AJAI MITTAL,NEW DELHI vs. ACIT, CIRCLE- 30(1), NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘A’ NEW DELHI

BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER

ITA No.6998/Del/2018 Assessment Year: 2014-15 Ajay Mittal, Vs. ACIT, Circle 30(1), F-33, Tara Apartments, New Delhi. Alaknanda, New Delhi-1100 19

PAN :AAKPM9813H (Appellant) (Respondent)

Appellant by Shri Arun Khanna, CA Respondent by Mrs. Suman Malik, Sr. DR

Date of hearing 31.03.2022 Date of pronouncement 19.04.2022

ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER: Captioned appeal by the assessee arises out of order dated 21.08.2018 of

learned Commissioner of Income-Tax(Appeals)-10, New Delhi for the assessment year 2014-15. 2. The solitary issue arising in the appeal relates to disallowance of

assessee’s claim of deduction under Section 54 of the Income-Tax Act, 1961.

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assessee sold a residential house for a total consideration of Rs.3,25,00,000. In

the computation of income filed along with the return of income for the

impugned assessment year, the assessee computed net long term capital gain of

Rs.1,86,58,096 after claiming indexation benefit under Section 48 of the Act.

However, assessee claimed deduction under Section 54 of the Act in respect of

long term capital gain by stating that he has invested a sum of Rs.1,93,80,772

towards constructing a new house. After examining the details called for,

Assessing Officer observed, as per Section 54 of the Act, the assessee is

required to invest the capital gain within a period of one year before or two years

after the date of transfer of old asset towards purchase of new residential house

or if the assessee within a period of three years after the date of transfer

constructed one residential house, will be eligible to claim deduction under

Section 54 of the Act. Assessing Officer observed, the date of transfer of the

original asset was 22.04.2013. Therefore, for claiming deduction under Section

54 of the Act, the assessee should have invested in purchase of the residential

house either after 22.04.2012 or before 20.04.2015. Whereas, as per the

apartment buyer’s agreement, assessee had booked the new asset on 15.04.2012

which is beyond the period prescribed under Section 54 of the Act. Further, he

observed, till the end of March, 2016, only 34% work of the housing project

where the assessee has invested was complete. Thus, he observed, the condition

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of construction of residential house within a period of three years after the date

of transfer of original asset was also not fulfilled. Thus, holding that the

conditions of section 54(1) of the Act were not fulfilled, the Assessing Officer

disallowed assessee’s claim of deduction under Section 54 of the Act. Though,

the assessee contested the aforesaid disallowance before learned Commissioner

(Appeals), however, he was unsuccessful.

long term capital gain of Rs.1,86,58,096 earned by the assessee on sale of

residential house on 24.02.2013, assessee invested a sum of Rs.1,93,80,772

towards purchase of new flat in construction linked payment plan with M3M,

Gurgaon up to 31.03.2014 i.e. by the end of the previous year relevnt to the

assessment year under dispute. He submitted, by the end of three years from the

date of transfer of original asset, assessee had invested a total sum of

Rs.4,23,66,845 towards purchase of new house. As regards the observation of

the Assessing Officer that assessee has invested in the new asset before one year

of date of transfer of original asset, learned counsel submitted, though, the

initial booking was done for a new property on 07.10.2011 of the same builder,

since, there was delay, the booking was cancelled and requested to be

transferred to new flat on 15.04.2012 and the builder confirmed it on

02.05.2012. Further, he submitted, the possession of the new asset was not

delivered to the assessee even after three years from the date of transfer of the

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original asset due to delay on the part of the builder in completing construction.

He submitted, though, the assessee had invested the capital gain in time, it did

not get possession of the property due to the fault of the builder in completing

construction and ultimately he got offer of possession from the builder on

01.08.2017 and physical possession was handed over to the assessee on

20.01.2022. Learned authorized representative submitted, investment made by

the assessee in construction linked payment plan tantamounts to construction

made by the assessee himself, hence, assessee would be eligible to claim

deduction under Section 54 of the Act. He submitted, only because the builder

took considerably long time to complete the construction, over which assessee

had no control, claim of deduction under Section 54 of the Act should not have

been denied. In this context, learned authorized representative drew our attention

to CBDT Circular No. 471 dated 15.10.1986 and 16.12.1993. Further, in support

of his contention, the learned authorized representative relied upon the following

decisions:

a) CIT vs. Kuldeep Singh (Delhi HC) (2014) 49 taxman.com 167;

b) CIT vs. Smt. Bharati C. Kothari (Cal. HC) (2000);

c) CIT vs. Bharti Mishra (2014) 222 Taxman.com s0 (Del.)

d) CIT vs. BS Shantha Kumri, IT Appeal No. 165 of 2014 dated 13/07/2015 (HC Kar.);

e) Farida A Dungarpurwala vs. ITO (2014) 52 taxmann.com 527 (Mum) trib.

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f) Hasmukh N Gala, Mumbai Vs. ITO, Mumbai (ITA No.7512/Mum/2013); &

g) CIT vs. R Bajaj (Dr) (2014) Taxman 305 (Kar HC).

learned Commissioner(Appeals), learned Departmental Representative

submitted, as per section 54(1) of the Act, the assessee is required to invest the

capital gain within one year before or three years after the date of transfer of the

original asset. He submitted, as per the factual finding of the Assessing Officer,

neither of the conditions of section 54 of the Act were fulfilled. Thus, he

submitted, assessee’s claim of deduction under Section 54 of the Act was

correctly disallowed.

and perused the material available on record. As far as the factual aspect of the

issue is concerned, there is no dispute that assessee has derived long term capital

gain of Rs.1,86,58,096. There is also no dispute that up to the end of 31.03.2014,

assessee invested Rs.1,93,80,772, more than the capital gain, towards

investment in a new residential house. The only reason for which assessee’s

claim of deduction was denied by the departmental authorities is, the assessee

has not invested the capital gain in the new asset within the period prescribed

under Section 54 of the Act. We are unable to agree with the conclusions of the

departmental authorities for the following reasons:

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6.1 As per the condition of section 54(1) of the Act for claiming deduction,

the assessee has to invest in purchase of new asset within one year before the

date of transfer of original asset or must have purchased new asset within a

period of two years after the date of transfer or must have constructed the new

house within a period of three years, after the date of transfer. In the facts of the

present appeal, undisputedly, the assessee had entered into an apartment buyer’s

agreement under construction linked payment plan. As per the conditions of the

agreement, the assessee need not pay the entire cost of the new residential house

at a go but has to pay in installments depending upon the stage of construction.

The facts on record reveal that in terms with construction linked payment plan,

the assessee has made phase wise payment as under:

Up to 31.03.2014 Rs.1,93,80,772 Up to 31.04.2020 Rs.2,03,63,267 Up to 21.04.2016 Rs.2,29,86,073

asset, the assessee has paid an amount of Rs.4,23,66,845, which is much more

than the capital gain derived by the assessee. Merely because, assessee did not

get physical possession of the property by the end of three years from the date of

transfer of original asset, assessee’s claim of deduction under Section 54 of the

Act cannot be denied. No doubt, the assessee has made the investment in terms

of section 54(1) of the Act and the delay in getting the possession of the

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property is beyond the control of the assessee, as, it entirely depends upon the

progress of construction by the builder. In the facts of the present appeal, there is

no dispute that there was considerable delay by the builder in completing the

project and the physical possession of the property was delivered to the assessee

only in January 2022. However, the assessee cannot be put to blame for the

laches of the builder. It is fairly well settled that sections 54 and 54F of the Act

are beneficial provisions, hence, have to be interpreted liberally. If the assessee

complies with the basic condition and makes investment accordingly, the benefit

of the provision cannot be denied only because the builder did not complete the

project in time, thereby, depriving the assessee of getting physical possession of

the property. While coming to such conclusion, we are supported by various

judicial precedents, including, the decision of the Hon'ble jurisdictional High

Court in the case of CIT vs. Kuldeep Singh (supra) and CIT Vs. Bharti Mishra

(supra). Thus, applying the ratio laid down in the judicial precedents cited

before us, we hold that the assessee is eligible to claim deduction under Section

54 of the Act. Accordingly, the addition made on account of long term capital

gain is hereby deleted. Grounds are allowed.

Order pronounced in the open court on 19th April, 2022. Sd/- Sd/- ( PRADIP KUMAR KEDIA ) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 19th April, 2022. Mohan Lal

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