ITO vs. R. SRINIVAS,

O R D E R Per Shri Jason P. Boaz, A.M. : This appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals), Mysore Dt.13.9.2013 for Assessment Year 2008-09. The assessee has also preferred Cross Objections in respect of the impugned order of the learned CIT (Appeals). 2. The facts of the case, briefly, are as under :-

1. The CIT (Appeals) erred in giving relief to the assessee in ITA No.383/Salary/CIT(A)-V/12-13.

2. In this case, the assessee did not file the return of income voluntarily, but, he filed it only after issue of a notice under Section 148.

3. Only when it was noticed during scrutiny proceedings that the assessee received Rs.1.25 Crores on relinquishment of right in the property at Sy. No.97 & 98 of Hoodi Village, KR Puram Hobli, Bangalore, the assessee put forth his claim for deduction under Section 54 / 54F.

4. The due date of filing of return for A.Y. 2008-09 was 31.7.2008, whereas the commencement of construction of the building as claimed by the assessee was 1.5.2009.

5. In order to avail of the benefit under Section 54(1) and (2), the assessee was bound to deposit the amount in a scheme framed by the Central Govt. The assessee had failed to adhere to the scheme. Therefore, the relief claim was denied by the Assessing Officer. The CIT (Appeals) relying on the decision of ITAT, Bangalore Bench in the case of Nipun Mehrotra Vs. ACIT (297 ITR-AT-110) allowed relief to the assessee by allowing the claim under Section 54F, considering the return filed under Section 139(4).

6. The assessee ought to have deposited the money within the due date of filing of return of income under Section 139(1). The conclusion drawn by the CIT (Appeals) regarding the expiry of due date of filing of return of income under Section 139(4) cannot be accepted.

7. The other decision relied upon by the assessee during appellate proceedings is in the case of Smt. Fatima Bai Vs. ITO, Ward 5(4), Bangalore in (KHC). In the above case, SLP was not filed before the Apex Court only because of the prescribed monetary limits.

8. A scheme has been devised by the legislature to grant relief in accordance with Section 54(1) and (2) of the IT Act, 1961. The same has to be followed strictly. The failure to comply with the same would not entitle the assessee to claim exemption.

C.O. No.69/Bang/2014 Such compliance is mandated by the provisions and a substantial question of law would arise.

C.O. No.69/Bang/2014 The learned Departmental Representative was heard in support of the grounds raised (supra) and submitted that the learned CIT (Appeals) while granting relief, to the assessee under Section 54F of the Act, the provisions of sections 54(1) and 54(2) of the Act have not been properly and strictly applied. It was submitted that in order to avail the benefit of exemption under Section 54F of the Act, since the assessee commenced construction of the new property only on 1.5.2009, the assessee ought to have deposited the amount of capital gains in the Capital Gains Account as per the Scheme framed by the Govt. on or before 31.7.2008, being the due date for filing the return for Assessment Year 2008-09 under Section 139(1) of the Act. The learned Departmental Representative vehemently argued that the conclusion of the learned CIT (Appeals), to allow the assessee's claim for exemption under Section 54F of the Act by considering the expiry of the due date for filing the return of income, as 31.3.2010, as per the provisions of section 139(4), was erroneous. The learned Departmental Representative submitted that in view of the above arguments, the order of the learned CIT (Appeals) be reversed and that of the Assessing Officer, rejecting the assessee's claim for exemption under Section 54F of the Act, be restored. 6.2 Per contra, the learned Authorised Representative strongly supported the impugned order of the learned CIT (Appeals) in allowing the assessee's claim for exemption under Section 54F of the Act and in this regard following the binding decisions of the Hon'ble High Court of Karnataka in the case of Fatima Bai (supra) and of the co-ordinate bench of the Tribunal in the case of Nipun Mehrotra (supra). The learned Authorised C.O. No.69/Bang/2014 Representative reiterated the submissions put forth before the learned CIT (Appeals). It is submitted by the learned Authorised Representative that the assessee continues to claim there is no transfer or sale on the period relevant to Assessment Year 2008-09 for levy of capital gains as the transfer / sale was concluded on 30.1.1997, by virtue of the order of the XV Addl. City Civil Judge in O.S. No.3486/1995 r.w. Execution Case No.803/1996. The learned Authorised Representative further submits that if, as held by the authorities below, the transfer has taken place by virtue of the Memorandum of Agreement dt.12.12.2007, when the assessee relinquished its right in respect of the said property at Survey No.26 & 27, Hoody village, K.R. Puram Hobli, Bangalore, then the LTCG worked out at Rs.70,16,326 is exigible to tax in Assessment Year 2008-09. It is further submitted that the entire gains is exempt under Section 54F of the Act since an amount of Rs.1,28,62,774 has been invested in the construction of the new property from 1.5.2009 to 31.3.2010, which as has been held by the learned CIT (Appeals), following the decisions of Fatima Bai (supra) and Nipur Mehrotra (supra), is within the time limit permitted under Section 139(4) of the Act. The learned Authorised Representative submitted that in view of the above, revenue’s appeal on this issue is liable to be dismissed. 6.3 We have heard both parties and perused and carefully considered the material on record, including the judicial decisions cited and placed reliance upon. The issue, before us, for consideration is the assessee's claim for exemption under Section 54 / 54F of the Act.

