHER FOR PURCHASE OR FOR CONSTRUCTIO N OF A RESIDENTIAL HOUSE. IT HAS NO APPLICATION TO A CASE WHERE THE ASSESSEE INV ESTS THE SALE CONSIDERATION DERIVED FROM THE TRANSFER EITHER IN P URCHASING THE PROPERTY OR CONSTRUCTING THE RESIDENTIAL HOUSE WITHIN THE PERIO D STIPULATED IN SECTION 54F(1) . THE PROVISO TO SECTION 54F PUTS AN EMBARGO ON THE APPLICATION OF SECTION 54F TO CASES WHICH ARE MENTIONED IN THE SAID PROVISO. THAT IS TO BE ELIGIBLE FOR THE BENEFIT UNDER SECTION 54F(1) THE ASSESSEE SHOULD NOT BE OWNING MORE THAN ONE RESIDENTIAL HOUSE OTHER THAN T HE NEW ASSET ACQUIRED OR HE SHOULD NOT PURCHASE ANY RESIDENTIAL HOUSE OTH ER THAN THE NEW ASSET WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANS FER OF RESIDENTIAL ASSET OR CONSTRUCTS ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE RE SIDENTIAL ASSET. IN THE ENTIRE SCHEME THERE IS NO PROHIBITION FOR THE ASSES SEE PUTTING UP CONSTRUCTION OUT OF SALE CONSTRUCTION RECEIVED BY S UCH TRANSFER OF A SITE WHICH IS OWNED BY HIM AS IS CLEAR FROM THE LANGUAGE USED. IT IS OPEN FOR THE ASSESSEE TO PUT UP A RESIDENTIAL CONSTRUCTION O R TO PURCHASE A RESIDENTIAL HOUSE. IT IS NOT THE REQUIREMENT OF LAW THAT HE SHOULD PURCHASE A RESIDENTIAL SITE AND THEN PUT-UP CONSTRUCTION. TH EREFORE, IN THE INSTANT CASE ADMITTEDLY THE ASSESSEE HAS PURCHASED A VACANT SITE ON 31.3.2001. HE SOLD THE ORIGINAL ASSET ON 27.8.2003 ON WHICH DA TE HE WAS ALREADY OWNING A SITE. IN FACT EVEN BEFORE SALE OF THE ORIG INAL ASSET HE HAD STARTED CONSTRUCTION ON SUCH SITE BY AVAILING LOAN FROM THE BANK. IN TERMS OF SECTION 54F(1) ALL INVESTMENTS MADE IN THE CONSTRUCTION OF THE RE SIDENTIAL SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 23 HOUSE OF THE SAID SITE WITHIN A PERIOD OF ONE YEAR PRIOR TO 27.8.2003 WOULD BE ELIGIBLE FOR EXEMPTION UNDER SECTION 54F(1) . SIMILARLY ALL INVESTMENTS IN THE SAID CONSTRUCTION AFTER 27.8.2003 WITHIN A PERI OD OF THREE YEARS THERE FROM IS ALSO ELIGIBLE FOR EXEMPTION. THEREFORE, THE ARGUMENT THAT SUCH INVESTMENT IN PUTTING UP A RESIDENTIAL CONSTRUCTION CANNOT BE MADE ON A SITE OWNED BY HIM TO BE ELIGIBLE FOR EXEMPTION IS W ITHOUT ANY SUBSTANCE. BOTH THE APPELLATE AUTHORITIES HAVE RIGHTLY EXTENDE D THE BENEFIT TO THE ASSESSEE AND THERE IS NO ERROR COMMITTED BY THEM WH ICH CALLS FOR INTERFERENCE. 4. RE.QUESTION NO.2 : AS IS CLEAR FROM SUB SECTION (4) IN THE EVENT OF TH E ASSESSEE NOT INVESTING THE CAPITAL GAINS EITHER IN PURCHASING THE RESIDENT IAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54F(1) , IF THE ASSESSEE WANTS THE BENEFIT OF SECTION 54F , THEN HE SHOULD DEPOSIT THE SAID CAPITAL GAINS IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT. IN OTHER WORDS IF HE WANT OF CL AIM EXEMPTION FROM PAYMENT OF INCOME TAX BY RETAINING THE CASH, THEN T HE SAID AMOUNT IS TO BE INVESTED IN THE SAID ACCOUNT. IF THE INTENTION IS N OT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE OF THE PROPE RTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THE REIN, THEN SECTION 54F(4) IS NOT AT ALL ATTRACTED AND THEREFORE THE CONTENTI ON THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS STIPULATED AND THEREFORE, HE IS NOT ENTITLED TO THE BENEFIT EVEN T HOUGH HE HAS INVESTED THE MONEY IN CONSTRUCTION IS ALSO NOT CORRECT. 5. FOR THE AFORESAID REASONS BOTH THE SUBSTANTIAL Q UESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THEREFORE, SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 24 WE DO NOT SEE MERIT IN ANY OF THE APPEALS. ACCORDIN GLY, ALL THE FOUR APPEALS ARE DISMISSED. 18. WE FURTHER OBSERVE THAT THE ABOVE JUDGMENT OF HON' BLE HIGH COURT OF KARNATAKA HAS BEEN DULY CONSIDERED BY HON' BLE HIGH COURT OF BOMBAY IN THE CASE OF HUMAYUN SULEMAN MERCHANT VS CIT (SUPRA) AND THE RELEVANT EXTRACT OF JUDGMENT OF HON'BLE HIG H COURT OF BOMBAY IS MENTIONED BELOW:- (O) MR.CHATTERJI, LEARNED SENIOR COUNSEL NEXT SUBMI TTED THAT IN ANY CASE THE ISSUE NOW STANDS CONCLUDED IN FAVOUR OF THE APP ELLANT BY THE DECISION OF THE KARNATAKA HIGH COURT IN K. RAMCHANDRA RAO (S UPRA) WHEREIN AN IDENTICAL QUESTION CAME UP FOR CONSIDERATION AND IT WAS HELD THAT EVEN WHERE THE ASSESSEE HAD NOT DEPOSITED THE UN-UTILIZE D CAPITAL GAIN IN AN ACCOUNT WHICH WAS DULY NOTIFIED BY THE CENTRAL GOVE RNMENT IN TERMS OF SECTION 54F(4) OF THE ACT, THE BENEFIT OF SECTION 5 4F(1) OF