THE PR. COMMISSIONER OF INCOME TAX -9 vs. PUNIT BERIWALA

$~10 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 401/2019

THE PR. COMMISSIONER OF INCOME TAX -9 ..... Appellant Through: Mr Abhishek Maratha, Sr. Standing Counsel.

versus

PUNIT BERIWALA

..... Respondent Through: Mr T.M. Shivakumar, Ms Priyanka Singh & Mr S.V. Retaria, Advs.

CORAM:

HON'BLE MR JUSTICE RAJIV SHAKDHER

HON'BLE MS JUSTICE TARA VITASTA GANJU

O R D E R %

28.11.2022 [Physical Hearing/Hybrid Hearing (as per request)] 1. This appeal is directed against order dated 16.11.2018 passed by the Income Tax Appellate Tribunal [in short, “Tribunal”]. 2. To adjudicate the appeal, the following broad facts need to be noted. 2.1. The assessee had filed its return on 30.07.2011 declaring taxable income amounting to Rs 75,90,654/-. The assessing officer, thereafter, issued a notice under Section 143(2) of the Income Tax Act, 1961 [in short, “the Act”] whereupon assessment proceedings were carried out and an assessment order was framed under Section 143(3) of the Act on 28.03.2014; consequentially the taxable income was pegged at Rs 7,03,73,194/-. 3. In the assessment order, insofar as the present case is concerned, it was noticed that the assessee had declared long-term capital gain amounting ITA 401/2019

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to Rs. 6,14,32,959/- on account of sale of shares, against which exemption under proviso a(i) of Section 54F(1) of the Act was claimed to the extent of Rs. 6,12,10,060/-, on the ground that the investment of the aforementioned amount has been made in a residential house. 3.1. The assessing officer denied the exemption claimed by the respondent/assessee and, accordingly, added the said amount to the taxable income of the respondent/assessee. 4. The respondent/assessee, being aggrieved, preferred an appeal to the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”]. 4.1. The CIT(A) vide order dated 23.03.2015 allowed the appeal preferred by the respondent/assessee. 5. It is against the said order of the CIT(A) that the appellant/revenue preferred an appeal to the Tribunal. Via the impugned order, i.e., order dated 16.11.2018, the Tribunal sustained the order of the CIT(A). 6. It is in these circumstances that the appellant/revenue has preferred the instant appeal. 7. According to us, what has emerged, insofar as findings of the fact are concerned, is that the assessee had two properties i.e., a flat at Sarvapriya Vihar and a parcel of land located in Madhya Pradesh. 8. Besides this, what has also emerged is that the assessee had paid Rs 30 lakhs as advance for the purchase of a commercial property. 9. The finding of fact returned by the CIT(A), which has been affirmed by the Tribunal, reads as follows: ‘2.4 In the assessment order, the A.O. has observed that "the Assessee has admitted that he has not earned any agricultural income during the year under consideration. In view of this ITA 401/2019

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admission of the Assessee, it is evident that the property at Madhya Pradesh is not an agricultural property". The appellant has stated that he did not have any agricultural income from this property because it was barren land, and that there was no construction on this property of any residential unit. In the assessment order, the A.O. has not brought any material on record to controvert the claim of the appellant. Regarding advance against property purchased, the appellant has stated that this advance has been given towards purchase of commercial flats. The A.O. has not been able to controvert the appellant's contentions and has failed to show that the above mentioned assets are in the nature of residential houses. Considering these facts, the rejection of the appellant's claim for deduction u/s 54F is not sustainable in law. The addition is therefore, deleted. The Grounds are accordingly allowed.”

9.1. Therefore, according to, both, the CIT(A) and the Tribunal, the parcel of land located in Madhya Pradesh could not be considered as a “residential house” within the meaning of proviso a(i) of sub-section (1) of Section 54F of the Act, as it was a barren property 9.2. Likewise, as regards the advance that the respondent/assessee had paid amounting to Rs 30 lakhs, the finding of fact returned by the CIT(A), which has received the imprimatur of the Tribunal is that no evidence was placed on record that the respondent/assessee was in possession of any residential house. 10. For the sake of convenience, the relevant portion of Section 54F, as it stood at the relevant point in time, is extracted hereafter:

“Section 54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.— (1) Subject to the provisions of sub-section (4),

ITA 401/2019

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where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head ―Income from house property.” [Emphasis is ours] 11. According to us, given the findings of fact returned by the CIT(A), ITA 401/2019

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which have been confirmed by the Tribunal, the provisions of proviso a(i) of sub-section (1) of Section 54F of the Act would not apply in the respondent/assessee’s case, as clearly, apart from the Sarvapriya flat, the respondent/assessee did not own a residential house. 11.1. In other words, the exemption claimed by the respondent/assessee was wrongly denied by the assessing officer. 12. In our opinion, no substantial question of law arises for our consideration in the instant appeal. 13. The appeal preferred by the appellant/revenue will have to be rejected. 13.1. It is ordered accordingly. 14. The case papers shall stand consigned to the record.

RAJIV SHAKDHER, J

TARA VITASTA GANJU, J

NOVEMBER 28, 2022 / r Click here to check corrigendum, if any

ITA 401/2019

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