Income Tax Officer, Ward- 3(1)(1), Bangalore V. Shri. Kondal Rao Madhavaram, Bangalore

MA 65/BANG/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7222 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 06-09-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 22-07-2021

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER MP NO.65/BANG/2021 [IN IT A NO. 370/BAN G/2020 ] ASSESSMENT YEAR: 2012 - 13 THE INCOME TAX OFFICER, WARD 3(1)(1), BENGALURU. VS. SHRI KONDAL RAO MADHAVARAM, NO.38/69, CASA DI MODA APARTMENT, ENTS GREEN GARDEN LAYOUT, KUNDALAHALLI GATE, MARATHAHALLI, BANGALORE 560 037. PAN: AKYPM 0944P APP L IC ANT RESPONDENT APP L IC ANT BY : S HRI G. ELAMURUGU, JT. C IT(DR)(ITAT), BENGALURU. RESPONDENT BY : NONE DATE OF HEARING : 03.09 . 202 1 DATE OF PRONOUNCEMENT : 06 . 0 9 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER BY THIS MISCELLANEOUS PETITION, THE DEPARTMENT SEE KS RECTIFICATION OF THE ORDER OF TRIBUNAL DATED 3.2.2021. 2. THE LD. DR SUBMITTED THAT THE TRIBUNAL WRONGLY H ELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 54F OF THE AC T, EVEN IF THE ASSESSEE HAS NOT COMPLETED THE CONSTRUCTION WITHIN THE PERIO D OF 3 YEARS AND ACCORDINGLY DIRECTED THE AO TO QUANTIFY AND ALLOW T HE EXPENDITURE INCURRED BY THE ASSESSEE ON THE CONSTRUCTION OF NEW HOUSE U/ S. 54F OF THE ACT. MP 65/B/21 PAGE 2 OF 6 ACCORDING TO HIM, THE NEW HOUSE WAS NOT CONSTRUCTED WITHIN THREE YEARS FROM THE DATE OF SALE OF ORIGINAL ASSET. FURTHER, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 54F, SINCE THE ASSESSEE HAS NOT INVESTED THE UNSPENT NET CONSIDERATION IN THE CAPITAL GAIN ACCOUNT SCHEM E BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME U/S. 139(1) OF THE ACT. THE LAND ON WHICH THE NEW ASSET WAS CONSTRUCTED WAS PURCHASED MORE THAN O NE YEAR PRIOR TO DATE OF SALE OF ORIGINAL ASSET. 3. FURTHER, THE LD. DR SUBMITTED THAT THERE WAS A M ISTAKE APPARENT IN PARA 2 OF THE ORDER OF THE TRIBUNAL WHEREIN IT IS M ENTIONED THAT THE TOTAL COST IN PURCHASE OF ABOVE PROPERTIES WAS RS.3,20,07 ,373, HOWEVER THE CORRECT AMOUNT IS RS.32,07,373. 4. THE LD. AR SUBMITTED THAT THERE IS NO MISTAKE AP PARENT ON THE RECORD IN THE ORDER OF TRIBUNAL WHICH WARRANTS RECTIFICATI ON, EXCEPT THE MISTAKE IN THE AMOUNT OF TOTAL COST IN PURCHASE OF PROPERTIES IN PARA 2 OF THE ORDER AS STATED BY THE LD. DR. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE TRIBUNAL IN THE ORDER DATED 3.2.2021 OBSERVED T HAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S. 54F OF THE ACT FOLLOWING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CIT V. SMT. B.S. S HANTAKUMARI, 60 TAXMANN.COM 74 (KAR) AND SMT. BABITA KEMPARAJE URS V. CIT, 167 ITD 125 (BANG). 6. IN THE PRESENT CASE, THE MAIN GRIEVANCE OF THE A SSESSEE WAS THAT HE HAS INVESTED THE NET SALE CONSIDERATION RECEIVED ON TRANSFER OF CAPITAL ASSET IN CONSTRUCTION OF NEW RESIDENTIAL HOUSE, HOWEVER, THE HOUSE WAS NOT COMPLETED IN FULL RESPECT, ON THIS REASON, DEDUCTIO N U/S. 54F CANNOT BE DENIED. ADMITTEDLY, THERE IS NO DISPUTE THAT ASSES SEE HAS INVESTED PART OF THE NET SALE CONSIDERATION IN CONSTRUCTION OF NEW H OUSE. HOWEVER, MP 65/B/21 PAGE 3 OF 6 CONSTRUCTION WAS NOT COMPLETED IN FULL RESPECTS, HE NCE DEDUCTION U/S. 54F WAS DENIED. THE ASSESSEE RELIED ON VARIOUS JUDICIA L PRONOUNCEMENTS AS FOLLOWS:- PADMA RAJGOPALAN VS ITO (BANG) ITA NO. 629/BANG/201 98 CIT V/S B.S. SHANTAKUMARI 60 TAXMANN.COM 74 (KAR) CIT V/S SAMBANDAM UDAYKUMAR 19 TAXMANN.COM 17 PCIT V/S C.GOPALASWAMY [384 ITR 307 (KARNATAKA) SMT. BABITHA KEMPARAJE URS V/S CIT, MYSORE P. SARANAKUMARI V/S ITO, ITA NO.325/MDS/2017 7. AS PER SECTION 54F, ASSESSEE HAS TO CONSTRUCT NE W RESIDENTIAL HOUSE WITHIN THE PERIOD OF 3 YEARS AFTER THE DATE OF TRAN SFER. IF THE INTENTION OF THE ASSESSEE IS TO CONSTRUCT A NEW RESIDENTIAL HOUSE AN D NOT IN A POSITION TO COMPLETE THE SAME, THE ASSESSEE THEN HAS TO DEPOSIT THE AMOUNT INTO ACCOUNT NOTIFIED BY THE CENTRAL GOVT. FOR THIS PURP OSE. IN THE PRESENT CASE, IT WAS THE INTENTION OF ASSESSEE TO CONSTRUCT A NEW HOUSE AND IN THE INTERMEDIARY PERIOD THE ASSESSEE HAS TO DEPOSIT THE SAME INTO THE SAID ACCOUNT. THE CONTENTION OF THE LD. AR IS THAT ASSE SSEE HAS APPROPRIATED THE NET SALE CONSIDERATION IN CONSTRUCTION OF THE N EW HOUSE, THOUGH IT WAS NOT FULLY COMPLETED. IN OUR OPINION, EVEN THOUGH T HE HOUSE WAS NOT COMPLETE IN ALL RESPECTS, THE ASSESSEE IS ENTITLED FOR PROPORTIONATE DEDUCTION U/S. 54F OF THE ACT TO THE EXTENT OF INVE STMENT. 8. THE HONBLE KARNATAKA HIGH COURT IN CIT V. SAMBANDAM UDAYKUMAR REPORTED IN 251 CTR 371 TOOK THE VIEW THAT, UNDER PROVISIONS OF SECTION 54F OF THE ACT, THE CONDITION PRECEDED I S THAT, CAPITAL GAINS REALISED FROM SALE OF CAPITAL ASSET SHOULD HAVE BEE N PARTED BY ASSESSEE AND INVESTED OR CONSTRUCTED A RESIDENTIAL HOUSE, AS THE CASE MAY BE. HONBLE COURT ALSO OBSERVED THAT, THE ESSENCE OF TH E PURPOSE OF SECTION 54F, IS WHETHER, THE ASSESSEE WHO RECEIVED THE CAPI TAL GAIN HAS INVESTED IN A HOUSE. ONCE IT IS DEMONSTRATED THAT THE CONSIDERA TION RECEIVED ON TRANSFER OF CAPITAL ASSET HAS BEEN INVESTED IN OR C ONSTRUCTION OF RESIDENTIAL MP 65/B/21 PAGE 4 OF 6 HOUSE, EVEN THOUGH THE CONSTRUCTION IS NOT COMPLETE IN ALL RESPECT AS REQUIRED UNDER LAW, ASSESSEE CANNOT BE DENIED BENEF IT UNDER SECTION 54F. FURTHER ON A PLAIN READING OF DECISION OF HONBLE K ARNATAKA HIGH COURT IN CASE OF CIT VS. SAMBANDAM UDAYAKUMAR, 19 TAXMANN.COM 17 (KA RN) REVEALS THAT, THERE IS NO PARTICULAR STAGE OF COMPL ETION OF CONSTRUCTION, THAT IS CONTEMPLATED. LD. AR SUBMITTED THAT THE CONSTRUC TION WAS LATER ON COMPLETED AND THERE IS NOTHING PLACED BY REVENUE ON RECORD TO DEMONSTRATE ANY OTHER VIOLATION IN SUPPORT OF THEIR ARGUMENTS. 