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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
PER BENCH This appeal by assessee is arising out of the order of Ld.CIT(A)-1, Nagpur
vide Order No.CIT(A)-1/399/2009-10 dated 22.10.2013. The assessment was
framed by Income Tax Officer, Ward-2(2), Nagpur u/s 143(3) r.w.s 147 of the
Income Tax Act, 1961 (in short “Act”) for A.Y. 2006-07 vide his order dated
31.12.2009.
The only issue in this appeal of assessee against the order of Ld.CIT(A)
confirming the action of the AO in disallowing the claim of exemption u/s 54F
of the Act in respect of investment in residential house out of the sale proceeds
of the plot of land. For this, the assessee has raised the following grounds:-
“The learned A.O. ought to have allowed exemption u/s 54/54F in respect of investment in residential house.
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The learned CIT(A) erred in not granting exemption under section 54/54F of I.T.Act 1961 in respect of investment in residential house.”
Briefly stated facts are that the assessee during the year under
consideration sold one immovable property described as plot No.492, Khasra
No.136, Mouza Nari, Ward No.57, City Survey No.295, Nagpur for Rs.25 lacs
which was purchased by him on 26.06.2000. The AO required the assessee as
to explain as to why capital long term capital on this transaction is not
declared in the return of income. The assessee replied that he has purchased
one leased property from Nagpur Improvement Trust (in short “NIT”) vie lease
agreement dated 26.06.2000 for a sum of Rs.22,10,000/-. The assessee
submitted that he has made investment for purchase of plot in auction on
14.09.2007, wherein at the time of auction on a sum of Rs.5,22,500/- was paid
on the same date. Further, a sum of Rs.5,22,500/- was paid on 14.11.2007
and further a sum of Rs.11,05,000/- was paid on 17.12.2007. In view of the
above, Ld. Counsel for the assessee before the AO claimed that long term
capital gain arising in the case of the assessee has been invested within a
period of one year from the date of capital gain arising and claimed the
exemption u/s 54F of the Act. The assessee claimed that it has constructed
the house before September 2012 but the AO stated that the assessee has not
complied with the conditions of section 54 of the Act and thereby he computed
long term capital gain at Rs.18,13,900/- and added to the returned income of
the assessee. Aggrieved the assessee preferred appeal before Ld.CIT(A).
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Ld.CIT(A) confirmed the action of the AO by observing in par 10.7 as
under:-
10.7. “As per the layout plan / map approved by the corporation filed during the appellate proceedings, it is seen that the appellant transferred the residential house on 13.12.2006, whereas the sanction for construction of house from the office of the Municipal Corporation of Nagpur is obtained on 17.3.2011. Further that nothing has been adduced on record by the appellant as regards to the fact whether construction has actually be commenced or done on the said piece of plot claimed to have been taken on lease from NIT, vide agreement dated 21st August, 2010, for a total consideration of Rs. 22,10,000/-. Thus, the appellant" even after passage of almost seven years, could not demonstrate with any concrete evidence as to show whether the net consideration realised from the sale of residential house has been utilised as per the scheme provided u/s 54 / 54F of the Act. Therefore, the AO is justified in denying the claim of the appellant and the action of the AO is confirmed.” Aggrieved, the assessee is in second appeal before the Tribunal.
Before us, Ld. Counsel for the assessee first of all narrated the actual
facts that it has made investment in purchase of plot in auction from NIT and
made total investment of Rs.22.10 lacs upto 17.12.2007. Ld. Counsel for the
assessee drew our attention to receipts issued by NIT which are enclosed at
pages 51 to 53 of assessee’s Paper Book. Ld. Counsel for the assessee also
drew our attention to page No.47 to 50 of assessee’s Paper Book wherein the
assessee after having paid the amount pursuant to auction of NIT for purchase
of plot requested of grant of lease deed so that the assessee can submit
building plan for approval with local authorities. The NIT delayed the process
of lease deed inspite of the fact that the full payment has been made but Page | 3
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eventually granted the lease deed only on 21.08.2010. The assessee
subsequently made an application for sanction of building plan before Nagpur
Municipal Corporation (in short “NMC”) and NMC after full verification of
documents and after taking due time for grant of approval, sanctioned the
building planning only on 17.03.2011. The approval of the NMC is enclosed at
pages 56 to 58 of the assessee’s Paper Book. The assessee also drew our
attention to the electricity bills in respect of construction of residential house to
show the consumption of electricity for this residential house is being paid for
the month of September 2012. The relevant bill is enclosed at page 59 to 61 of
the assessee’s Paper Book. From the above factual position and evidences, Ld.
Counsel for the assessee stated that the assessee has invested the entire sale
proceeds in acquisition of residential house and which cannot be disputed on
the basis of evidences on record. It was contended by Ld. Counsel for the
assessee that these evidences were filed before the AO and Ld.CIT(A) except the
electricity bills and tax receipts. We find that in similar circumstances, the
Mumbai Tribunal in the case of Sh. Hansmukh N.Gala in ITA
No.7512/Mum/2013 vide order dated 19.08.2015 for A.Y. 2010-11 on identical
facts considered the issue following the decision of Hon'ble Delhi High Court in
the case of CIT vs Kuldeep Singh 270 CTR 561 (Del.) and allowed the claim of
the assessee by observing in para 7 to 8 as under:-
“It is accepted position and it is not disputed by the Revenue that Rs.37,86,273/- had been invested by the assessee for purchase of the property at Gurgaon. However, legal title in the said property was not passed or transferred to the assessee within a period of two years from
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the date of sale of the first property on 3rd June, 2005. The second property it is apparent was still under construction though the builder had entered into and executed the flat buyers agreement with the assessee dated 9th February, 2006. The said agreement mentions the apartment number and gives specific detail of the property. The payments were linked to stage of construction and that amount of Rs.2,90,46,250/- was payable within 27 months of booking i.e. on or before 12th February, 2008 and the total cost of flat/apartment was Rs. 3,13,09,375/-. Thus, the consideration being paid by the respondent assessee was nearly 9 times income by way of capital gains which was earned by the assessee. The word “purchase” can be given both restrictive and wider 8. meaning. A restrictive meaning would mean transactions by which legal title is finally transferred, like execution of the sale deed or any other document of title “Purchase” can also refer to payment of consideration or part consideration along with transfer of possession under Section 53A of the Transfer of Property Act, 1882. Supreme Court way back in 1979 in CIT Andhra Pradesh vs. T.N. Aravinda Reddy (1979) 4 SCC 721, however, gave it a wider meaning and it was held that the payment made for execution of release deed by the brother thereby joint ownership became separate ownership for price paid would be covered by the word “purchase”. It was observed that the word “purchase” used in Section 54 of the Act should be interpreted pragmatically in a practical manner and legalism shall not be allowed to play and create confusion or linguistic distortion. The argument that “purchase” primarily meant acquisition for money paid and not adjustment, was rejected observing that it need not be restricted to conveyance of land for a price consisting wholly or partly of money’s worth. The word “purchase”, it was observed was of a plural semantic shades and would include buying for a price or equivalent of price by payment of kind or adjustment of old debt or other monetary considerations. It was observed that if you sell a house and make profit, pay Caesar (State) but if you buy a house or build another and thereby Page | 5
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satisfy the conditions of Section 54, you were exempt. The purpose was plain; the symmetry was simple; the language was plain.” 6. We find from the above facts and circumstances of the case that the
assessee has completed the construction of house as the evidence clearly prove
the same. We find that the assessee bonafide made investment in purchase of
plot purchase through auction from NIT and paid instalments accordingly. The
assessee applied for lease deed and after granting of lease deed of NIT, the
assessee applied for approval of building plan. After approval of building plan,
the assessee constructed the house and start residing in the same which is
proved by documentary evidence. We find that the assessee has duly invested
the amount in acquisition of new property and the delay in completion of
construction beyond the control of the assessee as the statutory permissions
were obtained from the Government authorities, who delayed the process. In
such circumstances, we are of the view that the beneficial provision should be
interpreted in favour of the assessee and seeing the bonafide of the assessee,
we direct the AO to allow the claim of deduction u/s 54 of the Act to the
assessee. Accordingly, we direct the AO.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 07th March, 2018.
Sd/– Sd/– (G.D.AGRAWAL) (MAHAVIR SINGH) HON’BLE PRESIDENT JUDICIAL MEMBER
Dated:07th MARCH, 2018 *Amit Kumar*
ITA No.07/NAG/2014
Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A), Nagpur 4. The CIT, Nagpur 5. The DR, Bench, ITAT, Nagpur
By Order Assistant Registrar ITAT, Nagpur Bench, Nagpur