ACIT 26(1), MUMBAI vs. GULSHAN H BHAKTIANI, MUMBAI

This appeal by Revenue under Section 253 of Income-tax Act is directed against the order of ld. CIT(A)-38, Mumbai dated 21.10.2016 for Assessment Year 2012-13. The Revenue has raised the following grounds of appeal:

Brief facts of the case are that the assessee filed his return of income for Assessment Year 2012-13 on 30.09.2012 declaring total income at Rs. 2,71,38,184/-. The assessment was completed on 23rd March 2015 under section 143(3) of the Act. In the return of income, the assessee claimed exemption under section 54F of Rs.2,11,15,556/- on account of Long Term Capital Gain resulting from the sale of office premises at Worli Mumbai, and invested the sale proceed in acquisition of residential property at Project Yoo Pune. The Assessing Officer while passing the assessment order disallowed the claim of exemption under section 54F holding that the assessee has not fulfilled the conditions prescribed under section 54 of the Income tax Act, by purchasing new property within two year from the date of sale or constructed within three years from the date of transfer of asset as the assessee has not received the possession of the said flat nor the construction was completed. On appeal before learned Commissioner (Appeals) the assessee was allowed exemption under Mum 2017 - Gulshan H Bhaktiani section 54F. Hence aggrieved by the order of ld. Commissioner (Appeals) the Revenue has filed present appeal before us.

None appeared on behalf of assessee despite sending of notice of hearing of the appeal for two occasions. Therefore, we deem it appropriate to decide the appeal on the basis of submission of learned DR for revenue and the material available on record. We have heard the submissions of learned Departmental Representative (DR) of the revenue and perused the material available on record. The learned DR for the revenue supported the order of Assessing Officer. The learned DR for the revenue submits that the assessee has shown to have purchased residential property in Pune. The Assessing Officer during the assessment proceeding issued notice under section 133(6) to the Builder from which the assessee purchased the new residential flat, requiring date of sanctioned plan from Pune Municipal Corporation, the commencement certificate, completion certificate, copy of occupation certificate of the project wherein the assessee purchased the residential property. The Builder vide its letter dated 16th March 2015; furnished the details required by Assessing Officer. The Builder informed the Assessing Officer that project was under construction and did not receive completion certificate from the Pune Municipal Corporation. It was informed that the project was likely to be completed on July 2015. Therefore, the assessee was not entitled for exemption claimed by him. 3 ITA No. 623 Mum 2017 - Gulshan H Bhaktiani

We have considered the rival submission of the parties and have gone through the orders of authorities below. We have also deliberated on the various case laws cited by lower authorities in their orders. In the return of income the assessee claimed Long Term Capital Gain on sale of property at Worli. The assessee claimed exemption under section 54F for Rs. 2,11,15,556/-on account of investment of Rs. 3,26,10,375/-for purchase of new residential property within stipulated period of time after sale of property in a residential property. The assessing officer disallowed the claim of assessee on the ground that possession of the flat has not been issued by the assessee within the specific time and claim under section 54F was disallowed.

Before learned Commissioner (Appeals) the assessee contended that he has paid substantial amount of cost of construction to the builder. In fact the assessee has invested the entire capital gain received by him in purchase of new residential unit within the stipulated period. The assessee also relied upon various decisions of High courts and the Tribunal. The learned Commissioner (Appeals) while following the decision of jurisdictional High Court in case of CIT versus Mrs Hilla JB Wadia(1993)

The Hon’ble High Court in Mrs Hilla JB Wadia (supra) held that when the assessee had transferred the property in which she had a half share and which was being used for the purpose of her residence to the society. The question was whether she could be said to have constructed a house property for the purpose of her residence within a period of 2 years from that date. Section 54 will have to be construed in the context of the manner in which such residential properties are now being constructed in a City like Bombay where, looking to the cost of the land, cooperative housing societies are being formed for constructing a building in which fiats are allotted to members. This must also be viewed as a method of constructing residential tenements. What one has to see is whether the assessee had acquired a right to a specific flat in such a building which was being constructed by the society and whether she had made a substantial investment within the prescribed period which would entitle her to obtain possession of the flat so constructed and in which she intended to reside.

The learned Commissioner (Appeals) also relied upon the Circular No. 471 of CBDT, however, the same was with regard to the flats constructed by Delhi Development Authority (DDA), and however, CBDT vide circular No. 672 dated 16th December 1993, clarified that the same benefit should be extended for acquisition of house or flats on allotment under similarly schemes. The learned Commissioner (Appeals) also held that the assessee has invested the amount in acquisition of new residential 6 Mum 2017 - Gulshan H Bhaktiani property, the builder has not completed the construction, the claim of deduction under section 54/54F cannot be denied to the assessee, as there is delay in completion of project by builder, which is beyond the control of the assessee for which the assessee should not be penalized. On the above observation the learned Commissioner (Appeals) allowed relief to the assessee. We have noted that the learned DR failed to bring any contrary facts or law to our notice to take any contrary view. Therefore, we do not find any illegality or infirmity in the order passed by learned Commissioner (Appeals), which we affirm. Hence, the grounds of appeal raised by the venue are dismissed.

In the result, appeal of the Revenue is dismissed.