Income Tax Appellate Tribunal - Delhi
Sita Devi Wadhwa, New Delhi vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH "G" DELHI)
BEFORE SHRI A.D. JAIN AND SHRI A.K. GARODIA
ITA NO. 239(Del)2010
Assessment year: 2006-07
Dy.Commissioner of Income Tax, Smt. Sita Devi Wadhwa,
Circle 31(1), New Delhi. V. 1103, Akashdeep, BK Road,
New Delhi.
ITA No. 241(Del)2010
Assessment year: 2006-07
Dy.Commissioner of Income Tax, Shri Satyam Mohan Wadhwa,
Circle 31(1), New Delhi. V. 1103, Akashdeep, BK Road,
New Delhi.
(Appellant) (Respondent)
Department by: Shri Kishore B. Sr. DR
Assessee by: Shri P.N. Mehta, CA
ORDER
PER A.D. JAIN, J.M.
These are Department's appeals in the case of two different assesses, for assessment year 2006-07. Since common issues are involved, both these appeals are being disposed of by this composite order. The grounds raised are as under:-
2 ITA Nos.239&241(Del)2010
"1. The learned CIT(A) has erred in deleting an addition of ` 22,41,000/-in the case of Smt. Sita Devi Wadhwa and ` 30,43,578/- in the case of Mr. Satyan Mohan Wadhwa by allowing the assessee's claim of exemption u/s 54F, without considering the fact that the assessee has failed to comply with the conditions as are laid down in section 54F of the Income Tax Act, 1961.
2. The ld. CIT(A) has further erred in relying upon the CBDT Circular Nos. 471 & 672 without appreciating the fact that these circulars apply in the cases of investment in flats under Self Finance Scheme of DDA/Coop.Societies/Institutions, with similar scheme, whereas in the case of assesses allotment has been made by a private company and that also on provisional basis only."
2. During the year, the assessee in ITA No. 241(Del)2010, Shri Satyam Mohan Wadhwa, made a long term capital gain of sale of shares, amounting to ` 23,22,114/-/ Out of this, he invested a sum of ` 22,41,400/- in the purchase of flat no. 4, Belle Vue, on the second floor, jointly with his mother. The assessee had invested ` 30,43,578/- before 31.07.2006. This amount included the cost of two covered car parking lots of the value of ` 2,75,000/-. The assessee claimed exemption u/s 54F of the I.T. Act.
3. The exemption claimed by the assessee was denied to him by the AO. The AO observed that since the possession of the flat had hitherto not been handed over to the assessee, the benefit of deduction u/s 54F of the Act was not available to the assessee. The assessee placed reliance on CBDT Circular Nos. 471 dated 15.01.1986 and 672 dated 16.12.1993. The 3 ITA Nos.239&241(Del)2010 assessee also placed reliance on the decision of the Hon'ble Delhi High Court in the case of "CIT v. R.L. Sood", 108 Taxman (Del)227.
4. Unimpressed, the AO denied the exemption claimed, observing that the flat had been allotted to the assessee provisionally subject to certain conditions which appeared not fulfilled by the assessee in due time; that the Apartment Agreement did not bear any date or signature; that on inquiry from Shweta Estate Pvt. Ltd. it had come to his knowledge, that through their letter dated 23.12.2008, he possession had not hitherto been handed over and that the project was till then under progress; that for claiming deduction u/s 54F of the Act, it was a pre-requisite that the assessee within a period of one year before or two years after the date on which transfer took place, purchases or constructs, a residential property; and that the assessee was not in possession of the property which was still under construction, nor was the title of the property cleared as the assessee had not been issued any allotment letter from Shweta Estate Pvt. Ltd. The assessees were thus denied the claim of exemption u/s 54F of the Act.
5. By virtue of the impugned orders, the ld. CIT(A) reversed the assessment orders, granting exemption u/s 54F to the assessees. Aggrieved, the Department has filed these appeals before us.
4 ITA Nos.239&241(Del)2010
6. The ld. DR has argued that the ld. CIT(A) has erred in deleting the addition of ` 30,43,578/- (in ITA No. 241(Del)2010) and of ` 22,41,000/- (in ITA NO. 239(Del)2010); that the ld. CIT(A) has wrongly allowed the claim of exemption u/s 54F; that this was done in oblivion of the fact that the assesses had failed to comply with the provisions of section 54F of the Act; that the ld. CIT(A) has gone wrong in placing reliance on CBDT Circular Nos. 471 and 672; that the ld. CIT(A) failed to appreciate that these Circulars are not applicable to the present cases, as they apply where investment has been made in flats under the Self Finance Scheme of DDA/Co-operative Societies/Institutions; that the ld. CIT(A) failed to consider that in the assessees' cases, allotment had been made by a private company and that too on a provisional basis only; and that therefore, the orders passed by the ld. CIT(A) be set aside and those of the AO revived while allowing both the appeals filed by the Department.
7. The learned counsel for the assessee, on the other hand, has strongly supported the impugned orders. It has been contended that both the assesses had duly complied with the provisions of section 54F of the Act; that the Scheme under which the allotments were made have not been shown any different from that of DDA in the case of Self Financing Scheme; that the Circulars have been rightly relied on by the ld. CIT(A); that the ld. CIT(A) 5 ITA Nos.239&241(Del)2010 has duly appreciated all the facts and has passed self speaking orders, which do not require any interference; and that the appeals filed by the Department, carrying no merit, be dismissed.
8. We have heard the parties and have perused the material on record. The question is as to whether the ld. CIT(A) has rightly deleted the additions made while allowing the claim of the assessees for exemption u/s 54F of the Act.
9. The undisputed facts are that the assessees applied for allotment of flats to be constructed under a Group Housing Scheme of M/s. Shweta Builders Pvt. Ltd. Capital gains arose to the assessees on sale of shares. The assessees invested the said sale proceeds of shares jointly with M/s. Shweta Estate Pvt. Ltd., for allotment of a flat, before 31.07.2006. Shweta Estate Pvt. Ltd., vide letter dated 24.11.2006, had made a provisional allotment, on the basis of the available applications, conveying the acceptance of the proposal of the assessees for allotment of a specific house of the Belle Vue Scheme at flat No. 4, on the second floor. The allotment of the flat was made under the Scheme by Shweta Estate Pvt. Ltd. The payment therefor was linked to instalments of the cost of construction. This Scheme was, therefore, found by the ld. CIT(A) to be exactly similar to the SFS of the DDA. CBDT Circular No. 474 dated 15.10.86 was found to 6 ITA Nos.239&241(Del)2010 have liberally interpreted the provisions of sections 54 and 54F of the I.T. Act, concerning flats under the SFS of the DDA, treating the allotment of flats thereunder as cases of construction for the purpose of capital gains. This benefit was found to have been extended vide Circular No. 672 dated 16.12.93, to flats or houses constructed by Co-operative Societies or other Institutions, if the terms of the Scheme of allotment of flat under construction were similar to the SFS of the DDA. The ld. CIT(A) found that under the Belle Vue Scheme of Shweta Estate Pvt. Ltd., the allotment letter had been issued on payment of the first instalment of the cost of construction. This allotment was to be final, unless invested or withdrawn unless the allottee withdrew from the Seheme, which facts were found to be in pari materia with the SFS of DDA, whereunder, the allottee gets titled to the property on issuance of the allotment letter and the payment of instalment is later and taking of delivery is a formality.
10. It was in the above facts that the ld. CIT(A) observed that the benefit of section 54F of the I.T. Act was available to the present assessees also.
11. Before us, the Department has not been able to demonstrate as to how the ld. CIT(A) has committed any error in granting exemption available u/s 54F of the Act to the present assessees, in the facts discussed. It has not been demonstrated as to how the Belle Vue Scheme of Shweta Estate Pvt. 7 ITA Nos.239&241(Del)2010 Ltd. is any different from the SFS of DDA. As such, it has not been explained as to how, if at all, CBDT Circular Nos. 474 dated 15.10.86 and 672 dated 16.12.93 are not applicable to the present assessees. Benefit u/s 54F of the Act was refused to the assessees for the reason that the assessees were neither in possession of the property, nor was their title qua the property cleared, no allotment letter having been issued to the assessees. However, as discussed by the ld. CIT(A), in view of the aforesaid CBDT Circulars, possession of the property before the statute thoroughly prescribed period of two years from the date on which capital gains arose, is not mandatory. Further, as per these Circulars, allotment of flats shall be treated as construction for the purpose of capital gains. Further, what was considered by the AO to be a mere provisional allotment by Shweta Estate Pvt. Ltd., was found by the ld. CIT(A) and in our view, correctly, to be a final allotment, despite the use of the word 'provisional' in the letter. This was due to the fact that in the letter, Shweta Estate Pvt. Ltd. had specified the Apartment number, the floor number, the type of flat, the Tower number and the phase of the Real Estate Project. It has been turned as 'provisional' allotment, since the said allotment letter was to be succeeded by an Apartment Buyer Agreement, which was to be signed by the allottee within 30 days from the dispatch. This was a legal arrangement between Shweta 8 ITA Nos.239&241(Del)2010 Estate Pvt. Ltd. and the assessees - allottees, sans which, the transfer of the specific flat could not have been effected. The assessees had paid the initial instalment and had made a proposal with Shweta Estate Pvt. Ltd. for allotment of flat. Shweta Estate Pvt. Ltd. had accepted such proposal and had allotted the specific flat to the assessees and so, there was no 'provisional' allotment.
12. In view of the above facts, finding no error in the well reasoned order passed by the ld. CIT(A), we hereby uphold the same, rejecting the grounds raised by the Department in both the cases.
13. In the result, both the appeals filed by the Department are dismissed.
Order pronounced in the open court on 3.12.2010.
Sd/- sd/-
(A.K. Garodia) (A.D. Jain)
Accountant Member Judicial Member
Dated: 3.12.2010
*RM
copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
True copy
By order
Deputy Registrar