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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
The Assessee has filed this Appeal against the Order dated 13.1.2016 of the Ld. Commissioner of Income Tax (Appeals)-I, Gurgaon on the following grounds:-
That on the facts and in the circumstances of the case and in law, the assessment order passed by the Ld. AO and order
passed by the Ld. CIT(A) is bad in law.
2.That on the facts and in the circumstances of the case and in law, the Ld. AO and Ld. CIT(A) erred in disallowing the deduction under section 54F of the Act amounting to INR
11,33,45,140 by treating the purchase of new residential flat as a case of “ construction” and not “purchase” on the ground that the payment was made by the Appellant in instalments to the builder for the flat.
3.Without prejudice to the above, even if the said property purchased by the Appellant is treated as a construction for the purpose of granting exemption under section 54F of the Act, relief under Section 54F should be available as the construction completed within the stipulated time period as provided under the provisions of sections 54F of the Act.
4.Without prejudice to the above ground, on the facts and circumstances of the case and in law , the Ld. A.O and Ld. CIT
(A) have erred in not allowing the deduction u/s 54F for the amount [paid upto the limit for filing of the return of income provided u/s 139(4) of the Act i.e 31/03/2013 and not only upto the date of filing of original return u/s 139(1) of the Act.
That on the facts and circumstances of the case, the AO has erred both in facts and in law in initiating penalty proceedings under section 271(1)© of the Act.
That on the facts and circumstances of the case, the AO has erred both in facts and inl aw in charging interest under section 234B and 234C of the Act.
The above grounds of appeal are mutually exclusive and without prejudice to each other.
The appellant craves leave to add, alter, amend, vary or rescind any of the above grounds either before or at the time of hearing in the interest of natural justice.
The brief facts of the case are that the assessee is a medical practitioner who has filed his return of income on 30/07/2011 which was subsequently revised on 05/11/2011. The assesee had earned Capital gain to the tune of Rs. 29,09,60,100/- on 14/09/2010 in the previous year relevant to the assessment year under consideration. A part of this capital gain was not offered for tax purposes by claiming deduction u/s 54F on the ground that the capital gain amounting Rs. 14,67,21,892/- was invested in a property 809,19th – 20th Floor , Building No. 8, Magnolias, DLF Golf Course Road Gurgaon; rest of the amount was offered for taxation. The case of the assessee was 3 selected for scrutiny. The A.O. completed the assessment wherein out of the total claim for exemption u/s 54F amounting to Rs. 14,67,21,892/-, he allowed a deduction of only Rs. 3,33,76,752/- and disallowed Rs. 11,33,45,140/- and assessed the income of the assessee at RS. 26,56,56,260/-. Against the assessment order, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 13.1.2016 has dismissed the appeal of the assessee.
Ld. counsel for the assessee lead us through the facts of the case. He stated that it is a matter of record that the assessee entered into Apartments Buyers Agreement on 19.01.2010 with DLF Universal Ltd. for purchase of a semi finished apartment as per the specification in para 1.1 thereof (page 136 of the paper book filed ). This apartment buyers agreement was a sequel to the earlier application made by the applicant herein on 30.11.2009 before DLF Universal Ltd. agreeing to the terms and condition as set out in the application. In para 3 of the said Apartment Buyers Agreement ( page 144 of the paper book filed ) the amount of Rs. 40 lakhs paid as part payment at the time of application is mentioned. The possession of the said flat was taken on 21.01.2013. According to him the artificial water tight compartment / pigeon hole construction of the provision created by the AO and endorsed by the CIT(A) on different time limits for purchase and construction should not be made applicable for interpreting a beneficial piece of legislation enacted with the object of promoting investment in residential house in India by an individual / HUF. As per him in facts of a given case there can be only purchase of residential house or construction of a residential house and therefore in facts of such cases the time framed prescribed u/s 54F would be applicable but at the same time there is no specific debarment under this section for the assessee to go in for purchase of a property ( land or dilapidated house property ) and consequent construction there upon. That in such a scenario both the time limit prescribed in both the situations i.e. purchase and construction would be applicable and available to the assessee. As per him in the present case the appellant initially went for booking of raw apartment and made payment for the same in the impugned property, which was before the arising of the capital gain and therefore all payments made wihin a period of one year prior to the capital gain would be applicable in his case. And that subsequently the appellant has made payment in installments for construction of the said residential property to the builder and therefore all payment made for such construction , either to the builder or to other parties directly by the appellant would also qualify to be payments for the construction of residential house and for which the period of 3 years from the date of arising of capital gain would be available for deduction.
He relied on the following case laws, quoting extensively from the judgements and head notes:
• B.B. Sarkar vs. CIT 132 ITR150 Calcutta • Commissioner of Income Tax vs. H.K. Kapoor (234 ITR 753)
Allahabad.
• Commissioner of Income Tax vs. SambandamUdaykumar 19 taxmann.com 17 Karnataka • Commissioner of Income Tax vs. Ashok Kumar Ralhan (46 taxmann.com 416)
• Commissioner of Income Tax vs. Bharti Mishra 41 taxmann.com 50 Delhi • Commissioner of Income Tax, Bangalore vs. Smt. B.S.
Shanthkumari 60 taxmann.com 74 Karnataka • RustomHomiVakil vs. Assistant Commissioner of Income (69 taxmann.com 42 ) – ITAT Mumbai 3.1 In reply the CIT DR basically relied on the orders of the lower authorities. He emphasized the need to read the two limbs of Section 54F separately i.e. the time limit for purchase and for construction ,for any harmonious understanding of the section . He also laid emphasis on the fact that the agreement talks of semi- finished apartments and therefore any investment thereto is in the nature of the construction contract. He relied on the CBDT circular 672 dt 16th dec 1993,quoted by the the A.O in the order, which would be applicable in to the facts of the case to treat as construction.
We have considered the matter carefully and find the interpretation of conditions of section 54F by the lower authorities as restrictive and not in consonance with existing judicial opinions.
According to the AO the asseseee entered into an agreement with DLF only for construction of a Flat. Since as per the AO Section 54F delineates the issues of construction of new assets and purchase of new assets and provides separate time limits for the two, it is important to identify the actual course of action taken. Since he held the agreement to be “ Construction " in nature, consequently as per law, he held that the assesee gets three after the sale of the original assets and no time before the sale. He further curtailed the time available to the assessee by holding that as per Section 54 F (4), in case the new assets has not been purchased by the due date of filling of the return and money had not been deposited in the SBI Capital Gain Scheme, the assesee forfeits his claim for any subsequent investment of the type under consideration. The above referred first two grounds are related to A.O's stand listed at S. No 1 above. The main ground for the Assessing Officer to take that stand was that at the time of booking in 2009 the construction of the flat had not started, booking is for semi furnished flat, instalments were being paid periodically and the completion of flat has not taken place even till the end of F.Y 2012-13. According to him mere mention of the word sale in the agreement with the builder does not lead to the inference of purchase, when the entire sequence of the events proves that it is construction of flat. The CIT upheld the contention of the A.O holding that the interpretation of the A.O is justified with respect to the time limits for purchase and construction of new house and holding the transaction in question as construction. It is noted that in acquiring a residential property, while there could be straight purchase or construction scenerios , but most likely there would invariably be the combination of elements of purchase and construction. In this case the assessee has entered into an agreement dated 19/01/2010 for purchase of semi-finished apartment. So clearly there is an agreement to buy a structure, which can be used if assesee so wants as a house as it is or use it after due up gradation to make it as per his requirements .The expenditure incurred for completing the finishing obviously cannot be segregated from the act of purchasing semi-finished apartment. So it is difficult to say that what he purchased initially was not a residential house. In fact the subsequent act of construction merges into the act of purchase. As held by on Hon’bleCalcullta High Court B.B. Sarkar vs. CIT (Supra) "Section 54 does not contemplate two kinds of relief; it only contemplates fulfilment of two alternative conditions. If both the conditions are satisfied within the time stipulated, the assessee does not become disentitled to the relief if the other conditions are fulfilled. If a floor is constructed to the new house or if it is renovated it remains as one house only, especially when there is no evidence that two different houses bearing two different municipal numbers were constructed.”
As held therein:
“It is, therefore, not a question of reading the word "or" as conjunctive, but to carry out the intention of the Legislature, it may be necessary to read "and" in place of "or" and vice versa in situations of this type”.
4.1 Similarly Hon’bleAllahbad High Court in the case of CIT vs HK Kapoor (Supra) has held that it was immaterial whether a construction of a new asset started before the sale of old asset on which the capital again accrued, which will even otherwise take care of the restrictive interpretation of the lower Authorities.
4.2 Similar view was taken by the jurisdictional high court in the case of CITvsBharti Mishra (Supra).
4.3 Hence considering the totality of circumstances it is clear that in transacting with M/s DLF universal ltd. for acquiring the flat(s) in question, the assesee has entered into both types of agreement i.e.both purchase and construction and both these are essentially running concomittantly. And the claim for the deduction has been restricted by the assesee to the investment done within the specified periods of one year prior to the date of sale of original assets to the three years from the date of sale of shares. Moreover the claim within the capital gains earned by the assesee. Hence the assessee would be entitled for deduction u/s 54F for the entire amount claimed. Hence the ground no 2 and 3 of Appeal are allowed.
4.4 As regards ground number 4 is concerned, this ground of appeal arises on account of A.O not allowing the claim of Investment/Expenditure incurred in" constructing" of residential house as a new asset, for the period beyond 01/08/2010 on the ground that such Investment / expenditure would have qualified for it, only if the capital gains on shares had been deposited in Capital Gain Scheme.The CIT(A) has upheld the A.O’s view.He rejected the assesse's stand that due date referred to in the concerned section included the due date for filing of the return u/s 139 (4 ) as well.
4.5 Before us, the learned AR drew our attention to a number of case laws to argue that the due date of filing of return u/s 139, referred to in section 54F(4) is available for the entire extended period, when such a return can be filed i.e. 31/03/2013 and not restricted upto 31/07/2011. He cited the following judgements to convas his point.
• Commissioner of Income Tax vs. Ms. JagritiAggarwal (15 taxmann.com 146 ) – Punjab and Haryana - • Commissioner of Income Tax vs. K. RamchandraRao (56 taxmann.com 163 ) – Karnataka – • Pr. Commissioner of Income Tax vs Shankar LalSaini(2018, 89 taxmann.com 235- Rajasthan 4.6 The CIT DR on the other hand relied on the orders of the lower authorities. He particularly emphasised that , in any case , the return filed by the assessee on 5/11/2011 was u/s 139(5) and not 139(4 ) and hence was not related to the due date of filing of the return. Since we have decided the main issues in dispute in favour of the assessee, hence, this ground need not be adjudicated.
4.7 Ground No. 5 regarding initiation of penalty proceedings is premature at this point of time and does not require adjudication.
4.8 Ground No. 6 regarding charging of interest u/s 234B and 234C are consequential .
In the result, the appeal of the assessee is allowed.
Order pronounced on 21/12/2018.