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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal filed by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-32, Mumbai [in short CIT(A)], in appeal No. CIT(A)-32/IT-578/ITO-23(1)(2)/2015-16 dated 10.01.2017. The Assessment was framed by the Income Tax Officer, Ward-23(1)(2), 2 Mumbai (in short ITO/ AO) for the A.Y. 2013-14 vide dated 25.02.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeals of assessee is against the order of CIT(A) upholding the action of the AO in disallowing the claim of deduction under section 54 of the Act disallowing the long term capital gain invested in purchase of residential house. For this assessee has raised the following three grounds: - “Ground No. 1 The LD CIT (A) in facts and in law has erred in upholding the additions so made by the AO a sum of Rs 55, 97,269 to the total income of the Assessee by disallowing the benefit claimed by the assessee u/s 54 on account of LTCG of the Income Tax Act, 1961. Ground No 2. The LD CIT (A) in facts and in law has erred in upholding the additions so made by the AO a sum of Rs 55, 97,269 to the total income. of the Assessee by disallowing the benefit claimed by the assessee u/s 54 on the grounds that the assess has not complied with the provisions of the section 54, of the Act, which is not correct hence the addition so made deserves to be deleted.
Ground No 3., .
The LD CIT (A) in facts and in law has erred in upholding the additions so made by the AO a sum of Rs 55, 97,269 to the total income of the Assessee 3 by disallowing the benefit claimed by the assessee u/s 54 on the grounds that the assess has not complied with the provisions of the section 54, of the Act. The LD CIT (A) failed to appreciate that the Section 54 is section which was incorporated to give maximum benefits to the assessee therefore should have the most liberal interpretation. Hence in order to serve the end of the justice the additional so made should be deleted.”
Briefly stated facts are that the AO noted that the assessee has sold the property on which capital gain earned is dated 12.03.2013 and this property was purchased by the assessee on 29.04.1991. The assessee purchased another house property and claimed to have invested the capital gain arising out of the above sale of property and claimed deduction under section 54 of the Act dated 21.11.2011. According to AO, the assessee has purchased new asset on 21.11.2011 and sold the property on 12.03.2013. According to AO, the assessee has to purchase new asset within the specified time under section 54 of the Act to claim deduction and the assessee has to purchase the property between 12.03.2012 to 12.03.2015. According to AO, the assessee has actually purchased the new asset on 21.11.2011 and in no way it can be said that the assessee has invested the amount of capital gain in the new asset one year before or two after the date on which transfer of long term capital asset took place or has a period of three years after that date, constructed one residential house in India. Hence, according to AO the assessee has not fulfilled the conditions prescribed under section 54 of the Act and he disallowed the claim of deduction. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) also confirmed the action of the AO by observing as under: - 4 “As per the section 54 of I.T. Act, the appellant has to purchase the new asset within the specified time frame of 12.03.2012 and 12.03.2015 i.e. one year before or two years after the date of transfer to long term capital asset which is 12.03.2013 in the case of the appellant. But the appellant had purchased a new asset on 21.11.2011 and claimed deduction for capital gain. The appellant had not purchased the new asset or invested the capital gain amount in the new asset within the specified time. Since the appellant had not complied with the provisions of sec. 54 of the I.T. Act to get deduction under this section. I uphold the order of the AO; the appeal is dismissed.”
Aggrieved, assessee came in appeal before Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, the learned Counsel for the assessee argued that the AO and CIT(A), both have not understood the issue in proper perspective and decided the issue just on the basis of conjunctures and surmises. He stated that both the authorities went on the premise that the assessee has entered into an agreement to purchase a new house more than one year before the date of sale of old house without appreciating the facts that the assessee has actually entered into an agreement to purchase a house that was to be built. It was contended by the learned Counsel for the assessee that the assessee has entered into an agreement to buy a house to be constructed on 05.09.2011 by paying a sum of ₹ 10 lacs and agreement was entered on 21.12.2011 i.e. a registered agreement. The assessee sold the old house on 12.03.2013 by executing sale deed and handing over possession to the buyer for a sum of ₹ 60 lacs. The assessee 5 invested out of this sum of ₹ 58.80 lacs on 16.03.2013. The dates and events narrated herein below :-
“important dates 05.09.2011 ₹ 10 Lakh paid towards New Hounse 21.12.2011 Registered agreement to purchase New House to be constructed, jointly by the appellant and her brother Mr. Gopal Paranjape for ₹ 1,28,80,000/-, Appellant paid 68,80,000/- and her brother paid 60,00,000/- As per the agreement the builder was to hand over the possession on 31.03.2013. (para 9 at page 13 of pager book] [annexed clear page along with this note] 23.10.2012 MOU signed to sell her Original House for ₹ 60L 11.03.2013 ₹ 60L received towards original House.
12.03.2013 Original House, Sale deed executed and possession handed over on 17.03.2013. 16.03.2013 The appellant paid 58,80,000/- to the builder towards New House.
(all payment date wise details are at page 8 of CIT(A) order] 24.01.2016 possession of new house received.”
6 5. We noted from the above dates, which are undisputed as the learned CIT DR, has not controverted these dates and facts, it is clear that the assessee sold the house on 11.03.2013 and received this amount on account of registration of sale deed and handing over of possession on 12.03.2013. The assessee paid a sum of ₹ 58.80 lacs on 16.03.2013 to the builder towards new house as the new house was originally booked by paying a sum of ₹ 10 lacs on 05.09.2011. In view of the above dates, we noted that the assessee has entered into an agreement to buy a house to be constructed on 05.09.2011 and agreement for purchase was registered on 21.12.2011. The assessee sold the old house and the entire capital gain proceeds were paid to the builder towards the purchase of new house i.e. an amount of ₹ 58.80 lacs on 16.03.2012. It means that the assessee received a sum of ₹ 60 lacs towards sale of original house on 11.03.2013 and paid a sum of ₹ 58.80 lacs towards purchase of a new house on 16.03.2013 i.e. within a week time from the date of transfer. We are of the view on the very first principle of the provisions of section 54 of the Act the assessee is entitled for the claim of deduction and the following four conditions are to be met with:-