BHASKAR RAGHUNATH SHELKE,,SHIRDI vs. INCOME TAX OFFICER,, AHMEDNAGAR

PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (A) – 2, Pune, dated 13.10.2016 for A.Y. 2013-14.

Assessee is an individual and is stated to be in the business of running hotel. Assessee filed his return of income for A.Y. 2013-14 on 31.01.2014 declaring total income of Rs.6,68,190/- and

agricultural income of Rs.4,01,193/-. The case was selected for

scrutiny and thereafter assessment was framed u/s 143(3) of the

Act vide order dated 08.03.2016 and the total income was

determined at Rs.51,37,354/- and agricultural income of

Rs.4,01,193/-. Aggrieved by the order of AO, assessee carried the

matter before Ld.CIT(A), who vide order dated dt.13.10.2016 (in

appeal No.PN/CIT(A)-2/ITO Wd-2/AN/485/2016-17) dismissed the

appeal of assessee. Aggrieved by the order of Ld.CIT(A), assessee is

now in appeal before us and has raised the following grounds :

“1. The learned Income Tax Officer, Ward 2, Ahmednagar has erred in assessing total income Returned by the Assessee of Rs. 6,68,190/- at a higher amount of Rs. 51,37,354/- the Commissioner of Income Tax (Appeals)-2 has erred in confirming the same. 2. Without considering facts and circumstances of the case and provisions of law, the learned Income Tax Officer, Ward 2, Ahmednagar has erred in contending that there is transfer of capital asset viz. agricultural land during the previous year and the Commissioner of Income Tax (Appeals)-2 has erred in confirming the same. 3. The learned Income Tax Officer, Ward 2, Ahmednagar has erred in disallowing deduction of Rs. 9,02,000/- towards expenses incurred by assessee for transfer of capital asset and Commissioner of Income Tax (Appeals)-2 has erred in confirming the same. 4. The learned Income Tax Officer, Ward 2, Ahmednagar has erred in calculating amount of exemption under section 54F by considering amount for construction of residential house as Rs. 53,91,397/- instead of correct amount of Rs. 57,50,000/- and the Commissioner of Income Tax (Appeals)-2, Pune has erred in confirming the same. 5. The learned Income Tax Officer, Ward 2, Ahmednagar has wrongly disallowed deduction of Rs. 35,00,000/- under section 54B forwards purchase agricultural land by the assessee and Commissioner of Income Tax (Appeals)-2 has erred in confirming the same.”

adjudication. Hence, ground No.1 of the assessee is dismissed.

there was transfer of capital asset during the previous year.

4.1. AO noted that assessee had sold agricultural land situated at

Shiridi and as per the sale deed, the consideration was

Rs.1,46,50,000/-. The sale deed was registered with Sub-Registrar

on 27.08.2012 and requisite registration charges and stamp duty

were also paid. AO was of the view that the transfer of capital asset

was liable for the capital gain. On the other hand, it was the

contention of the assessee that assessee had sold agricultural land

to six different persons but the cheques given by two buyers towards

sale consideration were dishonoured. It was therefore assessee’s

submission that assessee was still the legal owner of the land as the

possession was not transferred to the buyers and therefore assessee

was not liable for capital gains. The submissions of the assessee

were not found acceptable to the AO in view of the fact that sale

deed was duly registered with the Sub-Registrar, the registration

charges and stamp duty was paid and as per the sale deed the

purchasers were given possession according to their shares. AO

accordingly, computed the capital gain on the transfer of the

agricultural land at Rs.55,91,694/-. Aggrieved by the order of AO

assessee carried the matter before Ld.CIT(A), who upheld the order

of AO. Aggrieved by the order of Ld.CIT(A), assessee is now before

us.

and Ld.CIT(A) and submitted that assessee was still the legal owner

and has not transferred the land and therefore assessee was not

liable for capital gains tax. Ld. D.R. on the other hand, supported

the order of Ld.CIT(A).

on record. The issue in the present ground is with respect to the

order of Ld.CIT(A) wherein he held that assessee was liable for

capital gains on transfer of land. We find that Ld.CIT(A) while

upholding the order of AO has noted that the sale deed was

registered on 27.08.2012 in favour of six persons and in the sale

deed the share of six buyers were clearly mentioned. The

registration charges and stamp duty were also paid. He has further

noted that no civil suit was filed by the assessee for the alleged

dishonour of cheques issued by the purchasers. Before us, no

fallacy in the findings of Ld.CIT(A) has been pointed out by the

assessee. Further, no evidence of filing of suit by the assessee has

also been placed on record by the assessee. Considering the totality

of the aforesaid facts, we find no reason to interfere with the order of

Ld.CIT(A). Thus, the ground No.2 of the assessee is dismissed.

towards expenses incurred by the assessee for transfer of capital

asset.

