SRI. M N SHESHAGIRI,MYSURU vs. INCOME TAX OFFICER, WARD- 2(3), MYSORE

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, BANGALORE Before Shri Chandra Poojari, Accountant Member ITA No.2203/Bang/2019 : Asst.Year 2012-2013 Sri.M.N.Sheshagiri The Income Tax Officer No.201, Sankalp Divya Roopa Vs. Ward 2(3) Apartments, V.V.Mohalla, Mysore. Adi Pampa Road, Mysuru - 570 002 PAN : AIMPS3798P. (Appellant) (Respondent) Appellant by : Sri.Ravi Shankar, Advocate Respondent by : Sri.Ganesh R.Ghale, Standing Council for DR Date of Date of Hearing : 21.01.2020 Pronouncement : 27.01.2020 O R D E R This appeal filed by the assessee is directed against the order of the CIT(A), dated 31.12.2014. The relevant assessment year is 2012-2013.

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[Appeals] was not justified in confirming the addition made by the learned assessing officer of Rs.34,24,682/- by disallowing the deduction claimed by the Appellant under Section 54 of the Act on the facts and circumstances of the case. (b) The learned CIT(A) was not justified in law, in not appreciating that over sight in not making a deposit into the capital gains scheme was a technical default as long as the final objective of acquisition of the house property was met, on the facts and circumstances of the case. (c) The learned CIT(A) ought to have appreciated that the exemption provision under section 54 of the Act is a beneficial provision and therefore was to be liberally construed, on the facts and circumstances of the case. (d) Without prejudice, the assessee was entitled to file a return U/s 139(5) of the Act, on receiving a notice U/s 142(1) of the Act from the AO, before the expiry of one year from close of the assessment year or before the completion of the assessment proceedings whichever was earlier, hence the AO ought to have considered the payments made up to the date available for filing of revised return i.e. 31-03-2014 amounting to Rs.54,13,000/- for the purposes of calculating the investment in the new house property against Rs.22,06,000/- assumed by the AO in the order enclosed. 4. The learned CIT(A) was not justified in stating that the Jurisdictional High Court had held the case against the assessee, by extracting the grounds of appeal of the revenue, which is contrary to the decision rendered, on the facts and circumstances of the case. 5. The learned CIT(A) is not justified in law in not following the jurisdictional High Court Decision in the

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case of CIT, Bangalore v. K Ramachandra Rao [2015] 277 CTR 522 (Karnataka) which is binding on the learned CIT(A) on the facts and circumstances of the case. 6. The learned Assessing Officer is not justified in law in charging the interest under section 234B of the Act and further the calculation of interest under section 234B of the Act is not in accordance with law since the rate, method of calculation, quantum is not discernable from the order of assessment on the facts and circumstance of the case. 7. The Appellant craves leave to add, alter, substitute and delete any or all of the grounds of appeal urged above. 8. For the above and other grounds to be urged during the hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.”

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Rs.22,06,000 up to 31.07.2012, i.e., till the date of filing the return of income u/s 139(1) of the I.T.Act, for the assessment year 2012-2013. Therefore, after affording a fare and reasonable opportunity of being heard to the assessee, the A.O. restricted the assessee’s claim of deduction u/s 54 of the Act to a sum of Rs.22,06,000 and added the remaining amount of Rs.34,24,681, which was claimed in excess of the assessee’s eligibility for deduction u/s 54 of the Act.

“5. I have carefully considered the submissions made by the appellant and findings given by the AO. The provisions of See. 54(2) clearly provides that the unutilized sale proceeds shall be deposited before furnishing the ROI the Capital Gains schemes notified by the Central Government. Whereas in the appellants case the assessee has not deposited the unutilized capital gain in the Capital Gain scheme and the entire amount was kept in SB A/c for granting hand loans and spent for other purposes. The provisions of See. 54(2) are extracted as under: The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transferred 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 u/s 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 ROI under Sub See. (1) of See. 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 purpose of sub see (1) the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with

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the amount so deposited shall be deemed to be the cost of the new asset. As there is no ambiguity in the provisions given in the statue the case laws relied on by the appellant cannot be followed since they are case specific and facts are not similar to that of the appellants case. Therefore, I hereby uphold the order of the AO dismissing the grounds raised by the appellant.” 5. Aggrieved, the assessee is in appeal before the Tribunal. Before me, the learned AR strongly placed reliance on the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. K.Ramachandra Rao [(2015) 230 taxmann 334 (Kar.)]. In the aforesaid case, the assessee has not deposited the unutilized net consideration in his specified bank account as required u/s 54F of the Act. The assessee had, however, invested the net consideration in construction of residential house within the period stipulated u/s 54F(1) of the Act. Hon’ble Karnataka High Court had decided whether the assessee could be given the benefit of deduction u/s 54F(1) of the Act. The Court held that if the assessee invested the entire amount in construction of residential house within three years from the date of transfer, he cannot be denied deduction u/s 54F of the Act on the ground that he did not deposit the said amount in a given scheme before the due date prescribed u/s 139(1) of the Act. In the light of the decision of the Hon’ble Karnataka High Court (supra) the learned AR submitted that the assessee is entitled for deduction u/s 54 of the Act.

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return of income in capital gain scheme notified by the Central Government. According to the learned DR, the assessee has not deposited the unutilized capital gain in the capital gain scheme account and the entire amount was kept with saving bank account for granting hand loans and spent for other purposes. Since the amount of capital gain, which is not appropriated by the assessee towards purchase of new asset made within one year before the date on which the transfer of original asset took place and also which is not utilized by him for purchase or construction of new asset before the due date of furnishing the return of income u/s 139(1) of the Act, shall be deposited by him before furnishing such return of income and not deposit in capital gain scheme before furnishing the return of income u/s 139(1) of the Act, is not entitled for exemption u/s 54 of the Act. The learned DR further relied on the judgment of the Hon’ble Bombay High Court in the case of Humayun Suleman Merchant v. The CCIT, Mumbai & Anr. In IT Appeal No.545 of 2002 dated 18th August, 2016 and submitted that the judgment of the Hon’ble Karnataka High Court in the case of CIT v. K.Ramachandra Rao (supra) was considered by the Hon’ble Bombay High Court and it was observed that the Hon’ble Karnataka High Court was rendered this judgment in the case of CIT v. K.Ramachandra Rao (supra) sub silentio, i.e., no argument was made with regard to the requirement of deposit in notified bank account in terms of section 54F(4) of the Act before the due date as provided u/s 139(1) of the Act. He also placed reliance on the judgment of the Hon’ble Supreme Court

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in the case of Mathuram Agrawal v. State of Madhya Pradesh (1999) 8 SCC 667, wherein it was held as under:-

“The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be- obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain. unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of. the Legislature .....” (emphasis supplied) 6.1 He further relied on another judgment of the Hon’ble Supreme Court in the case of Thana Electricity (206 ITR 727) had observed as under:- “If the provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee has got to be accepted. This is a well-accepted view of law. It is the satisfaction of the court interpreting the law that the language of the taxing statute is ambiguous or reasonably capable of more meanings than one, which is material. If the court does not think so, the fact that two different views have been advanced by the parties and argued forcefully or that one such view: Which is favourable to that assessee has been accepted by some Tribunal or High Court, by itself will' not be sufficient to attract the principle of beneficial interpretation" 6.3 According to the learned DR, the judgment of the Hon’ble jurisdictional High Court in the case of K.Ramachandra Rao (supra) is no more a good law. He also relied on the order of the Tribunal in the case of Shri. Parswanath Padmarajaiah Jain v.

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ACIT in ITA No.453/Bang/2018, for assessment year 2013- 2014 – order dated 21.12.2018, wherein the Tribunal held that any ambiguity in reading of section 54F of the Act, it should be decided in favour of the Revenue as held by the Hon’ble Supreme Court in the case of Commissioner of Customs (Import) v. Dileep Kumar & Co. Further, the learned DR relied on the judgment of the Hon’ble Karnataka High Court in Writ Petition No.13541/2018 in the case of Prof.P.N.Shetty v. ITO – order dated 18th July, 2019, wherein the Court held that unutilized capital gain amount under section 54F(4) of the Act has to be charged u/s 45 as income of the assessee after the expiry of three years from the date of sale of capital asset.

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section 54F and cannot be denied the benefit for the reason that he had not complied with the requirements of section 54(2). Thus in effect the assessee would be entitled to deduction under section 54F for a sum utilized for construction of a residential house within this period specified in section 54F(1). The Assessing Officer is accordingly directed to allow deduction under section 54F.”.

7.2 In my opinion, the judgment relied on by the learned DR in the case of Prof.P.N.Shetty (supra) is not applicable to the facts of the present case, and hence, it was not considered. Regarding the judgment of the Hon’ble Bombay High Court in the case of Humayun Suleman Merchant v. The CCIT, Mumbai & Anr. (supra), cannot be applied. The said judgment is not considered in view of the judgment on similar facts in the case of K.Ramachandra Rao (supra), which is very much binding on the issue. As regards the ambiguity in statute, the learned DR have taken help of the judgment of the Hon’ble Supreme Court in the case of Commissioner of Customs (Import) v. Dileep Kumar & Co. (supra). But in the present case, the CIT(A) himself has observed in his order that there is no ambiguity in the present section 54F. Thus, this case has also no help to the Revenue.

7.1 Further the Cochin Bench of the Tribunal in the case of ACIT v. Shri Tony J.Pulikkal in ITA No.472/Coch/2016 – order dated 25.07.2018, held that the assessee is entitled for deduction u/s 54F of the Act with regard to the investment made in a residential house up to the period mentioned u/s

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139(4) of the Act. This view is also fortified by the judgment of the Hon’ble Guwahati High Court in the case of CIT v. Rajesh Kumar Jalan (206 CTR 361), wherein it was held that if the assessee claims exemption u/s 54F of the Act by retaining the cash, then the said amount is to be invested in the said account notified by the Central Government on this behalf. If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein, i.e., section 139(4), then section 54F(4) is not at all attracted and therefore, the contention that the assessee has not deposited the amount in the bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct.

7.3 Similar view was taken by the Hon’ble Kerala High Court in the case of Dr.Xavier J.Pullikal v. Deputy Commissioner of Income-tax (104 DTR 134) where in the Hon’ble Kerala High Court held as under:-

“The scheme for depositing capital gain is contemplated under Section 54F(4) and it depends upon when the property of the assessee is sold and when exactly the amounts were invested, whether it was invested in a residential house or otherwise. All these facts have to be considered with reference to provisions of Section 54F(4) along with Section 139 (1) of the Act, as the due time would be under Section 139(1) only not under Section 139(4) of the Act. I.T.A. No.10 of 2014 5 8. Tribunal, as a matter of fact, has accorded one more opportunity to the appellant assessee to place on record relevant facts for consideration and if his case were to be different from the facts of the other case and makes a vast difference

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altogether. So far as provisions of law is concerned, it is always open to him to place such facts before the Assessing Officer for consideration. However, Assessing Officer while applying the provisions of law to facts of a case without interdependent on facts of the other case has to consider the same. With these modifications, we dispose of the appeal directing the Assessing Officer to dispose of the matter in the light of the above observations.” 7.4 In my opinion, the assessee could make investment in construction of new building within three years from the date of transfer of the asset for claiming deduction u/s 54 of the Act. Section 54 of the Act are beneficiary and are to be considered liberally. In view of the above discussion, I am inclined the remit the issue to the file of the Assessing Officer to quantify the amount of exemption u/s 54 of the Act. The assessee is directed to prove the investment in residential building as prescribed u/s 54 of the Act before the due date of filing of the return u/s 139(4) of the Act. Accordingly, this issue is remitted for the limited purpose of quantifying the amount of deduction to the file of the A.O. after affording a reasonable opportunity of being heard to the assessee.

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Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A), Mysuru. 4. The Pr.CIT, Mysuru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore