Income Tax Appellate Tribunal - Delhi
A.D. Mehndroo vs Assessing Officer on 28 November, 1994
Equivalent citations: [1995]52ITD138(DELHI)
ORDER
R.M. Mehta, Accountant Member
1. This appeal is directed against the order passed by the CIT(A) raising for the consideration of the Tribunal on various grounds.
2. The learned counsel for the assessee, however, at the time of hearing stated that he was under instructions only to press the ground pertaining to the claim for deduction under Section 80C(2)(h)(ii)(b) of the Income-tax Act, 1961 and the other grounds of appeals were being withdrawn. The subsequent discussion disposes of the main issue which has been argued by the parties before the Tribunal.
3. The appellant in this case is an Advocate who admittedly was a Member of the Lawyers Cooperative Group Housing Society Ltd., and had been allotted a flat, the construction in respect of which had not been completed during the assessment year under consideration, viz., 1990-91. It is also an admitted fact that the assessee had during the previous year under consideration paid a sum of Rs. 10,000 as an instalment to the said Group Housing Society towards the flat which had been allotted to him and claimed the same as deduction under Section 80C of the Act.
4. The ITO rejected the claim for deduction on the ground that during the previous year under consideration the flat had not been completed and no income was taxable under the head "Income from house property" in the hands of the assessee. On further appeal, the DCIT(A) decided the matter ex parie and proceeded to confirm the action of the ITO primarily on the ground that the assessee had been provided sufficient opportunity to substantiate his claim but in view of the non co-operative attitude adopted by him, the disallowance made by the ITO was being upheld. As already stated, the learned counsel has not raised any argument vis-a-vis the lack of opportunity on the part of the DCIT(A) or in proceeding to decide the matter exparte. Thus, the parties stated before me that the matter need not be restored back to the DCIT(A) and the legal issue raised in the appeal be decided on merits.
5. Before I proceed to deal with the arguments advanced, it would be necessary on my part to extract the relevant provision of the Act under which the assessee has made the claim for deduction as follows :-
Section 80C(2)(h)(ii)(b)
(ii) For the purposes of purchase or construction of a residential house property, the construction of which is completed after the 31st day of March, 1987 and the income from which is chargeable to tax under the head 'Income from house property' (or which would, if it had not been used for the assessee's own residence have been chargeable to tax under that head) where such payments are made towards or by way of-
(b) any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or
6. The learned counsel for the assessee with reference to the aforesaid provision of the Act stated that during the previous year relevant to the assessment year under appeal, the assessee had not come into possession of the flat but said event took place only in the financial year 1990-91 relevant to the assessment year 1991-92 and even then the assessee-occupied the said flat and derived no rental income. It was also stated that the date of allotment of the flat was 22-5-1987 and the relevant provisions stipulated that the property be constructed, after 31-3-1987. The learned counsel also invited our attention to the further stipulation in the provision vis-a-vis the term used being "chargeable" and not "charged" in respect of the income from house property. According to him, all that the law required was that the asset should be one which should give rise to income under the head house property and also referred to a similar term used in Section 54 of the Act. It was further stated that the assessee squarely came within the meaning of the relevant provision and inasmuch as the sum of Rs. 10,000, had been paid as an instalment to the Group Housing Society in respect of the allotment of the flat the same was allowable as a deduction, under Section 80C (2) (h)(ii)(b) of the Income-tax Act, 1961.
7. The learned D.R. on the other hand strongly supported the orders passed by the tax authorities contending in the process that no deduction was allowable till the completion of construction and handing over of the property to the Member of the Housing Society. The argument which was canvassed in other words was that deduction was allowable in respect of an instalment paid after the construction had been completed and the assessee had taken physical possession.
8. After examining the rival submissions, I am of the view that there is substantial merit in the arguments advanced by the counsel for the assessee. The relevant provision of law stipulates the payment of an instalment to a Housing Society in respect of a property/flat which is allotted to a Member of the said society and the only two requirements are that the construction be completed after 31-3-1987 and secondly, the income from the said property is chargeable under the head "Income from house property". It is not disputed that the construction of the flat was completed after 31-3-1987 and we are in agreement with the view point canvassed by the learned counsel that the term used in the section is "chargeable" and not "charged". Then again, it is common knowledge that physical possession of a flat whether in a Group Housing Society or a scheme under a Government Authority or a Housing Board or even in respect of housing schemes floated by private entrepreneurs is not handed over to the allottee unless and until the total cost of the flat/property is paid. In case the argument of the learned D.R. is accepted then it would amount to a situation where no deduction would be allowable in respect of an instalment paid prior to the physical possession being handed over and once that is done then no further instalment would be due in respect of which the assessee can claim deducted. In other words, the relevant provision of law would become redundant and not at all workable. In my opinion, this was not the intention of the Legislature when the relevant provision was brought on the statute book. In the final analysis, I opine that the assessee's claim satisfies the various conditions laid down by the relevant provision of law and he is entitled to necessary deduction envisaged in the said provision. The ITO is directed to allow necessary relief.
9. In the result, the appeal is partly allowed.