9. THE HONBLE HIGH COURT OF KARNATAKA IN CIT V. K. RAMACHANDRA RAO 277 CTR 522 (KARNATAKA) HELD AS FOLLOWS:- 4.1 RE.QUESTION NO.2 : 'AS IS CLEAR FROM SUB-SECTION (4) IN THE EVENT OF T HE ASSESSEE NOT INVESTING THE CAPITAL GAINS EITHER IN PURCHASING TH E RESIDENTIAL 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 CAPITA L GAINS IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVER NMENT. IN OTHER WORDS IF HE WANT OF CLAIM EXEMPTION FROM PAYM ENT OF INCOME TAX BY RETAINING THE CASH, THEN THE SAID AMO UNT 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 TH E PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPUL ATED THEREIN, THEN SECTION 54F(4) IS NOT AT ALL ATTRACTED AND THE REFORE THE CONTENTION THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS STIPULATED AND THEREFORE, HE IS NOT ENTITLED TO THE BENEFIT EVEN THOUGH HE HAS INVESTED THE MONEY IN CO NSTRUCTION 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, WE DO NOT SEE MERIT IN ANY OF THE APPEAL S. ACCORDINGLY, ALL THE FOUR APPEALS ARE DISMISSED. 10. FROM THE JUDGMENT OF THE KARNATAKA HIGH COURT I N THE CASE OF CIT V. K. RAMACHANDRA (SUPRA) , WE OBSERVE FROM THE ANSWER TO QUESTION NO.2 IN MP 65/B/21 PAGE 5 OF 6 THE SAME CASE, IN PARA 4.1, THAT IF SUCH INVESTMENT IS MADE IN THE BANK ACCOUNT AS STIPULATED IN SECTION 54(2) OR INVESTED IN CONSTRUCTED OF NEW RESIDENTIAL HOUSE WITHIN THE STIPULATED PERIOD, THE N ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 54 OF THE ACT. HOWEVER, IF THE ASSE SSEE FAILED TO DEPOSIT INTO THE BANK ACCOUNT AND ALSO FAILED TO CONSTRUCT THE N EW RESIDENTIAL HOUSE WITHIN THE STIPULATED TIME, THEN ASSESSEE CANNOT TA KE ADVANTAGE OF ITS OWN DEFAULT SO AS TO CLAIM DEDUCTION U/S. 54 OF THE ACT . 11. IN THE PRESENT CASE, THE ASSESSEE IS ENTITLED F OR PROPORTIONATE DEDUCTION U/S. 54F TO THE EXTENT OF INVESTMENT MADE IN CONSTRUCTION OF NEW RESIDENTIAL HOUSE WITHIN THE PERIOD ALLOWED U/S. 54 F OF THE ACT, I.E., 09.10.2014 THOUGH CONSTRUCTION WAS NOT FULLY COMPLE TED. THE ASSESSEE SHALL PROVIDE NECESSARY EVIDENCE IN SUPPORT OF THE COST OF CONSTRUCTION INCURRED UPTO THE DATE OF TIME ALLOWED U/S. 54F OF THE ACT SO AS TO CLAIM THE DEDUCTION. IN OTHER WORDS, THE COMPUTATION HAS TO BE MADE AS FOLLOWS:- EXEMPTION U/S. 54 = LONG TERM CAPITAL GAIN X AMOUNT OF INVESTMENT NET SALE CONSIDERATION 12. THIS ISSUE IS THEREFORE REMITTED TO THE ASSESSI NG OFFICER FOR THE LIMITED PURPOSE OF COMPUTATION OF DEDUCTION U/S. 54 F OF THE ACT, AFTER EXAMINING THE COST OF CONSTRUCTION INCURRED IN CONS TRUCTION OF NEW RESIDENTIAL HOUSE UPTO 09.10.2014. 13. FURTHER, WE MAY CLARIFY THAT THE INVESTMENT MAD E BY THE ASSESSEE BEFORE ONE YEAR OF SALE OF ORIGINAL CAPITAL ASSET I.E., BEFORE 11.10.2010 CANNOT BE CONSIDERED FOR GRANT OF DEDUCTION U/S. 54 F OF THE ACT. 14. FURTHER, THE FIGURE MENTIONED IN PARA 2, PAGE 2 , 1 ST LINE OF THE ORDER AS RS.3,20,07,373 IS MODIFIED AND SUBSTITUTED TO RE AD AS RS.32,07,373. MP 65/B/21 PAGE 6 OF 6 15. IN THE RESULT, THE MISCELLANEOUS PETITION FILE D BY THE REVENUE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF SEPTEMBER, 2021. SD/- SD/- ( BEE NA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 6 TH SEPTEMBER, 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.