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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI AMIT SHUKLA
आदेश ORDER अिमत शु�ला, �या. स.: PER AMIT SHUKLA, JM:
The aforesaid appeal by the revenue and Cross Objection filed by the assessee are against impugned order dated 11.09.2013
2 Mr. Chandrakant Himatlal Shah CO. No. 14/Mum/2015 passed by CIT(A)-31, Mumbai for the quantum of assessment passed u/s 143(3) for the assessment year 2009-10. We will first deal with Revenue’s appeal, vide which following grounds have been raised :
1. The Ld CIT (A) erred on the facts and circumstances of the case in allowing the deduction u/s 54 of the I.T Act, 1961.
2. The Ld. CIT(A) erred in accepting the date of registration of Deed of Rectification i.e. 19.04.2008 as the date of purchase of new property considering the same to be within 1 year before the sale of capital asset.
3. The Ld. CIT(A) erred to appreciate that the date of registration of agreement i.e. 31.01.2007 shall be considered for judging the eligibility of deduction u/s 54.
4. The Ld. CIT(A) erred in not interpreting the decision of the Hon’ble Delhi High Court in the case of R.L. Sood - 245 ITR 727 wherein it was held that for the purpose of section 54, the date of agreement to purchase should be taken as the date of purchase”.
Brief facts are that, the assessee is an individual who has sold property, wherein he was 50% owner along with the other co- owner, Smt. Surekha C Shah, for an amount of Rs. 34,02,147/-. The said sale proceeds have been invested in the purchase of a new flat to the extent of Rs. 30,07,775/- and consequently exemption has been claimed u/s 54. AO noted that purchase agreement for new flat was 31.01.2007 and old flat was sold on 06.04.2009. Hence, the window period in which the assessee should have made the investment was between 06.04.2008 and 3 Mr. Chandrakant Himatlal Shah CO. No. 14/Mum/2015 05.04.2011 to claim the exemption u/s 54. In response to the show cause notice, the assessee had submitted and stated as under :- “Assessee has re-invested the sale proceeds of the said flat in new residential premises situated at Andheri, Mumbai. Assessee had entered into agreement for purchase of the new premises in January, 2007. The said building was under construction. Assessee had booked the flat on 14th Floor. Payment for the acquisition of said premises was being done as per construction (slab-wise). In April, 2008, due to inadequate approvals obtained by the builder, assessee was offered flat on 13th floor instead of 14th Floor. Deed of rectification was entered between the builder and the assessee on 19th April, 2008. Thereafter, assessee continued to make further payments. Last payment was made on 2nd December, 2008. Assessee has received the possession of the said new flat on 22nd January, 2009. Hence, assessee is entitled to deduction u/s 54 as purchase of new flat is within 1 year from the date of sale of old asset”.
However, the AO rejected the assessee’s explanation and disallowed the claim of exemption, because according to him the investment should have been made beyond period of one year before and 2 years after the date on which transfer of the old asset took place.
3. Before the CIT(A), the assessee made very elaborate submissions which have been incorporated by the CIT(A) from pages 3 to 6 of the appellate order. The Ld. CIT(A), noted the entire facts and also analyse the provisions of section 54 and observed that in the present case, the sale of the old property was registered on 30.03.2009 and the window period of the investment as per section 54 fall between 30.03.2009 to 30.03.2011. He also noted the two transactions of sale of old flat and purchase of the new flat and Rectification Deed of the new property for which the assessee has drawn support for his claim was as under :-
4 Mr. Chandrakant Himatlal Shah CO. No. 14/Mum/2015
Date of Sale of Old Property : 30.03.2009 Date of Original Agreement for New Property : 31.01.2007 Date of Rectification Deed for New Property : 19.04.2008 Date of possession : 22.01.2009 Date of Issue of Occupation Certificate : 24.02.2010
Thereafter, he analyze the rectification Deed and allowed the assessee’s claim after observing and holding as under :-
“The argument of the appellant is that the rectified deed is to be taken as the deed for purchase of new flat. A perusal of the documents in question reveals that the Agreement for Sale dated 23.01.2007 was registered vide number BDR-1-776/2007 and the subsequent Deed of Rectification dated 19.04.2008 was registered vide number DR-5272/1/2008. Thus both documents were duly registered as per the provisions of the Maharashtra Ownership Flats Act (MOFA), 1963. A careful reading of the Agreement for Sale dated 23.01.2007 shows that the document is only a base document for the proposed sale of the flat and contains no clause that indicates transfer of ownership of the flat booked by the appellant. Rather, it only lays down in great detail the terms and conditions, subsequent to the fulfillment of which, the flat in question will be sold to the appellant. In contrast, the Deed of Rectification dated 19.04.2008 clearly states in Clauses 2 and 3 as follows:
“2. That the purchasers have purchased Flat No. 1302 on 13th Floor, A Wing in the Building known as “Waterford” at C.D. Barfiwala Road, Andheri West, Mumbai -400 058, due to inadvertence in the Agreement number of Flat is wrongly mentioned as Flat No. 1402 on 14th Floor A Wing “Waterford” at C.D. Barfiwala Road, Andheri West, Mumbai -400 058.
That hereinafter the purchasers shall be known as the owners of Flat No. 1302 on 13''' Floor A Wing "WATERFORD" at C.D. Barfiwala Road, Andheri West, Mumbai - 400 058."
6.4 Courts have held that the sale deed must contain words to indicate the transfer of title to the property in 5 Mr. Chandrakant Himatlal Shah CO. No. 14/Mum/2015 question i.e. the operative words of conveyance must be present. In other words, the document must give evidence of the individual's ownership of a property. In the instant case therefore, the Deed of Rectification, duly registered must be considered to be the document indicating the purchase of the said flat by the appellant.
6.5 The appellant has also contended that 'purchase' could happen only on taking possession of the flat, which occurred in January 2009, thus the claim u/s 54 is allowable. The reasons for the change of flat number mentioned in the Agreement for Sale have been duly explained by the appellant and are found acceptable since the modification in proposed number of storeys in a building due to restrictions by government regulatory authorities such as the Airports Authority of India is a common phenomenon. The fact that the original flat proposed to be acquired through the Agreement for Sale was No. 1302 does not vitiate the claim of the appellant
6.5.1 The connotation of the word 'purchase' was examined by the Apex Court in the case of CIT v T.V. Aravinda Reddy reported at 120 ITR 46 (SC) wherein it was held that the meaning of the word should be interpreted in the sense of common usage. The Court held as follows: "3. We find no reason to divorce the ordinary meaning of the word "purchase" as buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration from the legal meaning of that word in section 54(1). If you sell your house and make a profit, pay Caesar what is due to him. But if you buy or build another subject to the conditions of section 54(1) you are exempt."
6.5.2 In the case of CIT vs Shahajada Begum (AP) 173 ITR 397, the appellant had sold a house used for self occupation, purchased another and had claimed exemption u/s 54 in respect of the capital gains arising from the sale of the first property. The claim u/s 54 was denied by the Assessing Officer, holding, that the crucial date for determining when the property was purchased was the date of registration of the conveyance deed (albeit for the purchase of the new property). The Hon’ble High Court held that ownership purchase of the new property). The non Die High Court he'd that ownership would be taken from the point in 6 Mr. Chandrakant Himatlal Shah CO. No. 14/Mum/2015 time when 'domain and control were given into the assessee’s hands' and allowed the claim of the appellant.
6.53 In the case of CIT v Dr. Laxmichand N. Nagda reported at 211 ITR 804, the Hon'ble Bombay High Court adjudicated on a matter wherein exemption u/s 54 had been disallowed by the A.O. on the grounds that the sale deed was not registered within the specified period. The Court while examining the allowability of the claim emphasized that the meaning of the word purchase should be construed liberally and held as follows:
"The word 'purchase' is not defined under the Act and, therefore, resort to its ordinary meaning, as understood by a lay-man, will have to be made. In many dictionaries, the word 'purchase means the acquisition of property by party's own act, as distinguished from acquisition by act of law. The content demands not the literal interpretation but liberal and wider interpretation. Giving the contextual meaning to the word 'purchase in an insurance policy, the Madras High Court in the case of C. Duraiswami Iyengar v. United India Life Assurance Co. Ltd. AIR 1956 Mad. 316 has observed :
"We consider that the word 'purchase' in Article 116 must be given a wider meaning so as to include the construction of a new building; that is to say, the word 'purchase' has got the same connotation as 'acquisition'." (p. 322) 4. The Supreme Court in the case of CIT v. TM. Aravinda Reddy [1979] 120 ITR 46 though in the context of different factual background observed that the word 'purchase' in section 54 has to be construed in a wider sense.
In the case of CIT v. Mrs. Shahzada Begum [1988] 173 ITR 397, the Andhra Pradesh High Court, rejecting the submission that crucial date for the purpose of determining when the property is purchased within the meaning of section 54 is the date of registration of the sale deed in favour of the assessee when the title passes, came to the conclusion that the expression 'purchase' would connote the domain and control of the property given into the assessee's hands.
7 Mr. Chandrakant Himatlal Shah CO. No. 14/Mum/2015
6. Taking into consideration the letter as well as the spirit of section 54 and the word 'towards' used before the word 'purchase' in sub-section (2) of section 54, it seems to us that the said word is not used in the sense of legal transfer and, therefore, holding of a legal title within a period of one year is not a condition precedent for attracting section 54. In the instant case, the whole consideration was paid, possession of the flat was obtained and it was actually put to use for dwelling within 4 months, as a result exemption contemplated under section 54 was clearly attracted." 6.54 In the instant case, the appellant had duly registered the Deed of Rectification on 19.04.2008 and this fell within the window provided for investment u/s 54 applicable in this case. The ownership of the' new flat clearly vests in the appellant through the execution of this document. In addition, the appellant has received possession from the developer in January 2009 and the Occupation Certificate is also dated 24.02.2010, thus both these events are also falling within the investment window as per section 54. 6.5.5 Thus after due consideration of the entire conspectus of facts available on record and the judicial principles laid down which have been discussed in the proceeding paragraphs, 1 hold that the appellant is entitled to deduction u/s 54 of Rs. 30,07,775/- the grounds, raised by the appellant are allowed”. 5. Before us, the Ld. Counsel referred to the following chronology of events :- Sr. No. Date Particulars 1 31.01.2007 Agreement for purchase for Flat No. 1402 2 19.04.2008 Agreement for purchase for Flat No. 1302 3 02.12.2008 Last payment made for purchase 4 22.01.2009 Possession received for flat purchase 5 30.03.2009 Agreement for sale 6 06.04.2009 Agreement for sale registered and submitted that, in fact the property has been purchased within one year if the relevant dates viz. 19.04.2008 and 22.01.2009 or 20.03.2009 is taken into consideration. The reasons given by the CIT(A) are based on proper appreciation of facts and 8 Mr. Chandrakant Himatlal Shah CO. No. 14/Mum/2015 material on records and hence such a finding cannot be tinkered with.
The Ld. DR strongly relied upon the order of the AO and submitted that, what is to be seen within the terms of “section 54” is not the date of agreement for sale registration and the possession received by the assessee. Thus, here in this case, the period of 1 year had elapsed.
After considering the rival contentions and on perusal of the relevant finding given in the impugned orders, we find that assessee had entered into an agreement for purchase of a flat no. 1402 on 31.01.2007. However, the said agreement was completely rectified and replace with a new agreement which was entered for purchase of a different flat No. 1302 on 19.04.2008. The possession of the said flat was given on 21.02.2009 and agreement for sale was made on 30.03.2009. Old flat was sold on 6th April, 2009. Thus, the claim of exemption u/s 54 made by the assessee was very much well within the ‘window period’ as defined in section 54. Therefore the finding of fact as recorded by the CIT(A) (incorporated above) is affirmed and thus ground raised by the revenue is dismissed.
In Cross Objection, assessee has raised following grounds :-
“1. The learned CIT(A) ought to have held that vide deed of rectification entered into on 19.04.2008 the assessee has purchased Flat No. 1302 on 13th Floor, ‘A’ Wing of Waterford building and, hence, the assessee is eligible for deduction u/s 54 of the Act.
2. Without prejudice to the above, the learned CIT(A) ought to have held that the assessee is entitled to deduction u/s 54 of the Act even if the date of rectification deed i.e. 19.04.2008 is not considered to be the date of purchase of new flat.
3. Learned CIT(A) ought to have calculated Indexed Cost of Acquisition of 140 (year of acquisition by Original Owner) instead of 463 (being the year of acquisition by 9 Mr. Chandrakant Himatlal Shah CO. No. 14/Mum/2015 assessee vide inheritance) as the cost of Inflation Index for the year of purchase”. 9. Ground no. 1 & 2 will become infructuous in view of the finding given in the Department’s appeal, hence they are dismissed.
As regards the issue raised in ground no.3, it has been admitted by both the parties the same is covered by the decision of Hon’ble Bombay High Court in the case of CIT vs. Manjula J Shah reported in [2013] 355 ITR 474 (Bom). Accordingly, we direct the AO to give benefit of cost of inflation Index for acquisition with reference to the year in which the previous owner had acquired the asset as per the principle laid down by the Hon’ble jurisdictional High Court. Accordingly, ground no. 3 is treated as allowed.
In the result, Cross Objection filed by the assessee is partly allowed.
In the result, revenue’s appeal stands dismissed and CO of the assessee stands partly allowed. Order pronounced in the open court on 30th October, 2015.
Sd/- Sd/- (िड. क�नाकर राव) (अिमत शु�ला) लेखा सद�य �याईक सद�य (D. KARUNAKARA RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 30th October, 2015 ��त/Copy to:- 1) अपीलाथ� /The Appellant. 2) ��यथ� /The Respondent. 3) The CIT(A) -31, Mumbai. 4) The CIT -20, Mumbai. 5) िवभागीय �ितिनिध “सी”, आयकर अपीलीय अिधकरण, मुंबई/ The D.R. “C” Bench, Mumbai.