Om Prakash Malhotra, New Delhi V. ITO WARD - 30(5), New Delhi

ITA 6902/DEL/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0527 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 06-09-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 19-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Competent authority; Capital Gains
• Section: 54; 54F; 143(2)

Judgement Text

1 ITA no. 6902/Del/2019 Om Prakash Vs. ITO IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”: NEW DELHI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA No. 6902/DEL/2019 [Assessment Year: 2013-14] Om Prakash Malhotra, H. No. 8, Hemkunt Colony, FF, Nehru Place, New Delhi-110019 PAN- AHZPM8778R Vs Income-tax Officer, Ward-30(5), New Delhi. APPELLANT RESPONDENT Assessee represented by Shri Ranjan Chopra, CA Department represented by Shri Jeetender Chand, Sr. DR Date of hearing 07.09.2022 Date of pronouncement 18.10.2022 O R D E R PER KUL BHARAT, JM: This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals)-33, dated 18.07.2019, pertaining to the assessment year 2013-14. The assessee has raised following grounds of appeal: “1. On the facts and in the circumstances of the case and in law the Commissioner of Income Tax (Appeals) has erred in disallowance of deduction under section 54 of the Act to the extent of Rs. 1,10,60,730 without appreciating the facts of the case. 2 ITA no. 6902/Del/2019 Om Prakash Vs. ITO 2. The Appellant prays that the disallowance of deduction u/s 54 amounting of Rs. 1,10,60,730 be deleted. 3. The Appellant craves leave to add, amend, alter, vary and/or withdraw any of or all the above grounds of appeal” 2. Facts giving rise to the present appeal are that the assessee filed his return of income on 30.07.2013 declaring total income at Rs. 8,42,402/-. The case was selected for scrutiny assessment under CASS. Statutory notice u/s 143(2) of the Income-tax Act, 1961 (in short “the Act”), was issued on 2.9.2014. In response to the statutory notice the learned Authorized Representative of the assessee attended the proceedings and filed requisite details which were placed on record by the Assessing Officer. The Assessing Officer during the assessment proceedings noticed that the assessee had sold a property at Kolkata on 9.7.2012 for a sum of Rs. 1,44,00,000/- and computed long term capital gain at Rs. 1,19,02,758/- and against this the assessee claimed deduction u/s 54 of the Act stating that he had made investment in the Apartment at PPE 241 Block, DLF Park Place, DLF, Gurgaon. The Assessing Officer partly allowed the claim of deduction u/s 54 and computed the total capital gain at Rs. 1,11,54,834/- and income from other sources at Rs. 4,26,712/-. Thus assessed income at Rs. 1,19,03,130/-. Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals), who after 3 ITA no. 6902/Del/2019 Om Prakash Vs. ITO considering the submissions dismissed the appeal. Now the assessee is in appeal before this Tribunal. 3. Ground no. 3 is general in nature and needs no adjudication. 4. Apropos ground nos. 1 & 2 of the appeal, learned counsel for the assessee submitted that the authorities below have failed to appreciate the facts in right perspective and declined the whole claim of deduction u/s 54 of the Act on the ground that the new asset was not acquired within the prescribed time. He contended that the authorities below have erroneously observed that there was no investment in the new asset one year before the original asset was transferred. However, the case of the assessee is that the assessee entered into Buyer’s agreement with the builder on 26.05.2010. He drew our attention to paper book pages 27 to 62 and also took us through the Buyer’s agreement and particularly drew our attention to clause 14 wherein the procedure for taking possession is described. As per this clause, the Builder, upon obtaining certificate for occupation and use from the competent authority, shall offer in writing possession of the said apartment to the Allottee. In terms of this clause possession is required to be taken within 30 days from the date of issue of such notice and the Company shall give possession of the said apartment to the allottee, provided the allottee is not in default of any of the terms and conditions. He further drew our attention to the 4 ITA no. 6902/Del/2019 Om Prakash Vs. ITO letter of offer for possession by builder letter dated 18.06.2012. As per this letter the assessee was required to take possession not later than 27.09.2012. Therefore, the learned counsel for the assessee vehemently argued that although substantial payment was made on 15.03.2010 and 12.04.2010, the remaining payment was made on 27.03.2012. Therefore, he argued that the purchase of new asset would be construed from the date when the possession is taken by the assessee. For this the learned counsel for the assessee placed reliance on the decision of the coordinate Bench of the Tribunal in the case of Rajiv Madhok V. ACIT [2020] 117 taxmann.com 232 (Delhi-Trib.). Further reliance was placed upon the decision of coordinate Bench of the Tribunal in the case of Ashok Kumar vs. ITO [2021] 125 taxmann.com 430 (Delhi-Trib.). He submitted that the issue is squarely covered in favour of the assessee. 5. On the contrary, learned DR opposed the submissions and supported the orders of the authorities below. He submitted that the law is very clear on this point. The assessee ought to have purchased new asset one year before the transfer of the original asset and there is no infirmity into the orders of the authorities below. 6. We have heard rival contentions and perused the material available on record. The dispute in this case relates to entitlement of deduction u/s 54of the Act 5 ITA no. 6902/Del/2019 Om Prakash Vs. ITO by the assessee. For the sake of clarity and effective adjudication, section 54 of the Act is reproduced herein below: 54. Profit on sale of property used for residence.- Subject to the provisions of sub-section (2), wherein, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long- term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head “Income from house property” (hereinafter in this case referred to as the original 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 section, that is to say,— (i) If the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between 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 from its transfer within a period of three years of its purchase or construction, 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 under section 45; and for the purpose of computing in respect of the new asset 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. Provided that where the amount of the capital gain does not exceed two crore rupees, the assessee may, at his option, purchase or construct two residential houses in India and where such option has been exercised, - 6 ITA no. 6902/Del/2019 Om Prakash Vs. ITO The provisions of this sub-section shall have effect as if for the words “one residential house in India”, the words “two residential houses in India” had been substituted; Any reference in this sub sub-section and sub-section (2) to “new asset” shall be construed as a reference to the two residential houses in India: Provided further that where during any assessment year, the assessee has exercised the option referred to in the first proviso, he shall not be subsequently entitled to exercise the option for the same or any other assessment year. [...] (2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one 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 assessee for furnishing the return of income under sub-section (7) 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 Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub- section (7), 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-section 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 not so utilised shall be charged under 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 such amount in accordance with the scheme aforesaid.” 7 ITA no. 6902/Del/2019 Om Prakash Vs. ITO 7. The undisputed facts in this case are that the assessee sold the original asset on 9.7.2017 for a sale consideration of Rs. 1,44,00,000/- and computed the long term capital gains on this transaction at Rs. 1,19,02,758/-. The assessee claimed deduction u/s 54 at Rs. 1,19,02,758/-. However, the AO restricted the deduction to the extent of Rs. 8,42,028/-. The contention of the assessee is that the lower authorities have erroneously taken the date of purchasing new asset as the date when the assessee had paid the last instalment i.e. 27.03.2012. It is contended that the possession of the new asset was taken on 18.06.2012 and original asset was sold on 9.7.2012. Therefore, the requirement of law for purchasing new asset within one year before the date on which the sale transaction of original asset took place is met. Now the moot question is as to what is the date of purchasing of new asset. In the present case following dates are relevant for consideration: 1) 26.05.2010 Apartment buyer agreement was executed. 2) 15.03.2011 to 27.03.2012 Payment of instalments are made 3) 18.06.2012 Letter of possession issued in respect of new Asset 4) 09.07.2012 Original asset is sold 5) 22.09.2015 Execution of conveyance deed in respect of New asset 8 ITA no. 6902/Del/2019 Om Prakash Vs. ITO 8. There is no dispute with regard to the fact that conveyance deed qua the new asset was executed subsequent to sale of original asset. Section 54 speaks about purchase of new asset within one year before the date on which transfer of the original asset took place. In our considered view the AO has misdirected himself by treating the date of initial payments made by the assessee as the date of purchase of the new asset. It is to be borne in mind that as per Section 2(47) of the Act, transfer in relation to a capital asset would also include any transaction allowing of any immovable property to be taken or retained in part performance of the contract of the nature referred to in Section 53A of the Transfer of property Act, 1882 ( 4 of 1882). Therefore, date of purchase would be when possession is offered by the builder in the present case. Since the payments made to builder would construe part performance by the assessee. However, without possession he would not be entitled for claiming transfer in terms of Section 2(47) of the Act. There is no quarrel so far the mandate of law that in terms of Section 54, the assessee is required to appropriate the capital gain towards the purchase of new asset made within year. It is the purchase which should be made within one year and in the absence of possession there would not be any transfer of capital asset, hence no purchase of new asset in terms of Section 54 of the Act. Undisputedly, the AO gave part relief by treating last instalment paid by the assessee as the capital gain appropriated within one year. In our view this act is not as per the 9 ITA no. 6902/Del/2019 Om Prakash Vs. ITO intent of the provision. The possession of new asset was given by the builder within one year of sale of original asset. The date of handing over of possession would be date of purchase, since right over the property passed on the day of handing over of possession. Our view is also supported by the ratio of decision of the Hon’ble Bombay High Court in the case of CIT Vs. Smt. Beena K. Jain [ (1996) 217 ITR 363], approving the view taken by co-ordinate Bench of this Tribunal, by observing as under: “Under section 54F of the Income-tax Act, in the case of an assessee if any capital gain arises from the transfer of any long-term capital asset, not being a residential house, and the assessee has, within a period of one year before or two years after the date on which the transfer took place, purchased a residential house, the capital gain shall be dealt with as provided in that section. As per the section certain exemption has to be allowed in respect of the capital gains to be calculated as set out therein. The Department contends that the assessee did not purchase the residential house either one year prior to or two years after the sale of the capital asset which resulted in the long-term capital gains. According to the Department, the agreement for purchase of the new flat was entered into more than one year prior to the sale. Hence, the petitioner is not entitled to the benefit under section 54F. In our view, the Tribunal has rightly negatived this contention and has held that the new residential house had been purchased by the assessee within two years after the sale of the capital asset which resulted in long-term capital gains. The Tribunal has held that the relevant date in this connection is July 29, 1988, when the petitioner paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat. This has been taken by the Tribunal as the date of purchase. The Tribunal has looked at the substance of the transaction and come to the conclusion that the purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on July 29, 1988, and handing over of possession of the flat on the next day.” 10 ITA no. 6902/Del/2019 Om Prakash Vs. ITO 9. Respectfully following the Hon’ble Bombay High Court in the case of CIT Vs. Smt Bina K. Jain (supra), we hold that the assessee is entitled for deduction u/s 54 of the Act. We, therefore, direct the AO to grant deduction u/s 54 of the Act as claimed by the assessee and delete the impugned additions. The grounds raised in this appeal are allowed in terms indicated hereinabove. 10. Assessee’s appeal stands allowed accordingly. Order pronounced in open court on 18 th October, 2022. Sd/- Sd/- (NARENDRA KUMAR BILLAIYA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI