Income Tax Appellate Tribunal - Chandigarh
Mrs. Paramjit Kaur, Chandigarh vs Ito, Chandigarh on 28 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.717/Chd/2017
(Assessment Year : 2013-14)
Mrs.Paramjit Kaur, Vs. The Income Tax Officer,
Plot No.25/7, Industrial Area, Ward 1(2),
Phase 2, Chandigarh. Chandigarh.
PAN: ADOPK0571B
(Appellant) (Respondent)
Appellant by : Shri Parikshit Aggarwal, CA
Respondent by : Smt.Meenakshi Vohra, DR
Date of hearing : 04.09.2017
Date of Pronouncement : 28.09.2017
O R D E R
PER ANNAPURNA GUPTA, A.M. :
Thi s appeal h a s b e e n f i l ed b y t he a s s e s s e e a g a i n st t h e o r de r o f L d .C I T( A p p e al s ) - 1 , C h a n d i g a rh d a ted 6 . 2 . 20 1 7 r e l a t i n g t o a s se ss m e n t y e ar 2 0 1 3- 1 4 .
2. Th e assessee has raised following grounds of appeal:
"1. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) in Appeal No. 265/15-16 dated 06.02.2017 has erred in passing that order in contravention of the provisions of Section 250(6) of the Income Tax Act, 1961.
2. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) was unjustified in not allowing complete deduction claimed u/s 54 out of long term capital gain arising from sale of a residential house and thereby partly confirming the action of Ld. AO in respect of not allowing deduction u/s 54 on following items :2
2.1 Aggregate payments of Rs. 18,52,650/- made to builder for a residential flat during the period of more than 1 year but less than 2 years prior to the date of sale of residential house from which taxable long capital gain arose.
2.2 Aggregate payments of Rs. 25,40,389/- made to builder for a residential flat during the period of 1 year prior to the date of sale of residential house.
2.3 Amount of Rs. 2,00,000/- deposited in capital gain scheme account on 27.09.2013 and subsequently utilized for payment of Rs.2,06,000/ -to builder for a residential flat, by erroneously interpreting that the amount in capital gain scheme account should have been deposited before the due date of filing of ITR u/s 139(1) and not u/s 139(4)."
3. Th e o n l y i ss u e i n t h e p r e s en t app e a l p er t a i n s t o d e n i a l o f e x e m p ti o n c l ai m e d u n d e r s e c ti o n 5 4 o f th e I nc o m e Ta x A c t , 1 9 6 1 ( i n sh o r t ' t h e A c t ') to t h e e x t e n t o f i n v e s t m e nt m a d e i n c o n s tr uc t i o n of n e w h o us e p r i or t o t h e da t e o f s a l e o f o r i g i n al a s s e t a n d o n a c c o u n t o f d e p o s i t m ad e i n C a p i t al G a i n A cc o u n t s ch e m e a ft e r th e du e d a t e o f f i l i n g o f r et u rn o f i n c o m e a s p er s e c t i o n 13 9 ( 1 ) o f t h e A c t .
4. B r i e f f a ct s l e a di n g t o t h e ca s e a r e t h a t th e a s se s s e e sold her h o u se No. 7 7 9, Se c t o r - 2 2 , C h a nd i g a r h on 0 7 . 1 1 . 2 0 12 f o r Rs . 5 7 , 5 0 , 00 0 / - a nd e a r n e d l o n g t er m c a p i t a l g a i n s o f Rs . 5 3 ,6 8 , 0 8 4 / - . O n t h i s t h e as s e s se e c l a i m ed e x e m p t i o n u / s 5 4 o f t he I n c ome Ta x A c t , 1 9 6 1 ,a s h e h a d e n t e r e d i nt o a n a g r e e m e n t w i t h M / s W i n d s hi e l d D e v e l o p e rs P v t . L t d , P u n e on 1 2 . 0 5 . 2 0 1 1 , i .e . p r i o r t o t h e da t e o f s a l e o f o r i g i n al a s s et , t o a c q u i r e a r e s i d e n t i a l f l a t N o . 9 0 5, m e a s u r i n g 8 6 .45 s q . m t s . c a r p et a r e a i n " M a r ve l C e r i s e " , Pune, f o r a t o ta l c o n s i d e ra t i o n of Rs. 5 7 , 4 0 , 2 5 0 / - . Th e f l a t s w e r e y e t t o b e c o n s t r u c t ed , b u t t h e b u i l d e r w o u l d h a v e c o n s t r u c te d t h e se f l a t s a n d h a d a g r e e d t o h a n d i t o v e r t o 3 t h e a s se s s e e o n o r b ef o r e 3 1 . 1 2. 2 0 1 3 . Th e as s es s e e m ad e payment of R s . 5 3 , 9 4 ,5 2 0 / - to the builder between 0 1 . 0 6 . 2 0 11 t o 4.1 2 . 2 0 1 3 as p e r th e f o l l o w i n g br e ak u p .
