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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & SMT.SUCHITRA KAMBLE
आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण अहमदाबाद �यायपीठ अहमदाबाद �यायपीठ ‘B’ अहमदाबाद। अहमदाबाद �यायपीठ अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SMT.SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.783/AHD/2016 Assessment Year :2012-13
Vikas Narayan Baddi Vs. ACIT, Cent.Cir.1(3) 2, Nagari Park Ahmedabad. Nr.Mahalaxmi Char Rasta Paldi, Ahmedabad 380 007. PAN : ABYPB 6959 N अपीलाथ�/ (Appellant) �� यथ�/(Respondent) Assessee by : Shri Manish Shah, Advocate with Jimi Patel, AR Revenue by : Shri G.C. Daxini, Sr.DR सुनवाई क� तार�ख/Date of Hearing : 22/06/2022 घोषणा क� तार�ख /Date of Pronouncement: 31/08/2022 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld. Commissioner of Income-Tax(Appeals)-11, Ahmedabad [hereinafter referred to as “Ld.CIT(A)”] under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) dated 18.12.2015 pertaining to the Asst.Year 2012-13.
At the outset itself, it was stated that solitary issue involved in the present appeal related to denial of claim of exemption of long term capital gain of Rs.1,08,69,338/- on account of investment of the same in a new residential house as per the provision of section 54F of the Act. It was stated that the claim of the assessee was
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denied by the Revenue by holding that the assessee had failed to comply with the conditions stated therein of making investment in new residential house within the stipulated period of two years from the date of sale of original asset. The assessee, on the other hand, has claimed that delay in investment was for reasons beyond his control and that too of a very short period of five months and intention of the assessee was to make investment of capital gain in new residential house, and therefore, it should be allowed the claim of the exemption under section 54F of the Act. The grounds raised before us, in this regard, are as under:
“1. The ld.CIT(A) has erred in law in making addition of long term capital gain of Rs.1,08,69,338/- u/s.54F of the Act on the erroneous ground that the assessee has utilised the amount of sales consideration deposited in capital gain account in purchase of the residential property after a period of 2 years.”
We have heard both the parties. The date line of events leading to earning of capital gain and denial of deduction under section 54F of the Act on the same were filed by the assessee before us by way of a detail as under: Sr. Date Particulars No.
01.12.2011 Assessee sold a land situated at Bangaluru for a total consideration of Rs. 1,52,04,000/-.
29.03.2012 Assessee deposited the sale consideration in capital gain account.
15.06.2013 Assessee executed Memorandum of Understanding for the purchase of/residential flat) for a total consideration of Rs. 1,87,25,000/- and paid Rs.10,000/- immediately upon the execution of Memorandum of Understanding of the purchase of flat. 4. 01.02.2014 On the registration of society. Vendor was allotted share certificate.
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02.04.2014 Assessee made further payments from capital gain account to vendor for purchase of residential flat according to Memorandum of Understanding executed on 15.06.2013. 6. 03.05.2014 Conveyance Deed for purchase of residential flat with Vendor had been executed by assessee.
Referring to the above Ld.Counsel for the assessee contended that during the impugned year, i.e F Y 2011-12 pertaining to AY 2012-13, on 01.12.2011, the assessee had sold a land situated in Bangalore for total consideration of Rs.1,52,04,000/-. The assessee claimed to have invested the sale consideration in the capital gain scheme of bank on 29.3.2012 . On 15.6.2013 the assessee executed memorandum of understanding (MOU) for the purchase of residential flat for a total consideration of Rs.1,87,25,000/- and paid Rs.10,000/- immediately upon the execution of MOU for the purchase of flat. On 1.2.2014, on the registration of the Society, the vendor was allotted share certificate. On 2.4.2014, the assessee made further payment from capital gain account to vendor for residential flat according to the MOU executed on 15.6.2013. On 3.5.2014 the conveyance deed for purchase of residential flat with the vendor was executed by the assessee. The time by which the new property was required to be purchased by the assessee as per the provisions of section 54F of the Act was 30.11.2013, i.e two years from the date on which transfer of original property took place being 01-12-2011 , while the assessee had executed conveyance deed for the purchase of new flat on 3.5.2014 – resulting in delay of five months.
Arguments of the ld.counsel for the assessee in support of his claim of exemption under section 54F was that –
ITA No.783/Ahd/2016 4 i) Entire net consideration had been deposited in the capital gain account scheme before the due date of filing of the return of income . The due date of filing return in the present case was 31.7.2012, amount was deposited in capital gain account scheme as per the assessee’s claim on 29.3.2012 and even going by Revenue’s claim, it was deposited on 17.5.2012,which was well before the due date of filing return of income.
In this regard, he drew our attention to para 4.1 of the assessment order wherein the AO, while rejecting assesses claim of depositing the gain before due date of filing of return, on 29.3.2012, noted the fact that the capital gain account scheme of the assessee being opened on 17.5.2012, the assessee could have deposited the amount of consideration in the capital gain scheme only on 17.5.2012 and not before that. The contention of the assessee was that even going by the department’s case, since the amount was deposited before the due date of filing of the return of income, the assessee was entitled to exemption under section 54F of the Act. ii) That even otherwise the facts demonstrate that the assessee intention all along was to immediately invest the net consideration in a new residential house . This he stated was evident from the fact that the assessee had parked the entire consideration immediately, on receipt of the same on sale of his property, in capital gain account scheme in Bank and as soon as a good property was available to him, had entered into a MOU for purchase of the property on 15.6.2013 , within a year
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and half of sale, having paid Rs.10,000/- upon execution of the MOU. The ld.counsel for the assessee contended that the terms of agreement clearly showed that both the parties had bound themselves by virtue of the said agreement – the assessee was bound to buy property and the vendor was bound to sell the property to the assessee. In this regard he drew our attention to various clauses of MOU – clauses (1) to (4) as under:
CLAUSE 1. "That the party hereto of the one part doth hereby agree, declare and confirm to sell , assign and transfer to the purchaser being party hereto of the seconds part the said premises along with all his right and interest in the said society and the proposed shares in the said proposed society for full and final consideration of Rs.1,87,25,000/- (Rupees one crore eighty seven lacs twenty five thousand )and the party hereto of second part doth hereby agree to purchase the said premises along with ownership rights , possessory rights, along with ail right and interest in the said society and the proposed shares from the party hereto of the one part for the said sum of Rs.1,87,25,000/- (Rupees one crore eighty seven lacs twenty five thousand ). Clause -2 Parties have agree that purchaser shall purchase 'and vendors shall sell said flat being flat No.l admeasuring 915.87 sq. ft. built up together with a attached Terrace admeasuring 342 sq. ft. built up situated on the 1st floor of the building known as " Vithal kunj building no,3" lying being at V.P.road, andheri(West), Mumbai- 400058 along with all its right, title, interest and his rights on common area in the building as well as right to become the share holder in the proposed society for the full and final consideration Rs.1,87,25,000/- to be paid by purchaser to the vendor and 'vendor duly acknowledge the receipt of the sum of Rs.10,000/- . The balance amount shall be paid on or before 31st May, 2014 or on registration of the society whichever is later. Clause 3:- Both the parties have agreed that they shall specifically perform their part of contract and shall not commit any breach of the terms and conditions recorded their in. Clause 4 :-Parties hereby agree, Declare and confirm that this memorandum of understanding is final and conclusive and binding upon them . No fraud, force, or coercion has taken place. 6. The ld.counsel for the assessee contended that the residential house could not be purchased within the stipulated time since the Society, in which residential house was situated, was not registered,
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and therefore, occupants of the society had agreed to form and register a Cooperative Society i.e. “Vithalkunj” which was ultimately registered on 1.2.2014, and immediately thereafter the assessee made payment of entire sale consideration of the property of Rs.1,87,25,000/- on 02-04-2014 and invested entire net consideration received on sale of his own property amounting to Rs.1,52,04,000/-, and sale deed of new property purchased was immediately thereafter registered and executed on 3.5.2013. In this regard, the ld.counsel for the assessee stated that MOU entered into for the purchase of the property mentioned at clause (F) that the occupants of the building viz. “Vithalkunj” had agreed to form a registered cooperative society. The clause (F) of the MOU reads as under:
Clause " F:- occupants of the building of Vithal Kunj have agreed to form and register a co-operative Housing society VIZ, Vithal kunj building CHSL (proposed) under the provision of Maharashtra CO- Operative Society Limited , However still the society is not formed and registered . 7. The ldcounsel for the assessee contended that the title to the property not being clear and which was beyond control of the assessee, the delay in purchase of the property beyond the time stipulated under section 54F of the Act cannot attributed to the assessee. It was a very short period of delay of five months only and intention of the assessee to purchase the said property was clear all along. The reliance was placed on the decision of the judgment of Hon’ble Apex Court in the case of Shri Sanjeev Lal Vs. CIT, reported in (2014) 365 ITR 0389 (SC) and the decision of the ITAT, Ahmedabad Bench in the case of Vinod Ugardas Patel vs Asst. CIT( OSD) in ITA No.529/Ahd/2014 dated 2.1.2017 (copies of both the orders were placed before us).
ITA No.783/Ahd/2016 7 8. The ld.DR, on the other hand, relied on the finding of the AO at page no.4.1 of the order, pointing out therefrom that deposits in the capital gain scheme was not made on 29.3.2012 as claimed by the assessee but on 17.05.2012 and that simply signing of the MOU for a meager amount of Rs.10,000/- could not be treated as transfer of assets as per the Transfer of Property Act and the assessee having not purchased new property within the stipulated time, it was not entitled to exemption under section 54F of the Act, and relied on the decision of Hon’ble Bombay High Court in the case of Rasiklal M. Parikh Vs. ACIT, (2017) 88 taxmann.com 732 (Bom).
We have considered contentions of the both the authorities below. The denial of claim of exemption of capital gains earned by the assessee amounting to Rs. 1,08,69,338/- u/s 54 F of the Act by the Revenue rests on the premise of the investment of net consideration received in purchase of new residential house not having been made within the time period stipulated under section 54F of the Act .
While, the case of the assessee is that he had entered into a MOU for purchase of new asset well within the stipulated time and the delay in registration of the purchase deed beyond the stipulated time was for reasons beyond his control, on account of delay in registration of the society of flat owners, which agency was imperative for assisting the execution of the registration of the purchase deed of new asset. Additionally the assessee claims the exemption allowable in the impugned year since it had complied with the condition stipulated of depositing the consideration in the capital gain account scheme of Bank before the due date of filing of return of income ,in case
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assessee is unable to invest the consideration in a new property by then.
To adjudicate the issue we consider it necessary to reproduce provisions of section 54F of the Act as under:
54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property". Explanation.—For the purposes of this section,— "net consideration", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1),
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shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such new asset is transferred. (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer 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 under section 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 return of income under sub-section (1) of section 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 purposes of sub- section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset: Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,— (i) the amount by which— (a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds (b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid. 11. As is evident from a bare reading of the section, to be entitled to claim exemption of capital gain earned on sale of any long term capital asset other than residential house, the assessee is required to invest /utilize the net sale consideration received on the sale of
ITA No.783/Ahd/2016 10 asset, in a residential house, either constructing it within three years or purchasing it within two years. The Section stipulates that if an assessee is not able to appropriate the sale consideration for the stipulated purpose by the due date of filing of return of income, then he shall deposit the consideration in a capital gain account scheme by the due date of filing return of income. The amount so deposited shall be deemed as cost of the new asset. And in the eventuality the assessee does not utilize the amount, wholly or partly ,so deposited in the bank for the stipulated purpose within the time specified , exemption to the extent so claimed shall be treated as income of the assessee of the previous year in which the period of three years from the date of transfer of original asset expires.
Thus the scheme of the exemption u/s 54F is to grant the same against long term capital gains on investment of the net consideration in a residential house, to be constructed within 3 years or purchased within 2 years. This basic condition remaining, assesses can claim exemption by depositing the unutilised amount in a capital gain account scheme of Banks by the due date of filing return of income of the year in which the gain accrues, subject to its actual utilization for the stated purpose within the stipulated time, failing which the exemption earlier granted on deemed utilization shall be taxed in the year of completion of the maximum period given for utilization, i.e three year period.
In the impugned case the facts demonstrate the assessee as having fulfilled the condition for claiming exemption in the impugned year by depositing the amount of net consideration in the capital gain account scheme of Bank before the due date of filing of return of income.
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The due date for filing of the return of income undisputedly was 31.07.2012. The assessee’s claim is that he had deposited net consideration in the capital gain account on 29.3.2012 and has demonstrated the same by filing his copy of bank account, from where withdrawal of the consideration for deposits in the capital gain scheme is reflected. Copy of the same was filed before us at page no.21 of the PB. The Revenue’s case is that since capital gain account itself was opened by the assessee on 17.5.2012, the deposits in the capital gain account scheme can be said to have been made by the assessee on the said date. Even going by the fact stated by the Revenue, the assessee has deposited the amount in the capital gain account within the time specified for doing so under the provisions of section 54F(4) of the Act, i.e before 31-07-2012. Therefore the assessee, we hold was entitled to exemption of its capital gain u/s 54F of the Act in the impugned year on the deemed cost of new asset ,being amount of net consideration deposited in capital gain account scheme of Bank. The denial of exemption for not actually utilizing the consideration for investment in new asset within the stipulated period ,as per the section, could have been done only in the year in which the three year period from date of capital gain expired.
Without prejudice to what is stated above, we find that as per the facts before us, the delay in investment is of a very short period of five months that too for reasons beyond the control of the assessee, the intention of the assessee being all along to buy the new asset within the stipulated period. Therefore denial of exemption for this reason makes it a denial purely for technical reasons without considering the overall facts and circumstances of the case demonstrating the true spirit of the transaction.
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The assessee has sold his property on 1.12.2011 and he was required to purchase a new residential house for claiming exemption under section 54F of the Act by 31.11.2013. The conveyance deed for purchase of new property has been executed five months later i.e. on 3.5.2014. It is not disputed that after depositing the sale consideration in his capital gain account scheme in May 2012, by June, 2013 the assessee had finalized the property for purchase and entered into an agreement to purchase the same also, which transaction was finally executed on 3.5.2014. This establishes his true intention of investing in the new property all along. The MOU for purchase of property clearly mentions that the occupants of the building in which a flat was purchased by the assessee ,had agreed to form and register a cooperative housing society which was still pending as on date of entering the MOU. That it was only in December, 2014, that the society was formed, and the Vendor was allotted share certificates, thus making his title to the property clear. And immediately thereafter, within three months of the formation of the society, the assessee got possession of his property and the entire consideration was also paid. These facts are not disputed by the Revenue.
Considering the above facts, there is no iota of doubt that the delay in registration of the new property was for reasons beyond his control. Therefore, we are in complete agreement with the assessee that the denial of exemption u/s 54 F in the present case is for a mere technical default in not getting the new property registered in his name within the stipulated time period of two years, as specified under section 54F of the Act, the consequent delay being minor delay of 5 months that too for reasons beyond the control of the
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assessee. The intention of the assessee all along was to invest in the new property well within the stipulated time and the delay was for reasons beyond his control and was too immaterial.
The reliance by the Ld.DR on the decision of the Hon’ble High Court of Bombay in the case of Rasiklal M Parikh (supra) is distinguishable on facts where the assesses reliance on an agreement to sell for purchase of a new asset for claiming deduction u/s 54F of the Act was found to be devoid of any merits since it was found that the floor where the flats were booked were not approved for construction as on date of entering into agreement to sell and therefore it was held that the assessee could not be said to have any title over such property to claim any investment thereon. In the present case there is no such legal impediment to the title of the property purchased the property very much belonging to the owner, the only hitch being registering a society for owning the property of all the fat owners for facilitating transfer of flats in the property.
Considering the entire facts and circumstances as above, we hold that the assessee is entitled in law to claim exemption of capital gains amounting to Rs.1,08,69,338/- under section 54F of the Act and direct the AO to allow the claim of the assessee. The ground of appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the Court on 31st August, 2022 at Ahmedabad.
Sd/- Sd/- (SUCHITRA R. KAMBLE) (ANNAPURNA GUPTA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad, dated 31/08/2022