ASST. COMMISSIONER OF INCOME TAX, CIRCLE-7(1), HYDERABAD vs. STOUVANT PITTIE, HYDERABAD

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ITA 691/HYD/2019Status: DisposedITAT Hyderabad06 January 2022AY 2013-1414 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee is eligible for deduction under Section 54F of the Income Tax Act, 1961, for the flats situated across nine independent blocks. The Tribunal found that the jurisdictional High Court had already decided this issue in favour of the assessee, overruling any contrary Special Bench decisions. Therefore, the CIT(A)'s decision allowing the deduction was affirmed. Regarding the non-refundable deposit of Rs. 3 Crores, the Tribunal held that it should be assessed as capital gains. The CIT(A) had followed a Tribunal order which held that such non-refundable advances, emanating from a development agreement, are an intrinsic part of the agreement and derived from the transfer of the capital asset. The Tribunal upheld the CIT(A)'s finding on this issue as well. The Revenue's appeal was dismissed.

What were the facts?

The assessee, Sri Stouvant Pittie, is in appeal against the order of the CIT(A)-3, Hyderabad, for Assessment Year 2013-14. The Revenue's appeal challenges the CIT(A)'s decision to allow a deduction of Rs. 26,57,53,178/- under Section 54F of the Income Tax Act, 1961, and to treat a non-refundable deposit of Rs. 3 Crores as taxable under capital gains rather than income from other sources. The assessee had entered into a development agreement in 2007 and an allocation agreement in 2013, receiving a share of constructed area and a cash payment. The CIT(A) had allowed the Section 54F deduction for flats situated across nine independent blocks and treated the non-refundable deposit as capital gains.

What were the issues?

1. Whether the assessee is eligible for deduction under Section 54F of the Income Tax Act, 1961, for investment in flats situated in multiple independent blocks, and if so, whether the deduction is restricted to one block. - Assessee's contention: The assessee argued that Section 54F does not restrict the number of house properties in which investment can be made for claiming deduction. They relied on pronouncements from CIT vs. Syed Ali Adil, Smt. V.R. Karpagam vs. ITO, and CIT vs. Smt. K.G. Rukminiamma. - Revenue's contention: The Revenue argued that the deduction under Section 54F should be restricted to one block, citing the Bombay High Court decision in K.C. Kaushik vs. P.B. Rane, Fifth ITO. They also contended that the facts of cited cases do not apply. 2. Whether a non-refundable deposit of Rs. 3 Crores, received as compensation for delay in construction under a development agreement, is taxable under the head 'capital gains' or 'income from other sources'. - Assessee's contention: The assessee argued that the compensation received for delay in construction, arising from a development agreement, should be treated as capital gains, citing the Hyderabad ITAT decision in Hyderabad Bottling Co. Ltd. vs. DCIT. - Revenue's contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 54F,Section 143(3),Section 56(2)(vii),Section 145A

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” : HYDERABAD

Before: SHRI S.S.GODARA & SHRI LAXMI PRASAD SAHU

This Revenue’s appeal for AY.2013-14 arises from the CIT(A)-3, Hyderabad’s order dated 20-02-2019 passed in case No.0079 / CIT(A)-3 / 2016-17, involving proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.

2.

The Revenue raises the following twin substantive grounds in the instant appeal:

“1.The Ld.CIT(A) erred both in law and on facts of the case.

2.The Ld.CIT(A) erred in allowing deduction u/s 54F of Rs.26,57,53,178/-. 3.The Ld.CIT(A) erred in considering the deduction u/s 54F for the flats situated in all nine independent blocks, whereas deduction is allowed only for one block vide Hon'ble Bombay High Court in the case of KC Kaushik Vs. PB Rane, Fifth ITO (1990) 185 ITR 499(Bom). 4.The facts of the cited cases do not apply to the instant case of the assessee. 5.The Ld.CIT(A) erred in treating non-refundable deposit of Rs.3 Crores as taxable under the head capital Gain. 6.Any other ground(s) that may be urged at the time of hearing”.

3.

We next note that the CIT(A)’s detailed discussion deciding both the foregoing twin issues in assessee’s favour reads as under:

4.

Learned departmental representative vehemently contended during the course of hearing that the issue as to whether an assessee could be held entitled for re-investment of the capital gains arising from transfer of a capital asset or assets; as the case may be, in different residential projects as a deduction u/s.54F of the Act is no more res integra in light of the tribunal’s Special Bench decision in Sushila M.Jhaveri case (supra). And that we ought to adopt stricter construction principle only whilst deciding a deduction claim in light of Commissioner of Customs Vs. Dilip Kumar (2018) 9 SCC 1 (FB)(SC).

5.

We find no merit in Revenue’s instant former argument since the hon'ble jurisdictional high court (supra) has already decided the very issue in assessee’s favour and against the department thereby overruling the Special Bench’s decision. No contrary opinion has come either from hon'ble apex court or a larger bench; as the case may be. We therefore affirm the CIT(A)’s detailed discussion holding the assessee as eligible for 54F deduction in issue.

6.

We now proceed to deal with the latter issue of taxability of assessee’s interest through deposit of Rs.3 crores. It has come on record that the Ld.CIT(A) has followed the tribunal’s order (supra) that such non-refundable advances have to be assessed as capital gains since derived from transfer of the corresponding capital asset only. We thus uphold the CIT(A)’s foregoing findings qua the instant latter issue as well. No other ground has been pressed before us.

7.

This Revenue’s appeal is dismissed in above terms.

Order pronounced in the open court on 6th January, 2022

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