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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI SAKTIJIT DEY & PRADIP KUMAR KEDIA
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.
Briefly, the facts are, the assessee is a resident individual. On 24.02.2013, 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 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.
Learned authorized representative of the assessee submitted, as against the 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 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. f) Hasmukh N Gala, Mumbai Vs. ITO, Mumbai (ITA No.7512/Mum/2013); & g) CIT vs. R Bajaj (Dr) (2014) Taxman 305 (Kar HC).
Strongly relying upon the observations of the Assessing Officer and 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.
We have considered rival submissions in the light of decisions relied upon 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:
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
Thus, by the end of three years from the date of transfer of the original 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 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.
In the result, appeal is allowed.