Income Tax Appellate Tribunal - Delhi
Joint Commissioner Of Income Tax vs Raj Kumar Aggarwala And Sons on 31 December, 2003
Equivalent citations: (2005)95TTJ(DELHI)315
ORDER
T.N. Chopra, A.M.
1. This appeal is filed by the Revenue against the order of CIT(A), dt. 20th April, 1999, for asst. yr. 1996-97.
2. The following grounds of appeal have been taken :
(i) That the learned CIT(A) has erred in law and on facts of the case in directing to allow deduction under Section 54 IT Act. The learned CIT(A) has ignored the fact that the sale of residential property had taken place on 3rd April, 1995, i.e., after the date of completion/construction of the new property which is 6th March, 1995, as per occupancy certificate issued by the local authority.
(ii) That the learned CIT(A) has erred in law and in facts of the case in directing to allow expenditure of Rs. 1,20,000 as assessee has not discharged his onus by providing the identity of person to whom such brokerage has been paid.
3. The main dispute is regarding claim of deduction under Section 54 of the IT Act. The assessee had sold immovable property on 3rd April, 1995, situated at 7, Shahtoot Marg and disclosed the capital gain thereon. During the course of assessment proceedings, the assessee however came up with the claim for exemption under Section 54 of the IT Act on the ground that a new residential house has been constructed by the assessee at E-23, DLF, Phase-I, Gurgaon, on plot of land which had been earlier purchased in the year, 1993. As per valuation report for the newly constructed house filed by the assessee, the construction commenced in March, 1995 (sic-March, 1994) and was completed on 15th April, 1995. The assessee stated before the AO that the occupation certificate for the abovesaid property at E-23, DLF, was obtained on 6th March, 1995. According to the assessee, the assessee's family had constructed a new house out of the sale proceeds of the old house and further that even though the occupancy certificate of the new house is dt. 6th March, 1995, the house was actually completed on 15th April, 1995, i.e., after the date of the sale of the old house which is 3rd April, 1995. The AO however, rejected the claim of exemption under Section 54 mainly on the following grounds :
(i) Regarding purchase of land since land has been purchased in December, 1993, whereas the old property has been sold in April, 1995, which is more than a year after the purchase of the land, claim under Section 54 is clearly not allowable with reference to the purchase of the land.
(ii) Regarding construction of the new house, AO observed that since the construction was completed on 6th March, 1995, which is the date of occupancy certificate and the sale of the old house has taken place after the completion of the construction, assessee is not entitled to exemption under s.54 even with regard to construction of the new residential house. In support of his conclusion, AO placed reliance on the decision of Gujarat High Court in the case of Shanti Ben Gandhi v. CIT (1981) 129 ITR 218 (Guj).
3. Aggrieved, the assessee carried the matter before the CIT(A). CIT(A) held that so far as investment in land is concerned, the findings of the AO that the assessee was not entitled to deduction under Section 54 was correct. However, with regard to construction of the property, CIT(A) held that since the property has been constructed after the sale of the old property and even the new construction had started on 13th March, 1994, this would not disentitle the assessee from claiming exemption under Section 54. CIT(A) accordingly held that the assessee is entitled to deduction under Section 54 in respect of amount invested in construction of the property, i.e., Rs. 23,71,293. The Revenue is aggrieved.
4. The learned Departmental Representative assailing the impugned order of the CIT(A) argued that the basic condition contained under Section 54 that the new property should be constructed within a period of 3 years after the date of transfer of the old property has not been fulfilled in the instant case inasmuch as the occupancy certificate issued by HUDA clearly established that the construction has been completed before 6th March, 1995, whereas old residential house has been sold by the assessee after the said date, i.e., on 3rd April, 1995. The learned Departmental Representative submitted that since old house has been sold after the completion of construction of the new residential house, the assessee is not entitled to deduction under Section 54.
5. Leaned counsel, on the other hand, strongly supported the impugned order of the CIT(A) and filed a paper book as well as synopsis of his arguments supporting the findings of the learned CIT(A). Learned counsel argued that the construction of the new house was started on 13th March, 1994 and it was completed on 15th April, 1995, when the sewer connection had been obtained from the Director, Town and Country Planning, Haryana. He filed before us copy of the occupation certificate as well as certificate from Duggal and Associates, architects, wherein it has been pointed out that HUDA issued certificate of occupancy after the construction has been completed and application in Form No. BR-4 has been made to the Estate Officer, HUDA. Application for sewer connection is thereafter furnished to HUDA enclosing therein the occupancy certificate and only after getting sewer connection, it can be said that construction has been completed and the house has become habitable. In support of his contention learned counsel placed reliance on the following decisions :
(i) CWT v. K.B. Pardhan (1981) 130 ITR 393 (Ori)
(ii) R.B. Jodha Mal Kuthiala v. CIT (1971) 82 ITR 570 (SC)
(iii) Bajaj Tempo Ltd. v. CIT (1992) 196 ITR 188 (SC)
(iv) Mrs. Seetha Subramaniam v. Asstt. CIT (1996) 56 TTJ (Mad) 417 : (1997) 93 Taxman 227 (Mad)(Mag)
(v) Smt Kalwanti D. Alreja v. ITO (1996) 54 TTJ (Bom) 593 : (1997) 94 Taxman 116 (Bom)
(vi) CIT v. J.R. Subramanya Bhat (1987) 165 ITR 571 (Kar) (vii) CIT v. Dr. Laxmichand Narpal Nagda (1995) 211 ITR 804 (Bom)
(viii) CIT v. Mrs. Shahzada Begum (1988) 173 ITR 397 (Bom) and
(ix) CIT v. H.K. Kapoor (Decd.) through LR.
6. We have carefully considered the rival submissions and perused the orders of the tax authorities below. Documents placed in the paper book have also been gone through by us. Various judicial authorities cited by the learned representatives have also been carefully gone through by us. Section 54(1) lays down the conditions for relief in respect of capital gains on sale of residential house by the assessee. The section, inter alia, provides that exemption would be available if the assessee has within a period of 3 years after the date of transfer of the old residential house constructed a residential house. Now, in the instant case facts are undisputed that old residential house at 7, Shahtoot Marg, has been sold by the assessee on 3rd April, 1995. Regarding the construction of the new residential house, construction commenced on 13th March, 1994 and as per the occupancy certificate issued by Senior Town Planner, Gurgaon, the construction has clearly been completed before 6th March, 1995, when the occupancy certificate was issued to the assessee. Copy of the certificate on record indicates that assessee has been granted permission for the occupation of the building at E-2/23, DLF, Qutab Enclave. Full particulars of the building have already been indicated in the occupation certificate which read as under:
"I grant permission for the occupation of the said building for drawing, dinning, kitchen, lobby, stone under stair case, dros, toilet, one bedroom at ground floor, and two bedrooms, two toilet, box room and mumty at first floor and basement for storage only."
6.1 This certificate is dt. 6th March, 1995, which clearly shows that the construction of the building has been completed before 6th March, 1995. Learned counsel has also filed before us a letter dt. 14th Feb., 1993, which elucidates the procedure for obtaining occupancy certificate in Haryana. This letter reads as under:
"To whom it may concern This is to certify that the procedure for obtaining occupancy certificate in Haryana, is as follows :
1. Application in Form No. BR-IV under regulation No. 11(i) has to be made to the Estate Officer, HUDA.
2. A statement from the architect, supervising the construction, stating that the construction has been completed in accordance with rules has to be attached to the application.
3. A copy of the sanction letter issued by the Town Planner's office at the time of sanction of building plans has to be attached to the application.
4. The HUDA inspectors will physically inspect the building and point out violations of rules and require modifications and impose compounding fee.
5. After the compounding fee is paid, HUDA may issue a "Certificate of occupancy."
6. A copy of the above "Certificate of occupancy" must accompany the application for sewer connection.
22nd Oct., 2003 Sd/
D.K. Duggal
Architect, Engineer, Valuer"
7. From the aforesaid discussion it is amply evident that construction of the house has been completed before 6th March, 1995. Thus, for the purposes of Section 54(1) it clearly follows that the construction of the residential house has been completed before the sale of the old house and the basic conditions for allowing exemption under Section 54 are not fulfilled under the instant case. We find no merit in the contention of the learned counsel that construction of the house would be construed to have been completed only after sewer connection has been provided by HUDA. As we have already mentioned above, Section 54(1) refers to the construction of the house which does not obviously extend to obtain the sewer connection or electricity connection, etc. Regarding the reliance placed by the learned counsel on the decision of Orissa High Court in K.P. Pardhan's case (supra), we feel that the said decision does not render any assistance to the case of the assessee. In the said decision while considering the exemption provision under the WT Act, the High Court held that a house under construction or in the process of completion cannot be treated as a house for the purposes of Section 5(1)(iv) of the WT Act; incomplete construction would not be a house. In the instant case, however, the construction has admittedly been completed as clearly indicated in the occupancy certificate and the house was fit for occupation. Merely because sewer connection has been applied for would not imply that the construction of the house is incomplete.
8. The decision of Gujarat High Court in the case of Smt. Shantaben P. Gandhi v. CIT (1981) 129 ITR 218 (Guj) relied upon by the AO and cited by the learned Departmental Representative before us fully supports the case of the Revenue against the claim of exemption by the assessee under Section 54. The said case pertained to asst. yr. 1970-71 and Section 54 as it stood then provided that in order to avail of the benefit of deduction under Section 64, it will be necessary for the assessee to show that the new house property was constructed within a period of two years after the date of transfer of the old house. In the said case, the Tribunal found that construction of the new building was completed on 31st March, 1968, whereas the old property was transferred and sold on 20th March, 1970. On these facts, the High Court upheld the findings of Tribunal that since the new house property was constructed before the transfer of the old property and not within a period of two years after the date of such transfer, deduction under Section 54 was not available to the assessee. The facts and circumstances of the instant case are on all fours with that of the said case with the only difference that under the amended Section 54 as applicable for the assessment year under appeal, the construction of the new house is to be made within the period of 3 years and not two years from the date of transfer of the old house. The ratio of Gujarat decision, therefore, clearly applies and the Revenue has rightly disallowed claim of deduction under Section 54 to the assessee. Regarding the various decisions cited by the learned counsel, we have gone through these decisions and find that these are clearly distinguishable and render no assistance to the case of the assessee.
9. Regarding the liberal interpretation of an exemption provisions, the rules of liberal interpretation would be liable to be invoked if the words of the statute are not clear and contained ambiguity. However, the preposition is well-settled that if the words of the statute are clear and admit of no ambiguity or doubt then the intention of the legislature has to be gathered from the words used in the statute. This is a cardinal principle of interpretation. The language used in Section 54(1) is unambiguous and clear. The relevant portion of the section reads ;
"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 a residential house."
10. This section clearly mandates that construction should have been made within a period of 3 years after the date of transfer. Any construction made, prior to the date of transfer would not fulfil the condition as stipulated under Section 54(1). In view of unambiguous and categorical stipulation in the statute, we feel that the assessee does not qualify for deduction under Section 54.
11. Learned counsel has relied upon the decision of Madras Bench of the Tribunal in the case of Mrs. Seetha Subramaniam (supra). The said decision has been rendered in the context of revisionary jurisdiction of the CIT under Section 263 and renders no assistance to the assessee's case. Learned counsel has next relied upon the decision of Karnataka High Court in the case of CIT v. J.R. Subramanyam Bhat (supra). Admitted facts of this case are that the assessee had completed the construction of the new house in March, 1977, whereas the old house was sold in February, 1977. On these facts, it was held that since the construction was completed within two years from the date of sale of the old building, benefit under Section 54 is applicable. This decision does not help the case of the assessee inasmuch as in the assessee's case before us construction has been completed before the transfer of the old house which took place on 3rd April, 1995. Therefore, facts in the instant case are distinguishable and the Karnataka decision (supra) does not help the assessee.
12. Learned counsel has next cited the decision of Allahabad High Court in the case of CIT v. Kapoor (supra). In this case, the question for consideration was whether exemption of capital gains could be refused to the assessee simply on the ground that construction of the new house had begun before the sale of the old residential house. The issue is entirely different from what arises in the present appeal before us. It is not that construction has begun before the date of transfer of the old house. The crucial facts in the present case are that the construction of the new building has already been completed before the date of transfer of the old house. The Allahabad decision, therefore, does not help the assessee.
13. Regarding the other decisions cited by the learned counsel, namely, CIT v. Dr. Laxmichand (supra), CIT v. Mrs. Shahzada Begum (supra), etc., we have gone through these decisions also and find that these are distinguishable on the facts and issues involved and do not help the assessee. For the aforesaid reasons, we allow ground No. 1 and hold that assessee is not entitled to deduction under Section 54. Ground No. 1 is allowed.
14. Ground No. 2 is against the direction of the CIT(A) to allow expenditure of Rs. 1,20,000 claimed as brokerage on the sale of the residential house. AO has dealt with the issues vide para 14 of the assessment order and the CIT(A) has disposed of the issue vide paras 7, 8 and 9 of the appellate order. Brokerage/ commission has been claimed on the sale of the house as under :
Shri Daljeet Singh Rs. 50,000 Shri Daljeet Singh Rs. 50,000 Shri Man Mohan Rs. 20,000
15. Regarding payment of brokerage to the aforesaid persons, the AO called upon the assessee to file documentary evidence in support of the brokerage. The assessee filed copies of bank certificates indicating that cheques have been issued for payment. The AO observed that mere filing of the bank certificate is not sufficient inasmuch as it is not verifiable whether the names appearing in the bank certificates (are) property brokers who transacted the sale of the property. The AO further observed that even confirmation letters from the brokers have not been filed. He accordingly disallowed the claim of expenditure of Rs. 1,20,000 for the purposes of computation of capital gains.
16. In appeal, the CIT(A), however, allowed the claim with the observation that it was for the AO to have verified the facts from the bank by deputing an Inspector or by issuing summons under Section 131 of the IT Act. CIT(A) proceeded to direct the AO to allow deduction of the expenditure for the purposes of computation of capital gain.
17. We have heard the parties and are inclined to reverse the findings of CIT(A) on this issue. Genuineness of the expenditure whether the same has been incurred for the purposes of arranging the sale transaction, has not been established by the assessee and the onus in this behalf has not been discharged. Mere filing of bank certificates does not establish that assessee has made payment to brokers by way of brokerage on the sale transactions. The reasoning adopted by the learned CIT(A) that the AO should have deputed the Inspector for making inquiries from the bank or issued summons under Section 131 appears to be entirely misconceived inasmuch as the onus primarily rests on the assessee to establish the genuineness of payment of brokerage. We would accordingly allow the ground No. 2 and uphold the action of the AO in disallowing the expenditure of Rs. 1,20,000 while computing capital gains. Ground No. 2 is allowed.
18. In the result, the appeal of the Revenue is allowed.