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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI JOGINDER SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Manoj Kumar Aggarwal (Accountant Member): 1. These are set of two appeals-one each by revenue and another by assessee for Assessment Year 2009-10. Since, common issues are involved, we dispose-off both the appeals by this combined order. First, we take up revenue’s appeal for Assessment Year 2009-10 wherein revenue is aggrieved by the order of Ld. Commissioner of Income Tax (Appeals)-31 [CIT(A)], Mumbai dated 23/12/2013 qua granting of relief u/s 54 of the act to the assessee. ITA No. 1523/Mum/2014 2. Briefly stated, the assessee is a resident individual who e-filed its return of income for impugned AY on 30/09/2009 declaring total income of Rs.29,36,513/- which was picked up for scrutiny assessment u/s 143(3) vide Assessing Officer [AO] dated 30/12/2011 wherein total income was determined at Rs.1,16,47,580/- after making certain disallowances. The assessee sold one house property situated at ‘Florantine’ on 28/08/2008 for Rs.105.25 Lacs , the cost of acquisition of which was Rs.14,76,011/-. Against Long Term Capital Gain thus arising for Rs.90,48,989/-, the assessee claimed deduction u/s 54 for Rs.82,66,780/- on account of investment in ‘new flat’ situated at ‘Evita’ and invested the balance gains in RECL bonds u/s 54EC. The AO noted that the agreement for the purchase of ‘new flat’ was dated 12/07/2004 and as such the same was much beyond the time limit of one year as prescribed under Section 54 of the Act. The AO further observed that approx. 90% of investment in new flat was made before 31/03/2007 and final possession payment was made on 19/07/2007 and both these dates were also beyond the prescribed period of one year as provided in Section 54 which makes assessee ineligible to claim the exemption u/s 54. AO also noted various clauses as to the terms of possession and concluded that the even the possession of the new flat was Shri Fazal Alauddin Sabuwala Shri Farid Sabuwala Assessment Year: 2009-10 already offered to the assessee well before 19/07/2007 and hence, the assessee was not eligible to claim the said deduction from any angle. The assessee relied upon various judicial pronouncements and submitted one letter from the builder to assert that the physical possession of the new flat was given only on 01/10/2007 and hence the factum of possession alone makes assessee eligible to claim section 54 deduction notwithstanding the time of actual investment made by the assessee in the new flat. Rejecting the contentions of the assessee, AO denied the said the deduction to the assessee which was assailed before First Appellate Authority. The assessee raised similar contentions and contended that he had acquired the flat only on 01/10/2007 and before that he had a mere right to acquire the flat. CIT(A) after noting ratio of various judicial pronouncements and considering assessee’s contentions, came to conclusion that date of possession was material to determine the moment at which purchase could be said to have been completed. As the possession was obtained within one year before date of sale of the property, the assessee was entitled for the said deduction. The decision of the Ld. CIT(A)has been assailed by the revenue before us.
The Ld. DR while drawing our attention to the statutory provisions and schedule of investment made by the assessee in the new flat contended that full payment to acquire the new property was made much before the prescribed period of one year before the date of sale and mere postponement of obtaining the actual possession of the new flat do not entitle the assessee to claim the impugned deduction, which he was not entitled to claim otherwise. The assessee did not make a single rupee investment in the prescribed period of one year and even the final payment was made much before and as per the terms of the agreement, the assessee obtained deemed possession of the property well before making the final payment. All the events took place beyond prescribed period of one year and therefore, the deduction claimed by the assessee only upon the strength of self serving possession document issued by the builder is not tenable in law. If this proposition is accepted then merely by timing the possession of the new property as per assessee’s own convenience and whims, the assessee could extend the deduction benefit to any indefinite period in future which would defeat the ITA No.1523/Mum/2014 Shri Fazal Alauddin Sabuwala Shri Farid Sabuwala Assessment Year: 2009-10 very purpose of the deduction provision. Therefore, the CIT(A) was not justified in allowing the impugned deduction to the assessee. Per contra, Ld. Counsel for assessee [AR] asserted that the possession was obtained only on 01/10/2007 and as this date fall within the prescribed period of one year, the Ld. CIT(A) rightly allowed the claim of the assessee after due consideration. Reliance was placed on following judicial pronouncements:- (i) CIT Vs. Beena K.Jain [Bombay High Court 75 Taxman 145 (Bom)] (ii) Bastimal K.Jain Vs ITO [Mumbai Tribunal order dated 08/06/2016] (iii) V.M.Dujodwala Vs.ITO (Mumbai Tribunal 36 ITD 130) 4. We have heard the rival contentions and perused relevant material available on record including the cited case laws. The basic facts are not in dispute. The only dispute to be settled before us is whether the assessee could claim deduction u/s 54 merely by obtaining the possession within the prescribed time period of one year before the date of sale of the Long Term Capital Asset notwithstanding the fact that not even a single rupee was invested by the assessee within that time window? At this juncture, it would be prudent to reproduce the relevant portion of Section 54 which reads as follows:- “54. Profit on sale of property used for residence.- (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset , being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head “Income from house property” (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,— ………… (Bold and underline, emphasis being supplied by us) Thus, to claim deduction under Section 54, the assessee is required either to purchase or to construct a new residential house. The time window to purchase the property has been prescribed as ‘within one year before or two years after the transfer of Long Term Capital Asset’. In the present case, the date of sale is 28/08/2008 and accordingly the time window to Shri Fazal Alauddin Sabuwala Shri Farid Sabuwala Assessment Year: 2009-10 purchase the new property was 28/08/2007 to 28/08/2010. We find that the assessee has made the final payment of the new flat on 19/07/2007. As per terms of the ‘Agreement for sale’ dated 12/07/2004, the final payment was to be made upon possession being offered by the builder. It could be clearly seen that all these events fall outside the prescribed time window. The assessee is building its claim only on the strength of one general letter dated 11/08/2008 issued by the builder. Although we are conscious that the provisions of Section 54, being beneficial provision, should be construed liberally, yet the same could not be stretched beyond a particular extent and could not be construed in a manner so as to grant relief to the assessee to any extent, which he is not otherwise entitled to. Even if for a moment, if we consider the date of possession as 01/10/2007 as per the builder’s letter, we find that mere obtaining the possession within the prescribed time window could not be equated with the term ‘purchased’ as used in Section 54 rather the term ‘purchased’ signify much more than that and includes multiple events such as signing and registration of agreement, making payment, documentary possession, obtaining actual physical possession, execution of transfer deeds, registration of deeds etc. Hence, finding strength in the argument of Ld. DR, we answer the above question in negative and accordingly inclined to allow the appeal of the revenue and no hesitation in holding that the assessee was not entitled for the said deduction. In most of the case laws relied upon by the assessee, we find that the possession was coupled with some investment by assessee which fell within the prescribed time window and all those decisions have been rendered on the peculiar facts and circumstances of the case and keeping in the view the overall factual situation, conduct of the assessee and surrounding circumstances and hence distinguishable. In the case of CIT Vs. Smt. Beena K.Jain (supra), our jurisdictional Hon’ble Bombay High Court was faced with a situation where the majority of payment and possession fell within the prescribed time window and hence the same is clearly distinguishable. Rather this case only fortifies the stand taken by us that the expression ‘purchased’ constitutes much more event than a mere possession. Hence, after due consideration of statutory provisions and ITA No.1523/Mum/2014 Shri Fazal Alauddin Sabuwala Shri Farid Sabuwala Assessment Year: 2009-10 facts and circumstances of the case, we are of the opinion that the assessee was not entitled for the said deduction. We held so.
This is assessee’s appeal for AY 2009-2010 where the assessee is aggrieved in similar circumstances by the order of Ld. First Appellate Authority order dated 18/10/2013. The assessee was denied exemption u/s 54 for an amount of Rs.90,48,919/- claimed by him against investment in new property. AO making similar observation as in ITA No. 1523/Mum/2014 denied the said claim of the assessee which was assailed before Ld. CIT(A). The CIT(A) while noting various discrepancies in the possession letter issued by the builder and noting the possession & payment dates, affirmed the stand of the Ld. AO vide its order dated 18/10/2013. The same has been assailed before us. As the facts and circumstances are similar except for amount and minor variations, we have already decided this issue in favour of the revenue in ITA No. 1523/Mum/2014. Following the same, we dismiss the appeal of the assessee and affirm the stand taken by Ld. First Appellate Authority. In nutshell, the appeal of the revenue is allowed and that of assessee is dismissed. 6.
Order pronounced in the open court on 1st February, 2017 Sd/- Sd/- (Joginder Singh) (Manoj Kumar Aggarwal) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 01.02.2017 PS:- Pooja K.
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त(अपील) / The CIT(A)