7.1. Assessee had claimed deduction of Rs.9,02,000/- towards

stamp duty and other charges stated to have been paid by him. The

claim of the assessee was not found acceptable to the AO as he

noted that the receipts were in the name of the purchaser. Before

Ld.CIT(A), it was submitted that the aforesaid expenses have been

paid by the assessee and not by the purchaser and therefore, it

should be allowed as deduction while computing the capital gain.

The submission of the assessee was not found acceptable to the

Ld.CIT(A) as he has noted that the stamp duty and other registration

charges were always attributable to the purchaser and not to the

seller. He accordingly upheld the order of AO. Aggrieved by the

order of Ld.CIT(A), assessee is now before us.

and Ld.CIT(A) and pleaded that the assessee be allowed the claim of

deduction. Ld. D.R. on the other hand, supported the order of

Ld.CIT(A) and further submitted that the issue of stamp duty and

other charges paid by the assessee is not emanating from the sale

deed. He thus supported the order of Ld.CIT(A).

on record. The issue in the present ground is with respect to claim

of deduction of the stamp duty and other charges stated to have

been paid by the assessee while computing capital gains. Before us,

Ld.A.R. has not controverted the findings of Ld.CIT(A) and further he

has not controverted the contention of Ld. D.R. with regard to the

payment of stamp duty and other charges being not emanating from

the sale deed which has been executed for the sale of property. In

such a situation, we do not find any reason to interfere with the

order of Ld.CIT(A). Thus, the ground No.3 of the assessee is

dismissed.

deduction u/s 54F and 54B of the Act.

10.1. AO noted that assessee had sold agricultural land at Shiridi

for Rs.1,46,50,000/- but had not offered to tax the capital gains for

the reason that according to assessee, since the assessee was the

legal owner of the land and since possession was not given assessee

was not liable for capital gains. The submissions of the assessee

were not found acceptable to AO. The AO thereafter under Para 8 of

the order worked out the capital gains at Rs.88,47,805/-. AO also

noted that assessee had made a claim for deduction of

Rs.55,00,000/- u/s 54F of the Act on account of construction of

residential house. AO noted that since assessee had invested part

sale consideration in construction of new house upto 31.07.2013

(being the date for filing the return of income for A.Y. 2013-14), he

granted deduction of only Rs.53,91,397/- as against assessee’s

claim of Rs.55,00,000/-. He also noticed that assessee had claimed

deduction u/s 54B of the Act of Rs.35 lakhs on account of purchase

of agricultural land at Mauje Jalgaon, Taluk Rahata on 26.11.2013.

AO was of the view that the claim of deduction u/s 54B of the Act

cannot be granted to assessee as the amount subject to capital gains

was not used for acquiring the new asset (i.e., agricultural land)

before the due date of furnishing the return of income i.e., before

31.07.2013. He accordingly denied the claim of deduction.

Aggrieved by the order of AO, assessee carried the matter before

Ld.CIT(A), who upheld the order of AO by observing as under :

“5.2. I have perused the facts as mentioned in the assessment order as well as arguments taken on behalf of the appellant. As apparent from the fact, the sale deed has been duly registered on 27.08.2012 in favour of six persons. Not only that in the sale deed itself share of six buyers have been clearly mentioned, meaning thereby that share in land of the six buyers are determinate. Registration charges and stamp duty have been duly paid. Just because some cheques given by the buyers was not honoured cannot invalidate the transaction. The appellant is free to initiate separate legal proceeding for dishonour of the cheques and that has nothing to do with the validity of the sale deed. It is further noted that no civil suit has been filed by the appellant for dishonour of the cheque. Considering all these facts, I am inclined to agree with the Assessing Officer that the land has been duly transferred by way of duly registered sale deed dated 27.08.2012 and the same is covered under the definition of transfer u/s 2(47) of the I T Act. The Assessing Officer has therefore rightly computed the capital gain in the transfer of the agricultural land and his order is therefore confirmed. 6………….. 6.1………… 7………….. 7.1. I have gone through the provisions of Sec.54F in this regard. The sub-section (4) of sec.54F reads as under : …………. 7.1.1 On a perusal of the aforesaid provision, it can be clearly seen that if the amount is not utilized for the purchase or construction of new asset within the due date of furnishing of return, then the assessee is liable to deposit the unutilized portion of the net consideration in an account maintained under capital gain account scheme. Such deposit has to be made not later than the due date applicable for furnishing return of income under sub-section (1) of sec.139 of the IT Act.

7.1.2. Even the Capital Gain Account Scheme, 1988 states that the deposit in the account is to be made before the due date of furnishing of return of income. Para 4(4) of this scheme reads as under : “(4) Such deposits may be made in one lump sum or in installments at any time on or before the due date of furnishing the return of income under sub-section (1) of sec. 139 of the Act as is applicable in the case of the depositor."

7.1. 3 Thus, on a plain and harmonious reading of the provision of see. 54F as well as Capital Gains Accounts Scheme 1988 as reproduced above" it is clear that if the net consideration received on sale of the asset is not utilized within the due date of furnishing of return then it shall be deposited in an account under the Capital Gain Account Scheme. The use of the word 'shall' in sub- section (4), of sec. 54F makes it obligatory for the appellant to deposit unutilized portion in the account under the scheme. In the light of clear provision I am unable to agree' with the appellant that even though the amount was not deposited under the Capital Gain Account Scheme yet he was eligible for deduction u/s 54F of the IT Act. I therefore uphold the order of the Assessing Officer in restricting the deduction u/s. 54F to Rs. 53,91,397/-.

and Ld.CIT(A) and further submitted that though the due date of

filing of return of income was 31.07.2013 but assessee had filed the

return of income on 31.01.2014 i.e., within the time permitted u/s

139(4) of the Act and the amounts were invested before filing of

return of income. He therefore submitted that assessee is eligible

for claim of deduction u/s 54F and 54B of the Act and in support of

his contentions, he relied on the decision of Pune Bench of the

Tribunal in the case of ITO Vs. Vilas Balram Patil (ITA

No.923/PUN/2015 order dated 20.12.2017). He also placed on

record the copy of the aforesaid decision. Ld. D.R. on the other hand

supported the order of lower authorities and submitted that to claim

deduction u/s 54F and 54B of the Act, assessee is required to invest

the amounts before the due date of filing the return of income u/s

139(1) of the Act. He thus supported the order of Ld.CIT(A).

on record. The issue in the present ground is with respect to the

denial of claim of deduction u/s 54F and 54B of the Act. It is an

undisputed fact that the due date of filing the return of income for

A.Y. 2013-14 in the case of assessee was 31.07.2013 but he has

filed the return of income on 31.01.2014 u/s 139(4) of the Act. It is

a fact that the assessee had invested Rs.55 lacs in the construction

of residential house for which assessee had claimed deduction u/s

54F of the Act and Rs.35 lakhs was invested towards purchase of

agricultural land for which he had claimed deduction u/s 54B of the

Act. The aforesaid investments for which the deduction has been

claimed have been made after the due date for filing of return of

income u/s 139(1) of the Act but before the filing of return u/s

139(4) of the Act. Therefore, in a situation, when the entire amount

which was subject to capital gains tax has been utilized before the

filing of return of income, then the deduction u/s 54F and 54B of

the Act cannot be denied to the assessee. Further since the entire

amount which was subject to capital gains was utilized for the

purpose of construction of new house and purchase of agricultural

land, then there was no question of its deposit in notified Bank account in terms of Sec.54F(4) of the Act. Considering the aforesaid facts, we are of the view that assessee is eligible for deduction u/s 54F and 54B of the amount utilized for purchase of qualifying asset. We thus allow the grounds of the assessee.

Order pronounced on 1st day of August, 2019.

Sd/- Sd/- (VIKAS AWASTHY) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 1st August, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. The CIT(A)-2, Pune. 4 The Pr. CIT-1, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए”/ DR, 5. ITAT, “A” Pune; 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER

// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.