C.O. No.69/Bang/2014 6.4 At the outset, on an appreciation of the facts on record, we concur with the finding of the learned CIT (Appeals) that there is no merit in the arguments put forth by the assessee that the transfer of the assessee's right in the property at Survey Nos.26 & 27, Hoody village, K.R. Puram Hobli, Bangalore took place in 1997. As per the facts on record, the assessee's father and uncle Sri Sekharan were before the Courts for sharing of the said property. Finally, the said property was transferred through Memorandum of Agreement dt.212.12.2007 on mutual consent. Therefore, it is clear that what was sought to be sold by the assessee's uncle in 1997 was not valid in the eye of law and the fact that the said property was transferred through the Memorandum dt.12.12.2007 proves that the real transfer took place on 12.12.2007 when the assessee relinquished his right for the consideration of Rs.1.25 Crores and not in 1997 as contended by the assessee. We, therefore, find no merit in this alternate claim put forwarded by the assessee in its Cross Objection at S.No.1 and accordingly dismiss the same. 6.5.1 Now that it has been held that the assessee's property was transferred vide Memorandum dt.12.12.2007 when the assessee relinquished his rights in the said property for a consideration of Rs.1.25 Crores credited in the assessee's bank account on 18.1.2008, the said consideration is exigible to tax as capital gains in the year under consideration i.e. Assessment Year 2008-09. In this regard, the assessee computed the LTCG on transfer of his share of the said property at Rs.70,16,326 and claimed that the entire capital gains was exempt under Section 54 / 54F of the Act. It was submitted by the assessee that the consideration received was invested in the purchase of a site on C.O. No.69/Bang/2014 3.4.2008 for Rs.52,08,174 and the balance was invested in the cost of construction incurred in putting up the new residential property thereon between 1.5.2009 and 31.3.2010. The details of the investments made out of the sale consideration of Rs.1.25 Crores is computed as under by the assessee :- 1) Purchase of site on 3.4.2008 Rs.52,08,164 2) Building Construction commenced from 1.5.2009 to 31.3.2010 a) Ground Floor Rs.25,87,500 b) First Floor. Rs.24,79,000 c) Second Floor Rs.25,87,500 Total Investment Upto 31.3.2010 : Rs.1,28,62,774.

6.5.2 The assessee's contention is that since the concerned assessment year was 2008-09, the time limit to utilize the capital gains for making the deposit or to invest the capital gains in the construction of the new residential building is 31.3.2010, as per the provisions of section 139(4) of the Act. In support of this proposition, the assessee placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of Nipur Mehrotra (supra); the decision of the Hon'ble Gauhati High Court in the case of Rajesh Kumar Jalan reported in 286 ITR 274 and of the Hon'ble High Court of Karnataka in the case of Fatima Bai (supra). 6.5.3 The fact that the assessee has invested the entire sale consideration / capital gains in the purchase of the site and in the construction of the residential property thereon by 31.3.2010 is not disputed. The dispute raised by revenue is that since the assessee failed to invest the capital gains of Rs.70,16,326 before the due date of filing the return of income for Assessment Year 2008-09 i.e. 31.7.2008, as laid down u/s. 139(1)

C.O. No.69/Bang/2014 of the Act or to deposit the same by this date, i.e. 31.7.2008, in the Capital Gains Account Scheme of the Govt., the assessee is not eligible for exemption under Section 54 / 54F of the Act. In this regard, we find the co-ordinate bench of the ITAT, Bangalore in the case of Nipun Mehrotra (supra) held that if the sale consideration / capital gains is utilized for the purchase or construction of the new asset before the date of filing the return under Section 139(4) of the Act, the assessee is entitled to exemption under Section 54F of the Act. In the case on hand, the facts clearly establish that the assessee has utilized the sale consideration / capital gains for a) purchase of a residential site for Rs.52,08,164 on 3.4.2008 and b) for cost of construction of the Ground to 2nd floor of the residential construction of the Ground to 2nd floor of the residential building upto 31.3.2010 amounting to Rs.72,91,836. In this factual matrix, we are of the opinion that the assessee is eligible for exemption under Section 54F of the Act. In coming to this finding we draw support from the decision of the co-ordinate bench of the Tribunal in the case of Nipun Mehrotra (supra),wherein following the decision of the Hon'ble Gauhati High Court in the case of Rajesh Kumar Jalan (supra), it was held that when the sale consideration / capital gains has been utilized for the purchase or construction of the new asset before the due date for furnishing the return of income under Section 139(4) of the Act, the assessee is entitled to exemption under Section 54F of the Act. The learned CIT (Appeals) in the impugned order has, also observed that the claim for exemption, in respect of the other co-sellers of the said property, has been allowed by the Department. In this view of the matter, following the decision of the co-ordinate bench of the ITAT, Bangalore in Nipun C.O. No.69/Bang/2014 Mehrotra (supra), we find that revenue has failed to controvert the decision of the learned CIT (Appeals) and therefore uphold the impugned order of the learned CIT (Appeals). Consequently, the grounds atS.Nos.1 to 11 raised by revenue are dismissed.