Smt.Girija Varadaraju , Bangalore V. Income Tax Officer Ward-3(2)(3), Bangalore

ITA 768/BANG/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8926 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-07-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 12-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V. SRINIVASAN
• Keywords: Capital asset; Gift; Benefit of exemption; Set aside; Capital Gains
• Section: 54; 54F; 234B; 139(1); 54EC; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER IT A NO. 768/BANG/2019 ASSESSMENT YEAR: 2015 - 16 SMT. GIRIJA VARADARAJU, 544, 5 TH MAIN ROAD, KENGERI SATELLITE TOWN, BENGALURU 560 060. PAN: AKDPR 3008 A VS. THE INCOME TAX OFFICER, WARD 3(2)(3), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : S HRI V. SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI KA NNAN NARAYANAN, ADVOCATE DATE OF HEARING : 20 . 0 7 .202 1 DATE OF PRONOUNCEMENT : 06 .0 8 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-3, BENGALURU DATED 19.02.2019 FOR THE ASSESSMENT YEAR 2015-16. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR A S THEY ARE AGAINST THE APPELLANT, ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF DEDUCTION UNDER SECTION 54F OF THE INCOME TAX ITA NO.768/BANG/2019 PAGE 2 OF 7 ACT, 1961 UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 3. THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED THA T THE APPELLANT HAD INVESTED PROCEEDS FROM CAPITAL GAINS IN CONSTRUCTION OF RESIDENTIAL PROPERTY AS REQUIRED UN DER SECTION.54F OF INCOME TAX ACT, 1961. 4. THE LEARNED CIT [A] OUGHT TO HAVE APPRECIATED TH AT THE JUDGEMENT OF THE HON'BLE KARNATAKA HIGH COURT COMMI SSIONER OF INCOME TAX VS. K.RAMACHANDRA RAO 56 TAXMANN, 163(KARNATAKA), COMMISSIONER OF INCOME TAX VS. P.R. SESHADRI 329 ITR 377 ( KARNATAKA) RETIED UPON IN THE APPELLA TE ORDER PASSED ACTUALLY SUPPORTS THE STAND OF THE APPELLANT FOR THE CLAIM OF DEDUCTION U/S.54F OF INCOME TAX ACT, 1961 AND TH US THE ASSESSMENT MADE WITHOUT GIVING DEDUCTION U/S.54F DE SERVES TO BE VACATED. 5. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WI TH THE HON'BLE CCIT/DG, THE APPELLANT DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST U/S 234-A AND 234-B OF THE ACT, WHICH U NDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE DE SERVES TO BE AS 6. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D IT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE C OSTS. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS RECEIVED CERTAIN IMMOVABLE PROPERTY MENTIONED IN PAGES 3 & 4 OF THE ASSESSMENT ORDER FROM HER SPOUSE MR. MIRLE VARADARAJ AS GIFT AND SUC H PROPERTIES WERE SOLD IN THE PREVIOUS YEAR 2014-15 RELEVANT TO AY 2015-16 FOR A CONSIDERATION OF RS.4,42,12,000. THE ASSESSEES SPOUSE HAD OWNED A SITE NO.6368/22/1A1/3/1, VOLEGERAHALLI, BBMP WARD NO.130 , BANGALORE. THE ASSESSEES CONTENTION IS THAT OUT OF HER SALE CONSI DERATION OF RS.4,42,12,000, SHE HAS INVESTED AN AMOUNT OF RS.3, 37,47,415 UPTO 31.10.2017 AND THEREAFTER INVESTED THE REMAINING AM OUNT OF SALE CONSIDERATION IN THE CONSTRUCTION OF NEW RESIDENTIA L HOUSE WHICH IS OWNED ITA NO.768/BANG/2019 PAGE 3 OF 7 BY HER SPOUSE, MR. MIRLE VARADARAJ. ACCORDINGLY TH E ASSESSEE CLAIMED THIS AMOUNT AS AN INVESTMENT IN THE RESIDENTIAL HOUSE FO R EXEMPTION U/S. 54F OF THE INCOME-TAX ACT, 1961 [THE ACT]. HOWEVER, THE A O DENIED THE SAID EXEMPTION ON THE REASON THAT THE ASSE HAD NOT DEPOS ITED THE NET SALE CONSIDERATION IN THE CAPITAL GAIN ACCOUNT SCHEME ON OR BEFORE THE DUE DATE FOR FILING RETURN OF INCOME U/S. 139(1) OF THE ACT. ON APPEAL, THE CIT(APPEALS) CONFIRMED THE ORDER OF AO. AGAINST TH IS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE MAIN CONTENTION OF THE LD. AR IS THAT THE ASSES SEE HAS UTILIZED RS.3,37,47,415 OUT OF THE NET CONSIDERATION OF RS.4 ,42,12,000 IN THE CONSTRUCTION OF NEW RESIDENTIAL HOUSE IN HER SPOUSE S NAME. SINCE THE ASSESSEE HAS INVESTED THE ABOVE AMOUNT WITHIN THE P ERIOD STIPULATED U/S. 54F OF THE ACT IN THE CONSTRUCTION OF NEW RESIDENTI AL HOUSE IN THE NAME OF HER SPOUSE, EXEMPTION U/S. 54F HAS TO BE GRANTED. HE RELIED ON THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. K. RAMACHANDRA RAO, 277 CTR 522 (KAR) . 5. IT WAS SUBMITTED THAT IF THE ACTUAL INVESTMENT I S MADE WITHIN THE PERIOD STIPULATED U/S. 139(1), THOUGH THE ASSESSEE HAS NOT DEPOSITED IN THE CAPITAL GAIN ACCOUNT SCHEME, THE EXEMPTION U/S. 54 F CANNOT BE DENIED ON THE REASON THAT CONSTRUCTION HAS NOT BEEN COMPLETED IN ALL RESPECTS AND IT WAS NOT FIT FOR OCCUPATION FOR RESIDENTIAL PURPOSES . ACCORDING TO THE LD. AR, ONCE IT IS DEMONSTRATED THAT THE CONSIDERATION RECE IVED ON TRANSFER OF LONG TERM CAPITAL ASSET HAS BEEN INVESTED EITHER IN PURC HASING THE RESIDENTIAL HOUSE OR IN CONSTRUCTION, THOUGH CONSTRUCTION IS NO T COMPLETE; EXEMPTION IS TO BE GRANTED. HE RELIED ON THE TRIBUNAL IN THE CA SE OF SRI SUDHEER VALSALA SREEKUMARAN IN ITA NO.393/BANG/2020 DATED 20.12.201 9. HE ALSO RELIED ON THE JUDGMENT OF HONBLE HIGH COURT OF KARNATAKA IN CIT V. P.R. SESHADRI, 329 ITR 377 (KAR) WHEREIN IT WAS HELD THAT EVEN THOUGH ITA NO.768/BANG/2019 PAGE 4 OF 7 OWNERSHIP OF THE LANDED PROPERTY IS IN THE NAME OF ASSESSEES SPOUSE, INVESTMENT BY ASSESSEE IN CONSTRUCTION OF RESIDENTI AL HOUSE WOULD NOT DISENTITLE THE CLAIM FOR EXEMPTION U/S. 54F OF THE ACT. IT WAS SIMILARLY HELD IN DIT (IT) V. MRS. JENNIFER BHIDE, 349 ITR 80 (KAR) AS FOLLOWS:- A CAREFUL READING OF SECTION 54 AS WELL AS SECTION 54EC MAKES IT CLEAR THAT WHEN CAPITAL GAINS ARISE FROM THE TRANSF ER OF LONG TERM CAPITAL ASSET TO AN ASSESSEE AND THE ASSESSEE HAS, WITHIN THE PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON W HICH THE TRANSFER TOOK PLACE PURCHASE OR HAS, WITHIN THE PER IOD OF THREE YEARS AFTER THE DATE OF TRANSFER, CONSTRUCT RESIDEN TIAL HOUSE, THEN INSTEAD OF 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 PROVISIONS MADE UNDER T HE SECTION WHICH GRANTS EXEMPTION FROM PAYMENT OF CAPITAL GAIN S AS SET OUT THEREUNDER. THEREFORE, IN THE ENTIRE SECTION 54, TH E PURCHASE TO BE MADE OR THE CONSTRUCTION TO BE PUT UP BY THE ASSESS EE SHOULD BE THERE IN THE NAME OF THE ASSESSEE, IS NOT EXPRESSLY STATED. SIMILARLY, EVEN IN RESPECT OF SECTION 54EC, THE ASS ESSEE HAS AT ANY TIME WITHIN A PERIOD OF SIX MONTHS AFTER THE DA TE OF SUCH TRANSFER INVESTED THE WHOLE OR ANY PART OF THE CAPI TAL GAINS IN THE LONG TERM SPECIFIED ASSET THEN SHE WOULD BE ENTITLE D TO THE BENEFIT MENTIONED IN THE SAID SECTION. THERE ALSO, IT IS NO T EXPRESSLY STATED THAT THE INVESTMENT SHOULD BE IN THE NAME OF THE ASSESSEE. THEREFORE, TO ATTRACT SECTION 54 AND SECTION 54EC W HAT IS MATERIAL IS THE INVESTMENT OF THE SALE CONSIDERATION IN ACQU IRING THE RESIDENTIAL PREMISES OR CONSTRUCTING A RESIDENTIAL PREMISES OR INVEST THE AMOUNTS IN BONDS SET OUT IN SECTION 54EC . ONCE THE SALE CONSIDERATION IS INVESTED IN ANY OF THESE MANN ER, THE ASSESSEE WOULD BE ENTITLED TO THE BENEFIT CONFERRED UNDER TH IS PROVISION. IN THE ABSENCE OF AN EXPRESS PROVISION CONTAINED IN TH ESE SECTION THAT THE INVESTMENT SHOULD BE IN THE NAME OF THE AS SESSEE ONLY, ANY SUCH INTERPRETATION WOULD AMOUNT TO COURT INTRO DUCING THE SAID WORD IN THE PROVISION WHICH IS NOT THERE. IT A MOUNTS THE COURTS LEGISLATING WHEN THE PARLIAMENT HAS DELIBERA TELY NOT USED THOSE WORDS IN THE SAID SECTION. [PARA 7] ITA NO.768/BANG/2019 PAGE 5 OF 7 IN THE INSTANT CASE, THE ASSESSEE HAS PURCHASED THE PROPERTY JOINTLY WITH HER HUSBAND. SHE HAS INVESTED THE MONEY IN RUR AL BONDS JOINTLY WITH HER HUSBAND. IT IS NOBODY'S CASE THAT HER HUSBAND CONTRIBUTED ANY PORTION OF THE CONSIDERATION FOR AC QUISITION OF THE PROPERTY AS WELL AS BONDS. THE SOURCE FOR ACQUISITI ON OF THE PROPERTY AND THE BONDS IS THE SALE CONSIDERATION. I T IS NOT IN DISPUTE. ONCE THE SALE CONSIDERATION IS UTILIZED FO R THE PURPOSE MENTIONED UNDER SECTIONS 54 AND 54EC, THE ASSESSEE IS ENTITLED TO THE BENEFIT OF THOSE PROVISION. AS THE ENTIRE CONSI DERATION HAS FLOWN FROM THE ASSESSEE AND NO CONSIDERATION HAS FL OWN FROM HER HUSBAND, MERELY BECAUSE EITHER IN THE SALE DEED OR IN THE BOND HER HUSBAND'S NAME IS ALSO MENTIONED, IN LAW HE WOULD N OT HAVE ANY RIGHT. IN THAT VIEW OF THE MATTER, THE ASSESSEE CAN NOT BE DENIED THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT. THE T RIBUNAL, ON PROPER APPRECIATION OF THE MATERIAL ON RECORD, HAS RIGHTLY ALLOWED THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE AS SESSING AUTHORITY AS WELL AS THE APPELLATE COMMISSIONER.[PA RA 8] 6. ON THE CONTRARY, THE LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES AND RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF CUSTOMS (IMPORTS) V. DILIP KUMAR, C IVIL APPEAL NO.3327/2007 DATED 30.7.2018 WHEREIN IT WAS HELD THAT WHILE GIVING BENEFIT TO THE ASSESSEE, THE PROVISION NEEDS TO BE INTERPRE TED STRICTLY AND IN CASE THERE IS AMBIGUITY, THE BENEFIT OF SUCH AMBIGUITY C ANNOT BE CLAIMED BY THE ASSESSEE AND IT MUST BE INTERPRETED IN FAVOUR OF TH E REVENUE. ACCORDINGLY, IT WAS SUBMITTED BY THE LD. DR THAT ASSESSEE HAS NO T INVESTED THE NET CONSIDERATION IN THE CAPITAL GAIN ACCOUNT SCHEME WI THIN THE TIME STIPULATED FOR FILING RETURN OF INCOME U/S. 139(1) OF THE ACT AND THE BENEFIT OF EXEMPTION U/.S 54F CANNOT BE GIVEN. SIMILARLY, INV ESTMENT IN THE PROPERTY IN THE NAME OF SPOUSE OF ASSESSEE ALSO CANNOT BE CO NSIDERED FOR EXEMPTION U/S. 54F OF THE ACT. 7. IN OUR OPINION, THE ARGUMENTS OF THE LD. DR IS A GAINST THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. K. RAMACHANDRA RAO (277 CTR 522) AND IN THE CASE OF P.R. SESHADRI (329 ITA NO.768/BANG/2019 PAGE 6 OF 7 ITR 377) WHEREIN BOTH THE ARGUMENTS OF THE LD. DR WERE CONSI DERED AND IT WAS DECIDED IN FAVOUR OF ASSESSEE. BEING SO, IN PR INCIPLE, WE AGREE WITH THE CONTENTION OF THE LD. AR THAT EVEN THOUGH THE A SSESSEE HAS NOT DEPOSITED THE CONSIDERATION RECEIVED ON SALE OF LON G TERM CAPITAL ASSET IN THE CAPITAL GAIN ACCOUNT SCHEME WITHIN THE DUE DATE PRESCRIBED U/S. 139(1) OF THE ACT, THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S. 54F OF THE ACT IF THE ASSESSEE HAS INVESTED THE NET CONSIDERATION IN ACCO RDANCE WITH THE PROVISIONS OF SECTION 54F OF THE ACT IN ACQUIRING O R CONSTRUCTION OF NEW RESIDENTIAL HOUSE. THEREFORE, THE CONTENTION OF THE LD. DR THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE CAPITAL GAIN AC COUNT SCHEME AS STIPULATED AND NOT ENTITLED TO THE BENEFIT OF EXEMP TION, EVEN THOUGH SHE HAS INVESTED THE MONEY IN CONSTRUCTION OF NEW RESIDENTI AL HOUSE IS NOT CORRECT. ON THIS REASON, THE REVENUE CANNOT DENY THE BENEFIT OF EXEMPTION U/S. 54F OF THE ACT. 8. THE NEXT CONTENTION OF THE LD. DR IS THAT THE AS SESSEE INVESTED IN THE CONSTRUCTION OF NEW HOUSE, NOT IN HER NAME BUT IN THE CONSTRUCTION OF NEW RESIDENTIAL HOUSE IN THE NAME OF SPOUSE. IN OU R OPINION, THIS ISSUE HAS ALREADY BEEN DECIDED BY THE HONBLE HIGH COURT OF K ARNATAKA IN THE CASE OF P.R. SESHADRI (SUPRA) AND HELD THAT IF THE ASSESSEE INVESTED THE NET SAL E CONSIDERATION IN THE TIME ALLOWED IN CONSTRUCTION O F NEW HOUSE IN THE LANDED PROPERTY OWNED BY THE ASSESSEES SPOUSE, THA T WILL NOT DISENTITLE THE CLAIM OF DEDUCTION U/S. 54F OF THE ACT. FURTHER, I T IS CLARIFIED THAT THERE SHOULD BE DIRECT NEXUS OF INVESTMENT BY THE ASSESSE E IN THE RESIDENTIAL HOUSE OWNED BY ASSESSEES SPOUSE. IN OTHER WORDS, IF IT WAS GIVEN FOR SOME OTHER PURPOSE TO HER HUSBAND AND IF THERE IS N O NEXUS BETWEEN THE THESE TWO, THEN EXEMPTION U/S. 54F CANNOT BE GRANTE D. HOWEVER, THE LOWER AUTHORITIES HAVE NOT EXAMINED THE EXACT AMOUNT OF N ET CONSIDERATION INVESTED IN THE CONSTRUCTION OF NEW RESIDENTIAL HOU SE AND THE TIME LIMIT IN WHICH IT WAS INVESTED BY THE ASSESSEE. IN OUR OPI NION, THESE FACTS ARE TO ITA NO.768/BANG/2019 PAGE 7 OF 7 BE EXAMINED BY THE AO SO AS TO GRANT DEDUCTION U/S. 54F. ACCORDINGLY, IN THE INTEREST OF JUSTICE, WE ARE INCLINED TO REMIT T HE ISSUE TO THE FILE OF THE AO TO VERIFY WHETHER THE CLAIM OF AMOUNT INVESTED IN T HE CONSTRUCTION OF NEW HOUSE ON THE LANDED PROPERTY OWNED BY THE ASSESSEE S SPOUSE HAS ACTUALLY BEEN INVESTED THEREIN. HOWEVER, NEEDLESS TO SAY THAT THE AO CANNOT DENY THE EXEMPTION U/S. 54F ON THE REASON TH AT THE CONSTRUCTED HOUSE IS NOT FIT FOR OCCUPATION. THERE IS NO SUCH S TIPULATION IN SECTION 54F. ACCORDINGLY, THE ISSUE IS REMITTED TO THE AO FOR FR ESH CONSIDERATION WITH THE ABOVE DIRECTIONS AFTER PROVIDING OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. 9. CHARGING OF INTEREST U/S. 234A AND 234B OF THE A CT IS MANDATORY AND CONSEQUENTIAL IN NATURE. 10. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF AUGUST, 2021. SD/- SD/- ( BEENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 6 TH AUGUST, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.