Shri. Mallappa Sharanappa Udnoor, Gulbarga V. Income Tax Officer, Gulbarga

ITA 74/BANG/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5433 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 11-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHREEHARI KUTSA
• Keywords: Capital asset
• Section: 54B; 54F; 54; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH - SMC A BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 74 /BANG/201 7 (ASSESSMENT YEAR : 20 05 - 06 ) SHRI MALLAPPA SHARANAPPA UDNOOR, KUSNOOR VILLAGE, TQ.;& DIST. KALABURAGI. PAN AAKHM 7653 K VS. INCOME TAX OFFICER, WARD (2), KALABURAGI. APPELLANT RESPONDENT. APPELLANT BY : SHRI SHREEHARI KUTSA, C.A. RESPONDENT BY : SHRI AR.V.SREENIVASAN, JCIT (D.R) DATE OF H EARING : 22.03.2017. DATE OF P RONOUNCEMENT : 05 .05 . 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DT.31.10.2016 OF COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2005 - 06. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 2 ITA NO. 74 /BANG/ 2017 3 ITA NO. 74 /BANG/ 2017 3. THE ONLY ISSUE ARISES IN THIS APPEAL OF THE ASSESSEE IS REGARDING DENIAL OF BENEFIT OF SECTIONS 54 B & 54F OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') IN RESPECT OF THE INVESTMENT MADE BY TH E ASSESSEE WITHOUT MAKING THE DEPOSITS IN THE CAPITAL GAIN ACCOUNT WITHIN THE PERIOD AS PRESCRIBED UNDER THE SECTION. THE ASSESSEE SOLD AGRICULTURE LAND FOR A CONSIDERATION OF RS.73,91,250 HAVING 1/3 RD SHARE AMOUNTING TO RS.25.53.750. THE ASSESSEE DID N OT FILE RETURN OF INCOME WITHIN THE DUE DATE AS PER SECTION 139. THE ASSESSING OFFICER PASSED ASSESSMENT ORDER UNDER SECTION 144 OF THE ACT. THE MATTER WAS CARRIED TO THIS TRIBUNAL AND VIDE ORDER DT.23.12.2008 IN ITA NO.1021/BANG/2008, THE TRIBUNAL REMA NDED THE MATTER TO THE ASSESSING OFFICER WITH THE DIRECTION TO TAKE ALL 4 ITA NO. 74 /BANG/ 2017 FACTUAL AND LEGAL ISSUE IN THE CASE. THE ASSESSING OFFICER ACCORDINGLY PASSED THE FRESH ASSESSMENT ORDER DT.31.12.2009 AND ASSESSED THE LONG TERM CAPITAL GAIN AT RS.18,86,920. THE AS SESSEE CLAIMED EXEMPTION UNDER SECTION 54 B / 54F OF THE ACT WHICH WAS DENIED BY THE ASSESSING OFFICER THAT THE ASSESSEE DID NOT DEPOSIT THE CAPITAL GAIN IN THE CAPITAL GAIN ACCOUNT BEFORE THE DUE DATE OF FILING OF RETURN I.E. 31.7.2005. THE ASSESSEE CHALL ENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE CIT (APPEALS) BUT COULD NOT SUCCEED. 4. BEFORE THE TRIBUNAL, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE FILED THE DETAILS OF INVESTMENT MADE IN AGRICULTURE LAND AND INVESTMENT MADE IN THE CONSTRUCTION OF RESIDENTIAL HOUSE. HE HAS FURTHER CONTENDED THAT SINCE THE ASSESSEE HAS INVESTED IN THE AGRICULTURE LAND ON 12.7.2006 AND ALSO CONSTRUCTION OF RESIDENTIAL HOUSE BEFORE 31.3.2007 THEREFORE WHEN THE INVESTM ENT WAS WITHIN THE TIME PERIOD AS ALLOWED UNDER SECTION 54B & 54F OF THE ACT THEN THE CLAIM OF DEDUCTION CANNOT BE DISALLOWED ONLY ON THE GROUND THAT THE ASSESSEE DID NOT DEPOSIT THE CAPITAL GAIN IN THE CAPITAL GAIN ACCOUNT. THE LEARNED AUTHORISED REPRES ENTATIVE HAS RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SAMA N DAM UDAYKUMAR 345 ITR 389 AS WELL AS THE DECISION DT. 15.2.2016 IN 5 ITA NO. 74 /BANG/ 2017 THE CASE OF CIT VS. C. GOPALA SWAMY IN ITA NO. 303/2016 AND SUBMITTED THAT THE HON'B LE HIGH COURT HAS HELD THAT IF THE INVESTMENT IS MADE WITHIN THE DUE DATE THEN THE BENEFIT OF SECTION 54 / 54F CANNOT BE DENIED. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF HUMAYUN SULEMAN MERCHANT VS. CCIT 387 ITR 421. 