THE ACT WOULD STILL BE AVAILABLE. THE COURT HELD THAT IF THE INTENTION WAS NOT TO RETAIN THE CAPITAL GAINS BUT WAS TO INVEST IT IN CONSTRUCTION OF PROPERTY WITHIN THE PERIOD STIPULATED IN SUB SECTION (1) OF SECTION 54( F) OF THE ACT THEN SECTION 54F(4) OF THE ACT IS NOT AT ALL ATTRACTED. WE ARE W ITH RESPECT UNABLE TO ACCEPT THE REASONING ADOPTED BY KARNATAKA HIGH COUR T IN K. RAMCHANDRA RAO (SUPRA). THE MANDATE OF SECTION 54F(4) OF THE A CT IS CLEAR THAT AMOUNT WHICH HAS NOT BEEN UTILIZED IN CONSTRUCTION AND/OR PURCHASE OF PROPERTY BEFORE FILING THE RETURN OF INCOME, MUST NECESSARIL Y BE DEPOSITED IN AN ACCOUNT DULY NOTIFIED BY THE CENTRAL GOVERNMENT, SO AS TO BE EXEMPTED. (P) FURTHER, SECTION 54F(4) OF THE ACT SPECIFICALL Y PROVIDES THAT THE AMOUNTS WHICH HAVE NOT BEEN INVESTED EITHER IN PURCHASE / C ONSTRUCTION OF HOUSE HAVE TO BE DEPOSITED IN THE SPECIFIED ACCOUNTS BEFO RE THE DUE DATE OF FILING SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 25 OF RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT . THE AFORESAID ASPECT IT APPEARS WAS NOT NOTICED BY THE KARNATAKA HIGH COURT . IN ANY CASE, THE ENTIRE BASIS OF THE DECISION OF THE KARNATAKA HIGH COURT IN K. RAMCHANDRA RAO (SUPRA) IS THE INTENT OF THE PARTIES. IN INTERP RETING A FISCAL STATUTE ONE MUST HAVE REGARD TO THE STRICT LETTER OF LAW AND IN TENT CAN NEVER OVERRIDE THE PLAIN AND UNAMBIGUOUS LETTER OF THE LAW. IT IS TRUE THAT NORMALLY WHILE CONSTRUING AN ALL INDIA STATUTE LIKE THE INCOME TAX ACT, WE WOULD NOT EASILY DEPART FROM A VIEW TAKEN BY ANOTHER HIGH COU RT ON AN ISSUE ARISING FOR OUR CONSIDERATION. THIS ON CONSIDERATION OF CER TAINTY AND CONSISTENCY IN LAW. HOWEVER, THE VIEW OF THE OTHER HIGH COURTS ARE NOT BINDING UPON US UNLIKE A DECISION OF THE APEX COURT OR OF LARGER OR A CO-ORDINATE BENCH OF THIS COURT. THUS IF ON AN EXAMINATION OF THE DECISI ONS OF THE OTHER HIGH COURT WE ARE UNABLE TO ACCEPT THE SAME, WE ARE NOT BOUND TO FOLLOW/ACCEPT THE INTERPRETATION OF THE OTHER HIGH COURTS LEADING TO A PARTICULAR CONCLUSION. IN THIS CASE WE FIND THAT THE DECISION OF THE KARNATAKA HIGH COURT IN K.RAMCHANDRA RAO (SUPRA) WAS RENDERED SUB- SILENTIO I.E. NO ARGUMENT WAS MADE WITH REGARD TO THE REQUIREMENT OF DEPOSIT IN NOTIFIED BANK ACCOUNT IN TERMS OF SECTION 54F(4) OF THE ACT BEFORE THE DUE DATE AS PROVIDED IN SECTION 139(1) OF THE ACT. AS OBSERVED IN SALMOND'S JURISPRUDENCE 12TH EDITION : THE RULE THAT A PRECEDENT SUB SILENTIO IS NOT AUT HORITATIVE GOES BACK AT LEAST TO 1661(M) WHEN COUNSEL SAID : 'AN HUNDRE D PRECEDENTS SUBSILENTIO ARE NOT MATERIAL'; AND TWISDEN J AGREE D : 'PRECEDENTS SUB-SILENTIO AND WITHOUT ARGUMENT ARE OF NO MOMENT '. THIS RULE HAS EVER SINCE BEEN FOLLOWED. (Q) IN FACT THIS COURT IN COMMISSIONER OF INCOME TA X VS. THANA ELECTRICITY SUPPLY LTD. 206 ITR 727 HAS OBSERVED THAT A DECISIO N OF ONE HIGH COURT IS NOT BINDING AS A PRECEDENT ON ANOTHER HIGH COURT UN LIKE A DECISION OF THE APEX COURT. IN SUPPORT, RELIANCE WAS PLACED IN THE ABOVE ORDER UPON THE SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 26 DECISION OF THE APEX COURT IN VALLIAMMA CHAMPAKA PI LLAI VS. SIVATHANU PILLAI AIR 1137 1979 (SC) 1937 TO HOLD THAT IT IS W ELL SETTLED THAT DECISION OF ONE HIGH COURT IS NOT A BINDING PRECEDENT UPON A NOTHER HIGH COURT AND AT BEST CAN ONLY HAVE PERSUASIVE VALUE. HOWEVER, AT THE COST OF REPETITION WE MUST EMPHASIZE THAT THE DECISION OF ANOTHER HIGH COURT RENDERED IN THE CONTEXT OF AN ALL INDIA ACT WOULD HAVE PERSUASIVE V ALUE AND NORMALLY TO MAINTAIN UNIFORMITY AND CERTAINTY WE WOULD ADOPT TH E VIEW OF THE OTHER HIGH COURT. HOWEVER, WITH THE GREATEST RESPECT, WE FIND THAT THE DECISION OF KARNATAKA HIGH COURT IN K.RAMCHANDRA RAO (SUPRA) HAS BEEN RENDERED SUB-SILENTIO. THEREFORE, WE CANNOT PLACE ANY RELIAN CE UPON IT TO CONCLUDE THE ISSUE ON THE BASIS OF THAT DECISION. 19 . THE JUDGMENT OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V/S K RAMACHANDRA RAO (SUPRA) WAS PRONOUNCED ON 14.07.2014 AND THAT OF HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF HUMAYUN SULEMAN MERCHANT VS CIT (SUPRA) WAS PRONOUNCED ON 18.08.2016. SUBSEQUENTLY ON NOVEMBER 05, 2019 HONBLE HIGH COURT OF MADRAS IN THE CASE OF VENKATA DILIP KUMAR V/S CIT, CHENNAI (SUPRA) (2019) 111 TAXMAN.COMM 180 (MADRAS) WHILE ADJUDICATING THE SIMILAR ISSUE RELATING TO PROVISIO NS OF SECTION 54 OF THE ACT REFERRED TO THE JUDGMENT OF HON'BLE HIGH C OURT OF KARNATAKA IN THE CASE OF CIT V/S K RAMACHANDRA RAO (SUPRA) AND SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 27 FOLLOWED THE RATIO LAID DOWN THEREIN. RELEVANT EXTR ACT IS REPRODUCED BELOW:- 17. HAVING COME TO THE CONCLUSION THAT THE ASSESSEE HA D UTILISED THE NET CONSIDERATION IN CONSTRUCTION OF A HOUSE WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER, THE QUESTION WOULD BE WH ETHER THE ABSENCE OF DEPOSIT OF UNUTILISED NET CONSIDERATION IN A SPECIF IC BANK ACCOUNT AS IS REQUIRED U/S 54F(4) OF THE ACT, SHOULD THE ASSESSEE BE DENIED THE BENEFIT OF DEDUCTION U/S 54F OF THE ACT. ON THIS ISSUE THE ID. COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. K RAMOCHONDRA RAO 2015 56 TAXMAN.COM 163/230 TAXMAN 334 KAR. IN THE AFORESAID DECISION THE ASSES SEE HAD NOT DEPOSITED THE UNUTILISED NET CONSIDERATION IN A SPE CIFIC BANK ACCOUNT AS IS REQUIRED U/S 54F OF THE ACT. THE ASSESSEE HAD HOWEV ER INVESTED THE NET CONSIDERATION IN CONSTRUCTION OF A RESIDENTIAL HOUS E WITHIN THE PERIOD CONTEMPLATED U/S 54F (\) OF THE ACT. THE HON'BLE K ARNATKA HIGH COURT HAD TO DECIDE WHETHER THE ASSESSEE COULD BE GIVEN A DED UCTION OF BENEFIT U/S 54F(I) OF THE ACT. THE HON'BLE KARNATAKA HIGH COURT HELD THAT IF THE ASSESSEE INVESTS THE ENTIRE CONSIDERATION IN CONSTR UCTION OF THE RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER HE CANNOT BE DENIED DEDUCTION U/S 54F OF THE ACT ON THE GROUND THAT HE DID NOT DEPOSIT THE SAID AMOUNT IN CAPITAL GAIN ACCOUNT SCHEME BEFORE THE DU E DATE PRESCRIBED U/S 139( I) OF THE ACT. IN THE LIGHT OF THE AFORESAID D ECISION OF THE HON'BLE KARNATAKA HIGH COURT AND IN THE LIGHT OF THE ADMITT ED FACTUAL POSITION THAT THE ASSESSEE INVESTED THE SALE CONSIDERATION IN CON STRUCTION OF A RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD BE GIVEN THE BENE FIT OF DEDUCTION U/S 54 F OF THE A ET ON THE SUM OF RS.16 ,50,000/- ALSO AND CANNOT BE DENIED THE SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 28 BENEFIT THE SAID BENEFIT FOR THE REASON THAT HE HAD NOT COMPLIED WITH THE REQUIREMENTS OF SEC.54F(4) OF THE ACT. THUS IN EFFE CT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S.54F OF THE ACT OF RS.20,3 31,839 /- VIZ., FOR THE INVESTMENT OF RS.3,50,000/- IN PURCHASE OF THE LAND, RS.31,839/- STAMP DUTY AND REGISTRATION CHARGES AND UTILISED FOR CONS TRUCTION OF A RESIDENTIAL HOUSE WITHIN THIS PERIOD SPECIFIED IN SECTION E ACT . THE AO IS ACCORDINGLY DIRECTED TO ALLOW DEDUCTION U/S 54F OF THE ACT AT A SUM OF RS.20,31,839/-. THE APPEAL OF THE ASSESSEE IS THUS PARTLY ALLOWED. 20. WE OBSERVE THAT THE JUDGMENT IN THE CASE OF VENKATA DILIP KUMAR V/S CIT, CHENNAI (SUPRA) IS THE MOST RECENT ONE AND THE REVENUE HAS NOT BROUGHT BEFORE US ANY OTHER JUDGMEN T IN ITS SUPPORT SUBSEQUENT TO THE JUDGMENT OF HONBLE HIGH COURT OF MADRAS IN THE CASE OF VENKATA DILIP KUMAR V/S CIT, CHENNAI (SUPRA). SO THE SITUATION BEFORE US IS THAT THE JUDGMENTS OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V/S K RAMACHANDRA RAO (SUPRA) AND THE JUDGMENT OF HONBLE HIGH COURT OF MADRAS I N THE CASE OF VENKATA DILIP KUMAR V/S CIT, CHENNAI (SUPRA) ARE IN FAVOUR OF THE ASSESSEE LAYING DOWN RATIO THAT IN CASE OF E XEMPTION CLAIMED U/S 54F OF THE ACT IF THE ASSESSEE FULFILLS THE SUB STANTIVE CONDITIONS PROVIDED U/S 54F(1) OF THE ACT THEN THE ASSESSEE SH OULD NOT BE DENIED THE EXEMPTION FOR NOT COMPLYING TO THE PROCE DURAL SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 29 REQUIREMENT OF SECTION 54F(4) OF THE ACT RELATING T O DEPOSIT OF UNUTILIZED SALE CONSIDERATION UP TO THE DUE DATE OF FILING OF RETURN OF INCOME IN THE CAPITAL GAIN ACCOUNT SCHEME. ON THE OTHER HAND HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF HUMAYUN SULEMAN MERCHANT VS CIT (SUPRA) HOLDING AGAINST THE ASSESSEE HAS HELD THAT SINCE THE PROVISIONS OF SECTION 54F(4) ARE VERY CLE AR AND THERE IS NO AMBIGUITY, THUS THERE IS NO OCCASSION TO APPLY LIBE RAL/BENEFICIAL CONSTRUCTION WHILE INTERPRETING THE SECTION AND THE REFORE THE ASSESSEE WHO HAS NOT UTILIZED THE SALE CONSIDERATIO N FROM SALE OF CAPITAL ASSET FOR PURCHASE OF RESIDENTIAL HOUSE BEF ORE ONE YEAR AND AFTER TWO YEARS FROM THE DATE OF SALE OF ORIGINAL A SSET OR HAS NOT CONSTRUCTED NEW RESIDENTIAL HOUSE WITHIN THREE YEAR S THEN THE UNUTILIZED SALE CONSIDERATION AS ON THE DUE DATE OF FILING OF RETURN OF INCOME FOR THE YEAR IN WHICH ORIGINAL ASSET IS SOLD HAS TO BE DEPOSITED IN CAPITAL GAIN ACCOUNT SCHEME AS NOTIFIE D BY THE CENTRAL GOVERNMENT. IN CASE THE ASSESSEE FAILS TO DO SO TH EN BENEFIT OF SECTION 54F OF THE ACT SHOULD NOT BE ALLOWED TO THA T EXTENT. SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 30 21. IN THIS SITUATION WHERE ON A SIMILAR ISSUE THE HON 'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V/S K RAMACHANDRA RAO (SUPRA) AND HONBLE HIGH COURT OF MADRAS IN THE CASE OF VENKATA DILIP KUMAR V/S CIT HAVE HELD IN FAVOUR OF THE ASSESSEE WHEREAS HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF HUMAYUN SULEMAN MERCHANT VS CIT (SUPRA) HAS HELD AGAINST THE ASSESSEE, WE ARE BOUND TO APPLY THE RATIO LAID DOWN BY HON'BLE APEX COURT IN THE CASE OF CIT V/S VEGETABLE PRODUCTS LTD (1972) 88 ITR 192 (S C) WHEREIN HON'BLE APEX COURT HAS HELD THAT IF TWO RE ASONABLE CONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE, T HAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE FOLLOWED. THIS PRINCIPLE LAID DOWN BY THE HON'BLE APEX COURT HAS BEEN FURTHER FOL LOWED BY HON'BLE SUPREME COURT IN THE CASE OF PETRON ENGG. CONSTRUCTION (P) LTD & ANR. V CBDT (1989) 175 ITR 523 (SC) . WE THUS IN VIEW OF THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF CIT V/S VEGETABLE PRODUCTS LTD (SUPRA) AND ABSENCE OF ANY JUDGMENT ON THE INSTANT ISSUE OF THE HON'BLE JURISDICTIONAL HIGH COURT ARE BOUND TO FOLLOW THE JUDGMENT OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V/S K RAMACHANDRA RAO (SUPRA). SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 31 22. IT WOULD BE ALSO RELEVANT TO REFER TO THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF SANJEEV LAL V CIT (SUPRA) WHEREIN THE HON'BLE APEX COURT HAS LAID DOWN THE PURPOSIVE INTE RPRETATION OF SECTION 54 OF THE ACT AND GAVE A LIBERAL APPROACH T O THE ASSESSEE WHO CLEARLY INTENDS TO CLAIM THE BENEFIT OF SECTION 54. THEIR LORDSHIPS ALSO HELD THAT SECTION 54 IS BENEFICIAL P ROVISION AND IS TO BE CONSTRUED KEEPING IN VIEW THE INTENTION OF THE L EGISLATURE TO GIVE RELIEF IN THE MATTER OF PAYMENT OF TAX ON THE LONG TERM CAPITAL GAIN. ON GOING THROUGH THE ABOVE RATIO LAID DOWN BY HON'BLE APEX COURT WE FIND THAT IN THE INSTANT CASE WE ARE DEALI NG WITH THE BENEFICIAL PROVISIONS OF SECTION 54F OF THE ACT WHE RE THE ASSESSEE HAS TO INVEST THE SALE CONSIDERATION FROM ANY CAPI TAL ASSET OTHER THAN RESIDENTIAL HOUSE FOR PURCHASING/ INVESTING IN A RESIDENTIAL HOUSE. SO APPLYING THE RATIO OF HON'BLE APEX COURT IN THE CASE OF SANJEEV LAL V CIT (SUPRA) SECTION 54F BEING THE BENEFICIAL PROVISION WE WOULD LIKE TO TAKE A LIBERAL APPROACH IN THE CAS E OF ASSESSEE FOR COMPUTING THE TAX ON LONG TERM CAPITAL GAIN. 23. ON PERUSAL OF THE DECISION OF CO-ORDINATE BENCH KO LKATTA IN THE CASE OF SUNAYANA DEVI VS ITO DATED 13.9.2019 (SUPRA), WE FIND SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 32 THAT SIMILAR ISSUE CAME FOR ADJUDICATION AND THE SA ME HAS DECIDED IN FAVOUR OF THE ASSESSEE AFTER PLACING RELIANCE ON THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V/S K. RAMACHANDRA RAO (SUPRA). RELEVANT EXTRACT OF THE DECISION OF CO- ORDINATE BENCH IS REPRODUCED BELOW:- 17. HAVING COME TO THE CONCLUSION THAT THE ASSESSEE HA D UTILISED THE NET CONSIDERATION IN CONSTRUCTION OF A HOUSE WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER, THE QUESTION WOULD BE WH ETHER THE ABSENCE OF DEPOSIT OF UNUTILISED NET CONSIDERATION IN A SPECIF IC BANK ACCOUNT AS IS REQUIRED U/S 54F(4) OF THE ACT, SHOULD THE ASSESSEE BE DENIED THE BENEFIT OF DEDUCTION U/S 54F OF THE ACT. ON THIS ISSUE THE ID. COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. K RAMOCHONDRA RAO 2015 56 TAXMAN.COM 163/230 TAXMAN 334 KAR. IN THE AFORESAID DECISION THE ASSES SEE HAD NOT DEPOSITED THE UNUTILISED NET CONSIDERATION IN A SPE CIFIC BANK ACCOUNT AS IS REQUIRED U/S 54F OF THE ACT. THE ASSESSEE HAD HOWEV ER INVESTED THE NET CONSIDERATION IN CONSTRUCTION OF A RESIDENTIAL HOUS E WITHIN THE PERIOD CONTEMPLATED U/S 54F (\) OF THE ACT. THE HON'BLE K ARNATKA HIGH COURT HAD TO DECIDE WHETHER THE ASSESSEE COULD BE GIVEN A DED UCTION OF BENEFIT U/S 54F(I) OF THE ACT. THE HON'BLE KARNATAKA HIGH COURT HELD THAT IF THE ASSESSEE INVESTS THE ENTIRE CONSIDERATION IN CONSTR UCTION OF THE RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER HE CANNOT BE DENIED DEDUCTION U/S 54F OF THE ACT ON THE GROUND THAT HE DID NOT DEPOSIT THE SAID AMOUNT IN CAPITAL GAIN ACCOUNT SCHEME BEFORE THE DU E DATE PRESCRIBED U/S 139( I) OF THE ACT. IN THE LIGHT OF THE AFORESAID D ECISION OF THE HON'BLE KARNATAKA HIGH COURT AND IN THE LIGHT OF THE ADMITT ED FACTUAL POSITION THAT SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 33 THE ASSESSEE INVESTED THE SALE CONSIDERATION IN CON STRUCTION OF A RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD BE GIVEN THE BENE FIT OF DEDUCTION U/S 54 F OF THE A ET ON THE SUM OF RS.16 ,50,000/- ALSO AND CANNOT BE DENIED THE BENEFIT THE SAID BENEFIT FOR THE REASON THAT HE HAD NOT COMPLIED WITH THE REQUIREMENTS OF SEC.54F(4) OF THE ACT. THUS IN EFFE CT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S.54F OF THE ACT OF RS.20,3 31,839 /- VIZ., FOR THE INVESTMENT OF RS.3,50,000/- IN PURCHASE OF THE LAND, RS.31,839/- STAMP DUTY AND REGISTRATION CHARGES AND UTILISED FOR CONS TRUCTION OF A RESIDENTIAL HOUSE WITHIN THIS PERIOD SPECIFIED IN SECTION E ACT . THE AO IS ACCORDINGLY DIRECTED TO ALLOW DEDUCTION U/S 54F OF THE ACT AT A SUM OF RS.20,31,839/-. THE APPEAL OF THE ASSESSEE IS THUS PARTLY ALLOWED. 24. SIMILAR VIEW WAS ALSO TAKEN BY THE CO-ORDINATE BEN CH OF CHANDIGARH IN THE CASE OF MRS. SEEMA SABHARWAL V/S ITO ITA NO.272 (CHD)/2017 ORDER DATED 5.2.2018 OBSERVED WH EREIN ALSO THE TRIBUNAL CONSIDERED THE SIMILAR ISSUE WHEREIN S ALE CONSIDERATION WAS NOT DEPOSITED IN THE CAPITAL GAIN ACCOUNT BEFORE INVESTING/CONSTRUCTING IN THE PROJECTS OF RESIDENT IAL HOUSE WITHIN THE STIPULATED TIME PERIOD PROVIDED IN SECTION 54F OF THE ACT. THE RELEVANT FINDING IS MENTIONED BELOW :- 8. WE HAVE HEARD THE RIVAL CONTENTIONS. BEFORE DELI BERATING FURTHER ON THIS ISSUE WE WOULD LIKE TO REPRODUCE THE RELEVANT PROVI SIONS OF SECTION 54 OF THE ACT HEREIN UNDER:- SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 34 'PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE. 54. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2 ), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED F AMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASS ET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOU SE PROPERTY' (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGI NAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA, THEN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME -TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SE CTION, THAT IS TO SAY,-- (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER TH AN THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED (HERE AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE DIFFERENCE BETWE EN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING F ROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTI ON, AS THE CASE MAY BE, THE COST SHALL BE NIL; OR (II) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGED UN DER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSE T ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 35 (2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT APP ROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGIN AL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CO NSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF I NCOME UNDER SECTION 139 , SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RE TURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 ] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFI CIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSES OF SUB-SECTION (1), THE AMOUN T, IF ANY, ALREADY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTR UCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHALL BE DEEM ED TO BE THE COST OF THE NEW ASSET : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SU B-SECTION IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION O F THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THEN,-- (I) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UND ER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUC H AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. EXPLANATION.--[OMITTED BY THE FINANCE ACT, 1992, W. E.F. 1.4.1993' SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 36 9. A PERUSAL OF THE ABOVE REPRODUCED PROVISIONS OF SECTION 54 OF THE ACT REVEALS THAT IT DEALS WITH THE CAPITAL GAINS EARNED ON SALE OF PROPERTY USED FOR RESIDENCE AND AS PER THE PROVISIONS OF SUB SECT ION (1) OF SECTION 54 OF THE ACT, IF AN ASSESSEE, AFTER SALE OF HIS RESIDENT IAL PROPERTY, HAS WITH IN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTE R THE DATE OF SUCH TRANSFEROR WITH IN A PERIOD OF THREE YEARS , CONSTR UCTS A RESIDENTIAL HOUSE, THE CAPITAL GAINS WILL NOT BE CHARGED TO TAX UPTO T HE EXTENT OF THE AMOUNT SPENT ON THE PURCHASE OR CONSTRUCTION OF RESIDENTIA L HOUSE. SUB SECTION (1) OF SECTION 54 OF THE ACT IS A SUBSTANTIVE PROVISION ENACTED WITH THE PURPOSE OF PROMOTING PURCHASE / CONSTRUCTION OF RESIDENTIAL HOUSES. HOWEVER, SUB SECTION (2) OF SECTION 54 IS AN ENABLING PROVISION WHICH PROVIDES THAT THE ASSESSEE SHOULD DEPOSIT THE AMOUNT EARNED FROM CAPI TAL GAINS IN A SCHEME FRAMED IN THIS RESPECT BY THE CENTRAL GOVERN MENT TILL THE AMOUNT IS INVESTED FOR THE PURCHASE / CONSTRUCTION OF THE RES IDENTIAL HOUSE. THIS PROVISION, IN OUR VIEW, HAS BEEN ENACTED TO GATHER THE REAL INTENTION OF THE ASSESSEE TO INVEST THE AMOUNT IN PURCHASE / CONSTRU CTION OF A RESIDENTIAL HOUSE. AS PER THE PROVISIONS OF SUB SECTION(1) OF S ECTION 5 4 , THE ASSESSEE HAS BEEN GIVEN TWO YEARS TIME TO PURCHASE AND THREE YEARS TIME TO CONSTRUCT A RESIDENTIAL SUBSEQUENT TO THE DATE OF T RANSFER OF THE ORIGINAL ASSET. AT THE TIME OF THE ASSESSMENT PROCEEDINGS, S UBSEQUENT TO THE DATE OF TRANSFER OF THE ORIGINAL ASSET, AN ASSESSEE MAY CLAIM THAT HE WILL INVEST THE AMOUNT IN PURCHASE / CONSTRUCTION OF A NEW HOUS E, THOUGH NOT HAVE TAKEN ANY STEPS TOWARDS THAT DIRECTION TILL THEN. I N SUCH A SCENARIO, THERE SHOULD NOT BE ANY METHOD OR PROCEDURE BEFORE THE AS SESSING OFFICER THROUGH WHICH HE COULD GATHER THE REAL INTENTION OF THE ASSESSEE, AS THE ASSESSEE, BY SAYING SO, MAY DELAY THE TAXATION OF T HE CAPITAL GAINS EARNED AT LEAST FOR THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET. HENCE, SUB SECTION (2) PUTS AN EMBARGO TO THE ASSESSEE TO CASUALLY CLAIM THE BENEFIT OF SECTION 54 AT THE TIME OF ASSESSMENT, WI THOUT BEING ANY ACT DONE SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 37 TO SHOW HIS REAL INTENTION OF PURCHASING / CONSTRUC TING A NEW RESIDENTIAL UNIT. SUB SECTION (2), THEREFORE, GOVERNS THE CONDU CT OF THE ASSESSEE THAT THE ASSESSEE SHOULD PUT THE AMOUNT OF CAPITAL GAINS IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION SPECIFICALLY NOTIFIED IN T HIS RESPECT AND THAT THE RETURN OF THE ASSESSEE SHOULD BE ACCOMPANIED BY SUB MITTING A PROOF OF SUCH DEPOSIT, HENCE, SUB SECTION (2) IS AN ENABLING PROVISION WHICH GOVERNS THE ACT OF THE ASSESSEE, WHO INTENDS TO CLAIM THE B ENEFIT OF THE EXEMPTION PROVISIONS OF SECTION 54. THE REAL PURPOSE OF THE E NABLING PROVISION IS THE COMPLIANCE OF THE SUBSTANTIAL PROVISION OF SUB SECT ION (1) TO SECTION 54 OF THE ACT. SUB SECTION (2), IN FACT, REGULATES THE PR OCEDURE FOR THE SUBSTANTIVE RIGHTS OF THE EXEMPTION PROVISIONS U/S 54 OF THE AC T. THIS ENABLING SECTION, IN OUR VIEW, CANNOT ABRIDGE OR MODIFY THE SUBSTANTI VE RIGHTS GIVEN VIDE SUB SECTION (1) OF SECTION 54 OF THE ACT, OTHERWISE, TH E REAL PURPOSE OF SUBSTANTIVE PROVISION I.E. SUB SECTION (1) WILL GOT DEFEATED. THE PRIMARY GOAL OF EXEMPTION PROVISIONS OF SECTION 54 IS TO PR OMOTE HOUSING. THE PROCEDURAL AND ENABLING PROVISIONS OF SUB-SECTION ( 2) THUS CANNOT BE STRICTLY CONSTRUED TO IMPOSE STRICT LIMITATIONS ON THE ASSESSEE AND IN DEFAULT THEREOF TO DENY HIM THE BENEFIT OF EXEMPTIO N PROVISIONS. IN OUR VIEW, IF THE ASSESSEE AT THE TIME OF ASSESSMENT PRO CEEDINGS, PROVES THAT HE HAS ALREADY INVESTED THE CAPITAL GAINS ON THE PU RCHASE / CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE WITHIN THE STIPULATED PER IOD, THE BENEFIT UNDER THE SUBSTANTIVE PROVISIONS OF SECTION 54(1) CANNOT BE DENIED TO THE ASSESSEE. ANY DIFFERENT OR OTHERWISE STRICT CONSTRU CTION OF SUB SECTION (2), IN OUR VIEW, WILL DEFEAT THE VERY PURPOSE AND OBJEC T OF THE EXEMPTION PROVISIONS OF SECTION 54 OF THE ACT. OUR ABOVE VIEW , IS FORTIFIED WITH THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SHRI K RAMACHANDRA RAO, ITA NO. 47 OF 2014 C/W ITA NO. 46/ 2014, ITA NO. 494/2013 AND ITA NO. 495/2013, DECIDED VIDE ORDER D ATED 14.7.2014 WHEREIN THE HON'BLE HIGH COURT HAS DIRECTLY DEALT W ITH THIS ISSUE WHILE SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 38 INTERPRETING THE IDENTICAL WORDED PROVISIONS OF SEC TION 54F(2) OF THE ACT. THE FOLLOWING QUESTION OF LAW WAS FRAMED BY THE HON 'BLE HIGH COURT ON THIS ISSUE:- '2) WHEN THE ASSESSEE INVESTS THE ENTIRE SALE CONSI DERATION IN CONSTRUCTION OF A RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER CAN HE BE DENIED EXEMPTION UNDER SECTION 54F ON THE GROUND THAT HE DID NOT DEPOSIT THE SAID AMOUNT IN CAPITAL GAINS ACCOUNT SC HEME BEFORE THE DUE DATE PRESCRIBED UNDER SECTION 139(1) OF THE IT ACT? ' 10. THE SAID QUESTION HAS BEEN ANSWERED BY THE HON' BLE HIGH COURT IN THE FOLLOWING WORDS:- 'AS IS CLEAR FROM SUB SECTION (4) IN THE EVENT OF T HE ASSESSEE NOT INVESTING THE CAPITAL GAINS EITHER IN PURCHASING THE RESIDENT IAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54 F(1), IF THE ASSESSEE WANTS THE BENEFIT OF SECTION 54 F, THEN HE SHOULD DEPOSIT THE SAID CAPITAL GAINS IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT. IN OTHER WORDS IF HE WANT OF CL AIM EXEMPTION FROM PAYMENT OF INCOME TAX BY RETAINING THE CASH, THEN T HE SAID AMOUNT IS TO BE INVESTED IN THE SAID ACCOUNT. IF THE INTENTION IS N OT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE OF THE PROPE RTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THE REIN, THEN SECTION 54 F(4) IS NOT AT ALL ATTRACTED AND THEREFORE THE CONT ENTION THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS STIPULATED AND THEREFORE, HE IS NOT ENTITLED TO THE BENEFIT EVEN T HOUGH HE HAS INVESTED THE MONEY IN CONSTRUCTION IS ALSO NOT CORRECT.' 11. THOUGH THE HON'BLE HIGH COURT IN RELATION TO TH E ISSUE OF CLAIM OF EXEMPTION U/S 54F OF THE ACT HAS HELD THAT WHAT MAT TERS IS THE INTENTION OF THE ASSESSEE TO PURCHASE / CONSTRUCT NEW HOUSE. THE HON'BLE KARNATAKA HIGH COURT HAS HELD THAT IF THE INTENTION IS NOT TO RETAIN CASH BUT TO INVEST SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 39 IN CONSTRUCTION OR ANY PURCHASE IN PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THEREIN, THAN SECTION 54F(4) IS NOT AT ALL ATTRACTED. WE MAY CLARIFY HERE THAT PROVISIONS OF SECTION 54(2) ARE ALMOST IDENTICALLY WORDED AS IN SECTION 5 4 F ( 4 ) OF THE ACT. ADMITTEDLY, IN THIS CASE , THE ASSESSEE HAS INVESTED THE AMOUNT FOR THE PURCHASE / CONSTRUCTION OF THE HOUSE WITHIN THE STIPULATED PER IOD AS ALSO OBSERVED ABOVE WHILE DECIDING THE FIRST ISSUE. THE ASSESSEE HAS PROVED SUCH INVESTMENT DURING THE ASSESSMENT PROCEEDINGS AND, T HUS, THE ASSESSEE HAS COMPLIED WITH THE REQUIREMENT OF SUBSTANTIVE PR OVISIONS AND, THUS, IS ENTITLED TO THE CLAIM OF EXEMPTION U/S 54F OF THE A CT. IN VIEW OF THIS, WE DIRECT THE ASSESSING OFFICER TO GRANT EXEMPTION TO THE ASSESSEE AS PERMISSIBLE UNDER THE PROVISIONS OF SAECITON54 OF T HE ACT. 25. IN BOTH THE ABOVE DECISIONS OF THE CO-ORDINATE BEN CHES OF KOLKATTA IN THE CASE OF SUNAYANA DEVI V/S ITO (SUPRA) AND CHANDIGARH BENCH IN THE CASE OF MRS. SEEMA SABHARWAL V/S ITO (SUPRA) RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF HON'BL E HIGH COURT OF KARNATAKA IN THE CASE OF CIT V/S K. RAMACHANDRA RAO (SUPRA) ITA NO.47/2014 DATED 14.7.2014 AND A LIBERAL VIEW H AS BEEN TAKEN FOR THE BENEFIT OF AN ASSESSEE IF HE/SHE PURCHASES WITHIN TWO YEARS OR CONSTRUCT WITHIN 3 YEARS A RESIDENTIAL HOUSE THEN THE EXEMPTION U/S 54F CANNOT BE DENIED FOR THE REASON T HAT THE ASSESSEE FAILED TO DEPOSIT UN UTILIZED AMOUNT IN CA PITAL GAIN SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 40 ACCOUNT SCHEME BEFORE THE DUE DATE PRESCRIBED U/S 1 39(1) OF THE ACT. 26. EXAMINING THE FACTS OF THE INSTANT CASE IN THE LIG HT OF ABOVE TWO DECISIONS, WE FIND THAT BOTH ARE SQUARELY APPLI CABLE IN THE CASE OF ASSESSEE AS IN THE INSTANT CASE ALSO AFTER GIVIN G ADVANCE OF RS. 39,28,746/- THE REMAINING AMOUNT OF THE SALE CONSID ERATION I.E. RS. 95,71,254/- WAS NOT DEPOSITED IN THE CAPITAL GAIN A CCOUNT BUT FINALLY WITHIN TWO YEARS THE ASSESSEE HAS PURCHASED NEW RESIDENTIAL HOUSE AT THANE AND AGAINST THE SALE CONSIDERATION O F RS. 1.35 CRORES RECEIVED FROM SALE OF ORIGINAL CAPITAL AMOUN T HAS INVESTED RS. 1,36,73,006/-. 27. HERE WE WOULD LIKE TO MENTION THAT THE ASSESSEES CASE IS ON A MUCH STRONG FOOTING FOR THE REASON THAT AT THE TIME WHEN HE RECEIVED THE ADVANCE FROM SALE OF ORIGINAL PROPERTY ON 21.6.2012 AT RS. 45 LAKHS AND ON 28.8.2012 AT RS. 90 LAKHS WHICH FORM THE PART OF SALE CONSIDERATION OF RS. 1,35,00,000/- SHOWN IN THE SALE DEED REGISTERED IN MARCH, 2013, THE ASSESSEE WITH AN IN TENTION TO PURCHASE THE RESIDENTIAL FLATS AT BHOPAL HAVE GIVEN THE ADVANCE OF SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 41 RS. 1.50 CRORES TO BUILDER NAMELY SHRI SHYAM MANOHA R AGRAWAL AND RS. 50 LAKHS TO ALARAK BUILDERS & DEVELOPERS (R S. 50 LAKH EACH ON 30.8.2012, 13.10.2012 AND 09.11.2012 TO SHRI SHY AM MANOHAR AGRAWAL AND RS.50 LAKH ON 30.8.2012 TO ALARAK BUILD ERS & DEVELOPERS). 28. THIS ADVANCE OF RS. 2.00 CRORES WAS GIVEN BY THE A SSESSEE WITH THE INTENTION TO PURCHASE A RESIDENTIAL HOUSE AT BH OPAL SO AS TO CLAIM EXEMPTION U/S 54F OF THE ACT BY UTILIZING THE SALE CONSIDERATION FROM SALE OF ORIGINAL CAPITAL ASSET ( OTHER THAN RESIDENTIAL HOUSE). THIS FACT WAS DULY SHOWN BY THE ASSESSEE IN THE COMPUTATION OF INCOME AND EXEMPTION U/S 54F OF THE ACT WAS CLAIMED ON THE BASIS OF THE ADVANCE GIVEN TO BUY TH E RESIDENTIAL PROPERTY AT BHOPAL AND ALSO THE ADVANCE GIVEN TO PU RCHASE THE PROPERTY AT THANE. THIS FACT IS NOT REBUTTED BY THE REVENUE AUTHORITIES. LD. A.O HAS ALSO NOT GIVEN ANY CONTRA DICTORY FINDING TO THE FACT THAT THE ASSESSEE HAS PARTED OFF WITH WHOL E OF THE SALE CONSIDERATION FROM SALE OF ORIGINAL CAPITAL ASSET F OR PURCHASE OF RESIDENTIAL PROPERTY AT BHOPAL BEFORE THE DUE DATE OF FILING OF RETURN SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 42 OF INCOME FOR ASSESSMENT YEAR 2013-14. EVEN BEFORE LD. CIT(A) THIS FACT WAS BROUGHT TO NOTICE BUT SINCE THE BHOPAL PRO JECT COULD NOT TAKE UP AND ASSESSEE HAD NO MORE HOPE OF GETTING RE SIDENTIAL PROPERTY AT BHOPAL, HE FOCUSED ON INVESTMENT MADE I N THE RESIDENTIAL PROPERTY AT THANE. IT IS TRULY DISCERNA BLE THAT ASSESSEE TRIED TO FULFILL THE CONDITION OF PURCHASE OF RESID ENTIAL HOUSE BEFORE ONE YEAR FROM THE DATE OF TRANSFER BUT DUE TO LITIG ATION THE BHOPAL PROJECT COULD NOT TAKE UP AND ASSESSEES FUND WERE BLOCKED WHICH WERE SUBSEQUENTLY REALIZED IN PARTS. BUT HE IN ORD ER TO FULFILL THE CONDITION OF PURCHASING THE RESIDENTIAL HOUSE WITHI N TWO YEARS FROM THE DATE OF SALE OF PROPERTY, TOOK LOANS AS WELL AS USED HIS OWN FUNDS TO INVEST A TOTAL SUM OF RS. 1,36,73,006/- FO R PURCHASING RESIDENTIAL PROPERTY AT THANE. THUS THE BONAFIDE I NTENTION OF THE ASSESSEE OF FULFILLING THE SUBSTANTIVE CONDITIONS O F PROVISIONS OF SECTION 54F(1) CANNOT BE DOUBTED. THE ASSESSEE IN O RDER TO CLAIM BENEFIT OF SECTION 54F(1) OF THE ACT HAS FINALLY IN VESTED SUM OF RS. 1,36,73,006/- FOR PURCHASE OF RESIDENTIAL FLAT AT T HANE WITHIN TWO YEARS AND THEREFORE THE CONDITION OF INVESTING THE SALE CONSIDERATION SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 43 OF RS. 1.35 CRORES IN PURCHASE OF RESIDENTIAL HOUSE WITHIN TWO YEARS HAS BEEN FULFILLED BY THE ASSESSEE. 29. THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO IN VIEW OF THE RATIO LAID DOWN BY THE HON' BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V/S K RAMACHANDRA RAO (SUPRA) WHICH HAS ALSO BEEN FOLLOWED BY THE CO-ORDINATE BENCHES O F KOLKATTA AND CHANDIGARH IN THE CASE OF SUNAYANA DEVI V/S ITO (SUPRA) AND IN THE CASE OF MRS. SEEMA SABHARWAL V/S ITO (SUPRA) RESPECTIVELY, WE FIND THAT SINCE THE ASSESSEE HAS FULFILLED THE SUBS TANTIVE CONDITION OF SECTION 54F(1) OF THE ACT BY WAY OF UTILIZING TH E SALE CONSIDERATION FROM SALE OF THE CAPITAL ASSET (OTHER THAN RESIDENT IAL HOUSE) AT RS. 1.35 CRORES FOR PURCHASE OF RESIDENTIAL PLOT AT THA NE COSTING RS.1.36 CRORES (APPROX) WITHIN TWO YEARS OF SALE OF ORIGINA L CAPITAL ASSET, ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 54F(1) OF TH E ACT FOR THE LONG TERM CAPITAL GAIN OF RS. 1,06,95,941/-. THUS GROUN D NO.1 OF THE ASSESSEES APPEAL IS ALLOWED. 30. GROUND NO.2 RAISED BY THE ASSESSEE ARE GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. SHRI UMESH PREMCHANDANI ITANO.681/IND/2018 44 31. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 06.11.2 020 . SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 06/11/2020 /DEV COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR