Commissioner The Commissioner Of Income Tax-Ii vs. Ritesh Kumar Kumat

1 ITA N

o.63/2012

20.01.2014 Shri RL Jain, learned Senior Counsel with Ms. Veena Mandlik, learned counsel for the appellant. Heard. This appeal under section 260-A of the Income Tax Act has been filed by the Commissioner of Income Tax against the respondent aggrieved of the judgment delivered by the Income Tax Tribunal, Indore Bench dated 17.02.2012 in ITA No.300/Ind/2011 for the assessment year 2008-09. the basic facts necessary for the purpose of understanding the controversy involved in this case are:- 1. The brief facts of the case are that the assessee filed his return of income on 29.09.2008 declaring total income of Rs.5,08,150/-. The assessee derives income from House Property, Business or Profession and Income from Capital Gain. The case was selected for Scrutiny. At the time of Scrutiny the lr. AO observed that the assessee sold a plot in Indore and purchased a flat in Banglore. The Assessing Officer made addition as assessee could not fulfill the conditions laid down in Section 54F. 2. The assessee during the year under 2 consideration sold plot No.124, Shanti Nagar, Indore for Rs.73,36,000/- on 11.01.2008. After deducting the cost of acquisition the capital gain worked out to Rs.69,46,182/-. Out of this capital gain, assessee has claimed exemption under section 54F at Rs.65,00,000/- for purchase of flat in Mascot Residence, Banglore. 3. As per provision of section 54F the assessee should have purchased the residential house within two years from the date of sale of property i.e. by 10.01.2010. From the purchase deed of the flat at Mascot Residency, Banglore, it was noticed that same was executed on 10.06.2010. Therefore, the purchase of new asset was beyond the prescribed limit of two years. 2. The learned Tribunal has taken note all these facts including the law applicable. Relevant observation made by the Tribunal are incorporated herein for the sake of reference:- 3. We have considered the rival submissions and perused the material available on file. Brief facts of the case are that the assessee declared income of Rs.5,08,150/- in its return filed on 29.09.2008. The assessee sold plot No.124, 3 Shanti Niketan, Indore, for Rs.73,36,000/-. The assessee after deducting the cost of acquisition claimed the capital gains at Rs.69,46,182/- out of which the assessee claimed exemption under section 54 on account of purchase of flat in Mascot Residency, Bangalore for Rs.65 lacs. The assessee sold this plot on 11.1.2008. As per the Assessing Officer and in view of provisions of section 54F of the Act, the assessee was expected to purchase the residential house within two years from the date of sale of the property by 10.01.2010. It was further pointed out by him that the flat in Bangalore was purchased on 10.06.2010, therefore, the new asset was purchased beyond the prescribed limit of two years whereas the stand of the assessee is that the construction of the residential building was completed by 29.02.2008 and possession of the flat was also taken on 26.06.2008. It was claimed that allotment-cum-possession letter of the flat was issued by the developer on 26.6.2008 when the cheques were handed over because against the total cost of flat at Rs.65 lacs, a sum of Rs.60 lacs was paid within 8 months of the sale consideration. On appeal, the learned Commissioner of the Income Tax (Appeals) granted relief to the assessee which is under challenged before this Tribunal. The relevant finding 4 contained in the impugned order is reproduced hereunder:- 4.3 Now on the basis of undisputed facts on record, it becomes clear that the appellant well within two years took defined and effective steps for acquisition of flat for which purchase price was agreed at Rs.65 lacs and paid more than 90% of the purchase price at Rs.60 lacs on 06.09.2008 i.e. within 8 months from the date of sale of old asset, that was incidentally also before due date of filing of return of income applicable in the case of the appellant. Further, still, definite and convincing material has been brought on record to the effect that the building in which the flat was acquired by the appellant was complete and made habitable well before December, 2009, whereby 14 flats were actually sold by the builder through Registered Deeds. The appellant further filed certificate from Govt. agency i.e. Bangalore Municipal Corporation in respect of the said flat and has also given electricity consumption bills for the period from January, 2008 to May 2008. Thus merely because the sale agreement was registered beyond the period of two years it would be totally unjust and uncalled for 5 to deny exemption under section 54 F of the Act to the appellant for the entire amount of Rs.65 lacs. The AO has observed that MP High Court judgment (supra) is not applicable in the case of the appellant but in the facts and circumstances of the case, such judgment is found to be squarely applicable to the case of the appellant wherein, the Hon'ble MP High Court has held as under:- “Held that, the Central Board of Direct Taxes had issued circular No.471 dated October, 15, 1986, stating that cases of allotment of flats under the self financing scheme of the Delhi Development Authority shall be treated as cases of construction for the purpose of capital gains. Section 54 of the Act says that within two years of sale the assessee should have constructed the house but it does not mean that the construction should necessarily be complete within two years. If substantial investment was made in the construction of the house, it amounted to sufficient steps being taken, thus satisfying the requirements of section 54, the Tribunal was not justified in denying exemption 6 under section 54 to the assessee. 4.4. It may be noted that even if possession was not taken on 26.06.2008 and encashment of cheques was made on 06.09.2008, even then this fact cannot be denied that the appellant paid Rs.60 lacks and was allotted a flat which within 8 months of sale of “old asset”. Hence the total exemption cannot be denied in view of authoritative judgment from Hon MP High Court as aforesaid. 4.5. However, since on admitted facts the balance amount of Rs.5 lacks was paid by the appellant after that expiry of period of two years from the sale of 'old asset', the AO is directed to restrict the claim of exemption to the extent of Rs.60 lacs and the denial of exemption under section 54 of the Act is restricted to Rs.5 lacs only.” 3. After taken note all these facts and also provision contained under section 54 F of the Income Tax Act, made the following observation:- 4. If the conclusion drawn in the impugned order, facts narrated before us and the provisions of the Act are kept in juxtaposition, we find that the assessee made substantial investment for acquisition of flat at Bangalore the total cost of which 7 was rs.65 lacs and the assessee paid Rs.60 lacs on 6.9.2008 within 8 months from the date of sale of the old asset before the due date of filing of return of income. There is an uncontroverted finding in the impugned order that the new asset (Flat at Bangalore) was made available well before December, 2009 which was sold through a registered sale deed. The assessee also furnished a certificate from the Bangalore Municipal Corporation evidencing electric connection bills for the period from January, 2008 to May, 2008. In view of these facts, we are not in agreement with the conclusion drawn by the learned Assessing Officer that the sale agreement was registered beyond the period of two years, therefore, the assessee is not entitled to exemption under section 54F of the Act. So far as the reliance on the decision in the case of Shashi Sharma vs. CIT 224 ITR 106 (MP) is concerned, we are of the considered opinion that it favours the assessee. We are usefully reproducing hereunder the relevant portion from the order of the Hon'ble jurisdictional High Court:- “Held, that the Central Board of Direct Taxes had issued Circular NO.471 dated October 15, 1986, 8 stating that cases of allotment of flats under the self-financing scheme of the Delhi Development Authority shall be treated as cases of construction for the purpose of capital gains. Section 54 of the Act says that within two years of sale the sass should have constructed the house but it does not mean that the construction should necessarily be complete within two years. If substantial investment was made in the construction of the house, it amounted to sufficient steps being taken,

thus

satisfying

the requirements of section 54. The Tribunal was not justified in denying exemption under section 54 to the assessee. 4.1. If the provisions of the Act are analysed for the purpose of attracting the provisions of section 54 of the Act, it is not necessary that the assessee should become the owner of the property so purchased. The word 'purchase' occurring in section 54(1) has to be given its common meaning viz. Buy for a price or equivalent to a price by payment in kind or adjustment towards a debt or for other monetary consideration. Therefore, for the purpose of applicability of section 54, 9 registration of the document is not imperative. The ratio laid down in Balraj vs. CIT; 254 ITR 22 (Del), CIT v. Dr. Laxmichand Narpal, Nagda; 211 ITR 804 (Bom) and CIT v. Mrs. Shahjada Begam; 173 ITR 397 supports the case of the assessee. To claim exemption under section 54, the construction /acquisition of the new asset should be within two years after transfer/sale of the existing house. Hon'ble Allahabad High Court even went to step further by holding that exemption of capital gains could not be refused to the assessee simply on the ground that the construction of the new house had began before the sale of the old house (CIT v. HK Kapoor – 150 CTR (All) 128. In the present appeal, substantial investment was made by the assessee out of the sale proceeds of the old asset (approximately 90%), therefore, the claimed exemption cannot be denied to the assessee, consequently we find no infirmity in the stand of the learned Commissioner of Income Tax (Appeals) and confirm the same. Finally, the appeal of the Revenue stands dismissed. 10 4. We find no infirmity in the aforesaid judgment of the Tribunal and we also do not find that any substantial question of law has been raised before us, which requires interference. Accordingly, the appeal stands dismissed. C.c. as per rules. (Shantanu Kemkar) (M.C. Garg) Judge Judge Kratika/