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE MATERIAL ON RECORD, IT IS NOTED THAT THE ASSESSEE HAS NOT DEPOSITED THE CAPIT AL G A IN ARISING FROM TRANSFER OF LAND IN THE CAPITAL GAIN ACCOUNT HOWEVER , IT IS UNDISPUTED THAT THE ASSESSEE MADE INVESTMENT OF RS.59,555 IN AGRICULTURE LAND AND OF RS.12,20,000 IN CONSTRUCTION OF HOUSE WITHIN THE TIME PERIOD AS PRESCRIBED UNDER SECTION 5 4B AND 54F OF THE ACT. BOTH THESE INVESTMENTS WERE MADE PRIOR TO THE TIME PERIOD PRESCRIBED UNDER SECTION 139(4) I.E. 31.3.2007. THEREFORE WHEN THE PRIMARY AND SUBSTANTIAL CONDITION AS PRESCRIBED UNDER SECTION 54B AND 54F ARE SATISFIED BY INVESTING THE C APITAL GAIN WITHIN THE TIME PERIOD THEN DEPOSIT OF THE AMOUNT IN THE CAPITAL GAIN ACCOUNT IS NOT A PRE - REQUISITE 6 ITA NO. 74 /BANG/ 2017 CONDITION AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SAM ANDAM UDAY KUMAR (SUPRA) HELD IN PARAS 10 & 11 AS UNDER : 10. A READING OF THE AFORESAID PROVISION MAKES IT VERY CLEAR THAT IF A CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE AND THE ASSESSEE HAS WITHIN THE PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE D ATE ON WHICH TRANSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE, IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET THE WHOLE SUCH CAPITAL GA IN SHALL NOT BE CHARGED UNDER SECTION 45 OF THE ACT. HOWEVER, 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 BE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION SHALL NOT BE CHARGED UNDER SECTION 45 OF THE ACT. 11. SECTION 45 OF THE ACT MAKES IT VERY CLEAR THAT ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL, SAVE OR OTHERWISE PROVIDED IN SECTIONS 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G AND 54H IS CHARGEABLE TO INCOME TAX UNDER THE HEAD 'CAPITAL GAINS' AND SHALL BE DEEMED TO BE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. THE AFORESAID SECTION S WHICH FORM PART OF SECTION 54 OF THE ACT ARE CASES WHERE CAPITAL GAIN ON TRANSFER OF CAPITAL ASSET NOT TO BE CHARGED IN THOSE CASES. SECTION 54F OF THE ACT IS A BENEFICIAL PROVISION OF PROMOTING THE CONSTRUCTION OF RESIDENTIAL HOUSE. THEREFORE, THE SAID PROVISION HAS TO BE CONSTRUED LIBERALLY FOR ACHIEVING THE PURPOSE FOR WHICH IT WAS INCORPORATED IN THE STATUTE. THE INTENTION OF THE LEGISLATURE WAS TO ENCOURAGE INVESTMENTS IN THE ACQUISITION OF A RESIDENTIAL HOUSE AND COMPLETION OF CONSTRUCTION OR OCCUPA TION IS NOT THE REQUIREMENT OF LAW. THE WORDS USED IN THE SECTION ARE 'PURCHASED' OR 'CONSTRUCTED'. FOR SUCH PURPOSE, THE CAPITAL GAIN REALIZED SHOULD HAVE BEEN INVESTED IN A RESIDENTIAL HOUSE. THE CONDITION PRECEDENT FOR CLAIMING BENEFIT UNDER THE SAID PR EVISION IS THE CAPITAL GAIN REALIZED FROM SALE OF CAPITAL ASSET SHOULD HAVE BEEN PARTED BY THE ASSESSEE AND INVESTED EITHER IN PURCHASING A RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE. IF AFTER MAKING THE ENTIRE PAYMENT, MERELY BECAUSE A REGIS TERED SALE DEED HAD NOT BEEN EXECUTED AND REGISTERED IN FAVOUR OF THE ASSESSEE BEFORE THE PERIOD STIPULATED, HE CANNOT BE DENIED THE BENEFIT OF SECTION 54F OF THE ACT. SIMILARLY, IF HE HAS INVESTED THE MONEY IN CONSTRUCTION OF A RESIDENTIAL HOUSE, MERELY B ECAUSE THE CONSTRUCTION WAS NOT COMPLETE IN ALL RESPECTS AND IT WAS NOT IN A FIT CONDITION TO BE OCCUPIED WITHIN THE PERIOD STIPULATED, THAT WOULD NOT DISENTITLE THE ASSESSEE FROM CLAIMING THE BENEFIT UNDER SECTION 54F OF THE ACT. THE ESSENCE OF THE SAID P ROVISION IS WHETHER THE ASSESSEE WHO RECEIVED CAPITAL GAINS HAS INVESTED IN A RESIDENTIAL HOUSE. ONCE IT IS DEMONSTRATED THAT THE CONSIDERATION RECEIVED ON TRANSFER HAS BEEN INVESTED EITHER IN PURCHASING A RESIDENTIAL HOUSE OR IN CONSTRUCTION OF A RESIDENT IAL HOUSE EVEN THOUGH THE 7 ITA NO. 74 /BANG/ 2017 TRANSACTIONS ARE NOT COMPLETE IN ALL RESPECTS AND AS REQUITED UNDER THE LAW, THAT WOULD NOT DISENTITLE THE ASSESSEE FROM THE SAID BENEFIT. THE SAID VIEW OF HON'BLE JURISDICTIONAL HIGH COURT HAS BEEN FURTHER REITERATED IN THE SUB SEQUENT DECISION DT.15.2.2016 IN THE CASE OF CIT VS. SRI C . GOPALASWAMY (SUPRA) . ACCORDINGLY, IN VIEW OF THE BINDING PRECEDENT OF HON'BLE JURISDICTIONAL HIGH COURT THE CLAIM OF BENEFIT UNDER SECTION 54B & 54F IS ALLOWED. 7. IN THE RESULT, THE APP EAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH MAY, 201 7 . SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 05 .05 .2017. *REDDY GP COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . C.I.T. 4 . CIT(A) 5 . DR, ITAT, BA NGALORE. 6 . GUARD FILE. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE.