Mr.Claudius Mark Stanislaus Pinto , Bangalore V. Deputy Commissioner of Income Tax (International Taxation) , Mangalore

ITA 826/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2396 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 16-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR ADD L
• Assessee Lawyers: V SRINIVASAN
• Keywords: Capital asset; Benefit of exemption
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE S HRI JASON P BOAZ , ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER I.T . (I.T) A. NO. 826 /BANG/20 18 (ASSESSMENT YEAR : 20 12 - 13 ) MR.CLAUDIUS MARK STANISLAUS PINTO, C/O RAVI LOBO & CO., NO.37/7, TANK ROAD, MEANEE AVENUE, SIVAN CHETTY GARDEN, BANGALORE - 560 042 . . APPELLANT. PAN AYRPP3981G VS. DY. COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, M ANGALORE. .. RESPONDENT. APPELLANT BY : SHRI V. SRINIVASAN, ADV. R E SPONDENT BY : DR. P.V. PRADEEP KUMAR,ADDL.CIT (D.R) DATE OF H EARING : 28.08.2018. DATE OF P RONOUNCEMENT : 05 .09 .201 8 . O R D E R PER SHRI JASON P BOAZ , A .M . : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 10 , BANGALORE DT.2.1.2018 FOR THE ASSESSMENT YEAR 20 12 - 13. 2 IT (IT) A NO. 826 /BANG/20 18 2. BRIEFLY STATED, THE FACTS RELEVANT FOR DISPOSAL OF THIS APPEAL ARE AS UNDER : - 2.1 THE ASSESSEE, A NON - RESIDENT, E - FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2012 - 13 ON 26.7.2012 DECLARING INCOME OF RS.22,70,060; THAT ENTIRELY CONS ISTED OF INTEREST EARNED FROM DEPOSITS IN INDIA. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') VIDE ORDER DT.31.12.2014, WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMI NED AT RS.2,09,20,060 ; IN VIEW OF THE ASSESSING OFFICER MAKING AN ADDITION OF RS.1,86,50,000 BY WITHDRAWING THE EXEMPTION GRANTED UNDER SECTION 54 OF THE ACT FOR ASSESSMENT YEAR 2009 - 10. DURING THE ASSESSMENT YEAR 2009 - 10, THE ASSESSEE HAD SOLD A RESIDENT IAL HOUSE A T MANGALORE THAT DEVOLVED ON THE ASSESSEE ON THE DEATH OF HIS FATHER. THE ASSESSEE HAD COMPUTED THE CAPITAL GAINS IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2009 - 10 AND HAD CLAIMED EXEMPTION UNDER SECTION 54 OF THE ACT FOR THE DEPOSIT IN THE C APITAL GAINS ACCOUNT SCHEME, WHICH WAS ALSO ALLOWED. 3 IT (IT) A NO. 826 /BANG/20 18 2.2 IN THE IMPUGNED ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 20 1 2 - 13, THE ASSESSING OFFICER, HOLDING THAT THE ASSESSEE HAD NOT PURCHASED A RESIDENTIAL HOUSE IN INDIA WITHIN THE TIME ALLOWED UNDER SECTION 54 OF THE ACT, HAS TAXED THE CAPITAL GAINS BY WITHDRAWING THE EXEMPTION GRANTED AFTER THE COMPLETION OF THE PERIOD OF THREE YEARS FROM THE SALE OF THE ORIGINAL CAPITAL ASSET DURING THE ASSESSMENT YEAR 2012 - 13 WHICH IS BEFORE US. IN DOING SO, THE A SSESSING OFFICER HAS TAKEN THE VIEW THAT THE PURCHASE OF NEW RESIDENTIAL HOUSE BY THE ASSESSEE AT CANADA WOULD NOT ENTITLE THE ASSESSEE TO EXEMPTION UNDER SECTION 54 OF THE ACT SINCE THE NEW RESIDENTIAL HOUSE WAS NOT SITUATED IN INDIA. 3. AGGRIEVED BY THE ORDER OF ASSESSMENT DT.31.12.2014, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (APPEALS) 10, BANGALORE. THE LEARNED CIT (APPEALS) DISPOSED OFF THE APPEAL VIDE THE IMPUGNED ORDER DT.2.1.2018, DISMISSING THE APPEAL BY HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION UNDER SECTION 54 OF THE ACT SINCE THE ASSESSEE HAD NOT USED THE FUNDS DEPOSITED IN THE CAPITAL GAINS ACCOUNT SCHEME FOR THE PURPOSE OF PURCHASING OF THE NEW RESIDENTIAL HOUSE. 4 IT (IT) A NO. 826 /BANG/20 18 4. THE ASSESSEE, BEING AGGRIEVED BY THE ORDER O F THE CIT (APPEALS) - 10, BANGALORE DT.2.1.2018 FOR ASSESSMENT YEAR 2012 - 13 HAS FILED THIS APPEAL BEFORE THE TRIBUNAL, WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS : - 5 IT (IT) A NO. 826 /BANG/20 18 5. THE GROUNDS AT S.NOS.1 AND 6 , BEING GENERAL IN NATU R E, NO ADJUDICATION IS CALL ED FOR THERE O N. 6. GROUND NOS.2 TO 4 - COMPUTATION OF LONG TERM CAPITAL GAIN (LTCG) AND EXEMPTION U/S.54 OF THE ACT. 6 IT (IT) A NO. 826 /BANG/20 18 6.1 THESE GROUNDS (SUPRA) IN RESPECT OF COMPUTATION OF LTCG AND THE WITHDRAWAL OF EXEMPTION UNDER SECTION 54 OF T HE ACT ARE INTERLINKED AND TAKEN UP TOGETHER FOR ADJUDICATION. 6.2.1 IN RESPECT OF THESE GROUNDS, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD SOLD A RESIDENTIAL PROPERTY ALONG WITH HIS MOTHER AND BROTHER O N 20.9.2008 AND HAD COMPUTED CAPITAL GAINS. (LTCG) OF RS.2,92,29,059, WHICH WAS REPORTED IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2009 - 10. IN RESPECT OF THE SAID C APITAL GAINS, THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54 OF THE ACT BY DEPOSI TING RS.1,86,50,000 IN THE CAPITAL GAINS ACCO U NT S SCHEME WITH CORPORATION BANK. HE DREW OUR ATTENTION TO THE R E TURNS OF INCOME FILED FOR ASSESSMENT YEAR 2 009 - 10 AS WELL AS THE ORDER OF ASSESSMENT FOR THIS YEAR PASSED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DT.22.12.2011, ACCEPTING THE INCOME RETURNED ; AFTER SCRUTINY. THE LEARNED AUTHORISED REPRESENTATIVE ALSO DREW OUR ATTENTION TO THE PURCHASE OF THE NEW RESIDENTIAL HOUSE BY THE ASSESSEE ON 26.4.2010 IN CANADA FOR $ 633,000 (EQUIVALENT TO RS.2,81,37 ,546) BY OBTAINING LOAN 7 IT (IT) A NO. 826 /BANG/20 18 FROM HSBC BANK IN CANADA AND ALSO UTILIZING HIS OWN FUNDS AND FUNDS REPATRIATED FROM INDIA. 6 .2.2 IT WAS SUBMITTED THAT WHILE THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE IS NOT ENTITLED TO GET THE EXEMPTION. 54 OF THE ACT BECAUSE HE HAS NOT MADE THE INVESTMENT IN INDIA, THE LEARNED CIT (APPEALS) HAS UPHELD THE ADDITION MADE ON THE GROUND THAT THE ASSESSEE HAD NOT USED THE DEPOSIT OF RS.1,86,50,000 MADE IN THE CAPITAL GAINS ACCOUNT FOR PURCHASE OF THE NEW RE SIDENTIAL HOUSE. IT WAS FURTHER SUBMITTED THAT THE LEARNED CIT (APPEALS) HAS OBSERVED THAT THE ASSESSEE HAD OBTAINED A LOAN FROM A BANK IN CANADA AND AS SUCH, THERE WAS NO RELATION BETWEEN THE CAPITAL GAINS ARISING TO THE ASSESSEE AND THE PURCHASE OF HOUS E PROPERTY IN CANADA. ACCORDING TO THE LEARNED AUTHORISED REPRESENTATIVE, THE ASSESSEE HAS UTILIZED THE SALE PROCEEDS / CONSIDERATION FROM THE SALE OF THE PROPERTY IN MANGALORE BY MAKING INVESTMENT IN THE CAPITAL GAINS ACCOUNT WHICH WAS SUBSEQUENTLY TRANSF ERRED TO CANADA AFTER MATURITY OF FIXED DEPOSITS. RELYING ON THE PROVISO TO SEC. 54(2) OF THE ACT, THE LEARNED CIT (APPEALS) HELD THAT SINCE THE ASSESSEE HAS NOT UTILIZED THE MONEY DEPOSITED IN THE CAPITAL GAINS 8 IT (IT) A NO. 826 /BANG/20 18 ACCOUNT FOR THE PURCHASE OR CONSTRUCTION OF A HOUSE PROPERTY, HE IS NOT ENTITLED TO CLAIM THE BENEFIT OF EXEMPTION UNDER SECTION 54 OF THE ACT. 6 .2.3 THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE CONTENDS, BEFORE US, THAT THERE IS NO REQUIREMENT FOR PURCHASE OF THE NEW RESIDE N TIAL HO USE IN INDIA BEFORE THE AMENDMENT BY FINANCE ACT, 2014. IT WAS ALSO CONTENDED THAT THERE WAS NO REQUIREMENT THAT THE VERY SAME FUNDS FROM THE SALE OF THE ORIGINAL ASSET HAVE TO BE USED TO PURCHASE THE NEW RESIDENTIAL HOUSE TO SECURE EXEMPTION UNDER SECTION 54 OF THE ACT. IN SUPPORT OF THE ABOVE PRPOSITIONS, THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : - (I) CIT VS. ANANDNRAJ (2016) 284 CTR (KAR)84. (II) CIT VS. KAPIL KUMAR AGARWAL (2016) 382 ITR 56 (P&H) (III) LEENA JUGALKISHOR SHAH VS. ACIT (2017) 392 ITR 18 (GUJ); AND (IV) VIJAY UMESH TONSE VS. ITO (IN ITA NO.834/BANG/2011 DT.31.1.2013) 6 .3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9 IT (IT) A NO. 826 /BANG/20 18 6 .4 .1 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. A CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF VINAY MISHRA IN ITA NO.895/BANG/2012 DT.12.10.2012 HAS TAKEN THE VIEW THAT THE PURCHASE OF PROPERTY OUTSIDE INDIA WILL NOT DISENTITLE THE ASSESSEE FROM CLAIMING EXEMPTION UNDER SECTION 54 / 54F OF THE ACT. SIMILAR VIEW HAS TAKEN BY ANOTHER CO - ORDINATE BENCH OF THE ITAT, BANGALORE IN THE CASE OF VIJAY UMESH T ONSE IN ORDER IN ITA NO.834/BANG/2011 DT.31.1.2013 RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE. THIS VIEW TAKEN IS NOW SUPPORTED BY THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF LEENA JUGALKISHOR SHAH (SUPRA), WHERE THE CONTRARY VI EW TAKEN BY THE ITAT, AHMEDABAD BENCH HAS BEEN REVERSED. IN THE ABOVE FACTUAL AN D LEGAL MATRIX OF THE CASE, WE ARE INCLINED TO HOLD THAT THE PURCHASE OF RESIDENTIAL PROPERTY BY THE ASSESSEE IN CANADA WOULD BE SUFFICIENT COMPLIANCE WITH THE REQUIREMENTS OF SEC. 54 OF THE ACT AS IT STOOD IN THE YEAR UNDER CONSIDERATION AND THE EXEMPTION ALLOWED TO THE ASSESSEE THEREUNDER FOR THE ASSESSMENT YEAR 2009 - 10 CANNOT BE WITHDRAWN. 10 IT (IT) A NO. 826 /BANG/20 18 6 .5.1 NOW COMING TO THE OBJECTIONS / REASONS ADDUCED BY THE LEARNED CIT (APPEA LS) FOR UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO REQUIREMENT THAT THE VERY SALE PROCEEDS RECEIVED BE USED FOR MAKING THE REINVESTMENT IN THE NEW PROPERTY. THE PROVISIONS OF THE ACT PERMIT R E - INVESTMENT BENEFIT EVEN ONE YEAR BEFORE THE TRANSFER OF THE ORIGINAL ASSET AND THEREFORE, IT NEED NOT BE THAT THE SOURCE OF RE - INVESTMENT MUST BE FROM THE SALE PROCEEDS OF THE ORIGINAL ASSET. IN THIS CONTEXT WE FIND THAT THE HON'BLE KARNATAKA HIGH COUR T IN THE CASE OF CIT V V.ANANDRAJ (2016) 284 CTR (KAR) 84 AT PARA 6 OF ITS ORDER HAS HELD AS UNDER : 6. IT IS NOT IN DISPUTE THAT THE ASSESSEE SOLD THE AGRICULTURAL LAND AND THE CONSIDERATION RECEIVED IS IN THE NATURE OF A LONG TERM CAPITAL GAIN. EV EN BEFORE THE SALE OF THE PROPERTY HE HAD BORROWED HOUSING LOAN AND STARTED CONSTRUCTION ON THE SITE BELONGING TO HIM. AFTER THE SALE, THE AMOUNT SPENT TOWARDS CONSTRUCTION OF THE HOUSE IS MORE THAN THE CONSIDERATION RECEIVED BY THE SALE OF AGRICULTURAL LA ND AND THEREFORE, HE IS ENTITLED TO THE BENEFIT OF SECTION 54F OF THE ACT. 6.5.2 SIMILARLY, THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KAPIL KUMAR AGARWAL (SUPRA) HAS HELD THAT I N ORDER TO AVAIL BENEFIT UNDER SECTION 54F OF THE ACT, TH E ASSESSEE IS REQUIRED TO EITHER PURCHASE A RESIDENTIAL HOUSE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH TRANSFER TAKES PLACE OR CONSTRUCT A RESIDENTIAL HOUSE 11 IT (IT) A NO. 826 /BANG/20 18 WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE. NO PROVISION HAS BEE N MADE BY THE STATUTE THAT IN ORDER TO AVAIL OF THE BENEFIT OF SECTION 54F OF THE ACT, THE ASSESSEE HAS TO UTILISE THE AMOUNT RECEIVED BY HIM ON SALE OF ORIGINAL CAPITAL ASSET FOR THE PURPOSES OF MEETING THE COST OF THE NEW ASSET. 6.5.3 IN OUR CONSIDE RED OPINION THE ABOVE JUDICIAL PRONOUNCEMENTS SUPPORT THE CASE OF THE ASSESSEE AND IN THIS VIEW OF THE MATTER, THE IMPUGNED ORDER OF THE LEARNED CIT (APPEALS) UPHOLDING THE WITHDRAWAL OF EXEMPTION UNDER SECTION 54 OF THE ACT ON THIS GROUND IS ALSO SET ASID E. CONSEQUENTLY, THE ADDITION OF RS.1,86,50,000 IS DELETED. WE HOLD AND DIRECT ACCORDINGLY. 7. GROUND NO.5 CHARGING OF INTEREST U/S.234C OF THE ACT . 7.1 IN THIS GROUND, THE ASSESSEE DENIES ITSELF LIABLE TO BE CHARGED INTEREST UNDER SECTION 234C OF THE ACT. THE CHARGING OF INTEREST IS CONSEQUENTIAL AND MANDATORY AND THE ASSESSING OFFICER HAS NO DISCRETION IN THE MATTER. THIS PROPOSITION HAS BEEN UPHELD BY THE HON'BLE APEX COURT IN THE CASE OF ANJUM H GHASWALA (252 ITR 1) (SC) AND WE THEREFORE 12 IT (IT) A NO. 826 /BANG/20 18 U PHOLD THE ACTION OF THE ASSESSING OFFICER IN CHARGING THE SAID INTEREST IN THE CASE ON HAND. THE ASSESSING OFFICER IS, HOWEVER, DIRECTED TO RECOMPUTE THE INTEREST CHARGEABLE UNDER SECTION 234C OF THE ACT, IF ANY, WHILE GIVING EFFECT TO THIS ORDER. 8. IN THE RESULT, THE AS APPEAL IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 5 TH DAY OF SEPT., 201 8 . SD/ - ( LALIET KUMAR ) JUDICIAL MEMBER SD/ - ( JASON P BOAZ ) ACCOUNTANT MEMBER BANGALORE, DT. 05 .09.2018. *RE DDY GP COPY TO : 1 APPELLANT 4 CIT(A) 2 RESPONDENT 5 DR. ITAT, BANGALORE 3 CIT 6 GUARD FILE SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL BANGALORE.