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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Manoj Kumar Aggarwal (Accountant Member):
Aforesaid appeals by Revenue for Assessment Year (AY) 2011-12 arise out of common order passed by learned Commissioner of Income Tax (Appeals)-3, Chennai [CIT(A)] on 13-12-2019 in the matter of separate assessments framed by Ld. Assessing Officer (AO) for different assessees u/s. 143(3) r.w.s 147 of the Act on 30-12-2018 / 31-12-2018. The facts as well as issues are quite identical in all the appeals. The grounds raised in ITA No.495/Chny/2020 read as under: - 1. The order of the Ld. Commissioner of Income Tax (Appeals) is contrary to the law and the facts of the case. 2.1 The Ld. CIT(A) has erred in allowing partial relief to the assessee in respect of amount spent towards construction of new property without taking cognizance of the fact that the assessee has not fulfilled the conditions stipulated in section 54F of the I.T. Act. 2.2 The Ld. CIT(A) has erred in relying the decision of the jurisdictional High Court in the case of CIT Vs Shri. Sardarmal Kothari and jurisdictional Tribunal in the case of Kannan Chandrasekhar Vs ITO the facts of which are distinguishable from the facts of the current case. 2.3 The Ld. CIT(A) has erred in not following the decision of the Hon'ble Bombay High Court in the case of Humayun Suleman Merchant Vs CIT reported in 387 ITR 421 wherein it is held that "failure to deposit the amount of consideration not utilised towards the purchase of new flat in the specified bank account before the due date of filing return of income under section 139(1) is fatal to the claim for exemption." 2.4 The ld CIT(A) erred in allowing the claim of deduction u/s.54F of the Act without considering the fact that the assessee has not spent substantial amount in construction before the time limits specified in the statue and that
3 ITA Nos.495 to 498/Chny/2020 completion certificate was obtained much beyond the due date for completion of construction of the new asset.
As evident, the sole issue that arises for our consideration is computation of deduction u/s 54F. Having heard rival submissions and after perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee along with other 6 joint owners sold certain property situated at Mevallur Kuppam Village for Rs.33 Crores on 19.04.2010. All the joint owners purchased a property at Medavakkam High Road, Perambur for Rs.11.30 Crores and claimed deduction u/s 54F. 3.2 The assessee computed its share in the sale consideration for Rs.495 Lacs. The assessee computed Long Term Capital Gains (LTCG) of Rs.478.99 Lacs and claimed deduction u/s 54F for proportionate investment made in residential land for Rs.254.67 Lacs. Since entire sale consideration was not invested, the deduction u/s 54F was claimed proportionately for Rs.246.43 Lacs and taxable LTCG were computed at Rs.232.55 Lacs which were offered to tax. 3.3 The Ld. AO re-computed assessee’ share in the sale consideration for Rs.513.67 Lacs. The indexed cost was computed as Rs.2.20 Lacs. The assessee was asked to submit proof for having invested unutilized amount in Capital Gain Account Scheme as required under law. The assessee submitted that the sale consideration was received in installments at various point of time and the same was utilized for purchase of land and towards registration / construction of the property. 3.4 Upon perusal of construction certificate as obtained from CMDA, it was noted that the construction was completed on 29.12.2015 as against the requirement that the property should have been constructed within a
4 ITA Nos.495 to 498/Chny/2020 period of 3 years i.e., by April, 2013. Further, the assessee constructed a residential-cum-office building. However, the assessee submitted that the property was a residential property and only small portion was used for own office space. The small delay in construction was due to fault of the contractor and sale consideration was received in installment which was utilized towards purchase of land and construction of property. The assessee submitted construction contract dated 05.03.2012 wherein contractor was required to complete the construction within 12 months. It emerged that the property was sold on 19.04.2010, the land was purchased on 14.02.2011 and the construction contract was entered into on 05.03.2012 and therefore, the claim of the assessee that delay in completion of construction was due to the contractor was not agreeable. The assessee applied for completion certificate only on 12.10.2015 which was much beyond the requisite date of completion i.e., April, 2013 and the assessee did not deposit the unutilized amount in Capital Gains Account Scheme. Accordingly, the deduction so claimed u/s 54F was denied by Ld. AO. Appellate Proceedings 4. The Ld. CIT(A) noted the schedule of payment received by the assessee upon sale of property and the investment so made in various financial years as under: - No. Financial Year Amount Recd. (Rs.) Amount invested (Rs.) 1. Up to 31.03.2009 Rs.275 Lacs -- 2. 2009-10 Rs.290 Lacs -- 3. 2010-11 Rs.1279 Lacs Rs.1152.70 Lacs 4. 2011-12 Rs.950 Lacs Rs.362.02 Lacs 5. 2012-13 Rs.466 Lacs Rs.231.98 Lacs 6. 2013-14 Rs.40 Lacs Rs.9.73 Lacs Total Rs.3300 Lacs Rs.1756.45 Lacs
