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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Chandra Poojari, AM & Shri George George K, JM
Per George George K, JM :
This appeal at the instance of the assessee is directed against CIT(A)’s order dated 02.07.2019. The relevant assessment year is 2013-2014.
The grounds raised read as follow:- “1. The Assessment order is wrong in law and on facts so far as prejudicial to the interest of the appellant.
The Appellant had not concealed any particulars of income.
The Appellant has purchased a residential house, and claimed deduction under the relevant section of the I.T.Act. The Act does not specifically states that for claiming such exemption, the entire investment should
ITA No.511/Coch/2019. 2 Smt.Mercy George, L/H of Late Sri.George Abraham be from the capital gain or no other funds be used for purchase of new asset. Likewise the Assessing Officer cannot deny the eligible investment u/s 54 made within one year prior to the date of transfer of property.
On the basis of above, and other grounds and arguments that may be presented at the time of hearing, I request that the order of the Assessing Officer may be cancelled.”
Brief facts of the case are as follow:- The assessee during the relevant assessment year has sold house wherein he had 50% share, on 12.04.2012 for a total consideration of Rs.2,60,00,000. The assessee had purchased residential property for a sum of Rs.85,30,475 on 15.09.2011. In the return of income filed for the assessment year 2013-2014, the assessee had claimed exemption u/s 54 of the I.T.Act for the house purchased on 15.09.2011. The Assessing Officer disallowed the claim of exemption u/s 54 of the I.T.Act stating that the purchase was made using other funds and sale proceeds were not used for the purchase of the new asset.
Aggrieved by the assessment order denying the claim of exemption u/s 54 of the I.T.Act, the assessee preferred an appeal to the first appellate authority. The CIT(A) dismissed the appeal of the assessee. The CIT(A) relied on the judgment of the Hon’ble Kerala High Court in the case of V.R.Desai, 2011 Tax Pub 1074.
Aggrieved by the order of the CIT(A), the assessee has preferred this appeal before the Tribunal. The learned AR submitted that the issue in question is squarely covered in favour of the assessee by the judgment of the Hon’ble Kerala High Court in the case of ITO v. K.C.Gopalan [(1999) 107 Taxman
ITA No.511/Coch/2019. 3 Smt.Mercy George, L/H of Late Sri.George Abraham 591 (Ker.)]. The learned Departmental Representative, on the other hand, strongly supported the orders passed by the Income- tax Authorities.
We have heard the rival submissions and perused the material on record. Section 54 of the I.T.Act does not prohibit the assessee to raise funds or borrow money for investment in the house property. The section 54 of the I.T.Act does not specifically state that claiming exemption, the entire investment should be from capital gains or no other funds be used for purchase of new asset. The only condition imposed u/s 54 is that investment should be made prior to one year or within two years of transfer of the property from which capital gain is earned. The judgment relied on by the CIT(A) is not applicable to the facts of this case. In the case considered by the Hon’ble Kerala High Court in the case of V.R.Desai (supra), the assessee did not deposit the sale proceeds of the house, on which capital gains has arisen, within the time limit prescribed (deposit in the specified account), hence, it was held by the Hon’ble High Court that assessee was not entitled to the claim of deduction u/s 54F of the I.T.Act in view of the specific provisions of section 54F(4) of the I.T.Act.
6.1 The issue that arises for our consideration was decided in favour of the assessee by the judgment of the Hon’ble Kerala High Court in the case of ITO v. K.C.Gopalan (supra). The Hon’ble High Court had observed that the assessee has to construct / purchase a new house property for his residence in order to get the benefit of section 54 of the I.T.Act. The relevant finding of the Hon’ble Kerala High Court reads as follow:-
ITA No.511/Coch/2019. 4 Smt.Mercy George, L/H of Late Sri.George Abraham
“The assessee has to construct or purchase a house property for his own residence in order to get the benefit of section 54. The wording of the section itself would make it clear that the law does not insist that the sale consideration obtained by the assessee itself should be utilised for the purchase of house property. The main part of section 54 provides that the assessee has to purchase a house property for the purpose of his own residence within a period of one year before or after the date on which the transfer of his property took place or he should have constructed a house property within a period of two years after the date of transfer. Clauses (i) and (ii) of section 54 would also make it clear that no provision is made by the statute that the assessee should utilise the amount which he obtained by way of sale consideration for the purpose of meeting the cost of the new asset.”
6.2 In view of the above judgment of the Hon’ble Kerala High Court in the case of ITO v. K.C.Gopalan (supra), which is identical to the facts of the instant case, we hold that the assessee is entitled to the claim of deduction u/s 54 of the I.T.Act. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed. Order pronounced on this 05th day of November, 2019.
Sd/- Sd/- (Chandra Poojari) (George George K.) ACCOUNTANT MEMBER JUDICIAL MEMBER
Cochin ; Dated : 05th November, 2019. Devadas G*
Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The Pr.CIT, Kottayam. 4. The CIT(A), Kottayam. 5. The DR, ITAT, Cochin 6. Guard file.`
BY ORDER,
(Asstt. Registrar) ITAT, Cochin