Income Tax Appellate Tribunal - Bangalore
Income-Tax Officer, Bangalore vs Shri. Ravi Narayan Deshpande, Dharwad on 13 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
" C" BENCH : BANGALORE
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER
ITA No.306/Bang/2017
Assessment year : 2013-14
The Income Tax Officer, Vs. Shri Ravi Narayan Deshpande,
Ward 2(1), Eka Bilwa, Mahishi Road,
Hubballi. Malmaddi,
Dharwad.
PAN: ACQPD 3517K
APPELLANT RESPONDENT
Appellant by : Shri M.K. Biju, Jt. CIT(DR)(ITAT), Bengaluru
Respondent by : Smt. Prathiba, Advocate
Date of hearing : 21.08.2017
Date of Pronouncement : 13.09.2017
ORDER
Per Sunil Kumar Yadav, Judicial Member
This appeal is preferred by the revenue against the order of CIT(Appeals) inter alia on the following grounds:-
"1. Whether, on fact & circumstances of the case Ld. CIT(A) is correct in allowing the claim of the assessee for deduction u/s. 54F by relying on the judgment of the Hon'ble ITAT, "A" Bench Hyderabad in the case of Pradeepkumar Choudhary Vs. DCIT , Circle 1(1), Hyderabad.
2. Whether, on fact & circumstances of the case Ld. CIT(A) is correct in allowing the assessee's claim u/s. 54F as the assessee has neither deposited the capital gains in capital gains deposit ITA No.306/Bang/2017 Page 2 of 8 account scheme nor not utilized the capital gain for purchase of new asset before the due date of filing of return of income."
2. During the course of hearing, the ld. DR has contended that assessee has not acquired residential house during the prescribed period.
Therefore, deduction u/s. 54F cannot be allowed. Besides, he has also relied upon the order of the AO.
3. In rebuttal, the ld. counsel for the assessee has invited our attention to the fact that assessee has entered into agreement to acquire residential house with the developers & builders. But unfortunately, the residential house was not allotted within the specified period. However, the flat was allotted to the assessee on 26.06.2016 after the prescribed period of three years. The delay in acquiring the asset was not on account of assessee as he has deposited the sale proceeds with the developer within the prescribed period. The ld. counsel for the assessee further relied upon various judgments in support of his contention that if the assessee makes the payment in time and delay in allotment of flat is on account of the developer, the benefit of deduction u/s. 54F cannot be denied. In support of his contention, the ld. counsel for the assessee has filed copy of sale agreement and copy of the judgment of Hon'ble jurisdictional High Court in the case of CIT v. Sambandam Udaykumar, 251 CTR 317 and Principal CIT v. Sri C. Gopalaswamy vide judgment dated 15.12.2016, copy of which is placed on record.
ITA No.306/Bang/2017 Page 3 of 84. We have carefully examined the order of lower authorities in the light of rival submissions and we find that undisputedly assessee has made payment of sale proceeds within the prescribed period in order to avail the benefit of deduction u/s. 54F of the Act. The possession of the flat was delayed for different reasons for which the assessee cannot be held responsible. The delay in completing the construction was on account of various reasons which were duly explained. The CIT(Appeals) re-
examined the issue in the light of various judicial pronouncements of Hon'ble jurisdictional High Court and other High Courts and being convinced with the explanation of the assessee, he directed the AO to allow the benefit of deduction u/s 54F of the Act. The relevant observations of the CIT(Appeals) is extracted hereunder for the sake of reference:-
"5. In the proceedings before me in appeal, the assessee has reiterated the stand taken in grounds of appeal and statement of facts. The assessee has also contested the view of the AO that, the assessee ought to have invested the sale proceeds within two years in order to avail the benefit u/s.54F. According to the assessee the law provides for investment in construction within three years, not two years as held by the AO. I find that, the argument of the assessee is not devoid of substance. Copy of deed, for sale of residential plot, copy of agreement for sale and agreement for construction of new property, bank account evidencing in payments to builder are furnished to me for my perusal. Sale of property by the assessee on 10/10/2012 is not in dispute, as it is evidenced by a sale deed. The assessee, having paid Rs.66,07,217/including Rs.14,00,000/- paid before due date of filing return by way of RTGS (Rs.4,00,034/- on 27.09.2013 and Rs.10,00,062/- on 30.09.2013), to the developer is also not disputed by the AO. The payments are evidenced by entries in bank account. Agreement for sale and construction dtd 28/01/2012 between the assessee and developer (Mantry ALPYNE) is evidenced by an agreement. Copy of sale deed dtd ITA No.306/Bang/2017 Page 4 of 8 29/06/2016 evidencing registration of the new flat in the name of the assessee, his wife Smt. Vidya Deshpande and son Shri. Amol Ravi Deshpande is furnished to me. The assessee has sought for relief on the ground that, substantial part (Rs.66,07,217/-) of sale proceeds is invested in the new flat that too before due date of filing return of income, which is hence registered.
6. The assessee has taken support from the decision of Delhi High Court In the case of CT Vs. RL Sood and that of ITAT Hyderabad in the case of Pradeep Kumar Choudhary Vs. DCIT, Circle-1(1), Hyderabad. In the case of CIT Vs. R.L. Sood (Delhi High Court), it has been held that, the date of agreement to purchase should be taken as the date of purchase and date of registration of sale deed for purchase is not relevant. In this case, (R.L.Sood) the High Court has held as under.
The assessee had paid certain amount out of the total consideration for purchase 0 a flat within the period of one year from the date of sale of his old residential house. Thus, on payment of a substantial amount in terms of the agreement of purchase dated 25/09/1981, i.e, within four days of the sale of his old property, the assessee acquired substantial domain over the new residential flat within the specified period of one year and complied with the requirements of section 54. Merely because the builder failed to handover possession of the assessee within the period of one year, the assessee could not be denied of the said benevolent provision. This would not be in consonance with the spirit of section 54.
7. The Hon'ble ITAT 'A' bench Hyderabad in the case of Pradeepkumar Choudhary has held as under.
"In the above case it was held that, whether for purpose of section 54F a flat which is newly constructed by a builder on behalf of assessee is in no way different from a house constructed- Held, yes-Whether therefore, where amount of consideration received on transfer was invested by assessee in a flat constructed by builder within 3 years, it would amount to construction of a residential house for purpose of section 54F and assessee would get benefit of deduction for payment made within 3 years- Held, yes".ITA No.306/Bang/2017 Page 5 of 8
8. As regards, the issue of the assessee, having invested the sale proceeds in the new house property in the name of himself wife and son to claim deduction u/s. 54F, the assessee has relied on the decision of Delhi HC in the case of CIT Vs. Ravindrakumar Arora (ITA No. 1106/2011). In this case, the Hon'ble High Court of Delhi has held as under.
CIT Vs. Ravinder Kumar Arora (Delhi HC)- Section 54F mandates that the house should be purchased by the assessee and it does not stipulate that the house should be purchased in the name of the assessee only. Here is a case where the house was purchased by the assessee and that too in his name and wide's name was also included additionally. Such inclusion of the name of the wife for the above-stated peculiar factual reason should not stand in the way of the deduction legitimately accruing to the assessee. Objective of Section 54F and the like provision such as section 54 is to provide impetus to the house construction and so long as the purpose of house construction is achieved, such hyper technically should not impede the way of deduction which the legislature has allowed. Purposive construction is to be preferred as against the literal construction, more so when even literal construction also does not say that the house should be purchased in the name of the assessee only. Section 54F of the Act is the beneficial provision which should be interpreted liberally in favour of the exemption/deduction to the tax payer and deduction should not be denied on hyper technical ground. Andhra Pradesh High Court in the case of Late Mir Gule, Ali Khan Vs. CIT, (1987) 165 ITR 228 (AP) has held that the object of granting exemption under Section 54 of the Act is that an assessee who sells a residential house for purchasing another house must be given exemption so far as capital gains are concerned. The word "assessee" must be given wide and liberal interpretation so as to include his legal heirs also. There is no warrant for giving too strict an interpretation to the word "assessee" as that would frustrate the object of granting exemption. We also find judgement of other High Courts giving benefit of Section 54F(1) of the Act when the house of the assessee is purchased jointly with his wife. In the case of CIT Vs. Natrajan, (2007) 287 ITR 271 (Mad), though this case was decided in relation to Section 54 of the Act, the said Section is pari material of Section 54F(1) of the Act. Likewise, the Punjab & Haryana High Court in the case of CIT Vs. Gurnam Singh, (2010) 327 ITR 278 took the same ITA No.306/Bang/2017 Page 6 of 8 view while discussing the provisions of Section 54 of the Act which is again pari material of Section 54F(1) of the Act.
9. In the case on hand, there is no denying the fact that, the source for investment in new property including stamp duty and registration charges has gone from the accounts of the assessee only, that too out of sale proceeds of the old property (residential plot), which has given rise to long term capital gains.
10. Under the substantive part of section 54F (1), the capital gains arising from the transfer of any long term capital asset not being a residential house, shall not be subjected to the taxation provisions if the assessee had within the period 1 year before or 2 years after the date on which the transfer took place, purchased a residential house. Alternatively, he should have constructed one residential house in India within a period of 3 years. If these conditions are satisfied, the capital gain will be dealt with in accordance with clauses (3) and (b) of sub section (1) of section 54A from the Act. There is no dispute about the fact that, the assessee in this case made a transfer of a long term capital asset which is not a residential house. There is no dispute about the fact that, there was capital gain arising from the said transaction. But according to the AO, the benefit is not available to the assessee since possession of payments is handed over to the assessee within two years of sale. To appreciate the reach of the said contention, it is necessary to extract proviso to section 54F( 1) which reads as under:
1. [subject to the provisions of sub-section( 4), where, in the case of an assessee being an individual or a Hindu Undivided family], the capital gain arises from the transfer of any long term capital asset, not being a residential house (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, one residential house in India] (hereafter in this section referred to as the new asset ), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,-ITA No.306/Bang/2017 Page 7 of 8
a) If the cost or the new asset is not less than the net consideration respect of the original asset, the whole of such capital gain shall not be charged under section 45:
b) If the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:
Provided that nothing contained in this sub-section shall apply where
(a) the assessee,-
(i) Owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or
11. In the light of the above discussion, provisions of law, and the above decisions and in view of the fact that, the assessee has invested a sum of Rs.66,07,217/- out of sale consideration of Rs.70,00,000/- in the new property which is since registered, I have to take a view that, the assessee cannot be denied the benefit of deduction u/s. 54F of the Act. Accordingly, the disallowance is disapproved and the addition is deleted. The grounds are allowed."
5. Since no infirmity is pointed out in the order of the CIT(Appeals), we confirm the same.
6. In the result, the appeal of revenue is dismissed.
Pronounced in the open court on this 13th day of September, 2017.
Sd/- Sd/-
( JASON P. BOAZ ) ( SUNIL KUMAR YADAV)
Accountant Member Judicial Member
Bangalore,
Dated, the 13th September, 2017.
/ Desai Smurthy /
ITA No.306/Bang/2017
Page 8 of 8
Copy to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT, Bangalore.
6. Guard file
By order
Senior Private Secretary
ITAT, Bangalore.