5 ITA Nos.495 to 498/Chny/2020 It was noted that up-to 31.03.2011, the owners received sale consideration of Rs.1844 Lacs out of which an amount of Rs.1152.70 Lacs was re-invested towards purchase of another property and the amount of Rs.630 Lacs was earmarked for construction and the balance amount was offered to tax by the joint owners. Thus, substantial portion of net consideration so received was re-invested within stipulated period from the date of transfer of capital asset. Relying upon the decision of Hon’ble High Court in CIT vs Sardarmal Kothari and Shanthilal Kothari (302 ITR 286), it was held that construction need not be completed within stipulated time to claim the benefit u/s 54F. Similar was the view of Chennai Tribunal in Mr. Kannan Chandrasekhar vs ITO in ITA No.2932/Mds/2016 wherein it was held that what was necessary is that the construction should be commenced. 5. So far as the issue of depositing the unappropriated capital gains in capital gain account scheme before date of filing of return u/s 139(1) is concerned, reliance was placed on the decision of Chennai Tribunal in ACIT vs T.S. Arunachalam, (ITA No.2455/Mds/2017 dated 30.01.2018) wherein it was held that it was not necessary and it was enough if the assessee had invested substantial portion of net consideration in new asset within the stipulate period. Further, the contractor was required to complete the construction within 12 months and it was beyond the control of the assessee to complete the construction within stipulated period. The provisions of Sec.54F were beneficial provisions to promote investment in housing sector and encourage investments in acquisition of residential property. Finally, the claim was allowed by observing that substantive part of the conditions was complied with by the assessee. The assessee had invested the sale
6 ITA Nos.495 to 498/Chny/2020 consideration in purchase of land and started construction. Investment of substantial amount in new asset was sufficient compliance to claim deduction u/s 54F as held by various High Courts. 6. Regarding allegation of usage of building for commercial purpose, the field enquiries revealed that the usage for non-residential purpose was only to the extent of 6.47%. Accordingly, Ld. AO was directed to reduce the deduction proportionately. 7. Regarding purchase of 2 properties by Shri Uttam Kumar Jain, the assessee submitted that the deduction may be allowed for investment made in purchase of flat at Ozone project. Accepting the same, Ld. AO was directed to allow deduction against flat purchased in Ozone Project. Aggrieved as foresaid the revenue is in further appeal before us assailing the grant of deduction u/s 54F. Our findings and Adjudication 8. From the table as extracted in para-4, the undisputed position that emerges is that up-to 31.03.2011, the owners has received sale consideration of Rs.1844 Lacs out of which an amount of Rs.1152.70 Lacs was re-invested towards purchase of another property and the amount of Rs.630 Lacs was earmarked for construction and the balance amount was offered to tax by the joint owners. It could thus be seen that substantial portion of net consideration so received was re-invested within stipulated period from the date of transfer of capital asset. Certain amount was retained for construction of property whereas the remaining portion was offered to tax. 9. It could also be seen that the assessee entered into construction agreement on 05.03.2012 wherein the contractor was required to complete the construction within a period of 12 months. Considering the
7 ITA Nos.495 to 498/Chny/2020 same, the construction would have been completed well within the stipulated time. However, the delay in construction is nowhere attributed to the assessee and the assessee could not be penalized for delay on the part of the contractor to complete the construction particularly considering the fact that the provisions of Sec.54F are beneficial provisions to promote investment in housing sector and encourage investments in acquisition of residential property. Once the assessee is found eligible to claim the same, the benefit should be granted to full extent as held in various judicial pronouncements. Therefore, the deduction could not be denied simply because there was delay on the part of contractor to complete the construction. The decision of Hon’ble High Court of Madras in CIT vs Sardarmal Kothari and Shanthilal Kothari (302 ITR 286) supports the case of the assessee. 10. The issue of depositing the unappropriated capital gains in capital gain account scheme before date of filing of return u/s 139(1) has been dealt with by Ld. CIT(A) in correct perspective and we concur with the adjudication made therein. The Ld. CIT(A) has relied on the binding judicial precedent of Chennai Tribunal in ACIT vs T.S. Arunachalam, (ITA No.2455/Mds/2017 dated 30.01.2018) wherein it was held that it was enough if the assessee had invested substantial portion of net consideration in new asset within the stipulated period. No contrary decision has been placed on record. The revenue has referred to the decision of Hon’ble High Court of Madras in CIT vs. Venkata Dilip Kumar Kartha-HUF (WA No.414 of 2020 and CMP No.6477 of 2020 dated 15.10.2020). Upon study we find that this question of law has been left open since writ appeal has been held to be infructuous. Further, from the factual matrix, it could be seen that the assessee has
8 ITA Nos.495 to 498/Chny/2020 received the sale consideration in installments up-to financial year 2013- 14 and entire funds were not even otherwise available for the assessee to deposit the same into capital account scheme during this year. The assessee is only claiming part exemption. The same is evident from payment and investment schedule as extracted by us in preceding para- 4 of this order. 11. Therefore, considering the facts and circumstances of the case, we see no reason to interfere in the impugned order. Concurring with adjudication made therein, we dismiss all the appeals of the revenue. 12. All the appeals stand dismissed. Order pronounced on 11th January, 2023.
Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा12 /VICE PRESIDENT लेखासद: /ACCOUNTANT MEMBER
चे+ई/ Chennai; िदनांक/ Dated : 11-01-2023 DS आदेशकीWितिलिपअ7ेिषत/Copy of the Order forwarded to : अपीलाथ�/Appellant2. ��थ�/Respondent आयकरआयु4 (अपील)/CIT(A)4. 1. 3. आयकरआयु4/CIT 5. िवभागीय�ितिनिध/DR6. गाड9फाईल/GF