MRS. CHANDA RUNWAL,MUMBAI vs. ACIT CENTRAL CIRCLE 4(1), MUMBAI, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKARAssessment Year: 2018-19
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 17.10.2024, impugned herein, passed by the Ld.
Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y.
2018-19. Mrs. Chanda Runwal
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2. In the instant case, the Assessee sold a residential property at DEONAR on dated 13.12.2017 on a total consideration of Rs.5,56,00,000/- and earned the capital gain of Rs.3,30,86,396/- and claimed the same as exempt within the provision of section 54
of the Act, for the purchase of a residential house property at Runwal Greens numbered as T-6/1402. 3. Further, the Assessee also transferred her capital asset in the form of office premises at Santacruz on dated 07.07.2017 on a total sale consideration of Rs.4,50,00,000/- with a indexed cost of acquisition at Rs.1,47,82,609/- and consequently earned the capital gain of Rs.2,99,47,240/- and out of which claimed the amount of Rs.2,67,36,488/- qua purchase price of residential house at Runwal
Greens numbered as T-6/1502, as exempt under the provisions of section 54F of the Act.
Though the Assessing Officer (AO) allowed the exemption claimed by the Assessee to the tune of Rs.3,30,86,397/- u/s 54 of the Act for the purchase of residential house property numbered as T-6/1402 (Runwal Greens), however, denied the exemption claimed by the Assessee u/s 54F of the Act, for the residential property i.e. T-1502(Runwal Greens), mainly on the following reasons:
“That all the provisions i.e. a(i), a(ii) & a(iii) of section 54 are distinguished in nature as they are separated by the word “or”
which means that if the Assessee fails to satisfy either of these clauses, then the Assessee is not eligible for the exemption within the provision of section 54 of the Act. In the instant case of the Assessee, the Assessee has failed to satisfy the clause a(ii) of the proviso to section 54 of the Act, therefore she is not eligible to claim the exemption within the provision of section 54F of the Act.
As the Assessee has purchased residential house at Runwal
Greens numbered as T-6/1402 on dated 13.12.2017, therefore within the clause a(ii) of the proviso to sub section (1) of section 54 of the Act, the Assessee is not eligible for the deduction
Mrs. Chanda Runwal
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claimed u/s 54F of the Act. As the Assessee has purchased another residential house i.e. T-6/1402 within a period of one year after the date of transfer of original asset on 07.07.2017, hence the claim of exemption of the Assessee within the provision of section 54 of the Act of Rs.2,67,36,488/- is denied”.
1 Further, the AO also denied the amount of Rs.50,81,123/- being claimed by the Assessee as indexed cost of improvement mainly on the following reason:
“That the Assessee could not submit any documentary evidence in support of its claim of cost of improvement i.e.
claim of expenditure incurred for the additions and alterations made to the capital asset. Again the Assessee submitted only the copy of invoices of payment made to securities, which cannot be accepted as expenses incurred on additions and alterations made to the asset”.
The Assessee, being aggrieved, challenged the said additions made by the AO, on account of disallowances of claims made u/s 54F of the act and indexed cost of improvement i.e. claim of expenditure incurred for the additions and alterations made to the capital asset/residential property at Deonar, by filing first appeal before the Ld. Commissioner, however of no avail, as the Ld. Commissioner affirmed the aforesaid additions/disallowances by dismissing the appeal of the Assessee and therefore the Assessee being aggrieved is in appeal before this Court.
The Assessee has claimed that there is no bar to claim the exemption u/s 54 & section 54F of the Act simultaneously. Further, the condition prescribed in the provision of section 54F of the Act (i) restricts owning of more than one residential house other than the new asset on the date of transfer of the original asset and therefore Mrs. Chanda Runwal
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jumping to clause (ii) which prescribes “that if the Assessee purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset, then the provisions contained in section 54F of the Act would not apply”, is not a correct interpretation. The Assessee further submitted that even otherwise the Assessee had purchased two flats i.e. T-6/1402 & T-6/1502 down and above as “duplex house”
and there is no bar to purchase two units in the same building consisting one, at a time. The Assessee in support of its claim also relied on various judgments passed by various courts.
1 With regard to the claim of cost of improvement/claim of expenditure incurred for the additions and alterations made to the capital asset, the Assessee has submitted that the Assessee had purchased the property at Deonar on dated 01-04-2001 i.e. before more than 17 years from the date of sale made on dated 13.12.2017 on a consideration of Rs.5,56,00,000/-, on which the Assessee has claimed the indexed cost of improvement of Rs.50,81,123/- u/s 55 of the Act. The Assessee successively spent the said amount in the successive years i.e. more than 10 years from the date of the purchase of the property and duly submitted the relevant documents during the assessment proceedings. However, still the AO doubted the said claim of expenditure, which is even otherwise having no effects on the claim of exemption u/s 54 of the Act, as the AO has allowed the complete capital gain, as claimed by the Assessee.
On the contrary, the Ld. D.R. vehemently supported the orders passed by the authorities below. The Ld. D.R. further claimed that the Authorities below have correctly applied the law as applicable to the peculiar facts and circumstances of the case and therefore no fault can be faulted with the orders passed by the Mrs. Chanda Runwal
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authorities below. The Ld. D.R. also argued that Hon’ble Bombay
Kumar Suri [2013] 29 taxmann.com 231 (Bombay) has decided the issue that deduction u/s 54 & 54F of the Act can be claimed by the Assessee in case of conjoint residential property, only in a case when two flats (residential property) were joined before the Assessee became owner of said property. In the instant case, it is clear from the purchase agreements for the two flats in Runwal
Greens, being T-6/1402 and T-6/1502 that the same were not joined on or before the date of acquisition by the Assessee i.e. on or before 13.12.2017, the date on which the Assessee became owner of said properties. The above said two flats were separate units as per the purchase deeds and the Assessee has not been able to show the plans passed by the Municipal Corporation of Greater Bombay, when these facts were joined before 13.12.2017. The Ld. D.R. also refuted the claim of the Assessee raised u/s 55 of the Act, with regard to the cost of improvement by submitting that the Assessee has not substantiated her claim qua cost of improvement. Even otherwise, the exemption u/s 54 of the Act has been allowed by the AO to the tune of Rs.3,30,86,397/- in total as claimed by the Assessee and therefore disallowance on account of improvement of indexed cost to the tune of Rs.50,81,123/- having no effect on the claim of exemption u/s 54 of the Act, which infact has already been allowed.
We have heard the parties and perused the material available on record. Coming to the denial of claim u/s 54 of the Act, we observe that the AO by taking refuge of the clause a(ii) to proviso to section 54F(1) of the Act and mainly on the reason that the Assessee during the assessment year under consideration and within a period of one year, after the date of transfer of original Mrs. Chanda Runwal
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asset on 07.07.2017, has also purchased a residential house i.e. T-
6/1402 (Runwal Greens) by claiming exemption of capital gain of Rs.3,30,86,397/- earned on sale of house property at Deonar on dated 13.12.2017 for a total sale consideration of Rs.5,56,00,000/- and therefore the Assessee is not entitled for the claim of exemption within the provision of section 54F of the Act to the tune of Rs.2,67,36,488/-, which was claimed as long term capital gain being exempt. For brevity and ready reference, the provisions of section 54F of the Act are reproduced herein below:
“54F. (1) Subject to the provisions of sub-section (4), 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, one residential house in India (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 Mrs. Chanda Runwal
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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":
59[Provided further that where the cost of new asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of this sub-section.]
Explanation.—For the purposes of this section,—
"net consideration", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.
(2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed.
(3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such new asset is transferred.
(4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub- section (1), the amount, if any, already utilised by the assessee for the Mrs. Chanda Runwal
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purchase or construction of the new asset together with the amount so deposited shall 60[, subject to the second proviso to sub-section (1)] be deemed to be the cost of the new asset :
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—
(i) the amount by which—
(a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds
(b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid:
60[Provided further that the net consideration in excess of ten crore rupees shall not be taken into account for the purposes of this sub- section.]
Explanation. —[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]”
1 From the clause a(i) it appears, if the Assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset, then the Assessee shall not be entitled for the claim of exemption u/s 54 of the Act. As per clause a(ii), if the Assessee purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset, then also the Assessee is not entitled to claim the exemption u/s 54F of the Act.
2 The Assessee has claimed that she had purchased two units i.e. 1402 & 1502 on a total consideration amount of Rs.7,60,00,000/- {Rs. 380,00,000/- each} for both the flats being duplex on the very same date i.e. 08.12.2017 and paid the amount Mrs. Chanda Runwal
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of Rs.5,00,00,000/- (Rs. Five Crores) vide HDFC bank cheque no.
745086 dated 08-12-2017 towards earnest money, as it appears from the allotment letter dated 08-12-2017 and receipt (bill of supply) dated 11-12-2017 and agreed to pay balance amount of Rs.
2,60,00,000/- and subsequently got executed the agreements for sale dated 12.12.2017, which were subsequently got registered on dated 13.12.2017 from the office of Sub