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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY
Aforesaid appeal has been filed by the assessee challenging the order dated 18th December 2017, passed by the learned Commissioner (Appeals)–33, Mumbai, for the assessment year 2011–12.
The dispute in the present appeal is confined to reduction of assessee’s claim of deduction under section 54 of the Income Tax Act, 1961 (for short “the Act”) by an amount of ` 50 lakh.
2 Hansa Shah
Brief facts are, the assessee, an individual, filed her return of income for the impugned assessment year on 30th September 2011, declaring total income of ` 9,62,339. During the assessment proceedings, the Assessing Officer while verifying the return of income filed by the assessee found that the assessee in the relevant previous year has sold a flat jointly held with others and declared her share of capital gain at ` 55,82,426. However, she claimed deduction of the capital gain under section 54 of the Act towards investment made of ` 98,90,358, in purchase of a new flat. After calling for necessary details and examining them, the Assessing Officer noted that the investment of ` 98,90,358, made in purchase of new house included housing loan of ` 50 lakh availed from Citi Bank. Therefore, he called upon the assessee to explain why the housing loan of ` 50 lakh invested in purchase of new house should not be excluded from the deduction claimed under section 54 of the Act. Objecting to the proposed disallowance, though, the assessee submitted that the housing loan was not utilised for purchase of the new house, however, the Assessing Officer rejecting the claim of the assessee reduced the housing loan from the cost of new house and allowed the balance amount of ` 48,93,358 towards deduction under section 54 of the Act. Accordingly, he made an addition of ` 6,92,068 towards long term capital gain. Being aggrieved of the aforesaid addition, though, the 3 Hansa Shah assessee filed an appeal before the first appellate authority, the learned Commissioner (Appeals) sustained the addition made by the Assessing Officer.
The learned Authorised Representative submitted, the housing loan of ` 50 lakh taken from Citi Bank was not for purchase of the new house for which deduction under section 54 of the Act was claimed. He submitted, while purchase of new house was vide agreement dated 23rd September 2010, the housing loan of ` 1 crore was sanctioned by the Citi Bank in the joint name of the assessee and other co–owners on 21st January 2011, and the loan was disbursed to the assessee on 2nd February 2011. In this context, the learned Authorised Representative drew my attention to copy of sanction letter of the Citi Bank and the Bank Account showing disbursement of housing loan. The learned Authorised Representative submitted, by the time the housing loan was disbursed, consideration for new house has already been paid. In this context, the assessee drew my attention to Page–20 of the paper book where source of fund for financing the purchase of new house has been mentioned indicating payment of ` 75 lakh from sale proceed of the original asset. Thus, the learned Authorised Representative submitted, the housing loan taken from Citi Bank cannot be linked to the purchase of new house. Without prejudice to the aforesaid submission, the learned Authorised Representative
4 Hansa Shah submitted, even utilisation of housing loan in purchase of new house will not disentitle the assessee from claiming deduction under section 54 of the Act, as the only condition for availing deduction under section 54 of the Act is, purchase of new house has to be made within the stipulated period irrespective of the source of fund utilised in purchase of house. In this context, he relied upon the decision of the Tribunal, Mumbai Bench, in ACIT v/s Dr. P. S. Pasricha. The learned Authorised Representative submitted, the aforesaid decision of the Tribunal has been affirmed by the Hon'ble Jurisdictional High Court while dismissing Revenue’s appeal in of 2009, dated 7th October 2009.
The learned Departmental Representative relied upon the observations of the learned Commissioner (Appeals) and the Assessing Officer
I have considered rival submissions and perused materials on record. The only reason for part disallowance of deduction claimed under section 54 of the Act by the assessee is on the ground of alleged utilisation of housing loan availed from Citi Bank towards purchase of new house. It is relevant to observe, before the Assessing Officer as well as before learned Commissioner (Appeals) the assessee has submitted that the housing loan was not utilised for the purpose of 5 Hansa Shah purchase of the new house. Before me also, the assessee has produced the loan sanction letter of the Citi Bank as well as Bank statement to demonstrate that the housing loan was disbursed much after the purchase of new house by the assessee. In fact, the assessee has also explained the source of fund utilised in purchase of new house. From the material placed before me, it appears, the assessee along with others had purchased a new flat vide agreement dated 23rd September 2010. From the copy of the said agreement placed in the paper book it also appears that the total sale consideration of ` 2.50 crore was also paid to the vendors before or at the time of execution of the agreement. Thus, from the aforesaid facts available on record, prima–facie, it appears that the housing loan taken by the assessee was not utilised for purchase of the new house.
Even, assuming that the housing loan was utilised for the purpose of purchase of new house property, it needs to be examined whether by the reason of utilisation of housing loan in purchase of new house property, the assessee will not be eligible to claim deduction under section 54 of the Act. For this purpose, it is necessary to look into the provision of section 54 of the Act. On a careful reading of the aforesaid provision as a whole and more particularly sub–section (1) of section 54 of the Act, it becomes clear that the only condition which requires to be fulfilled is, one year before or two years after the date
6 Hansa Shah of transfer of the original asset the assessee must have purchased the new house property. In case, the logic of the Department that for availing deduction the consideration received by the assessee from sale of original asset has to be utilised for investment in new house property is accepted, the provision of section 54(1) becomes redundant because such a situation will never arise in case assessee purchases the new house property one year before the date of transfer of new asset. Thus, in such an eventuality the assessee can never utilise the capital gain in purchase of new house. Thus, on a plain interpretation of section 54(1) of the Act, it has to be concluded that if the assessee purchases a new house property one year before or two years after the date of transfer of original asset, it is entitled to claim deduction under section 54 of the Act irrespective of the fact whether money invested in purchase of new house property is out of the sale consideration received from transfer of original asset or not. The conditions of sub–section (2) of section 54 of the Act comes into play only in a situation where the assessee does not stick to the time limit provided under section 54(1) of the Act. Undisputedly, in the present case, the assessee has purchased the new house property within the stipulated period of two years from the date of transfer of original asset. That being the case, the assessee is eligible to avail deduction under section 54 of the Act. Accordingly, the Assessing Officer is 7 Hansa Shah directed to allow assessee’s claim of deduction under section 54(1) of the Act. Ground raised is allowed.
In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 05.10.2018