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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by Revenue under Section 253 of Income-tax Act is directed
against the order of ld. CIT(A)-28, Mumbai dated 06.05.2016 for
Assessment Year 2012-13. The Revenue has raised the following grounds
of appeal:
"On the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that the assessee has obtained possession of the under construction flat within three years of the transfer of the original capital asset and hence, is entitled for deduction u/s. 54F of the deduction without appreciating the facts that- (i) The assessee had not only obtained allotment of the new residential property on 06.08.2011, which is prior to the date of transfer of the original long term capital asset, but also had paid stamp duty and registration charges thereon prior to the transfer of the said asset. (ii) It has been held inter alia, in the following decisions that where assessee had booked a house with builder prior to date of transfer of original long term capital asset, the assessee was not entitled to claim deduction u/s. 54F in respect of cost of new flat-
ITA No. 4983 Mum 2016-Shri Abhay Ramesh Kumar Agarwal
(a) Farida A. Dungerpurwala vs. ITa, 67 SOT 208 (Mum), (b) Smt. Ushaben Jayantilal Sodhan vs. ITA, 149 ITD 1 (Ahmedabad), and (c) ACIT vs. Sagar Nitin Parikh, (ITA No. 6399/Mum/2011) dated 03.06.2015. (iii) The Board vide its Circular Nos. 471 dated 15.10.1986 and 672 dated 16.12.1993 has explained that to qualify for deduction u/s. 54F of the Act, in respect of the investment for construction of property, the crucial date is the date of allotment of flat, as the allottee gets title to the property on the issuance of the allotment letter and the payment of instalments is only a follow-up action and taking the delivery of possession is only a formality." 2. "The appellant prays that the order of the A.O. should be restored and order of the CIT(A) should be set aside."
At the outset of hearing, the ld. Authorized Representative (AR) of the
assessee submits that the grounds of appeal raised by Revenue is covered
in favour of assessee and against the Revenue in assessee’s own case in
assessee’s appeal against the impugned order of CIT(A) in ITA No.
3718/Mum/2016 dated 24.01.2018. On going through the order of
Tribunal, the ld. DR for the Revenue agreed that the grounds of appeal
raised by Revenue is also covered by the decision of Tribunal in assessee’s
own appeal against the impugned order of CIT(A) in ITA No.
3718/Mum/2016.
We have considered the contention of both the parties and have gone
through the orders of authorities below and the order passed by Tribunal in
ITA No. 3718/Mum/2016 dated 24.01.2018. For appreciation of fact and
completeness of this order, the order passed by Co-ordinate Bench is
extracted below:
ITA No. 4983 Mum 2016-Shri Abhay Ramesh Kumar Agarwal
“2. The short facts of the case are as under: The assessee has shown long term capital gains on sale of land being long term of Rs.1,80,01,574/- and claimed deduction under section 54F of the Act. The date of sale of the original asset i.e. Shikrapur Land at Pune is 3.08.2011 and the sale consideration was of Rs.1,90,00,000/-. The assessee has entered into agreement with Marvel Landmark Pvt. Ltd. on 21.11.2009 for acquisition of a residential house in Pune. The same was to be constructed as per the terms of the agreement under clause 5(b) and the possession was to be handed over on or before 31.12.2011. The assessee has made various payments aggregating to 1,82,57,229/- between the date of agreement and date of filing of the return on 27.07.2012. Thus, the assessee has invested entire capital gain for acquisition of new residential house. The Assessing Officer (hereinafter referred to as the AO) disallowed the entire claim but the Ld. CIT(A) has allowed the claim of payment to the extent of Rs.65,98,925/- for the period of 27.07.09 to 06.08.10 including Rs.55,52,000/- payment made towards residential house property to the builder and Rs.10,16,925/- , Rs.30,000/- towards stamp duty and registration charges respectively.
The assessee is in appeal before us for not allowing the deduction under section 54F on the ground that Ld. CIT(A) has allowed only the payment which was made after the date of transfer of capital asset i.e. for the period from 08.08.11 to 20.07.12 but did not allow the payment made prior to the transfer of the original assets. During the course of hearing the Ld. A.R. submitted that the similar issue is covered by the decision of Mumbai ITAT in the case of Kishore H. Galaiya vs. ITO (2012) 24 taxmann.com 11 (Mum).
The Ld. D.R. relied upon the orders of the Revenue authorities.
We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that the Ld. CIT(A) has granted the deduction under section 54F up to Rs.1,51,34,250/- and rest of the amount of Rs.28,67,234/- was not qualified for 54F on the ground that section 54F mandates that hole of sale consideration has to be invested in new residential house and amount not so invested has to be invested in specified assets. We find that the similar issue had come up before the Tribunal in the case of Mustansir I Tehsilder vs. ITO in ITA No.6108/M/2017 wherein the Tribunal has held as under:
ITA No. 4983 Mum 2016-Shri Abhay Ramesh Kumar Agarwal
“10. Section 54 of the Act provides the condition that the construction of new residential house should be completed within 3 years from the date of transfer of old residential house. According to Ld A.R, section 54 is silent about commencement of construction and hence commencement of construction can precede the date of sale of old asset. In the instant case, the assessee had booked the flat much prior to the date of old flat. We notice that the Hon'ble Karnataka High Court has held in the case of CIT Vs. J.R.Subramanya Bhat (supra) that commencement of construction is not relevant for the purpose of sec. 54 and it is only the completion of construction. The above said ratio was followed in the case of Asst. CIT Vs. Subhash Sevaram Bhavnani (2012)(23 taxmann.com 94)(Ahd. Trib.). Both these cases support the contentions of the assessee. Accordingly, for the purpose of sec. 54 of the Act, we have to see whether the assessee has completed the construction within three years from the date of transfer of old asset. In the instant case, there is no dispute that the assessee took possession of the new flat within three years from the date of sale of old residential flat. Accordingly, we are of the view that the assessee has complied with the time limit prescribed u/s 54 of the Act. Since the amount invested in the new flat prior to the due date for furnishing return of income was more than the amount of capital gain, the requirements of depositing any money under capital gains account scheme does not arise in the instant case. Further, the Hon'ble High Court has held in the case of K.C.Gopalan that there is no requirement that the sale proceeds realised on sale of old residential house alone should be utilised.
In view of the above, we are of the opinion that the assessee is entitled for deduction of full amount of capital gains u/s 54 of the Act, as he has complied with the conditions prescribed in that section. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to allow the deduction u/s 54 of the Act as claimed by the assessee.”
Respectfully following the same, we find that in this case the Tribunal has held that if the construction of new residential house is completed within three years from the date of old residential house and section 54 is silent about commencement of construction. Hence, the commencement of construction can precede the date of old assets. In this case, the date of sale of original asset i.e. Shrikarpur land at Pune is 30.08.2011 and assessee has entered into agreement with marvel land for acquisition of residential house on 21.1.2009 and possession was handed over on 31.12.11. Therefore, assessee has made payment prior to three years also. Therefore, the Ld. CIT(A) has not granted 54 deduction which includes maintenance charges to the builders cannot be allowed but we find that in the case of Bina K. Jain 75 taxman 145 wherein it is held that the maintenance charges also include for purchase of premises. We find that in this case the details of payments are as under: Total Cost Rs. 4
ITA No. 4983 Mum 2016-Shri Abhay Ramesh Kumar Agarwal
Cost of new Flat as per 2,06,86,250 Agreement Stamp Duty 10,16,960 Registration Fees 31,100 Legal Fees 3,940 Service Tax & VAT on 9,90,176 construction (8+9+15) Reimburs. Of TDS payable u/s 45,393 194IA (11+16) Cost of Marble Flooring 6,06,661 differential Total 2,33,80,480 Add: Maintenance and Facility Mgmt. 8,71,000 charges Total Cost 2,42,51,480
The assessee has made various payments aggregating Rs.1,82,57,229/- between the date of agreement and the date of filing of the return on 27.07.2012, which is exceeding the capital gains of the original asset. We find that all the legitimate expenditure for stamp duty, registration, service tax, VAT and flooring expenses included for acquiring the said flat is allowable and as per section 54 of the Act, the entire capital gain was invested for acquisition of new residential house under the construction by payment to the builder prior to date of filing the return of income as allowable under the provisions of section 54F. Therefore, we allow the same.
In the result, appeal of the assessee is allowed.
Considering the decision of Co-ordinate Bench in assessee’s own case for
same Assessment Year wherein assessee filed appeal against the impugned
order of ld. CIT(A). We do not find any merit in the grounds of appeal
raised by Revenue.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on this 28/08/2018.
Sd/- Sd/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER 5
ITA No. 4983 Mum 2016-Shri Abhay Ramesh Kumar Agarwal
Mumbai, Date: 28.08.2018 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4.The concerned CIT 5. DR “F” Bench, ITAT, Mumbai 6. Guard File
BY ORDER, Dy./Asst. Registrar ITAT, Mumbai