NANDLAL PRITAMDAS KISHNANI,NEW DELHI vs. ITO, WARD-61(2), NEW DELHI

Now, in regard to ground No.4 it comes up that the appellant claimed before the CIT(A) that the appellant has entered into the contract for the sale on 14.08.2008 and two payments of Rs. 5,00,000/- each has already been received on 14.06.2008 and 26.06.2008. At that point of time the circle rate for sale was Rs. 20,000/- per sq. mt. and the value of the sale consideration was Rs. 90,00,000/- as mentioned by the appellant and the AO has wrongly taken circle rate of Rs. 29,000/- which was w.e.f. 01.09.2008. Hence, the enhanced value u/s 50C should not have been taken by the AO. The appellant has also relied upon the amendment brought into the Act with effect from 01.04.2017 by the Finance Act, 2016, where 3 the date of 'Agreement to Sale' was to be taken for the purpose of sale consideration for circle rate and not the date of registration.

The findings of the AO and the submission of the appellant were considered by CIT(A) and the claim of the appellant that the circle rate of the property should not have been taken by the AO u/s 50C as on 01.09.2008 as the 'Agreement to Sale' was made in the month of August and part payment has already been received in June, has been rejected by CIT(A) and it was held that the amendment u/s 50C of the Act was brought into the statute by the Finance Act 2016 w.e.f. 01.04.2017 where a proviso was inserted in Section 50C which says that where the date of agreement and the date of registration for the transfer of the capital asset are not the same, the value adopted on the date of agreement may be taken for the purpose of computing full value of consideration. CIT(A) held this amendment to be prospective and also held that this is not a mandatory provision as ‘may’ is used and not ‘shall’, for the powers of AO, to invoke this proviso.

We are of the considered view that First Proviso to Section 50C as inserted by Finance Act 2016 w.e.f 01.04.2017, certainly applies to the present facts and circumstances as the agreement was executed prior to the amendment but with intention to seal the deal and transaction of payment of earnest money of Rs. Ten Lac, was by way of cheques. The Bank account statements filed in PB at page no. 36-38, corroborate the same. The retrospective application of this First Proviso, as been upheld by Hon’ble Madras High Court in CIT, Chennai Vs. Shri Vummudi order dated 28/09/2020, in TCA No. 329 of 2020, as relied by ld. AR. The CIT(A) has also fallen in error to hold that application is prospective.

The assessee during the course of assessment proceedings, furnished a revised computation of income claiming exemption u/s 54F for the investment made in the residential house property for Rs. 75,00,000/- and the deduction available to the assessee comes to Rs. 55,04,261/- against the deduction of Rs. 26,05,425/- as claimed by the assessee in his original return. Then while calculating of the deduction u/s 54F, AO has taken the investment in the new house at Rs. 20,53,350-, totally disregarding the investment in the residential house of Rs. 75,00,000/-. The Ld. AR has claimed that assessee u/s 54F was required to make investment in House Property before the due date of filing of return u/s 139(1) and had time to get the possession of the property within 2 years in case of purchase of property and in case of payment made u/s 54F falls short of the Sale Proceeds, the same can be kept deposited in Capital Gain Account to be utilized for the payment 7 of purchase of property. Here in the case of the assessee, the assessee has made the payment of Rs. 75 Lac before the filing of return u/s 139(1) and was not required to deposit the same in Capital Gain A/c & was not required to get the property registered or take possession before the due date of filing of return for the year under consideration, so as to claim deduction u/s 54F.

The assessee had invested in another property an amount of Rs.75,00,000/-. The payment was made by bank which can be very well verified from the attached bank statement (page no. 3 g of the paper book. It is submitted that the deduction u/s 54F should allowed with respect to the property in Gagan Vihar purchased before filing of return for Rs. 75,00,000. It is submitted that the deduction under section 54F cannot be disallowed merely on the basis of the fact that the registered deed as not produced.

After taking into consideration the facts and circumstances and the impugned orders, we observe that the AO had specifically mentioned in para 8 of the assessment order that the assessee had claimed to have purchased one residential house worth Rs.75 lacs and had contracted for construction of flat for Rs.54,40,770/- and that the assessee himself had asserted that the assessee can claim deduction u/s 54F of the Act on any one of them. This assertion of the assessee has been considered by the AO in para 10 by following observations:- “10. Further, the assessee has filed the proof of investment made in the residential property and exemption u/s 54F is allowable to the extent of 8 investment made in the new property and proportionate exemption is calculated in the following para.”

Still, the benefit of section 54F was extended to the assessee only with regard to investment in property to the extent of Rs.20,53,350/-. The CIT(A) had observed in para 6.4 that only an agreement to sell copy was filed with regard to purchase of Gagan Vihar property for Rs.75 lacs and when the assessee was asked to produce registered sale deed as evidence, the assessee took time on four occasions and, ultimately, the authorized representative of the assessee has mentioned that no registered sale deed can be produced by the assessee. Thus, considering the investment in Gagan Vihar property to be not supported by any documentary evidence and holding that agreement to sell has no evidentiary value after three months and even after a lapse of ten years i.e., from 2018, the assessee is only entitled to investment made in new property to the extent of Rs.20,53,350/- only and it was considered that as in original return deduction of only Rs.26,05,425/- was made this claim of purchase of residential house in Gagan Vihar for Rs.75 lacs is afterthought .

Now, before us again, the copy of agreement has been placed on record at pages 26 to 35 of the paper book. As we go through this agreement to sell, it comes up that the agreement was executed between Shri Lalit Kumar Malik as power of attorney holder of Sunil Kumar Malik and the assessee on 28.10.2008. It is a notarized agreement with two witnesses. It mentions that a sum of Rs.75 lacs

Thus, we are of the considered view that the ld. tax authorities below have fallen in error in not considering the agreement to sell as an investment in a house for the purpose of section 54F when whole of the amount stood paid and possession delivered. In this context, we rely the following propositions of law as submitted by the ld. AR:- (i). ITO Ward 32(4) vs. Smt. Swati Oberoi ITA No.4150/Del./20I8, Assessment Year : 2015-16 Delhi ITAT, where the Bench has held as follows; “13. In view of what has been discussed above, we are of the considered view that benefit of deduction u/s 54F of the Act cannot be denied to the assessee merely on the ground that conveyance deed has not yet been got registered particularly when the assessee is proved to be in possession of the property in question out of which she was already owner in possession of l/3rd share since 2008 after making a complete payment of the \ sale consideration to the vendors and has duly proved her possession over the property by way of electricity and water charges bills. So, we find no reason to interfere into the impugned order passed by the Id. C1T (A) allowing deduction to the assessee u/s 54F of the Act, hence appeal filed by the Revenue is dismissed. ” 10 Smt. Kondamma vs. The Income Tax Officer, Ward - 6 (2) (4), Bangalore, ITA No. 455/Bang/2019 Assessment Year : 2012-13, ITAT Bangalore where the Bench has held as follows; “In the present case, this is not in dispute that the assessee has made investment of Rs. 1 Crore for purchase of residential house and only the registered deed was executed after more than 4 years and the possession was also taken after more than 4 years but as per the judgment of Hon'ble Karnataka High Court, the assessee will not disentitled from claiming deduction u/s. 54F of the IT Act. Respectfully following this judgment of Hon'ble Karnataka High Court, we hold that assessee should be allowed deduction u/s. 54F to the extent of Rs. 70,84,063/- as claimed by the assessee because investment in purchase of a new residential house made by the assessee is of Rs. 1 Crore and it was made by the assessee on 30.06.2012 whereas the transfer of the original asset took placed on 19.09.2011. There is no dispute on these factual aspects because the same are noted by the AO also in para 14 of theassessment order and there is no observation of the AO that these facts are not correct. Hence we hold that deduction claimed by the assessee u/s. 54F is allowable and we delete the disallowance. ” (iii) Shri Basheer Noorullah Khan vs. The Commissioner of Income Tax (Appeals), Bangalore, ITA No. 575/Bang/2019 Assessment Year : 2013-14, where the Bench has held as follows; “In our considered opinion, as per the judgment of Hon’ble Apex Court rendered in the case of CIT Vs. Balbir Singh Maini (supra), the assessee has not become the owner of the property because there is no registered sale deed as executed by the vendor. But the judgment of Hon’ble Delhi High Court is not on this basis that the assessee buyer has become owner of the property in question even without a registered sale deed. Had this been the judgment of Hon'ble Delhi High Court, this judgment would be said to be bad in law after this judgment of Hon’ble Apex Court rendered in the case of CIT Vs. Balbir Singh Maini (supra), but the decision of the Hon’ble Delhi High Court is this that as per the requirement of section 54, the assessee buyer is not required to become absolute owner of the property in question. On this aspect of the matter, this subsequent judgment of Hon’ble Apex Court does not make difference because as per this subsequent judgment of Hon’ble Apex Court rendered in the case of CIT Vs. Balbir Singh Maini (supra), the assessee has not become the owner of the property in question because there is no registered sale deed executed by the vendor but as 11 per the judgment of Hon’ble Delhi High Court, becoming the owner of the property in question is not required for the purpose of section 54 of the IT Act. Section 54F of the IT Act is parametria with section 54 of the IT Act. Hence, we respectfully follow this judgment of Hon 'ble Delhi High Court and decide the issue in favour of the assessee. 8. In the result, the appeal filed by the assessee is allowed. ” 17. Thus we consider it an appropriate case to set aside the findings on issue of computation of capital gains to the files of A with directions to take into consideration the aforesaid conclusions of this Bench and complete the recomputation of the capital gains afresh. An opportunity of hearing be given to the assessee for the same.

Consequently the appeal be considered allowed for statistical purposes. Order pronounced in the open court on 23.07.2024. (G.S. PANNU) JUDICIAL MEMBER Dated: 23rd July, 2024. dk