M/S CHANDRAKANT H. KAKKAD,,RAJKOT-GUJARAT vs. THE INCOME TAX OFFICER, WARD-4(2),, RAJKOT-GUJARAT

आदेश/ORDER PER BENCH:- This is an appeal filed by the assessee for A.Y. 200-07 against the order of the CIT(A)-2, Rajkot dated 27-02-2017, in proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, 1961; in short “the Act”.

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“1.1. The Ld. CIT(A) has erred in law and facts in confirming the income at Rs. 11,21,230/- as against return income of Rs. 97,838/- and there by endorsing addition of an amount of Rs. 10,23,392/- without accepting claim of deduction U/s. 54 in respect of property purchase at Rs. 8,00,000/- on 16-10-2006. The addition needs deletion.

1.2. The Ld. CIT(A) has erred in law and facts in confirming the actions of the Ld. A.O. not to grant deduction U/s. 54 claimed of Rs. 8,00,000/-. The same needs to be allowed.

1.3. The Ld. CIT(A) has erred in law and facts in confirming the actions of the Ld. A.O. not to grant deduction U/s. 54 claimed of Rs. 8,00,000/-. The same needs to be allowed in respect of share of the assessee.

1.4. Without prejudice, the Ld. CIT(A) has erred in law and facts while confirming the action of the Ld. A.O. not to grant deduction U/s. 54 without considering and following the guidelines issued by the Hon. Supreme Court in the case of Vegetable Products 88 ITR 192 (SC). The same needs consideration.

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accepting the claim of renovation and brokerage expenses of Rs. 2,86,500/-. The addition needs deletion.

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“The other issue is exemption u/s 54. It is uncontroverted fact that the said investment in new property had not been made by the due date of furnishing return of income u/s 139(1) nor the unutilized amount was invested in the Capital Gains Account scheme. The AO accordingly

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denied the deduction. The claim of assessee is that the new asset was acquired jointly with daughter in law before the end of time allowed u/s 139(4) for furnishing the return of income and hence he should be allowed proportionate deduction u/s 54 in view of judgement of Punjab & Haryana High Court in case of Jagtar Singh Chawla 259 CTR 388 (P & H). The assessee has placed reliance of decision of ITAT Mumbai in case of ITO Vs. Deenaz Hoshang Jhabvala ITA No.5062(Mum) of 2012 (order date 15/01/2014) wherein reliance has been placed on decisions of Jagruti Agarwal 339 ITR 610(P & H), Rajeshkumar Jalan 286 ITR 274 (Gauhati) and fatimabai (2010) 32(I)ITCL 97 (Karnataka-HC) Wherein it was held inter-alia that the assessee can fulfill the requirement of Section 54 of Act up to the extended time limit for furnishing the return of income u/s 139(4) of the Act.

In this regard I find that the Mumbai High Court, recently in case of Humayun Suleman Merchant Vs. CCIT in IT. No. 545 of 2002 vide order dated 18/08/2016 having considered above cited judgments of Gauhati High Court as well as the High Court, has held as under:- "(i) On the basis of the above broad analysis, we shall now examine the facts of the present case. The sale of capital asset took place on 29th April, 1995 for a consideration of Rs.85.33 lakhs. The agreement for purchase of construction of flat for consideration ofRs.69.90 lakhs was entered into by the appellant on 16th July, 1996. An amount of Rs.35 lakhs were utilized by the Appellant in purchase of flat before the return of income was filed on 4th November, 1996 under Section 139 of the Act. However, the mandate under sub Section (4) of Section 54F of the Act is that the amount not utilized towards the purchase of the flat has to be deposited before the due date of filing return of Income under Section 139(1) of the Act in the specified bank account. In this case admittedly the entire amount of capital gains on sale of asset which is not utilized has not been deposited in a specified bank account before due date of filing of return under Section 139(1) of the Act. Therefore where the amounts of capital gains is utilized before 11/23 2'002.odt filing of the return of income in purchase / construction of a residential house, then the benefit of

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exemption under Section 54FoftheAct is available. Before us it is an undisputed position that except Rs.35 lakhs, the balance of the amounts subject to capital gains tax has not been utilized before date of furnishing of return of income i.e. 4th November, 1996 under Section 139 of the Act. Therefore, on plain interpretation of Section 54F of the Act, it appears that the impugned order of the Tribunal cannot be faulted.

(j) However, the aforesaid view would be subject to the result of our examination of the submissions and case laws relied- upon by Mr.Chatterji in support of the appeal to urge a view contrary to the plain meaning of Section 54F of the Act.

(k) Reliance placed by the Appellant upon the decision of this Court in Mrs.Hilla J. B. Wadia (supra) to contend that the issue stands concluded in favour of the appellant-assessee is not acceptable. This for the reason that the only issue for consideration before the Court in the above case was the interpretation of Section 54 of the Act. In the above case the assessee had sold her residential property and invested a substantial amount in a Society for construction of a residential flat in the building to be constructed. The assessee therein had paid substantial amounts to the society and also acquired domain over the flat within a period of 2 years from the date of the sale of her house. At that point of time i.e. for the Assessment Year 1973-74 there was no requirement of depositing any un-utilized amount in a specified bank account as now provided under Section 54(2) of the Act (similar to Section 54F(4) of the Act). Therefore the Court had no occasion to consider the provisions of Section 54(2) of the Act which is similar to Section 54F(4) of the Act, with which we are concerned.

(l) Mr.Chatterji, then placed reliance on the observation of this Court in Mrs. Hilla J. B. Wadia (supra) that the Circular issued by the Central Board of Direct Taxes dated 15th October, 1986 in relation to construction of a home by Delhi Development Authority should also be extended to cities like Mumbai, as there is no control over the time taken by the developer /

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builder to construct the house and give possession of the same to the assessee. The Central Board of Direct Taxes Circular dated 15th October, 1986 was issued only in the context of Section 54 and 54(F) of the Act to clarify that an investment in a under the self finance scheme of Delhi Development Authority would be treated as construction for e purpose of capital gain, where an allotment letter has been issued by the Authority and facility of payment in installment is provided for the purchase of flat. It did not even remotely concern itself with the provision of Section 54(2) and/or 54F(4) of the Act with which we are concerned. The Circular only extended the meaning of constructing a residential house within a period of three years from the sale of the capital asset. The subsequent Circular issued in 16thDecember, 1993 by the Central Board of Direct Taxes relied upon by the Appellant, only extended the meaning of "constructed within a period of three years" to allotment letters issued by the Co-operative Housing Society or other similar institution for the purpose of54Fofthe Act. Therefore, it does not in any manner do away with and / or relax the statutory mandate of depositing the un-utilized amount in the specified bank account as required by sub section (4) of Section 54F of the Act. Therefore, neither the decision of this Court in Mrs.HillaJ. B.Wadia (supra) nor the Central Board of Direct Taxes Circulars dated 15th October, 1986 and 18th December, 1993 would govern the issue so as to conclude the issue in favour of the Appellant.

(m) The reliance upon the decision of the M. P. High Court in Smt. Shashi Varma (supra}, also does not advance the case of the Appellant We find that the facts in the above case are similar to the one in Mrs. Hilla J. B. Wadia (supra) and for the same reasons, will not govern the present dispute. In fact, the issue stood covered by the Circular dated 15th October, 1986 as the property purchased therein was of the Delhi Development Authority. Thus, the above decision has no application to the present facts.

(n) Mr.Chatterji, learned Senior Counsel appearing for the appellant assessee then contended on the basis of the two

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Circulars dated 15th October, 1986 and 16th December, 1993 of the Central Board of Direct Taxes that once an allotment letter has been issued to the assessee, then it follows that the title of the constructed house has passed on to the assessee. Therefore the payment made subsequent to allotment letter in installments would not in any manner affect the assessee having satisfied Section 54F(1) of the Act. This submission ignores the fact that Sub Section (1) of Section 54F has been made subject to Sub Section (4) of the Act The requirement under Section 54F(4) of the Act is the deposit of the unutilized amount in the specified bank account till it is utilized. This requirement has not been done away with in either of the above two Circulars dated 15th October, 1986 and 16th December, 1993 relied upon by the Appellant-Assessee.

(o) Mr.Chatterji, learned Senior Counsel next submitted that in any case the issue now stands concluded in favour of the Appellant by the decision of the Karnataka High Court in K. Ramchandra Rao (supra) wherein an identical question came up for consideration and it was held that even where the assessee had not deposited the un-utilized Capital Gain in an account which was duly notified by the Central Government in terms of Section 54F(4) of the Act, the benefit of Section 54F(1) of the Act would still be' available. The Court held that if the intention was not to retain the capital gains but was to invest it in construction of property within the period stipulated in Sub Section (1) of Section 54(F) of the Act then Section 54F(4) of the Act is not at all attracted. We are with respect unable to accept the reasoning adopted by Karnataka High Court in K. Ramchandra Rao (supra). The mandate of Section 54F(4) of the Act is clear that amount which has not been utilized in construction and/or purchase of property before filing the return of income, must necessarily be deposited in an account duly notified by Central Government, so as to be exempted.

(p) Further, Section 54F(4) of the Act specifically provides that the amounts which have not been invested either in purchase / construction of house have to be deposited in the specified accounts before due date of filing of return of income under

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Section 139(1) of the Act. The aforesaid aspect it appears was not noticed by the Karnataka High Court. In any case, the entire basis of the decision of the Karnataka High Court in K. Ramchandra Rao (supra) is the intent of the parties. In interpreting a fiscal statute one must have regard to the strict letter of law and intent can never override the plain and unambiguous letter of the law. It is true that normally while construing an all India Statute like the Income Tax Act, we would not easily depart from a view taken by another High Court on an issue arising for our consideration. This on consideration of certainty and consistency in law. However, the view of the other High Courts are not binding upon us unlike a decision of the Apex Court or of Larger or a Coordinate Bench of this Court. Thus if on an. examination of the decisions of the other High. Court we are unable to accept the same, we are not bound to follow/accept the interpretation of the other High Courts leading to a particular conclusion. In this case we find that the decision of the Karnataka High Court in K. Ramchandra Rao (supra) was rendered sub-silentio i.e. no argument was made with regard to the requirement of deposit in notified bank account in terms of Section 54F(4) of the Act before the due date as provided in Section 139(1) of the Act. As observed in Salmond's Jurisprudence 12th Edition : "The rule that a precedent sub silentio is not authoritative goes back at least to 1661(m) when Counsel said, 'An hundred precedents subsilentio are not material'; and Twisden J agreed : precedents sub-silentio and without argument are of no moment'. This rule has ever since been followed."

(q) In fact this Court in Commissioner of Income Tax vs. Thana Electricity Supply Ltd. 206 ITR 727 has observed that a decision of one High Court is not binding as a precedent on another High Court unlike a decision of the Apex Court. In support, reliance-was placed in the above order upon the decision of the Apex court in Valliamma Champaka Pillai vs. Sivathanu Filial AIR 1137 1979 (SC) 1937 to hold that it is well settled that decision of one High Court is not a binding precedent upon another High Court and at best can only have persuasive value. However, at the cost of repetition we must

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emphasize that the decision of another High court rendered in the context of an all India Act would have persuasive value and normally to maintain uniformity and certainty we would adopt the view of the other High Court. However, with the greatest respect, we find that the decision of Karnataka High Court in K.Ramchandra Rao (supra) has been rendered sub-silentio. Therefore, we cannot place any reliance upon it to conclude the issue on the basis of that decision.

(r) It was next contented by Mr.Chatterji, that liberal / beneficial construction should be given to the provision of Section 54F of the Act as its object was to encourage the housing sector which would result in the benefit being extended to the appellant assessee. In support, reliance was placed upon the decision of Delhi High Court in Ravindra Kumar Arora (supra). We find that observation of the Delhi High Court in Ravindra Kumar Arora (supra) that Section 54F of the Act should be liberally construed was in the context of the benefit being denied as the name of the wife was added to purchase made by the assessee of a new flat. This denial was even though all the requirements of Section 54F of the Act stood satisfied. Therefore the observation of the Delhi High Court would have no application to the present facts.

(s) It is a settled position in law that no occasion to give a beneficial construction to a statute can arise when there is no ambiguity in the provision of law which is subject to interpretation. Thus in the face of the clear words of the Statute the intent of parties and/or beneficial construction is irrelevant. In fact, e Apex court in Sales Tax Commissioner vs. Modi Sugar Mills [1961] 12 STC 182 reiterated the well settled principle of interpretation in the following words: "In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statute be interpreted on any presumption or assumptions....It must interpret a taxing statute in the light of what is clearly expressed ..." Recently, the Supreme Court in Mathuram Agrawal vs. State of Madhya Pradesh [1999] 8 SCC 667 has observed as under :- "The intention of the Legislature in a taxation statute is to be gathered from the language of the

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provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spiritand intention of the Legislature....." (emphasis supplied) Similarly this Court in Thana Electricity (Supra) had observed as under : "If the provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee has got to be accepted. This is a well accepted view of law. It is the satisfaction of the court interpreting the law that the language of the taxing statute is ambiguous or reasonably capable of more meanings than one, which is material. If the court does not think so, the fact that two different views have been advanced by the parties and argued forcefully or that one such view which is favourable to the assessee has been accepted by some Tribunal or High Court, by itself will not be sufficient to attract the principle of beneficial interpretation". In the present facts the provision of Section 54F(4) of the Act are . very clear. There is no ambiguity. Thus, there is no occasion to apply liberal / beneficial construction while interpreting the Section as contended by the Appellant.

(t) It was next contended by Mr. Chatterji, learned Senior Counsel for the appellant that the word "appropriation" used in Section 54F(4) of the Act would also apply in the present case where the capital asset has been sold and sale proceeds are earmarked to be invested in construction of house. A plain reading of Section 54F(4) of the Act militates against it. As pointed out by Mr. Malhotra, learned Counsel appearing for the revenue, Section 54F(4) of the Act deals with two classes of cases, one where purchase of new residential house is within a period of one year before the date on which capital asset is sold by assessee and second class of cases where the amount

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subjected to capital gains are utilized for purchase/ constructing a flat, post the sale of the capital asset. In the present facts we are concerned with the second class i.e. purchase post the sale of the capital asset.

(u) The parliament has used the word "appropriated" in the first class of cases i.e. where property has already been purchased prior to the sale of capital asset and the amount received on sale of capital asset is appropriated towards consideration which has been paid for purchase of the flat. In this case we are concerned with the purchase / construction of residential housing, after the sale of capital asset. This requires the amount -which is to be subjected to capital gain has to be utilized before the date of filing of return of Income under Section 139 of the Act by the assessee. Section 54F(4) of the Act itself clearly states that the amount not utilized in purchase / construction of flat / house should be deposited in the specified Bank notified by the Government. Thus the plain language employed in Section 54F(4) of the Act make sea clear distinction between cases of appropriation (purchase prior to sale of capital asset) and utilization (purchase/construction after the sale of capital asset). Therefore the word "appropriated" would have no application in cases of purchase / construction of a house after the sale of capital asset with which we are concerned.

(v) Lastly and in the alternative, it is submitted by Mr. Chatterji, that as the entire amount has been paid to the developer/builder before the last date to file the return of Income under Section 139 of the Act, the exemption is available to the appellant under section 54F(4) of the Act. In support, the decision of Gauhati High Court in Rajesh Kumarjalan (Supra) is relied upon. The Gauhati High Court in the above case was concerned with the interpretation of Section 54 of the Act It construed the provision of sub Section (2) of Section 54 of the Act which is identically worded to sub section (4) of Section 54Fofthe Act The Court in the aforesaid decision held that the requirement of depositing before the date of furnishing of return of Income under Section 139 of the Act has not to be

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restricted only to the date specified in Section 139(1) of the Act but would include all sub section of Section 139 including sub section (4) of the Act. On the above basis it concluded that if the amount is utilized before the last date of filing of the return under Section 139 of the Act then the provision of Section 54(2) of the Act would not hit the assessee before it. It is not very clear in the above case whether the amounts were utilized before the assessee filed its return of income or not.

(w) However, the factual situation arising in the present case is different. The return of income is admittedly filed on 4 th November, 1996. In terms of Section 54F(4) of the Act as interpreted by the Gauhati High Court in Rajesh Kumar /a/an (supra) the amounts subject to capital gain on sale of the capital asset for purpose of exemption, has to be utilized before the date of filing of return of income. In this case 4th November, 1996 is the date of filing the return of Income. It is not disputed that on 4th November, 1996 when the return of income was filed, the entire amount which was subject to capital gain tax had not been utilized for the purpose of construction of new house nor were the unutilized amounts deposited in the notified Bank Accounts in terms of Section 54F(4) of the Act before filing the return of income. It is also to be noted that in line with the interpretation of Gauhati High Court on Section 54F(4) of the Act, the Assessing Officer had taken into account all amounts utilized for construction of a house before filing the return of income on 4th November,'1996 for extending the benefit of exemption under Section 54F of the Act. Therefore, in the present facts, the decision of the Gauhati High Court in Rajesh Kumarjalan (supra) would not apply so as to hold that the appellant had complied with the Section 54F(4) of the Act.

(x) In the above view question no. 2 is also answered in the affirmative i.e. in favour of the revenue and against the appellant."

In view of the above judgment of the Honorable Mumbai High Court, which applies to this case (facts of the cases and provisions of Section

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54 and 54F being similar as regards the issue at hand) and no contrary judgment of Jurisdictional High Court being brought to notice, the issue is decided against the assessee and it is held that the AO has rightly denied the exemption u/s 54.”

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From a plain reading of Section 54(2) of the Act it is clear that only Section 139 is mentioned in the context that the unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of tax under Section 139 of the Act. Therefore, Section 139 cannot be confined only to the provisions of the Section 139(1), but it includes all the sub section of Section 139 of the Act. …..

….we find that if the intention is not to retain cash but to invest in construction or purchase any property and if such investment period stipulated therein, then Section 54F(4) is not attracted. It appears from the records that the assessee has complied with the requirement of the substantive provision of Section 139 and, therefore, is entitled to the claim of exemption under Section 54F of the Act. Hence, we find no reason to pass such order by the Revenue in disallowing the exemption of Rs. 35,07,459/- as the claimed under Section 54F of the Act by the assessee. The order is, thus, quashed. Hence, assessee's appeal is allowed.

7.1 In the case of CIT v Rajesh Kumar Jalan [2006] 157 Taxman 398 (Gauhati), the High Court on similar facts held that assessee is eligible for claiming deduction under section 54F of the Act in case of HV investment property section 139(4) of the Act. While passing the order, the High Court made the following observations:

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Section 54 is a beneficial provision for the assessee in the matter relating with the sale of properties used for residence, it appears, for the constitutional goal of providing residence to the citizen of India. It is fairly well-settled that in construing a beneficial enactment, the view that advances the object of the beneficial enactment and serves its purpose must be preferred to the one which obstructs the objects and paralyses the purpose of the beneficial enactment.

It is too well-known a principle of construction of statutes that the Legislature engrafted every part of the statute for a purpose. The legislative intention is that every part of the statute should be given effect. The Legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the Legislature will not be accepted, except for compelling reasons. [Para 7]

From a plain reading of sub-section (2) of section 54, it is clear that only section 139 is mentioned in section 54(2) in the context that the unutilised portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the income-tax under section 139. Section 139 cannot mean only section 139(1) but it means all sub-sections of section 139. Under sub- section (4) of section 139, any person who has not furnished a return within the time allowed to him under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or

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before the completion of the assessment, whichever is earlier. Such being the situation, it was the case of the assessee that he could fulfil the requirement under section 54 for exemption of the capital gain from being charged to income-tax on the sale of property used for residence up to 30-3-1998, inasmuch as the return of income-tax for the assessment year 1996-97, could be furnished before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier, under sub-section (4) of section 139. [Para 6]

7.2 In the case of Uddhav Krishna Bankar v. ITO [2020] 121 taxmann.com 53 (Pune - Trib.), the ITAT held that where original agricultural land was sold by assessee on 12-10-2011 and new agricultural land was purchased on 26-8-2013, assessee having complied with requirement of section 54B(2) in light of time limit as per section 139(4), it could not have been denied benefit of exemption under section 54B by only taking into consideration section 139(1).

7.3 In the case of CIT v. Ms. Jagriti Aggarwal[2011] 15 taxmann.com 146 (Punjab & Haryana), the High Court held that due date for furnishing return of income as per section 139(1) is subject to extended period provided under sub-section (4) of section 139 and, if a person had not furnished return of previous year within time allowed under sub-section (1), assessee could file return under sub-section (4) before expiry of one year from end of relevant assessment year. Therefore, section 54 deduction could not be denied to assessee on this and the assessee would be eligible deduction u/s

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54 if investment is made within time-line provided u/s 139(4) of the Act of the Act.

7.4 The Ahmedabad Tribunal in the case of Shrawan kumar G. Jain (2018) 99 taxmann.com 88 (Ahd.) held that where assessee had purchased new residential house within due date specified under section 139(4) from date of transfer of original asset, requirement to deposit net consideration received by assessee in capital gain account scheme as per section 54F(4) would not be attracted and assessee would be eligible to benefit of exemption under section 54F.

7.5 The Delhi Tribunal in the case of Smt. Harinder Kaur (2021) 126 taxmann.com 160 held that where assessee paid amount of sale consideration received from sale of a residential house for purchase of another residential property prior to due date of filing of return of income under section 139(4), his claim for exemption under section 54 was to be allowed

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expense amounting to � 40,000/-. Out of the same, the assessee has claimed total expenses in connection with renovation and brokerage amounting to � 2,86,500/-. The AO and the Ld. CIT(Appeals) did not grant deduction of renovation and brokerage expenses by holding that no evidences were produced by the assessee except mal-saman majoori list and that the assessee did not produce any details regarding name and address of the person to whom payments were made. Before us, the counsel for the assessee has produced evidence of renovation and brokerage expenses by way of bills/vouchers (at pages 5-21 of paper book) and also filed certificate from Bank of Baroda (at page 47 of paper book) to support the fact that assessee had taken loan for the purpose of renovation. In response, the Ld. DR relied upon the observations made by the AO and Ld. CIT(Appeals) in their respective orders.

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Order pronounced in the open court on 21-09-2022

Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 21/09/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order,

Assistant Registrar, Income Tax Appellate Tribunal, Rajkot