SHRI UDAY SOOD,NEW DELHI vs. ITO, NEW DELHI

Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 26.03.2014 declaring total income of Rs. 14,57,120/-. The income comprised of salary, long term capital gain on sale

The assessee replied that he has sold the residential property on 21.08.2012 and earned net capital gain of Rs. 1,45,80,180/-. To avail benefit of section 54F of the Act, he entered into an agreement to purchase a flat in Lotus Boullward Project of Cloud and Projects Pvt Ltd on 27.09.2012 for a consideration of Rs. 1,52,14,375/-. Payments for the same were made from time to time as per the demand from the builder within a period of two years after the date on which the transfer took place as stipulated u/s 54F of the Act. The assessee however, admitted that he could not utilize the whole of the capital gain before filing of the return as the demands from the builder were staggered nor could he deposit the same amount in the

However, the A.O was not satisfied with the explanation given by the assessee. According to him, the assessee has claimed deduction u/s 54F of the Act which is not admissible since the assessee had sold a residential house property and deduction u/s 54F of the Act is admissible in respect of capital gain arising on capital assets other than residential one. He, therefore, asked the assessee to explain as to why investment made after the due date of filing of return u/s 139(1) of the Act may not be taxed as per the provisions of the I.T. Act.

The assessee replied that he has purchased a house property within the time allowed under the law and in respect of which documentary evidence were also filed. Deduction u/s 54F of the Act has been claimed in the return in accordance with the provisions of law. It was stated that construction of flat in Lotus Boullward Project of Cloud & Projects Pvt Ltd is complete and is now ready for possession. It was further submitted that there are several judicial decisions which permit the assessee to avail the deduction in identical circumstances. Therefore, the assessee is entitled to deduction as claimed in the return.

In appeal, the ld. CIT(A) upheld the action of the A.O for which the assessee is in appeal before us with the following grounds:

The ld. counsel for the assessee strongly objected to the order of the A.O which has been upheld by the ld. CIT(A). He submitted that the assessee has filed his return of income on 26.03.2014 declaring total income of Rs. 14,57,120/- wherein capital gain of Rs. 1,45,80,180/- was declared on account of sale of house property on 21.8.2012. Referring page 2 of the assessment order, he drew the attention of the Bench to the payments made towards purchase of the flat amounting to Rs. 1,35,16,645.00 as per agreement dated 27.09.2012. He submitted that the assessee has made payment of Rs. 81,72,207/- till 10.07.2-013 i.e. prior to 31.07.2013 which is due date of return u/s 139(1) of the Act which the A.O has allowed and not the amount of Rs. 1,35,16,645/- which the assessee has paid. Referring to the decision of the Hon'ble Gauhati High Court in the case of Rajesh Kumar Jalan reported in [2006] 286 ITR 274, he submitted that the Hon'ble High Court in the said decision has held that the assessee can fulfill the requirement of section 54 of depositing the unutilized portion of the capital gain on sale of residential property in notified scheme upto the expiry of time limit for filing return u/s 139(4) of the Act.

Referring to the decision of the Hon'ble Karnataka High Court in the case of Fathima Bai Vs. ITO [2009] 32 DTR 243 [Kar], he submitted that the High Court in the said decision has held that as the assessee having utilized the entire capital gains by purchasing a house property before the extended due date u/s 139(4) of the Act, is eligible for exemption u/s 54 of the Act. He submitted that similar view has been taken by the Hon'ble Karnataka High Court in the case of Smt. Vrinda P. Isaac reported in [2011] 64 DTR 376.

Referring to the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Kuldeep Singh reported in 270 CTR 561, he submitted that the Hon'ble High Court in the said decision has held that the word ‘purchase’ used in sub-section (2) of section 54 is not restricted or confined to registered sale deed or even possession but has wider connotation. Thus,

He, however, submitted that the Hon'ble Bombay High Court in the case of Humayan Suleman Merchant Vs CCIT in ITA No. 545/MUM/2002 order dated 18.08.2016 has taken a contrary view and has held that only the amount invested/utilized for the purpose of construction of house property before the due date of filing of the return u/s 139(1) only is entitled for exemption. He submitted that since there is no adverse decision of the Hon'ble jurisdictional High Court, therefore, in view of the decision of the Hon'ble Supreme Court in the case of vegetable product reported in 88 ITR 192, the decision which is in favour of the assessee should be followed. He submitted that since the assessee has paid an amount of Rs. 1,35,16,000/- before the filing of the return u/s 139(4) of the Act, therefore, the said amount should be allowed as deduction u/s 54 of the Act.

As regards the allegation of the A.O that the assessee had given the money to his wife as alimony and then borrowed the money from her towards investment, the ld. counsel for the assessee submitted that the only

Referring to the decision of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd Vs. CIT reported in 196 ITR 188 he submitted that the Hon'ble Supreme Court in the said decision has held that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. Since a provision intended for promoting economic growth has to be interpreted liberally, the restriction on it, too, has to be construed liberally so as to advance the objective of the section and not to frustrate it. He also relied on various decisions and submitted that the amount paid upto the date of filing of return should be allowed as deduction.

The ld. counsel for the assessee, in rejoinder, referring to the decision of the Hon'ble Karnataka High Court in the case of Smt. Vrinda P. Isaac [supra] submitted that investment made by the assessee being within the time specified u/s 139(4) of the Act is eligible for exemption u/s 54 of the Act. Therefore, in the instant case also, the payments made upto the date of filing of return u/s 139(4) of the Act is eligible for deduction.

We have considered the rival arguments made by both the sides, perused the orders of the A.O and the ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has sold the house property for a consideration of Rs. 1,70,00,000/- on 21.08.2012. After

The A.O in the body of the assessment order has allowed deduction u/s 54 of the Act at Rs. 81,72,207/- which has been upheld by the ld. CIT(A). It is the submission of the ld. counsel for the assessee that the amount paid for purchase of the flat amounting to Rs. 1,35,16,645/- which is paid within a period of two years from the date of sale of the house and which is paid before the due date of filing of return u/s 139(4) of the Act should be allowed as deduction. We find force in the above argument of the ld. counsel for the assessee. A perusal of the various decisions cited by him shows that the assessee is entitled to deduction u/s 54 of the Act on the amount paid upto the date of filing of return u/s 139(4) of the Act. Those

Admittedly, there is no decision of the Hon'ble jurisdictional High Court on this issue. It is the settled proposition of law that when there are two views on a particular issue and there is no decision of the Jurisdictional High Court on that issue, then the decision which is in favour of the assessee should be adopted. Since the assessee in the instant case has made payment of Rs. 1,35,16,645/- before the due date of filing of return u/s 139(4) of the Act, therefore, we are of the considered opinion that the assessee is entitled to deduction u/s 54 of the Act to the extent of Rs. 1,35,16,645/-. Payment of the above amount is not doubted. Therefore, it is immaterial as to from where the assessee has obtained the money and paid the amount. In this view of the matter, we hold that the assessee is entitled to deduction u/s 54 of the Act of Rs. 1,35,16,645/- as against Rs. 81,72,207/- allowed by the A.O. Accordingly, Ground of appeal Nos. 1 and 2 are partly allowed. In other words, the assessee gets relief of Rs. 53,44,438/- as against Rs. 64,07,973/- as per grounds of appeal Nos. 1 and 2. Thus the above grounds are partly allowed.

Ground No. 3 is in relation to levy of interest u/s 234A, 234B and 234C of the Act.

After hearing both the sides, we are of the opinion that charging of interest under the above provisions are mandatory and consequential in nature. Therefore, the above ground by the assessee is dismissed.

In the result, the appeal of the assessee is partly allowed Order pronounced in the open court on 25.04.2017.