Period Amount (in Rs.) Duration from sale of Original asset Prior to 07.11.2011 18,52,650/- Beyond 1 year 07.11.2011 to 07.11.2012 25,40,389/- 1 year before 07.11.2012 to 30.10.2014 10,01,481/- After date of sale Total 53,94,520/-
5. Th e A s s e s s i n g O f f i c e r h o we v e r d e n i e d t h e e x em p t i on u / s 5 4 o f t h e Ac t s t a t i n g t h a t th e a s s e s s ee h a d f a i l e d to f u l f i l l t h e c o n d i ti o n s o f s e c ti o n 5 4 a n d r e j e ct e d h e r cl a i m a n d t a xe d R s. 5 3 ,6 8 , 0 8 4 / - a s l o n g t e r m c a p i ta l g ai n . A s p e r the Assessing Officer, since the date of sale of house was 7 t h N o v e m be r , 2 0 1 2 , th e e xe m p t i o n u /s 5 4 o f t h e A c t w o u l d o n l y b e cl a i m e d b y t h e as s e s s e e i f s h e p u r c h a s e d another house between 7 . 1 1 . 201 1 to 6 . 1 1 . 2 014 (1 ye a r before or 2 years after t he s a l e) . B u t s i n c e t he a s s e s s e e pu r c h as e d f l a t on 1 2 .0 5 . 2 0 1 2 b ut d i d n o t t a k e p o s s e s s i on b y 2 3 . 1 1 . 2 0 1 5, t h e A s s e s s i n g O f fi c e r d i s a l l o we d the entire a m ou n t of Rs . 5 3 , 68 , 0 8 4 / - c l a i m ed by t he a s s e s s e e . M o r e ov e r t h e A O he l d t h a t t h e a ss e s s ee h a d a l so f a i l e d t o f u l f i l l th e c o n d i ti o n o f c o n s t r u c ti n g a ne w h o u se w i t h i n th r e e y e a rs f r o m t h e da t e of s a l e o f t he o r ig i n a l a s s et s i n c e t h e f l a t wa s n o t h a n d e d o v e r t o t h e a s s e ss e e t i l l 2 3 - 1 1 - 2 0 1 5 . Th e As s e s s i n g O f f i c er d e n i e d th e e x em p t i o n o n v a r i o u s gr o u n d s i n c l u d i n g;
i) treating t he a cq u i s i t i o n of f l at to be case of purchase.
4
ii) a s s e s s ee having e n t e r ed into a g r e e m en t on 1 2 . 0 5 . 2 0 11 t o a cq u i r e t h e f l a t , t ha t i s p r i o r t o on e y e a r b e f o r e th e d a t e o f s a l e o f o r i g i n a l a ss e t on 7 . 1 1 . 2 0 1 2; a n d
iii) not g e t ti n g th e p o s s e s si o n of f l a t w i t h i n t h r ee y e a r s f r om d a t e o f s a l e .
6. Th e matter was carried in appeal b e f o re the L d . CI T( A p p e a l s ) where the assessee c on t e s t e d t he d i s a l l o w an c e o n v a r i o u s gr o u n d s i . e . :
a ) m e r e l y n o t h an d i n g o v er o f pos s e s s i o n w i t h i n t h r e e y e a r s w a s n o t su f f i c i e nt r e a s on t o m a k e d i s a l l o w a n c e e v e n w h i l e t h e as s e s s e e h ad m a de s u b s t a n ti a l p a y m e nt w i t h i n t w o y e ar s ;
b) the a c qu i s i t i o n of fl a t t a n t am o u n te d to c o n s t r u c ti o n o f fl a t a n d no t p u rch a s e ;
c ) t h a t t h e re w as n o t i m e l i m i t f o r c o m m e n ce m en t o f c o n s t r u c ti o n t h ou g h t h e s e c t i o n p r e s c r i b ed t i m e l i m i t f o r c o m p l e t i n g t he s a m e .
7. Th e L d . CI T( A p p ea l s ) a ft e r c o n s i d e r i n g t h e as s es s e e ' s s u b m i s s i on s n a rr o w e d d o wn t h e p o i n t s o f d i s p ut e a s u n d e r;
a ) w h e th e r t h e ne w h o u se a c qu i re d s h o ul d b e t a ke n as p u r c h a s e o r c o nst r u c t i o n a n d ;
b) W ha t i s t he p e r i od w i th i n w h i c h th e i nv e s tm e n t c o u l d h a ve b e e n m a d e .
a n d h e l d t h a t th e p r e s e nt w a s a c a s e of c o n st ru c t i o n of r e s i d e n t i a l h o use a n d n o t p u r c has e a n d t ha t o u t o f t h e t ot a l 5 i n v e s t m e nt o f Rs . 5 3 , 9 4 , 52 0 / - , th e a m o u nt i n v es t e d b e fo r e t h e d a t e o f s a l e i . e . R s . 4 3 , 93 , 0 3 9/ - c o u l d n o t b e a l l o w e d as d e d u c t i o n a s p e r t h e pr o v i s i on s of s e c t i o n 5 4 o f th e A c t a n d o u t o f t h e b al a nc e a m o u n t of R s. 1 0 , 0 1 , 4 81 / - i n ve s t e d a f t er t h e d a t e o f sa l e, t h e a mo u n t o f R s . 7 , 9 5, 4 8 2 / - w h i c h w as i n v e s t e d i n co n st r u c t i o n o f th e ho u s e t i l l d u e da te o f f i l i n g o f r e t u r n o f i n c om e w a s t o b e a l l o w e d , W h i l e t h e r e m a i n i n g a m o u n t w h i c h wa s i n v e s t e d i n ca p i t a l g a i n s s che m e c o u l d n o t b e a l l o we d s i n c e t h e i n v es t m en t w a s m a d e a f t er t h e d ue date of filing of r e t ur n . Th e r e l e v an t finding of the L d . CI T( A p p e a l s ) a t p a r a 6. 6 o f h i s o r d e r i s a s un de r :
"6.6 On examination of the agreement with the builder, it can be concluded that it was a case of construction of residential house and not a purchase. This conclusion has drawn from the fact that when the appellant entered into an agreement with Windshield Developers Pvt. Ltd, Pune, the building had not yet started, therefore, the appellant could not have purchased a residential house. Moreover, the payment schedule given to the appellant by the builder was linked to the stages of completion of the building as is apparent from the agreement Since, it is a case of construction of residential house, the appellant was entitled to exemption with respect to investment made in construction of house 3 years after the date of sale. The appellant had sold the residential property on 07.11.2012 and should have either invested the capital gain amount before 31.07.2013 [due date of filing the return u/s 139(1)] or deposited in any Bank/institution or in any scheme specified/notified by the Government and furnish proof of deposit but the appellant failed to comply with the provisions of section 54 of the Act. Out of investment of Rs.53,94,520/-, only Rs.10,01,481 was invested after the date of sale as shown in tab l e ab ove and Rs . 4 3, 93, 039 /- was mad e 6 bef ore d ate of s al e an d therefore, sum of Rs.43,93,039/- cannot be allowed as deduction. Out of the remaining Rs.10,01,481 /- only Rs.7,95,482/- was invested in construction between 07.11.2012 to 31.07.2013 (as per the details filed by the appellant) and the remaining amount was invested after the due date of filing the return without investing them in specified Capital Gains Scheme. Therefore, only deduction u/s 54 of Rs.7,95,482/- is admissible to the appellant and the remaining amount of Rs.45,99,038/- is confirmed. The appellant gets relief of Rs.7,95,482/-. Ground of appeal No. 2 is partly allowed."
8. A g g r i e v e d by t h e s a m e , t h e a s s e ss e e h a s n o w c om e u p i n a p p ea l be f o re u s . Th e L d . c o u n s el f or t he a s s e ss ee d u r i n g t h e c o u rs e o f a r g um e n t s b e f o r e u s f i r s t d r e w o ur attention to the facts of the case and pointed out first the payments made towards c o n s tr u c t i o n of the r e s i d e n t ia l h o u s e , w h i c h a re r e p r o d u ce d a t p a g e 7 3 o f t h e Pa p e r B o ok as under:
Date Paid Amount Paid in Rs. Remarks
12.01.2011 304,600.00 Paid to Builder
12.01.2011 500,000.00 Paid to Builder
29.06.2011 500,000.00 Paid to Builder
03.08.2011 500,000.00 Paid to Builder
03.08.2011 48,050.00 Paid to Builder
30.11.2011 57,402.50 Paid to Builder
30.11.2011 39,862.00 Paid to Builder
28.12.2011 262,012.00 Paid to Builder
18.02.2012 262,013.00 Paid to Builder
22.02.2012 6,746.82 Paid to Builder
07.06.2012 262,012.50 Paid to Builder
07.06.2012 8,096.00 Paid to Builder
11.08.2012 1,048,050.00 Paid to Builder
13.08.2012 32,385.00 Paid to Builder
15.09.2012 262,012.50 Paid to Builder
17.09.2012 14,843.14 Paid to Builder
11.10.2012 262,012.50 Paid to Builder
11.10.2012 22,939.33 Paid to Builder
29.11.2012 262,012.50 Paid to Builder
29.11.2012 6,746.95 Paid to Builder
7
12.04.2013 524,025.00 Paid to Builder
12.04.2013 2,698.48 Paid to Builder
27.09.2013 200,000.00 Deposited in Capital
Gain Deposit A/c
30.10.2014 6,000.00 Out of Capital Gain
A/c wherein Rs.2 lacs
were deposited on
27.09.2013 (Total
Paid
to Builder
Rs.206000.00)
G Total Paid 5,394,520.22
9. D r a w i n g o u r a t t en t i o n to t he s ame , t h e L d . c o u nse l f o r a s s e s s e e p o i n t e d o u t t h a t t h e c ap i t a l g a i n s h av i n g a c c r u e d i n N o v e m b e r, 2 01 2 , t h e p a y m e n ts m a d e p r i o r t o t h a t d a t e a m o u n t e d to R s .4 3 , 9 3 , 0 3 9/ - a n d p o s t t h a t d a t e u p t o t he d a t e o f f i l i n g o f re t u r n o f i n c o me a m o u n t e d t o R s .7 , 9 5 , 4 8 2 /- Th e r e a f t e r t h e p a y m e n t s m a d e to t h e b u i l d e r s am o u n t e d t o R s . 6 , 0 0 0 /- a n d R s . 2 l a c s w a s d e p o s i t e d i n ca p i t a l g a i n a c c o u n t s c h e m e u p t o 2 7 . 9 .2 01 3 . L d. C o u n se l t h e r e a ft e r p o i n t e d ou t t h at t h e d u e d a t e for f i l i n g o f r et u r n o f i n c o me u / s 1 3 9 ( 1 ) of t he A c t f o r t h e i mp u g n e d y e a r w a s 3 1 . 7 . 2 0 1 3 w h i l e t h e r e tu r n c o u l d b e f i l ed d el a y e d u / s 1 3 9 ( 4 ) o f t h e A c t up to 3 1 .3 . 2 0 15 . Ld. co u n s e l for the a s s e ss e e f u r t her p o i n t e d o ut t h at t h e f a c t th a t t h e a m o u n t pa i d b y t h e a s s e s s e e t o t h e b u i l d e r t a n t a mo u n t e d t o c o n s tr u c t i o n of h o u s e i s n ot d i sp u t e d b y t he R e ve n u e a n d , th e r e fo r e , s t a n ds settled and a cc e p t e d . Th e r e a ft e r the Ld. co u n s e l f or a s s e s s e e p o i nt e d o u t t h a t a s p e r s e c t i o n 5 4 o f t h e A c t a t i m e p e r i o d o f t h r e e y e a r s w as g i v e n f o r c o mp l e t i o n o f c o n s t r u c ti o n o f t h e h o u s e b u t at t h e s a me t i m e, t h e L d. c o u n s e l f o r a s s es s e e p o i n t ed o u t, s e c t i o n 5 4 di d n o t p l a c e a n y b a r o n t he c o m m e n ce m e n t o f c o ns t r u c ti o n. Th e L d . 8 c o u n s e l f o r a s s es s e e p oi n t e d o ut t h a t , t h er e f o r e, t h e f a ct t h a t t h e a s s e ss ee c o m m e n c e d c on s t r u c t i on o f h ou s e p r i o r t o t h e s a l e o f t h e o r i g i n a l a s s e t wo u l d n o t a f f ec t i t s c l a i m of d e d u c t i o n u / s 54 o f t h e A c t . Th e L d . co u n s e l fo r a s s e s se e d r e w o u r a t t e n t i o n t o t h e f o l l o w i n g j u d g m e n t s o f t h e v a r i o us H i g h C o u rt s l a y i n g d o w n th i s p rop o s i t i o n :
i) C I T s . Bh a r t i M i sh r a ( 2 0 1 4) 9 8 D TR 1 ( D e l )
ii) C I T V s . H . K . Ka po o r ( D c d. ) t h ro u gh L R ( 1 9 9 8 ) 2 34 I TR 75 3 ( A l l )
iii) C I T V s . J . R . S ubr a m a n y a Bh a t ( 1 9 8 7 ) 1 65 I TR 57 1 ( K a r n a ta k a )
10. Th e L d . c o u n se l f o r a s se s s e e a l s o d r e w o u r at t e n t i o n to t h e d e c i s i on o f th e C o o r d i n at e Be n c h o f t h e I . T. A. T. i n t h i s r e g a r d a s u n d e r:
i) S m t . U s h a V s . AC I T ( 2 0 1 7 ) 4 9 C C H 37 0 ( C h e n Tr i b . )
ii) A CI T V s . S h r i Sub h a s h S e va r a m B h a v n a n i I TA N o . 9 28 / A h d /2 0 1 2 d a t ed 2 9 . 6.2 0 1 2
11. Th e L d . c o u n s e l f o r a s s e ss e e f ur t h e r p o i nt e d o ut t h a t v i s- à - v i s d en i a l o f c l a i m o f e x e m p t i o n u / s 5 4 o f t h e A c t o n a c c o un t o f de p o s i t s m a d e i n t h e ca p i t a l g a i n a c c o u nt s c h e m e a f t er t he d u e d a t e o f f i l i n g r e t u r n of i n c o m e u / s 1 3 9 ( 1 ) o f th e A ct , t h e H o n 'b l e ju r i s d i c t i o n a l H i gh C o u r t i n t h e c a s e of CI T v s J a g r a t i A g g a r wa l r e p o r te d i n 339 I TR 6 10 ( P & H ) h a d h e l d t h e d a t e o f f i l i n g o f d el a y e d r e t u r n u /s 1 3 9 ( 4 ) o f th e Ac t a s t h e d ue da t e a n d d e po s i ts m a d e i n c a p i t a l g a i n a c co u n t s c h e m e u p t o t h a t d a t e w e r e a l l o w ed d e d u c t i o n. Th e L d . c o u n s e l fo r a s s e s s e e , th e r e fo r e , s t a t e d t h a t t h e d e n i a l of d e d u c t i o n by th e L d . CI T( A p p e a l s ) w a s n o t 9 i n a c c o r da n c e wi t h l a w .
12. Th e L d . D R , o n t h e o t h e r h a n d , r e l i e d u p o n t h e o r d e r o f t h e L d. CI T( A pp e a l s ) .
13. W e h a v e h e a r d t h e c o n t e n ti o n s o f b o t h t h e p ar t i e s, perused the ord e r s of the a ut h o r i t i e s below and g on e t h r o u g h th e d o cum e n t s r e fe r r e d to b e f o r e u s .
14. Th e o n l y i s s u e i n t h e p r e s en t a pp e a l , w e f i n d , c an b e n a r r o w e d d o w n as u n d e r ;
i ) w h e t h e r t h e a m o u n t s i n v e st ed i n c o n s t r u c t i o n o f r e s i d e n t i a l f l at p r i o r t o t h e d a te o f s a l e o f r e si d e n t i a l h o u s e w o ul d q u al i f y f o r d e d u ct i o n u / s 5 4 of t h e A ct ; i i ) w h e th e r i nv es t m e n t ma d e i n c a p i t a l g a i n a cc o u n t s c h e m e a f te r d u e d a t e o f f i l i n g o f r e t u r n o f i n c o m e u / s 1 3 9 ( 1 ) o f t h e Ac t b u t b e f o r e th e d u e d a t e o f f i l i ng d e l a y e d r e t u r n a s p e r p r o v i s i on s o f s e c t i on 13 9 ( 4 ) , w o u l d q u al i f y a s d e e m e d u ti l i z a ti o n o f a m ou n t i n t he c o n s t r u c ti o n of a new r e s i d en t i a l house as per p r o v i s i o ns o f se ct i o n 5 4 of t h e A ct .
15. Th e u n d i s p u t e d f a c t s i n t h e p r ese n t c a se a r e t h at t h e L o n g Te r m C a p i t a l G a i n s a r o s e to t h e a s s e s s e e du r i n g t h e i m p u g n e d ye a r am o u n t i n g to R s .5 3 , 6 8 , 0 4 4/ - o n a c c o u n t o f sale of ho u s e owned by h er for a co n s i d e r a t i o n of R s . 5 7 , 5 0 ,0 0 0 / - o n 7 . 1 1. 2 0 1 2 . Th e f a c t t h at t he a s s e ss e e h a d e n te r e d i n to a n ag r e e m en t w i t h d e v e l o p e r M / s W i n d S h e i l d D ev e l o p er s P v t . L td . , P un e o n 1 2 . 5. 2 0 11 a n d h ad 10 acquired r e si d en t i a l flat for a total c o n s i de r a t i o n of R s . 5 7 , 4 0 ,2 5 0 / - i s n o t d i s p u t e d . L d . CI T( A p p e a l s ) h a s h e l d t h e s a i d ac q u i s i ti o n t o t a nt a m o un t t o c o n st r u c t i on o f h o u s e by the a s s e s see , which has not been d i s put e d by the Revenue. Th e fa c t t h a t t he a ss e s s e e m a de p a y m e n t s o n a c c o u n t of t h e sa i d f l a t p r i o r t o a n d p o s t t h e s al e o f o r i g i n a l a s s e t a s u n d e r i s a l s o n o t d i s p ut ed :
Period Amount (in Rs.) Duration
Prior to 07.11.2011 18,52,650/- Beyond 1 year
07.11.2011 to 07.11.2012 25,40,389/- 1 year before
07.11.2012 to 30.10.2014 10,01,481/- After date of sale
Total 53,94,520/-
16. F u r t h e r t h e b r eak - u p o f t h e a m ou n t o f R s . 1 0 , 0 1,4 8 1 / - m a d e a f t er t h e da t e o f s al e i s a s u n d e r :
R s . 2 6 2, 0 1 2 . 5 0 P ai d t o B u i l d e r
Rs. 6, 7 4 6 . 9 5 Paid to Builder
R s . 5 2 4 , 02 5 . 0 0 Paid to Builder
Rs. 2 , 6 9 8 . 48 Paid to Builder
R s . 2 0 0 ,0 0 0 . 0 0 D e p o s i t e d i n C api t a l G a i n
De p o s i t A / c
Rs. 6 , 0 0 0 . 00 O u t o f Ca p i t a l Ga i n A / c
w h e r e i n R s. 2 l a c s w e r e
d e p o s i t e d on 2 7 . 0 9 . 20 1 3
( To t a l P a i d t o B u i l de r
R s . 2 0 60 0 0 .0 0 )
17. O u t o f t h e a b o v e a m o u n t , t h e a s se s s e e h a s b e e n de n i e d d e d u c t i o n o n a cco u n t o f t h e a mou n t s p a i d p r i o r to t h e d at e of sale of the original a ss e t be i n g R s . 1 8 ,5 2 , 65 0 / - and R s . 2 5 , 4 0 ,3 8 9 / - fo r t h e re a s o n t ha t t h e co n s t r uc t i o n s h o u l d h a v e b e e n u n d er t a k e n o nl y a ft er t h e s al e o f t he o r i g i na l a s s e t a n d a n y am o u n t i n v e s te d p r i o r t o t h a t d at e w a s n o t a l l o w a b l e a s p e r t h e p r o v i s i o n s o f s e c t i o n 54 o f t h e A c t . 11 Further th e a mo u n t d e p os i t e d in capital g ai n account s c h e m e o f R s . 2 l a c s h a s a l s o b e en d i s a l l o w e d fo r t h e r e a s on t h a t t h e s a m e w a s d e p os i t e d be y o n d t he d a t e p r e s c r i b ed u / s 5 4 o f t h e A ct w h i c h w a s b y d u e d a t e o f f i l i ng o f r e t u rn o f i n c o m e u / s 139 ( 1 ) o f t h e A c t.
18. Th e m a i n a r g u m e n t o f t h e L d . c ou n s e l f o r a s s e sse e h a s b e e n t h a t ha v i n g a c c e p t e d th e f a ct t h a t t h e am o u nt i n v e s t e d i n n e w f l at b y v i r t u e o f a g r e em e n t e n t e re d i nt o w i t h t he builder ta n t a m ou n t e d to c o n s t ru c t i o n of the re s i d e n t i al h o u s e , t h e o n l y l i m i t a t i o n p r e s c ri b e d b y s e c t i on 5 4 o f t he A c t w a s t h a t th e c o n s t r u c t i o n o ug h t t o h a v e b ee n c o m p l e t e d w i t h i n a pe r i o d o f t h r e e ye a r s an d t h e s a i d s e c ti o n d i d n ot prescribe an y co n d i t i o n v i s - à - vi s the c o m m e nc e m e n t of c o n s t r u c ti o n . Th e L d . c o u n se l fo r a s s es s e e h a s r e l i e d u p on s e v e r a l ca s e l a w s i n t h i s r e g a r d.
19. W e h a v e g o n e t hr o u g h t h e d e c i s i o n s r e l i e d u p on b y t h e L d . c o u n s el f o r as s e s s e e a nd f i n d m e r i t i n t he c o nt e n t i o n o f t h e L d . C o u ns e l f o r t h e a s s e ss e e. Th e H o n ' b l e D e l h i H i g h Court in the case of B h ar a t i M i s h ra ((supra) h as c a t e g o r i ca l l y h el d t h a t t h e c o n d i t i o n s t i pu l a t e d b y s e c t i o n 5 4 F w h i c h i s i d en t i c a l t o t h a t i n s e c t i o n 5 4 o f c on s t r u c t i ng a r e s i d e n ti a l h ou s e w i t h i n th r e e y e a r s f o r t h e pu r p o s e of c l a i m i n g d e du c t i o n d o e s n o t s t i pu l a t e t h a t t h e c on s t r u c t i on m u s t h av e t ak e n p l a c e a f t er t h e d a t e o f s a l e o f or i g i n a l o r old asset. Th e re l e v a n t f i n d i n g s o f t h e H o n ' bl e Hi g h C o u r t a r e a s u nd e r :
" 1 2 . Section 54F(1) if read carefully states that the assesseee being an individual or Hindu Undivided Family, who had earned capital gains from transfer of any long-term capital not 12 being a residential house could claim benefit under the said Section provided, any one of the following three conditions were satisfied; (i) the assessee had within a period of one year before the sale, purchased a residential house; (ii) within two years after the date of transfer of the original capital asset, purchased a residential house and (iii) within a period of three years after the date of sale of the original asset, constructed a residential house.
13. For the satisfaction of the third condition, it is not stipulated or indicated in the Section that the construction must begin after the date of sale of the original/old asset. There is no condition or reason for ambiguity and confusion which requires moderation or reading the words of the said sub-section in a different manner. The apprehension of the Revenue that the entire money collected or received on transfer of the original/capital asset would not be utilised in the construction of the new capital asset, i.e., residential house, is ill-founded and misconceived. The requirement of sub-section (4) is that if consideration was not appropriated towards the purchase of the new asset one year before date of transfer of the original asset or it was not utilised for purchase or construction of the new asset before the date of filing of return under Section 139 of the Act, the balance amount shall be deposited in an authorized bank account under a scheme notified by the Central Government. Further, only the amount which was utilised in construction or purchase of the new asset within the specified time frame stand exempt and not the entire consideration received.
14. Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. The Supreme Court in CCE versus Favourite Industries, (2012) 7 SCC 153 has succinctly observed:-
"21. Furthermore, this Court in Associated Cement Companies Ltd. v. State of Bihar [(2004) 7 SCC 642] , while explaining the nature of the exemption notification and also the manner in which it should be interpreted has held: (SCC p. 648, para 12) "12.Literally 'exemption' is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially, in a growing economy. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden of progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking, liberal and strict construction of an exemption provision is to be invoked at different stages of interpreting it. When the question is 13 whether a subject falls in the notification or in the exemption clause then it being in the nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. (See Union of India v. Wood Papers Ltd. [(1990) 4 SCC 256 : 1990 SCC (Tax) 422] and Mangalore Chemicals and Fertilisers Ltd. v. CCT [1992 Supp (1) SCC 21] to which reference has been made earlier.)"
22. In G.P. Ceramics (P) Ltd. v. CTT [(2009) 2 SCC 90] , this Court has held: (SCC pp. 101-02, para 29) "29. It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. [See CTT v. DSM Group of Industries[(2005) 1 SCC 657] (SCC para 26); Tisco Ltd. v. State of Jharkhand [(2005) 4 SCC 272] (SCC paras 42-
45); State Level Committee v. Morgardshammar India Ltd. [(1996) 1 SCC 108] ; Novopan India Ltd. v. CCE & Customs [1994 Supp (3) SCC 606] ; A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala[(2007) 2 SCC 725] and Reiz Electrocontrols (P) Ltd. v. CCE. [(2006) 6 SCC 213]"
15. In view of the aforesaid position, we do not find any merit in the present appeal and the same is dismissed."
20. S i m i l a r l y , t h e H o n ' b l e A l l a h a ba d H i g h C o ur t i n t h e c a s e o f H . K . K ap o o r ( s up r a ) h as a l s o r e i t er a t ed t h e sa i d p r o p o s i t i o n s t a ti n g t h a t t h e e x em p t i o n o f ca p i t al g a i n u / s 5 4 o f t h e A c t c an b e a l l o w e d n o t w i t h s t a n d i n g t he f a c t t h a t the c o n s t r u c ti on o f t h e n e w h ou s e h a d b e g u n b e f o r e t h e sale of the old house agreeing with the p r o p os i t i o n l a i d d o w n b y t h e H on ' b l e K a r n a ta k a H i g h C o u r t i n t h e c a s e o f J . R . S u b ra m a n y a B h a t t ( s u p r a ) as u n d e r :
"5.There is no dispute that the building has been constructed within two years from the date of sale of the old building. The old building was sold in February, 1977. The new building was completed in March, 1977, the construction of which had commenced in 1976. Sec. 54 of the IT Act so far as it is relevant provides:
"Where a capital gain arises from the transfer of a capital asset to which the provisions of s. 53 are not applicable, being 14 buildings or lands appurtenant thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purposes of his own or the parent's own residence, and the assessee has within a period of one year before or after that date purchased, or has within a period of two years after that date constructed, a house vroperty for the purposes of his own residence, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,.."
Under this section, if the assessee has within a period of one year after the date on which the transfer took place purchased or has within a period of two years after that date constructed a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the other provisions set out in the said section. The Tribunal on an appreciation of the evidence has firstly found that the building was used by the assessee mainly for his residential purpose. Taking into consideration the area of the building under the occupation of the assessee, it has stated that the ground floor occupied by the assessee including the garage was 1 ,330 sq. ft. The land appurtenant to the ground floor excluding the land occupied by the house was 4,795 sq. ft. That was also held to be under the occupation of the assessee. This building with the land has been sold. It was only the first floor that was let out. The Tribunal took into consideration the extent of the building used mainly for the residential purpose of the assessee and found that the major portion of the building was under the occupation of the assessee. The Tribunal, therefore, concluded that the first condition prescribed under s. 54 was satisfied. This finding, it may be seen, has been arrived at by the Tribunal upon appreciation of the evidence and the factual aspects of the case.
6. So too was the next conclusion reached by the Tribunal. The date of the sale of the old building was 9th Feb., 1977. The completion of the construction of the new building was in March, 1977, although the commencement of the construction started in 1976. It is immaterial, as the Tribunal, in our opinion, has rightly observed, about the date of commencement of the construction of the new building. Since the assessee has constructed the building within two years from the date of sale of the old building, he was entitled to relief under s. 54 of the Act."
21. Th e L d . D R h a s n o t b r o u g h t a ny c o n t r a r y d e ci si o n t o o u r n o t i c e i n t hi s r e g a r d , n o r br o u g h t t o o u r no t i c e a n y 15 d i s t i n g u i s h i n g fac t s i n t h e p re s e nt c a s e s o a s t o di s t i n g u i sh t h e c a s e l a w s rel i e d u p o n b y t h e L d . c o u n s e l f o r a s s e s s e e. I n vi e w o f t he s am e , w e h o l d th a t t h e i n v e s t me n t s m a d e b y t h e a s s e s s e e i n t h e c o n s t r u ct i o n o f t h e h o u s e p ri o r to the s a l e o f t h e o r i gi n a l a s se t i s a l so e l i g i bl e fo r d edu c t i o n u / s 5 4 o f t he A c t . Th u s w e ho l d t ha t t h e a s se s s e e i s e n t i t l e d t o c l a i m de d u c t i on u / s 54 o f t h e A c t o f R s . 1 8, 5 2 ,6 5 0 / - a nd R s . 2 5 , 4 0 ,3 8 9 / - i n v e s t e d i n t he c o n s t r u c ti o n o f n e w a s s et p r i o r t o t h e s al e o f o r i g i n a l a ss et . G r o u n d N o s. 2. 1 a n d 2 . 2 r a i s e d b y t h e as se s s e e , t he r e f o re , s t a n d a l l o w e d .
22. A s f a r t h e a m o un t i n v e s te d i n t he c a p i t a l g a i n a cc o u nt scheme, it is not d i s p u t ed th a t the said am o u n t w as d e p o s i t e d af t e r th e d u e d a t e o f fi l i n g o f t h e r e tu r n o f i n c o m e u/s 139(1) of the Act. Th e a s s e s s me n t yea r in th e i m p u g n e d c a s e be i n g a s s es s m e n t y e a r 2 0 13 - 1 4 th e d a t e by which the delayed r e t u rn could be filed u/s 139(4) is 31.5.2015 i.e. one year a f t er the end of th e relevant a s s e s s m e nt y e a r. Th e d e p o s i t i n t h e c a p i t a l g ai n a c c o u n t s c h e m e h a s b e en m a d e o n 2 7 . 9. 2 0 1 3 w h i c h i s w e l l b e f o r e t h e d u e d a t e fo r f i l i n g t h e re t u r n o f i n c o m e u /s 1 39 ( 4 ) . Th e H o n ' b l e j ur i s d i ct i o n a l H i gh C o ur t i n t h e c as e o f J a g r i t i A g g a r w a l ( s u p r a) , w h i l e de a l i n g wi t h a n i de n t i c al is s u e h e l d t h a t t h o u g h s e c ti o n 5 4 s t i p u l a t es d e p o s i t o f a m ou n t i n t h e c a p i t a l g ai n a c co u n t s c h e m e be fo r e t h e d u e d a te s p e c i f i ed u / s 1 3 9 ( 1 ) , s e c t i o n 1 3 9 ( 4) w hi c h e x t e n ds t h e d a te o f fi l i n g o f r e t u r n o f i n c om e w a s h e l d t o b e a p r o v i s o t o su b - s e c t i on (1) of section 139 of the Act and not an i n d e p e n d e nt 16 p r o v i s i o n a n d t hu s t h e H o n' b l e Co u r t h e l d t h a t the d u e d a t e o f f u r ni s h i n g o f r e t u r n o f i n c o m e a s pe r se c t i o n 1 3 9 ( 1 ) w a s t o b e s u b j e c t e d to t h e e x t e n d e d pe r i o d p r o v i d ed u n d e r s u b - s e c t i o n ( 4) o f s ec t i o n 1 3 9 of t h e A c t . Th e r e l e v an t f i n d i n gs o f t h e Ho n ' b l e C ou r t a r e as u n d er :
" 1 0 . Having heard learned counsel for the parties, we are of the opinion that sub-s. (4) of s. 139 of the Act is, in fact, a proviso to sub-s. (1) of s. 139 of the Act. Sec. 139 of the Act fixes the different dates for filing the returns for different assessees. In the case of assessee as the respondent, it is 31st day of July of the assessment year in terms of cl. (c) of the Expln. 2 to sub-s. (1) of s. 139 of the Act, whereas sub-s. (4) of s. 139 provides for extension in period of due date in certain circumstances. It reads as under :
"(4) Any person who has not furnished a return within the time allowed to him under sub-s. (1), or within the time allowed under a notice issued under sub-s. (1) of s. 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 before the completion of the assessment whichever is earlier :
Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988 or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year."
11. A reading of the aforesaid sub-section would show that if a person has not furnished the return of the previous year within the time allowed under sub-s. (1) i.e., before 31st day of July of the assessment year, the assessee can file return before the expiry of one year from the end of the relevant assessment year.
12. The sale of the asset having taken place on 13th Jan., 2006, falling in the previous (sic--assessment) year 2006-07, the return could be filed before the end of relevant asst. yr.
2007-08 (sic--2006-07) i.e. 31st March, 2007. Thus, sub-s. (4) of s. 139 provides extended period of limitation as an exception to sub-s. (1) of s. 139 of the Act. Sub-s. (4) is in relation to the time allowed to an assessee under sub-s. (1) to file return. Therefore, such provision is not an independent provision, but relates to time contemplated under sub-s. (1) of s. 139. Therefore, such sub-s. (4) has to be read along with sub-s. (1). Similar is the view taken by the Division Bench of Karnataka and Gauhati High Courts in Fatima Bai and Rajesh Kumar Jalan cases (supra) respectively. 17
13. In view of the above, we find that due date for furnishing the return of income as per s. 139(1) of the Act is subject to the extended period provided under sub-s. (4) of s. 139 of the Act."
23. I n v i e w o f t h e p r o p o s i t i o n l ai d d o w n b y t h e Ho n ' b l e j u r i s d i c ti o n a l H i g h C o u r t i n t hi s r e g a r d w e h ol d t h a t th e a s s e s s e e i n t he p r e s e n t c a se h av i n g d e p o s i t e d th e a m o u n t i n t h e c a p i t a l ga i n s c h e m e b e f o re t h e d u e d a t e s p ec i f i e d u /s 1 3 9 ( 4 ) , w a s e n t i tl e d t o c l a i m d e du c t i o n o f t he s am e u / s 54 o f t h e A c t . Th u s t h e di s a l l o w a n ce o f de d u c t i o n ma d e b y t he L d . CI T( A p p e a l s ) t o t h e e x te n t o f R s . 2 l a c s o n t h i s a c c o u n t i s d e l e t e d . G r ou n d N o . 2 . 3 r a i s ed b y t h e a s s e s s e e i s , t h e r e f o r e, allowed.
24. I n v i e w of t h e ab o v e , t h e a p p e al o f t h e as s e s s ee stands allowed.
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 28 t h September, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh