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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: S/SHRI PRAMOD M. JAGTAP & T.R. SENTHIL KUMAR
आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण अहमदाबाद �यायपीठ अहमदाबाद �यायपीठ ‘C’ अहमदाबाद। अहमदाबाद �यायपीठ अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD (Conducted Through Virtual Court) ] ] BEFORE S/SHRI PRAMOD M. JAGTAP, VICE PRESIDENT AND T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.321/Ahd/2019 Assessment Year :2015-16 AniruddhRinki Gandhi DCIT (Intl.Taxn.) 14, Vaikunh Apartment Vs Baroda. Laxminarayan Co-op. Society Gotri Road, Baroda. PAN : BBNPG 1052 P अपीलाथ�/ (Appellant) �� यथ�/(Respondent) Assessee by : Shri Manish J. Shah, Advocate Revenue by : Shri V.K.Singh, Sr.DR सुनवाई क� तार�ख/Date of Hearing : 23/02/2022 घोषणा क� तार�ख /Date of Pronouncement: 28/02/2022 आदेश/O R D E R PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: This appeal is filed by the assessee against order dated 21.01.2019 passed by Ld.Commissioner of Income-tax (Appeals)-13, Ahmedabad [for short “Ld.CIT(A)] in Appeal No.CIT(A)- 13/Intl.Taxn./Ahd/75/2017-18 relating to the assessment year 2015-16.
Assessee’s grounds of appeal are as follows:
“On the facts and in the circumstances of the case the learned CIT(A) erred in restricting deduction U/s.54 at Rs.48,00,572/ as against claim of Rs.2,31,60,656 made by your appellant, Your appellant therefore in the interest of justice, the restriction of claim made by the CIT(A) to Rs.48,00,572/- as against claim
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of Rs.2,31,60,656 made by your appellant be directed to be allowed as claimed by appellant.”
Brief facts of the case is that the assessee is an individual and Non-Resident Indian [for short NRI]. For the Asst.Year 2015-16, the assessee has filed his return of income on 31.8.2015 and the same was revised by filing a Revised Return on 05.11.2015. Assessee has received a sum of Rs.2.40 crores against sale of property as per sale deed dated 2.12.2014 from Krupesh Patel and others. The payments were received in the following manner:
Amount (Rs) Ch.no. Date of credit in Bank 30,00,000 422148 07/07/2015 30,00,000 422149 07/07/2015 30,00,000 422150 07/07/2015 30,00,000 422151 07/07/2015 30,00,000 422152 12/10/2015 30,00,000 422153 12/10/2015 30,00,000 422154 12/10/2015 30,00,000 422155 12/10/2015
The assessee re-invested the sale consideration and purchased a residential flat for a sum of Rs.2,54,53,193/- which was an on- going project and possession of the flat vide NOC letter dated 2.8.2016 was given to the assessee. The re-investment made by the assessee by way of instalments as follows:
Paid Rs. Remark Amount Received Rs. 12000000 1,83,60,084 Upto 31/08/15 31/08/15 (Allowed by (Ext. 02/09/15) A.O.
ITA No.321/Ahd/2019 3 12/10/15 10/1 0/15 (on flooring) 3000000 616329 3000000 616329 28/12/15 ( On electric work) 3000000 616329 28/ 12/15 (on painting)
1348000 Stamp on Document (Febl6) 3896122 Other payments TOTAL 25453193
From the above two tables, it can be seen that the sale consideration received in installments has been re-invested in new property by the assessee, and also claimed deduction under section 54/54F of the Act. However, the assessee is required to file his Return of income under section 139 on or before 31.8.2015 and thereby he filed original return. As part of the sale consideration of the sale of the property was received on 12.10.2015, the assessee filed a Revised return claiming the entire benefit under section 54/54F of the Act.
The assessee’s case was selected for scrutiny assessment. The AO held that the assessee has made certain payments amounting to Rs.48,00,572/-with respect to purchase of new flat after the due date of filing of return of income u/s.139, and the same is not eligible for deduction under section 54/54F of the Act, and thereby determined total taxable capital gain and demanded taxes thereon.
Aggrieved against this assessment, the assessee preferred an appeal before the Commissionerof Income Tax (Appeals). The ld.CIT(A) confirmed the addition and the relevant part of the impugned order read as follows:
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“5.2 With regards to contention of Appellant that as consideration was received after due date of filing return of income, he could not invest such funds in a new properly. However, this contention of appellant cannot be accepted as appellant himself has admitted that balance Rs. 1,20,00,000/- is received on 12/10/2015 and still appellant has made investment only Rs.6,61,329/- on 10/10/2015 and rest of the investment house property was made in December 2015 and onwards which prove that even though sale proceeds were received in October 2015, funds were not used immediately but appellant waited and made investment made in span of 2 to 4 months. It is also observed that though appellant has filed original return of income on 31/08/2015 and at that entire funds were not received, appellant sum moto has filed revised return of income on 05/11/2015 and till that time, appellant has received entire sale proceeds and still appellant has not deposited funds in a separate capital gain scheme as envisaged in section 54/54F of the Act and non-deposit in such separate account clearly mean that appellant has failed to comply with specific provisions of the Act hence AO was correct in making disallowance u/s 54 of the Act.”
Further, Ld.CIT(A) relied upon judgment of the Bombay High Court in the case of Humayun Suleman Merchant Vs. CIT, 73 taxan.com 2 and few other judgments, and ultimately held that the assessee on the date of filing of revised return, entire sale consideration of the sale of the property was received by him but not deposited such consideration in separate capital gains account. Thereforethe AO was correct in making disallowance under section 54 of the Act proportionately for Rs.48,00,572/- thereby dismissed the appeal filed by the assessee.
Aggrieved with this appellate order, the assessee is in appeal before the Tribunal.
The Ld AR submitted that the lower authorities are legally not correct in restricting the relief to Rs.48,00,572/-. The CIT[A] erred in relying on the judgement of the Bombay High Court in the case of
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Humayun Suleman Merchant and whereas Karnataka High Court judgment in the case of CIT -Vs- K. Ramachandra Rao reported in [2015] 56 taxmann.com.163 is rightly applicable to the facts of the assessee. However there is no direct judgement by Jurisdictional High Court on this issue but jurisdictional ITAT Bench order dated 18-10-2016 in ITA NO.996/AHD/2104 in the case of Sanjay K Rana -Vs- ITO, the Hon’ble ITAT had occasion to consider both these judgements of Bombay High Court and Karnataka High Court and following the Apex Court ruling in the case of CIT -Vs- Vegetable Products Ltd [1973] 88 ITR 192, followed the ratio of judgement rendered by Karnataka High Court in the case of K. Ramachandra Rao and allowed the assessee appeal. The Ld AR pleaded to adopt the same principle in the present case and thereby allow the appeal of the assessee.
Per contra the Ld DR appearing for the Revenue supported the orders of the lower authorities and pleaded that they are well considered orders which does not require any interference and thereby requested to confirm the addition.
We have gone through records placed before us and perused orders of the authorities below. The fact that sale consideration of sale of the property was received by the assessee from 7.7.2015 to 12.10.2015, though property was sold on 02.12.20124. The assessee was required to file his return of income for the Asst.Year 2015-16 under section 139 of the Act on 31.8.2015, however, by that date the assessee has filed original return of income on 31.8.2015. Before 31.8.2015, the assessee had re-invested Rs.1,83,60,084/-in residential flat, and receipt of the balance consideration were reeived by the assessee only on 12.10.2015. The assessee has chosen to file
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a revised return under section 139(4) of the Act on 5.11.2015 claiming deduction under section 54/54F of the Act.
12.1. In our considered opinion the lower authorities have not appreciated the facts properly and followed the judgment of the Bombay High Court in the case of Humayun Suleman Merchant [cited supra] wherein the dates and facts are as follows:
29-04-95 Sale of Land for Rs.83,33,250/= 16-07-96 Agreement to Purchase Flat for Rs.69,60,000/= 17-07-96 Advance amount of Rs.10,00,000/= paid 23-10-96 2ndAdvance amount of Rs.10,00,000/= paid 31-10-96 Due date for filing of RoI u/s.139 01-11-96 3rdAdvance amount of Rs.15,00,000/= paid 04-11-96 RoI filed but balance amount not deposited in Capital Gains Account.
Thus the above case is factually not applicable to the present case in hand on the following reasonings - [a] Part [50%] Sale Consideration of Rs.1,20,00,000/= received by the assessee on 07-07-2015, however invested Rs.1,83,60,084/= on the purchase of new flat, which is not disputed by the assessee. Original RoI filed on 31-08-2015 is accepted and relief is given to the assessee.
[b] Balance [50%] sale consideration of Rs.1,20,00,000/= received by the assessee on 12-10-2015 only, reinvested substantial amount in the new flat and filed a revised RoI on 05-11-2015 claiming entire consideration for deduction u/s.54/54F.
[c] Unlike the Humayun Suleman Merchant case [cited supra] full consideration is not available with the assessee for reinvestment or to be deposited in Capital Gains account, before filing the RoI.
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12.2. Now let us look in to the Karnataka High Court judgement in the case of CIT -Vs- K. Ramachandra Rao held as follows: “… ... Sub-section (4) is attracted only to a case where the sale consideration is NOT utilized either for purchase or for construction of a residential house. It has no application to a case where the assessee invests the sale consideration derived from the transfer either in purchasing the property or constructing the residential house within the period stipulated in Section 54F(1). The proviso to Section 54F puts an embargo on the application of Section 54F to cases which are mentioned in the said proviso. That is to be eligible for the benefit under Section 54F(1) the assessee should not be owning more than one residential house other than the new asset acquired or he should not purchase any residential house other than the new asset within a period of one year after the date of transfer of residential asset or constructs any residential house other than the new asset within a period of three years after the date of transfer of the residential asset. In the entire scheme there is no prohibition for the assessee putting up construction out of sale construction received by such transfer of a site which is owned by him as is clear from the language used. It is open for the assessee to put up a residential construction or to purchase a residential house. It is not the requirement of law that he should purchase a residential site and then putup construction. Therefore, in the instant case admittedly the assessee has purchased a vacant site pri-31.3.2001. He sold the original asset on 27.8.2003 on which date he was already owning a site. In fact even before sale of the original asset he had started construction on such site by availing loan from the Bank. In terms of Section 54F(1) all investments made in the construction of the residential house of the said site within a period of one year prior to 27.8.2003 would be eligible for exemption under Section 54F(1). Similarly all investments in the said construction after 27.8.2003 within a period of three years therefrom is also eligible for exemption. Therefore, the argument that such investment in putting up a residential construction cannot be made on a site owned by him to be eligible for exemption is without any substance. Both the Appellate Authorities have rightly extended the benefit to the assessee and there is no error committed by them which calls for interference. …”[underlining emphasis is made by us]
Thus the Karnataka High Court held that the assessee having invested entire sale consideration in construction of a residential house within three years from date of transfer, he could not be denied exemption under section 54F on ground that he did not deposit said amount in capital gains account scheme before due
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date prescribed under section 139(1). Sub-section (4) of section 54 is attracted only in a case where sale consideration is not utilised either for purchase of/construction of a residential house.
12.3. Further research on the subject, we find a very useful judgement rendered by the Hon’ble Madras High Court in the case ofMs. Moturi Lakshmi -Vs- Income Tax Officer reported in [2020] 119 taxmann.com 488 (Madras) wherein it was held that where advance was paid by assessee to purchase residential flat prior to sale of capital asset, such advance was to be considered as part of purchase for purpose of section 54 of the Act. The Hon’ble High Court also referred its two more judgements on similar issues as follows:
“…. 6. The substantial question of law framed for consideration in this appeal has been answered in several decisions and the issue is no longer res integra. To answer the substantial question of law, we may have to refer to the two decisions of the Hon'ble Division Bench of this Court namely (i) in the case of CIT v. R. Srinivasan [2010] 235 CTR 588 wherein the question, which was framed for consideration, was as to whether the Tribunal was right in law in holding that the investment in the new asset for the purpose of deduction under Section 54F need not be out of sale consideration received on sale of the original asset. The question was answered in the following lines : "10. Section 54F provides option to the assessee to invest even within a period of one year before the date on which the transfer takes place. No such precondition to that effect is imposed by the provision. Only the Assessing Officer assumed that there is a precondition, which is not contemplated by the provision. Section 54F is clear, unambiguous and plain. It is only a mere presumption and assumption of the Revenue. It is well settled principle that taxing statute shall have to be interpreted on the basis of the language. The often quoted famous observation of Rowlatt,J in the case of Cape Brandy Syndicate v. IRC [(1921) 1 KB 64] are very relevant and at p.71, it has been held as follows: 'In a taxing statute, one has to look mainly at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no
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presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.' Section 54F encourages investment in residential house and the same is required to be interpreted in such a manner as not to nullify the object. Therefore, we are of the view that the assessee is entitled to the relief under section 54F and confirm the concurrent findings given by both the appellate authorities. The learned counsel appearing for the Revenue is also unable to furnish any material or evidence or case law or compelling reason to take a contrary view of the Tribunal. 11. For the foregoing reasons, we are of the view that the order of the Tribunal is in conformity with law. Under these circumstances, we are of the view that no question of law, much less substantial question of law, arises for consideration. Accordingly, the tax case appeal is devoid of merits and the same is dismissed." And (ii) in the case of C.Aryama Sundaram v. CIT [2018] 97 taxmann.com 74/258 Taxman 10/407 ITR 1 wherein one of the substantial questions of law framed for consideration was when capital gain arises from sale of building and/or land appurtenant thereto and a residential house is constructed within three years from the date of such sale, whether the cost of the new asset, which is eligible for set-off against capital gain, would include the cost of the land, if such land had been purchased three years prior to sale of the property from which capital gain arose.
12.1. By following the above judicial precedents from different High Courts, we are of the considered view that Sub-section (4) of section 54/54F is attracted only to a case where the sale consideration is NOT utilized by the assessee either for purchase or for construction of a residential house. This sub-section 4 has NO application to a case, where the assessee invests the sale consideration derived from the transfer either in purchasing the property within one year or constructing the residential house within three years period as stipulated in Section 54F(1). In the present case the assessee though registered the old property as per Sale Deed dated 02-12-2014 but received the sale considerations only on 07-07-2015 and 12-10- 2015 respectively. The assessee also reinvested the sale
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considerations immediate on the receipt of the same which is well within 3 years period in case of construction of a residential house/flat. Thus the question of deposit in Capital Gains account does not arise in this case. Therefore, we set aside the orders of both the lower authorities and direct the AO to delete the disallowance made of Rs.48,00,572/- and allow the entire claim of deduction to the assessee. Thus, the ground of assessee appeal is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 28th February, 2022 at Ahmedabad.
Sd/- Sd/- (PRAMOD M. JAGTAP) (T.R. SENTHIL KUMAR) JUDICIAL MEMBER VICE-PRESIDENT