SATYAVATI ARVIND KOTIAN,MUMBAI vs. INCOME TAX OFFICER-26(2)(2), MUMBAI

This is an appeal filed by the assessee against the order of CIT(A)- 46, Mumbai dated 20/01/2017 for A.Y.2011-12 in the matter of order passed u/s.143(3) of the IT Act wherein following grounds have been taken by the assessee:- 1-The Ld. C.I.T., (Appeals), Mumbai erred while not allowing the benefit of Rs. 22,65,274.00 which too was paid by the appellant. l-(a)The Ld. C.I.T., (Appeals), Mumbai erred while not appreciating the bonafides of the appellant while disallowing the claim of Rs.22,65,274.00. 2-The appellant craves leave to add, alter, amend and / or rescind any ground of appeal during the course of hearing.

The Assessing Officer stated that assessee had computed capital gains at Rs.32,52,854/- and the same was claimed as exemption u/s.54 of the Act. During the assessment proceedings, the Authorised Representative submitted that the assessee had invested in under construction house property at Matoshree Towers, Shivaji Park, Mumbai. However, on verification, the Assessing Officer noted that the assessee had booked a flat at Matoshree Towers and paid Rs.14 lacs but agreement for sale has not been executed. The Assessing Officer held that since the assessee paid Rs.14 lacs, and no agreement for sale has been executed, the right / title / interest over the property lie with the builder. Therefore, the assessee was not allowed deduction u/s 54 of Rs.32,52,854/- and the same was added to the total income of the assessee.

By the impugned order, CIT(A) confirmed the action of the AO against which assessee is in further appeal before me.

I have considered rival contentions and carefully gone through the orders of the authorities below. From the record, I found that the assessee enjoyed income from .capital gain. The assessee sold a house property No. A/506, Juhu Irla Parimal,C.H.S. Andheri, Mumbai for a consideration Ms. Satyavati Arvind Kotian of Rs.51,00,000.00. The said property was purchased for a consideration of Rs.14,00,000.00 vide agreement dated 18.2.2000. In the return of income the assessee had disclosed Rs.32,52,854.00 as capital gain and the same has been claimed as exempt. The assessee had invested Rs.14,00,000.00 in under construction house property at Matoshree Towers, Shivaji Park, Mumbai. As no agreement to sale was executed the Assessing Officer disallowed the entire claim of Rs.32,52,854.00 and assessed the income at Rs.41,35,980.00 which includes Rs.8,11,333.00 [salary] which was disclosed.

I also found that till the date of filing the return of income the assessee had paid the builder an amount of Rs.11,43,435.00. The municipal authorities stopped the construction activity of the builder in which the assessee had intended to take the flat. The balance was kept in fact by the assessee in his bank account ready. When the builder informed the assessee after a gap of 42 months that he has got all the clearances / permission from the competent authority, he immediately made the payment of Rs.22,65,274.00 from 17/02/2015 to 03/10/2016. As the circumstances were beyond his control he did not make the payment within the time allowed u/s.54, but the fund kept deposited in the bank amounting to Rs.22,65,274.00. He did not have any malafide intention.

Learned AR relied on the decision of the Co-ordinate Bench in case of Shri Satosh P. Malhotra in order dated 29/11/2017 wherein the Tribunal held as under:-

As per our considered view Sec.54 is an incentive provisions and it should be interpreted and applied liberally as held by the honourable Supreme Court in the case of Bajaj Tempo Ltd. Vs. C.I.T. (196 ITR 188). The honourable Supreme Court also held in the case of C.I.T. Vs. Gwalior Rayon Silk Manufacturing Co. Ltd. (196 ITR 149) that the expression used in the taxing statutes would primarily be understood in Ms. Satyavati Arvind Kotian the sense in which it is harmonious with the object of the statute to effectuate the legislative intention.

Furthermore Hon’ble Supreme Court in case of Sanjeev Lal 365 ITR 389 observed as under:- “Income-tax on the long-term Capital gain. The intention of the Legislature or the purpose with which the said provision has been incorporated in the Act is also very clear that the assessee should be given some relief. Though it has been very often said that common sense is a stranger and an incompatible partner to the Income-tax Act and it is also said that equity and tax are strangers to each other, still this court has often observed that purposive interpretation should be given to the provisions of the Act. In the case of Oxford University Press v. CIT [2001] 3 SCC 3591 this court has observed that a purposive interpretation of the provisions of the Act should be given while considering a claim for exemption from tax. It has also been said that harmonious construction of the provisions which subserve the object and purpose should also be made while construing any of the provisions of the Act and more particularly when one is concerned with exemption from payment of tax. Considering the aforestated observations and the principles with regard to the interpretation of statute pertaining to the tax laws, one can very well interpret the provisions of section 54 read with section 2(47) of the Act i.e., the definition of "transfer", which would enable the appellants to get the benefit under section 54 of the Act.”

Respectfully following the proposition of law laid down by Hon’ble High Court and Supreme Court as stated above, we do not find any merit in the action of AO for declining assessee’s claim of exemption u/s.54 of the IT Act.

It is clear from the above decision that amount invested in property as well as kept in bank account even though not in the capital gain tax account should be allowed as exemption deduction u/s.54F. Merely not keeping the amount in capital gain tax and keeping the same in the bank account and utilizing the same within the statuary period will not disentitle the assessee for claim of deduction u/s.54F. In the instant case before me, I found that assessee has already paid Rs.11.43 lakhs for booking of Ms. Satyavati Arvind Kotian the flat and the remaining payment was made when the builder has got clearance from the competent authority. Accordingly there is no reason to disallow Rs.11.43 lakhs paid by assessee towards booking of flat. Accordingly, AO is directed to allow the same as exempt u/s.54F. We direct accordingly.

In the result, appeal of the assessee is allowed in part in terms indicated hereinabove.