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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI D.T. GARASIA
Per D.T. Garasia, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 29.08.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.
This appeal is time barred by 31 days. The Ld. A.R. submitted an affidavit wherein the assessee has explained the reason for delay in filing the appeal is that the assessee is a non-working lady and has been currently having regular income from investments only though during the AY 2012-13 she earned Long Term Capital Gains from sale of ancestral property. As such she does not have much knowledge about tax laws and commercial matters. On receipt of the 2 Smt. Shalini Kulshrestha order passed by CIT(A) for the A.Y. 2012-13, though she was contemplating filing of further appeal, it took her to consult another counsel whom she approached through a family friend and in the process, filing of the appeal papers got delayed.
Since the reason for filing the appeal by delay of 31 days has been explained by the assessee, I condone the delay and proceed to decide the appeal.
The only ground in this appeal is regarding confirming the denial of deduction under section 54. The short facts of the case are as under: The assessee had sold an ancestral property at Kanpur with five other co-owners vide transfer deed dated 07.09.2011 for a total consideration of Rs.9,98,00,000/-. While calculating the long term capital gain on transfer of the said property, assessee has shown total sale consideration of Rs.1,76,00,000/- as per share. Further, she also claimed exemption u/s 54 of the Act on this entire capital gain for purchase of two residential houses.
Matter travelled to the Ld. CIT(A) and the Ld. CIT(A) has allowed the claim on one residential house.
During the course of hearing, the Ld. A.R. has submitted the decision of Hon’ble Bombay High Court in the case of CIT vs. Devdas Naik (2014) 366 ITR 0012 (Bom). The Ld. A.R. has also relied upon the decision of Hon’ble Karnataka High Court in the case
3 Smt. Shalini Kulshrestha of CIT vs. Khoobchand M. Makhija (2014) 223 Taxman 0189 (Kar) wherein the Hon’ble Karnataka High Court considering the facts of the case has held that assessee has sold one house and he has purchased 2 proeprties in the name of his both sons and the High Court has held that the language of section 54 of the Income Tax Act before amendment in 2015 was that assessee should be invested capital gain in residential house. It is only after the amendment to section 54F of the Income Tax Act by Finance (No.2) Act, 2014 which was replaced by the words “One residential house”, therefore, appeal may be allowed.
On the other hand, the Ld. D.R. relied upon the order of Revenue Authorities.
I have heard the rival contentions of both the parties. The basic facts of the case are as under: The assessee sold an ancestral property at Kanpur namely ‘Nawal Niwas’ under agreement dated 23rd November 2011 for a consideration of Rs.998 lakhs and since share of assessee was 17.64%, she received a sum of Rs.176 lakhs. Assessee had inherited rights in the said property through will. Following is the calculation of Long Term Capital Gains and the exemption u/s 54 claimed by the assessee:- Computation of Income (showing (Amount in Rs.) computation of Capital Gains) Capital Gains Sale of Residential Property 1,76,00,000 Less: Expenses incurred on Sale 1,00,000 1,75,00,000 Less: Indexed Cost of Acquisition
4 Smt. Shalini Kulshrestha Gross Long Term Capital Gain 17,60,708 Less: Exemption claimed u/s 54 (Rollover in 1,57,39,292 New Property) 1,57,39,292 Net Long Term Capital Gains chargeable to NIL tax ii) In respect of LTCG of Rs.157.39 lakhs that accrued to assessee, Assessee was entitled to claim exemption u/s 54. Accordingly assessee placed a deposit of Rs.157.39 lakhs with Oriental Bank of Commerce under Capital Gains Accounts Scheme 1988, on 15th May 2012 i.e. before due date of filing of return for A.Y. 2012-13 u/s 139(1). Thereafter, assessee utilised the money placed in Designated Bank Account in acquiring 2 flats, 1st flat in June 2012 and 2nd flat in August 2013. iii) The details of the residential properties invested in by the assessee are as follows:- Sr. Date of Complete address of the property Total purchase cost N Agreement including stamp duty/registration & brokerage (Rs.) Flat No.B-2202, 22nd Floor, Rushi 1. 14/06/2012 1,22,35,600 Heights, Riddhi Gardens, Filmcity Road, Malad (E), Mumbai – 400 097 Flat No.503, 5th Floor, Wind Flower, 2. 07/08/2013 40,00,000 Mantri Park, Dindoshi Filmcity Road, Goregaon (E), Mumbai-400 065 Total purchase cost of both the properties 1,62,35,600
I find that assessee is entitled for deduction of two residential property houses on the ground that there is a direct judgment of Hon’ble Karnataka High Court in the case of CIT vs. Khoobchand M. Makhija (supra) wherein the facts of the case are that in A.Y.
5 Smt. Shalini Kulshrestha 1996-97 LTCG of Rs.284.60 lakhs accrued to assessee against which it purchased one residential house being property No.623 for Rs.76.92 lakhs. Assessee also entered into agreement for purchase of property No.739 for Rs.75 lakhs and paid Rs.44 lakhs against the same and he also deposited Rs.170 lakhs in designated bank account before filing the return and paid Rs.31 lakhs for the 2nd property. Balance unutilized in designated account was offered to tax in A.Y. 1999-2000 as per section 54(2). The Hon’ble High Court has held that one residential house is sold out of sale consideration, it was open to the assessee to purchase a big residential house as to accommodate both his sons, in terms of section 54(1), he would have been entitled to the benefit of the said section. However, he has purchased two houses in order to accommodate his both the sons. Therefore, the Hon’ble Karnataka High Court has held that acquisition of two residential houses by assessee out of capital gain falls within the purchase of a residential house and 54(1) was allowed. I find that the language of section 54F of the Act was amended in 2015 and assessee should invest capital gain in residential house. It is only after amendment by Finance Act, 2014 which came into effect that one residential house situated in India. Thus, the amendment is prospective and not retrospective. There is a direct decision of Hon’ble Gujarat High Court in the case of Leena Jugalkishor Shah vs. ACIT in tax appeal No.483 of 2006 decided on 14.06.2016 wherein the Hon’ble Gujarat High Court has held as under: "There was no condition in section 54F of the Income-tax Act at the relevant time
6 Smt. Shalini Kulshrestha that the capital gain arising out of transfer of capital asset should be invested in a residential house situated in India. The language of section 54F of the Income-tax Act before its amendment was that the assessee should invest capital gain in a residential house. It is only after the amendment to section 54F of the Income-tax Act by the Finance (No. 2) Act, 2014, which came into effect with effect from 1.4.2015 that the assessee should invest the sale proceeds arising out of sale of capital asset in a residential house situated in India within the stipulated period. Thus on a plain reading of section 54F of the Income-tax Act before its amendment by the Finance (No. 2) Act leaves no room for any doubt that the assessee should restrict her investment within India or outside India. The only condition was that the assessee should invest in a residential house. The Tribunal has wrongly interpreted section 54F of the Income-tax Act by holding that the assessee should purchase the residential house situated in India. Prior to amendment to section 54F of the Act, the only condition stipulated was investment in a residential house. When the section 54F of the Income-tax Act was clear and unambiguous, there is no scope for importing into the statute the words which are not there. Such importation would be not to construe but to amend the statute. If there is any defect in the Act, it can be remedied only by the legislation and not by judicial interpretation.”
Therefore, respectfully following the same, I allow the claim.
In the result, appeal is allowed.
Order pronounced in the open court on 30.01.2018.