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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI S.S. GODARA & SHRI G.D. PADMAHSHALI
आदेश / ORDER
PER S.S. GODARA, JM :
This Revenue’s appeal for assessment year 2008-09 arises against the CIT(A)-2, Pune’s order dated 06-03-2019 passed in case No. 650- A/2017-18, in proceedings u/s. 143(3) r.w.s. 254 of the Income Tax Act, 1961; in short “the Act”.
Heard both the parties. Case file perused.
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Coming to the Revenue’s sole substantive grievance seeking to revive the assessee’s section 54F deduction disallowance of Rs.3.25 crores made by the Assessing Officer in his section 143(3) r.w.s. 254 order dated 28-11- 2016, we note that the CIT(A)’s detailed discussion to this effect reads as under :
“5. Ground nos. 1 to 5: - As all these grounds relate to the common issue of disallowance of deduction u/s. 54F, therefore the same are disposed of together as under. 5.1 During the appellate proceedings, the appellant filed written submissions which are reproduced as under: "Contention:- 1. The AO received information from Addl. CIT, Range-3, Pune that during survey action u/s. 133A of the I.T. Act, 1961 in the case of Shri KailashBabulalWani conducted on 12-03-2008, it was noticed that the assessee has received Rs.3 crores from Fullmoon Housing & Finance Put. Ltd. towards sale of land situated at Baner and the said amount was not offered to tax. 2. The assessee has claimed exemption u/s.54F of Rs.3.25 crores as investment in residential bunglow at Pune treating the money received of Rs.3 crores as Long-term Capital gain on sale of plot at Baner, Pune. Assessment u/s. 143(3) r.w.s. 147 was completed and the amount of Rs.3 crore received from Fullmoon Housing & Finance Pvt. Ltd. and treated as capital gain was considered as income from other sources i.e. brokerage/commission and thus the claim of deduction u/s 54F was disallowed. 3. The appellant filed an appeal before the ld. CIT(A) against the order of AO. The Ld CIT(A) also confirmed the addition made by the AO. Aggrieved by the order of CIT(A) the appellant filed an appeal before the Hon'ble ITAT Pune Bench. The Hon'ble ITAT vide its order ITA no.424/PN/2013 directed to treat the income of the assessee of Rs.3 crore as LTCG and further allowed the exemption u/s 54F after due verification. 4. As per the direction of the Hon'ble ITAT, the appellant furnished the necessary evidence in support of his claim of deduction u/s 54F as required in the form of development agreement dated 14.01.2008, copy (enclosed Refer page no.1-51). 5. The Ld AO on perusal of the development agreement noticed that the rights were granted to the assessee for development and sale of flats/units and no property was purchased by the assessee. Therefore, he drawn the conclusion that the investment made by the appellant is not for purchase of house property but had entered in to a development agreement for developing the said property. This conclusion drawn by the AO in ale year 2016 is factually incorrect, which is evident from the fact that the appellant had not made any attempt to develop the said property. On the contrary it was brought
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to the notice of the AO during the course of assessment proceedings that the said property is sold after a period of 3 years as a residential property. Therefore, it is submitted that the conclusion drawn by the AO is merely on presumption and surmises. 6. In support of our claim u/s 54F of the Act the appellant submits that: a. Development agreement submitted by us is in respect of the investment made by us for the plot of land along with constructed bungalow on same land. (Refer page no. 1-51). b. Property description given in the said agreement clearly indicates that it is a plot of land along with constructed bungalow. (Refer page no.41). c. Photocopy of property tax paid by the seller also gives clear indication that it is a residential property. (Refer page no.52). d. This property is sold by us on 24.08.2011 and as per the details at para c of the said sale deed (Refer page no.28, 48,59,70 and 113) it is clearly mentioned that on the said plot residential house admeasuring 198.75 sq. mtrs. was constructed as per commencement certificate no.7315 dt.27.10.1998. no.1635 dt.03.01.1991. 2278 dt.05.03.1992 and 783 dt.16.03.1993 and the completion certificate no.3773 dt.27. 03.1993 was also issued by the corporation. (Refer page no. 53-122). e. From the above details, it is clearly evident that the claim made by us u/s 54F is in respect of a residential house. 7. It is submitted before your Honor that under Section 54, the word used is ‘property used for residence', but in the body of both the sections, i.e., 54 & 54F, the phrases used are residential house Hence, the two phrases could be said to be inter-changeable and have the same connotation. The phrase 'residential house' is not defined in the Act. As such, it has to be understood in the normal sense of a house, which could be used for a residence. The term 'residential house' came for discussion before the Orissa High Court in a wealth-tax case in CWT v. KB. Pradhan [19811 130 ITR 393/7 Taxman 220 wherein it was held that the word 'house' used for residential purposes would not include a house property in the process of construction, which is incomplete and not habitable. Only if the house has reached a stage of construction by which it is available for occupation and is otherwise habitable, the assessee can regard the property as being in the nature of a residential house, but not otherwise. This case and its logic can safely be utilized for understanding the meanings of' residential house' for the purposes of sections 54 & 54F as well. 8. It is submitted before Your Honour that it is not in dispute that the property which was purchased by the appellant and claimed exemption U/sec. 54F is the bungalow along with land, which is house property as per municipal records and taxes have also been paid as residential property. It is further submitted that for the purpose of exemption U/ sec. 54 F it is bungalow along with the land which is formed part and parcel of the old big bungalow and therefore
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it is to be treated as land appurtenant. In support of this contention we have relied upon the following decisions: a. CIT v. Natu Hansraj [1976] 105 ITR 43 (guj.); b. Addl. CIT v. Vidya Prakash Talwar [1981] 132 ITR 661 (Delhi); c. CIT v. Zaibunnisa Beguni [1985] 151 ITR 320 (AP); d. CIT v. Kodandas Chanchlomal [1985] 155 ITR 273 (Guj.); e. M. Abdul Sattar v. CIT [1987] 163 ITR 642 (Karp); f. CIT v. Kamala Ranganathan [1990] 186 ITR 536 (Mad.); g. CIT v. Mrs. P. Rajasulochana [1994] 210 ITR 423 (Mad.); h. CIT v. Sint. D. Rani [1996] 218 ITR 724 (All.); and 7. In view of above facts and various documents, only because the appellant had executed the development of agreement, while purchasing the property where in it is stated that it is purchased for development, action of AO to reject the exemption is unjustified, as it is proved beyond doubt that the property purchased is a bungalow along with the land appurtenant thereto. b. As per municipal record it is residential house property c. Appellant has not carried out any development on the said property d. Appellant had sold the said house property as it is in the year 2011-12 r.t. A.Y. 2012-13 and long-term loss is accepted u/sec. 143(1) of the Act. Copy of acknowledgement of return of income, computation sheet and Balance Sheet for F.Y. 2011-12 are enclosed (Refer page no.123-128) e. Description of property in the development agreement and the sale deed dated 24.08.2011, is the same. In the circumstances, we submit that the deduction u/s 54F is correctly claimed and accordingly request your Honor to kindly allow the same delete the addition made by the AO. Submitted for just and favourable consideration.” 5.2 It is evident that the appellant had received an amount of Rs.3,00,00,000/- on various dates from 30/08/2007 to 11/10/2010 from M/s Full Moon Housing Pvt. Ltd. by account payee cheques for releasing all rights and interests in the property bearing Survey no.-5, Hissa No,-lA&lB/2 at Village Baner, Tal.- Haveli, Dist.-Pune which the appellant has acquired by an MOU dated 16/07/2001 by the then owner of the property Mr. Pradeep Kumar Dhorjee. The appellant had relinquished his rights from the property on 16/05/2007 in favour of the purchaser M/s Full Moon Housing Pvt. Ltd. at a sale consideration of Rs. 3,00,00,000/-. Hon'ble ITAT Pune has already considered the income so arose on relinquishing the rights on the said property as capital gains as cited supra. Now the matter of dispute is deduction claimed u/s 54F of the IT Act on reinvesting the amount of capital gains in a new residential property.
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5.2.1 In support of the claim, the appellant had submitted a registered development agreement of the property bearing Plot No.9, Survey No. 104 & 108, Hissa No. 1A,1B/1/1C admeasuring 743.40 sq. metres along with old bunglow structure thereon situated at Aundh, Pune vide registered agreement no. 1082/2008 dated 06/02/2008 registered at the office of the Sub-registrar, Haveli, Pune-19. On perusal of the agreement, it is observed that the owner of the property namely, MuzulTldar family through their attorney M/s. Saijyoti Associates entered into a development agreement with the appellant on 14/01;'2008. In para 2 of page no.'" of the agreement, it is clearly mentioned that the lump-sum amount of Rs.3,25,00,000/- has been agreed as a consideration and the Developer i.e. the appellant shall pay the agreement amount to the Assignor, according to unanimous directions of the owners and the other consenting parties and subsequently the same were paid through cheques. Thus, it is established fact that the appellant had acquired a residential property in the form of an old bungalow. Therefore, the appellant would be entitled to deduction u/s 54F of the IT Act on this investment. There is no specific limitations as to the type of residential property one has to acquire u/s 54F of the IT Act.”
Suffice to say, it has come on record that this is second round of proceedings between the parties before the tribunal as the learned co- ordinate bench earlier directions dated 18-11-2016 had restored the issue back to the Assessing Officer for examining the assessee’s section 54F deduction claim regarding reinvestment of capital gains in a residential house at Pune. Learned department representative is indeed very fair in not disputing the fact that the assessee had executed his agreement for acquisition of the new residential property on 14-01-2008 which was registered on 06-02-2008. These clinching documents form part of the assessee’s detailed paper book before us running into 134 pages wherein he had been assigned all rights and title (including alienation) qua the new asset. Mr. Jasnani vehemently argued that the said reinvestment was for business purposes only being in the nature of a development agreement. He fails to dispute that even the Assessing Officer could not rebut the fact of assessee’s impugned reinvestment in the new residential house; even if
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it is by way of a development agreement. We make it clear that there is no stipulation in section 54F which could be held to have been violated in assessee’s impugned development agreement. We thus invoke stricter interpretation in light of Commissioner of Customs Vs. Dilip Kumar and Co. 2018 (9) SCC 1 (SC) (FB) to affirm the CIT(A) action deleting the impugned disallowance. Ordered accordingly.
This Revenue’s appeal is dismissed.
Order pronounced in the open court on 01st September, 2022.
Sd/- Sd/- (G.D. Padmahshali) (S.S. Godara ) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; दिनाांक / Dated : 01st September, 2022. रदव
आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : अपीलार्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The CIT(A)-2, Pune 4. The Pr. CIT-1, Pune दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, “बी” बेंच, 5. पुणे / DR, ITAT, “B” Bench, Pune. गार्ड फ़ाइल / Guard File. 6. //सत्यादपत प्रदत// True Copy// आिेशानुसार / BY ORDER,
वररष्ठ दनजी सदचव / Sr. Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune