Delhi High Court
R.L. Sood vs Income Tax Officer. on 16 December, 1992
Equivalent citations: (1994)49TTJ(DEL)282
ORDER
N.D. RAGHAVAN, J.M. :
This is an appeal of the assessed challenging the order dt. 28th Oct., 1988 of the CIT(A) as arbitrary and illegal.
2. The facts of the case are briefly these :
The assessed, a resident, having the status of individual and the accounting period ending with 31st March, 1982 for the asst. yr. 1982-83 filed on 17th Feb., 1983 his return declaring Nil income. The assessment was completed under s. 144 computing the total income at Rs. 1,48,050. While doing so the Assessing Officer did not allow exemption under s. 54(1) of the Act in regarding to capital gains amounting to Rs. 2,40,000 on sale of property at East Patel Nagar sold for Rs. 2,75,000 on 22nd Sept., 1981, because the Greater Kailash Property claimed to have been purchased was only under an agreement of sale though dt. 25th Sept., 1981 but not under a sale deed being in registered only on 26th Feb., 1985 beyond statutory period. On appeal, the CIT(A) confirmed the assessment order. Hence the instant record appeal by the assessed before us.
3. Learned counsel for the assessed submitted to the effect that : The appellate officer did not adjudicate the arguments made before him fully and erred in upholding the assessment order regarding disallowance of exemption under s. 54(1) of the Act in respect of Rs. 2,40,000 as capital gains of sale of property at East Patel Nagar. Without prejudice to this further error was omitted by him in not considering the third ground of appeal before him that the Assessing Officer erred in passing the order under s. 144 without giving issuance of notice under s. 143(2) of the Act and also charging interest under s. 139(8) and initiating penalty proceedings under s. 271(1)(a) , 271(1)(b) and 271(1)(c) paras 3 to 5 of the order impugned are reiterated herein too. This CIT(A) having not discussed the facts of the case fully and judiciously his order deserves to be quashed. In this connection reliance is also placed on the decisions following :
CIT vs. T.N. Aravinda Reddy (1979) 120 ITR 46 (SC) CIT vs. Mrs. Shahzada Begum (1988) 173(AP);
Mrs. Shahzada Begum vs. ITO (1983) 5 ITD 292 (Hyd).
4. In the other hand, learned representative for the Revenue, countered the aforesaid submissions of the assessed by, to say in brief, defending the orders impugned. In this connection, the decision in the case of Nawab Sir Mir Osman Ali Khan vs. CWT (1986) 162 ITR 888 (SC) was also relied upon.
5. We have heard the rival submissions besides going through the facts of the case on record and the orders of the authorities below as well as the relevant pages of the paper book to which out attention was drawn and also the case laws relied upon by the parties before us. At the outset it would be relevant to list out the chronological events that took place in the instant case as below :
22nd Sept., 1981 : Date of sale of property at East Patel Nagar.
25th Sept., 1981 : Date of agreement to purchase flat from Paradise Home Builders the flat being at Greater Kailash April, 1982 : Month before which the premises to be delivered, i.e., within 7 months of the payment of the earnest money under the above agreement to purchase.
Sept., 1982 : Rs. 2,39,850 was paid by the assessed to the vendor in Installments up to this date since 25th Sept., 1981, under the agreement to purchase.
7th Feb., 1983 : Date of delivery of possession of the flat premises to the assessed.
17th Feb., 1983 : Date of filing of the return in question.
28th Feb., 1985 : Date of completion of as assessment 26th Feb., 1985 : Date of execution of sale deed.
6. The aforesaid chronology speaks for itself the crucial facts of the case which are necessary to be borne in mind for the purpose of determining the issue involved. In our opinion, the facts of this case are almost identical with the case of Mrs. Shahzada Begum vs. ITO (supra) relied upon by the assessed. It was also a case where capital gains was involved arising from sale of property used for residence. The question arose whether for purpose of s. 54 , the date of agreement to purchase could be taken as date of purchase and the date of registration of sale-deed for purchase was not relevant. It was answered in affirmative, i.e., in favor of the assessed. The question as to whether the word purchase occurring under s. 54 , was synonymous with the word own was also answered in negative, i.e., in favor of the assessed. In this connection, it would be most appropriate to extract the relevant portion of the said judgment as hereunder :
"The word purchase is not synonymous with the word own and to claim exemption under s. 54 one need not become a complete owner of the newly acquired property. It is enough he is in a position to exercise rights in the said property on his own rather than on behalf of the vendor. Further, in common parlance, a person who has paid some money and obtained an agreement regarding an immovable property would be stated to have purchased the property. In the instant case, the assessed had paid major portion of the sale consideration prior to the registration of the sale deed.
Further, it was significant that the recitals of the sale deed clearly indicated the prior agreement of sale and as soon as the sale deed was obtained the purchase related back to the date of agreement. Therefore, even by taking into consideration the subsequent event of obtaining the sale deed, it could be said that the new property was purchased within one year after the sale of the property.
Therefore, for the purpose of s. 54 , the date of purchase could be taken to be the date on which the agreement of purchasing a new house property was obtained by the assessed and in the instant case the assessed was entitled to the deduction under s. 54."
7. Several case laws of different High Courts and Supreme Court have been discussed therein particularly at page 297 thereof and in the light shed there from the aforesaid decision was arrived at by the Tribunal in favor of the assessed. The agreement entered into by the assessed in the instant case also as in that case clearly evidences purchase of a residential house property within one year, especially, when a substantial amount of more than 87% of the total sale consideration has been paid before the expiry of one year prescribed which is more than the considerable amount of 75% of the total sale consideration paid therein. The aforesaid decision has also been affirmed by the Hon able Andhra Pradesh High Court in (1988) 173 ITR 397 (AP) (supra), thus upholding the verdict that the matter had to be decided on the basis as to when the assessed purchased the property and not when the property was sold in favor of the assessed, that the expression purchased cannotes the domain and control over the property in question into the assesseds hands, that the payment of substantial consideration was paid, that the delay in obtaining formal registration of the sale deed was immaterial to the issue and that, therefore, the assessed was eligible for exemption under s. 54(1) of the Act.
8. It may also be further added, as it would be pertinent in the present context, that the decision in the case of CIT vs. Aravinda Reddy (supra), relied upon by the assessed though the Revenue attributed it as distinguishable, to strengthen the view taken by us because the Revenue urged that the actual purchase should have taken place by means of a registered document of sale deed only the relevant essence of the said judgment of the Apex Court is extracted as hereunder :
"Four brothers, members of an HUF, partitioned the joint family properties, leaving undivided a common house. The assessed, the eldest of them, had sold his own house incurring capital gains tax. Each of his three brothers executed a release deed valuing his share in the common house at Rs. 30,000 in favor of the eldest agreed to be given. The question was whether this would amount to a "purchase" of the house by the assessed attracting s. 54(1) and the assessed would be entitled of the relief there under on the ground that he had "purchased" a house property :
Held, that the word "purchase" in s. 54(1) had to be given its common meaning, viz., by for a price of equivalent of price by payment in kind or adjustment towards a debt or for other monetary consideration. Each release in this case was a transfer of the releasers share for consideration to the release and the transferee, the assessed, "purchased" the share of each of his brothers and the assessed was, therefore, entitled to the relief under s. 54(10)."
9. In this view of the matter, we do find that the decision in the case of Nawab Sir Osman Ali Khan vs. CWT (supra) relied upon by the Revenue is clearly distinguishable when the provision of law relevant therein is under the wealth-tax pertaining to s. 2 whereas the provision of law relevant herein is under the IT Act pertaining to s. 54B and particularly that when the assessed therein happens to be the vendor unlike the assessed herein who happens to be the purchaser, and for similar other reasons.
10. Further, the assessed also advanced his arguments that s. 2(42B) defines short-term capital gain as meaning capital gain arising from the transfer of a short term capital asset, and short-term capital asset is defined under s. 2(42A) as meaning a capital asset held by an assessed for not more than thirty six months immediately preceding the date of its transfer, thus attempting to draw our attention that the word held only is used under s. 2(42A) and not the word own thus distinguishing ownership. This apart the Board Circular No. 471, dt. 15th Oct., 1986, is also relied upon by the assessed to substantiate his stand, an extract of which is taken from the order impugned as under :
"Under the Self Financing Scheme of DDA, the allottee gets title to the property on the issuance of the allotment letter and the payment of Installment is only a follow up action and taking the delivery of possession is only formality. If there is a failure on the part of DDA to deliver the possession of the flat after completing the construction, the remedy for the allottee is to file a suit for the recovery of the possession. Therefore, for the purpose of capital gain tax, the cost of the new asset is the tentative cost of construction and the fact that the amount was allowed to be paid in Installments does not affect the legal position stated above."
11. Apart from the above, reliance was also placed on the decision in the case of Raja Ram vs. ITO (1987) 1 SOT 89 (Hyd) which has also duly taken the aid of the decisions in the case of Aravinda Reddy and of Shahzada Begum (supra). it will also be appropriate to extract the relevant portion of this decision which deals with a similar situation as herein :
"To conclude, the term purchase should be construed liberally in terms of the dicta of the Supreme Court in the case cited (supra), and the date of agreement of purchase should be taken as the date of purchase even though conveyance was given after expiry of one year from the date of sale of residential flat, and the mere fact that the major part of the consideration was paid after the expiry of one year would not disentitle the assessed from exemption under s. 54.
Accordingly, the order of the Commissioner was vacated."
12. A perusal of the aforesaid judgment particularly of the Hon able Andhra Pradesh High Court upholding the decision of the Tribunal and of the Hon able Supreme Court particularly the former case which is identical with the facts of the instant case would reveal that the issue involved herein is squarely covered by its ration decidendi.
13. In this view of the matter we quash the orders impugned before us by granting relief to the assessed as prayed in the main ground of appeal as a result of which the alternative ground of appeal becomes infructuous.
14. In the result, the appeal of the assessed is allowed hereby.