Income Tax Appellate Tribunal - Mumbai
Esther Christopher Mascarenhas, ... vs Assessee
1
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "I", MUMBAI
Before Shri J. Sudhakar Reddy, Accountant Member
and Smt. Asha Vijayraghavan, Judicial Member.
I.T.A. No. 459/Mum/2010.
Assessment year : 2006-07.
Mrs. Esther Christopher Mascarenhas, The Income-tax Officer,
'The Gem', Off S.V. Road, Vs. 8(1)(2), Mumbai.
Near L.I.C., Vileparle (W),
Mumbai - 400 056.
PAN AAEPM 9791Q
Appellant. Respondent.
Appellant by : Shri Rajeen Waglay.
Respondent by : Shri S.K. Singh.
ORDER
Per J. Sudhakar Reddy, A.M. :
This is an appeal filed by the assessee directed against the order of the CIT(Appeals)-16, Mumbai dated 19-11-2009 for the assessment year 2006-07.
2. Facts in brief :
The assessee is an individual deriving income from salary, professional fees and other sources. She had filed her return of income for the year ended 31-03- 2006 on 22nd March, 2007, declaring a total income of Rs.43,82,090/-. During the 2 year the assessee sold house property in Bombay and claimed exemption u/s 54 of the I.T. Act. The AO disallowed the claim u/s 54 amounting to Rs.95 lakhs on the ground that :
a) the return of income was not accompanied by the proof of deposit of Rs.95 lakhs made in State Bank of India in Capital Gains Scheme;
b) The property i.e. Trombay House, in respect of which the exemption was claimed, was not a residential house;
c) The return of income was not filed u/s 139(1) but was filed u/s 139(4).
3. The AO made a further addition of Rs.8,05,787/- on the ground that the date of acquisition of the flat was 4th Oct., 2002 and not 6th Nov. 2000. Aggrieved, the assessee carried the matter in appeal. The first appellate authority rejected all the contentions of the assessee. Further aggrieved, the assessee is in appeal before us on the following grounds :
"On the facts & the circumstances of the case, the Learned CIT(A) erred in:
1. Confirming the addition of Rs.95 Lac under the head long term capital gains on sale of Trombay House by denying the exemption u/s 54 of I.T. Act, 1961.
2. Confirming the addition of Rs.8,05,787 under the head long term capital gains by taking the date of purchase of property as 4-10-2002 instead of 6-11-2000.
4. The learned counsel for the assessee, Mr. Rajeev Waglay, submitted a paper book of 115 pages. On the issue of disallowance of Rs.95 lakhs claimed u/s 54 of the Act, the learned counsel submitted that this was done on three grounds. On the first ground of disallowance, the learned counsel submitted that under section 54(2) the only condition is that the amount in question should be deposited in specified account before the due date of filing of the return u/s 139(1). He vehemently contended that there is no condition in the Act that the return itself 3 should be filed within the time specified u/s 139(1). He pointed out to the evidence filed in the assessee's paper book from pages 38 to 41 and submitted that the sale proceeds were deposited in the specified account on 31-7-2006 which is the due date of filing of the return u/s 139(1) and hence there is no violation of the conditions stipulated under the Act.
5. On the issue of attachment of the proof of deposit with the return of income, the learned counsel submitted that due to inadvertence, the proof was not attached but was filed with the authorities subsequently. He submitted that the condition is only directory and not mandatory. He vehemently contended that the factum of depositing the money in the bank and the date of deposit cannot be manipulated and that the mere fact that the assessee missing out on attaching this proof to the return of income should not result in huge hardship by way of disallowance u/s 54. He submitted that as the proof is filed during the course of assessment proceedings, the same should be allowed. He relied on the following case laws :
(i) CIT vs. Shivanand Electronics 209 ITR 63 (Bom)
(ii) CIT vs. Hemsons Sons 251 ITR 693 (A.P.)
(iii) CIT vs. Berger Paints (India) Ltd. 254 ITR 503 (Cal.)
6. Coming to the third condition that the property should be a residential property, he submitted that the same was acquired by the assessee by way of gift from her father. He referred to pages 42 to 45 of the paper book which consists of valuation report dated 29-06-2006 which clearly states that the property was constructed on residential land. He relied on the order of the Secretary, Housing and Special Assistance Department dated 12th March, 1992 which clearly states that the property was a residential property. He further pointed out that for assessment year 1997-98, the computation of income of Mr. Coelho Peter shows 4 income as income from house property. He further relied on the Probate of WILL of Mrs. Gasper Coelho which shows that the property at Juhu i.e. Trombay House is a residential property. He relied on the vouchers from BPCL which shows that the payments was made by them for residential premises. He vehemently contended that Burma Shell, which has taken on lease the Trombay House, was using it as a residential training centre and the house was duly equipped with dining hall, kitchen, recreation lounge, residential rooms, as well as the flat for the Chief Training Manager and hence it is a residential property. He further submitted that the user of residential property by Burma Shell as a residential training centre, does not change the character of the residential property. For this proposition he relied on the following case laws :
i) CIT vs. Purushottam Dass 247 ITR 516 (Del). ii) ITO vs. Ms. Sandhya Saxena 7 SOT 527 (Mum). (iii) Damodar Raheja vs. ITO 10 ITD 75 (Mad).
7. On the second issue, the learned counsel submitted that the agreement in question was registered with the Sub Registrar, Mumbai on 6-11-2000 under Registration No. P-VDR-1/1919/2000. He submitted that a copy was taken of this registered document on 4-10-2002 and the AO got confused and held that the date of obtaining a copy of the registered document is the date of acquisition. To prove his point, he took this Bench to various documents. On a query from the Bench, he submitted that the issue may be set aside to the AO for fresh adjudication after verifying the facts.
8. The learned DR, Mr. S.K. Singh, on the other hand, opposed the contentions of the assessee and submitted that section 54 mandates that the assessee should file a return of income within the time specified u/s 139(1), if it has to get the benefit 5 of exemption u/s 54. He took this Bench through the order of the CIT(Appeals) and relied on the same. He further submitted that the amount of sale proceeds, which were not used for the purpose of new assets should have been deposited in the bank in the capital gains scheme before furnishing the return of income u/s 139(1) and the proof should have been attached to the return of income. He submitted that this is a mandatory condition u/s 54(2) and not doing the same would disentitle the assessee to claim deduction u/s 54. He submitted that when the word in the taxation statute, is unambiguous, same should be applied. For this proposition he relied on the following case laws :
Patil Vijaykumar and Others 151 ITR 48 (Kar) Seshasayee Paper and Boards Ltd. 272 ITR 165 IPCL Laboratory Ltd. 266 ITR 521 (SC) On the issue whether it is a residential house, the learned DR submitted that the assessee has not offered the income in question under the head "Income from house property". He relied on the findings of the Revenue authorities.
9. On ground No. 2, he submitted that the issue may be set aside to the file of AO to verify the actual date of registration.
10. In reply, Mr. Rajeev Waglay, submits that an amount should be assessable under the head "House Property Income" and it is not necessary that it should be assessed as such. He further submits that the assessee on facts has disclosed the income in question under the head "Income from House Property". He took this Bench to pages 49 to 53 of the assessee's paper book which consists of a return of income and computation and argued that it is factually incorrect to state that the assessee has not offered income under the head "Capital Gains".
610. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and a perusal of the papers on record and the orders of the authorities below as well as the case laws cited, we hold as follows.
11. The first appellate authority had confirmed the disallowance made by the AO on the following grounds :
i) The claim of exemption u/s 54 mandates that the return of income should be filed within the time stipulated u/s 139(1).
ii) The return of income should be accompanied by proof of deposit in the bank in the capital gains scheme.
iii) Section 54 is applicable only to a residential house, the income of which is chargeable under the head "Income from house property".
12. We would now consider the issue in seriatim.
Section 54(1) and 54(2) reads as follows :
"54. [1] [Subject to the provisions of sub-section (2), where, in the case capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (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, 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 following provisions of this section, that is to say, -
(i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this 7 section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year, and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase of its purchase or construction, as the case may be, the cost shall be nil, or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45, and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.
[(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (!) of section 139] in an account in any such bank or institution Central Government may, be notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit, and for assessee for the purchase or construction of the new asset together with the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :"
The conditions can be listed out as follows :
i) Capital gain should arise on the transfer of a long term capital asset being building or land apparent thereto and being a residential house, the income of which is chargeable under the head "income from house property". This is referred to as the original asset.8
ii) The assessee has within a period of one year before or two years after the date on which the transfer took place, purchased or within a period of three years constructed a residential house.
In such a case quantification of the exemption u/s 54(1) is to be made as per (i) and
(ii). Section 54(2) requires that in case the capital gain is not appropriated by the assessee for purchase for a new asset or for constructing of the new asset before the date of furnishing the return of income u/s 139, he should deposit the same not later than the due date prescribed for filing a return of income u/s 139(1) in a specified bank account. The proof of deposit shall be filed along with the return of income.
13. A plain reading of the above clearly shows that the amount in question should be deposited in the specified bank account before the due date prescribed for furnishing the return of income u/s 139(1). There is no dispute on the fact that that the assessee has fulfilled this condition. There is no requirement that the assessee should file her return of income before the due date prescribed u/s 139(1). On the contrary it is suffice if the assessee furnished the return of income u/s 139. The Revenue in this case is equating the requirement of depositing the money in the specified bank account before the due date for filing of the return specified u/s 139(1) as a requirement that the assessee should file the return within the time prescribed u/s 139(1). Section 54(2) does not specify such requirement. Thus, this basis of rejection of the claim u/s 54 is wrong.
14. Coming to the second requirement that the return shall be accompanied by proof of such deposit, we find that the factum of deposit of the amount in an account with a bank or an Institution notified in the Central Government Official Gazette, is not disputed. The requirement of attaching the proof with the return of income, in our considered opinion, is only directory . If it is to be taken that this is 9 a mandatory condition, then the return, in our humble opinion, would become a defective return and the AO should have considered the same as such u/s 139(9) and issued notice to the assessee for rectification of the same. The assessee produced the proof during the course of assessment proceedings and in such circumstances, in our humble opinion, the claim should be allowed. Not attaching the proof due to inadvertence, and latter rectifying the situation, should make the assessee eligible for deduction. Date of deposit cannot be manipulated. A number of High Court while interpreting similar conditions laid down u/s 80HHC and u/s 80J have held that such conditions of attaching reports etc. with the return of income were directory and not mandatory and it would be suffice if the assessee has filed the required documents before completion of the assessment. Some of the decisions are as follows :
CIT vs. Shivanand Electronics 209 ITR 63 (Bom) CIT vs. Hemsons 251 ITR 693 (A.P. CIT vs. Berger Paints (India) Ltd. 254 ITR 503.
In our opinion, the propositions laid down in these decisions apply in the case on hand.
15. Coming to the decision relied upon by the learned DR in the case of Seshasayee Paper and Boards Ltd. vs. DCIT 272 ITR 165 (Mad), the Hon'ble Madras High Court held that when there is no ambiguity in the provision, the provision cannot be interpreted to confer a benefit on the assessee. Similarly the Hon'ble Karnataka High Court in the case of Patil Vijaykumar and others 151 ITR 48 held that there are two forms of interpretation/clauses, the first one, when the word defined is declared to "mean" something and that such a definition is explanatory and prima facie restrictive and that when the definition is declared to "include something" then the definition is extensive.
16. Both these decisions do not discuss the issue whether the requirement of attaching a document to the return of income is declaratory or mandatory.
10Similarly the Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. 266 ITR 521, does not deal the issue whether a particular requirement in the statute should be considered declaratory or mandatory.
17. In view of the above discussion, we uphold the contention of the assessee that the requirement of attaching the proof of having deposited the amounts in the specified capital gain account, with the return of income, is directory and as the assessee has furnished all the details during the course of assessment, no disallowance u/s 54 can be made on this count.
18. The last ground is whether the property in question is a residential house. Factually for the assessment year 1997-98 Mr. Coelhi Peter Gasper has declared Rs.14,818 as income from house property in the return of income. In the last WILL and testament, the Trombay House is referred to as a residential property of ground and two upper floors at para 16 of the WILL. The vouchers of Bharat Petroleum Corporation describes the payment as made towards a residential premises. The Municipal Corporation of Grater Bombay levied municipal taxes on the ground that this is a residential property. The Secretary, Housing and Special Assistance Department, Govt. of Maharashtra, Mantralaya, Bombay vide proceeding No. REV-1091/(5053)/X III dated 12th March, 1992 has held as follows :
" In support of this claim the above structure is residential, the Petitioner produced a letter from the Bharat Petroleum Corporation Ltd. giving details of 'Trombay House', Juhu. The property has been described in detail and includes Dining Hall, Kitchen, Godown, Recreation lounge and Senior Administrative Officer's room on the ground Floor, and the Lecture Hall, Residential Rooms for participants on the First Floor. The second Floor has a Library and other rooms and a flat for the Chief Training Manager. The fact that the building is used as the training centre of Bharat Petroleum Corporation Ltd. and a flat is provided for the Training Manager in this structure is an ample proof that the structure is residential one."11
All the above evidences clearly demonstrate that this is a residential property. Thus, the third ground on which the assessee has been denied exemption u/s 54 of the Act is bad in law.
19. In view of the above discussion, we allow ground No. 1 of the assessee and direct the AO to grant deduction u/s 54 of the Act.
20. Coming to ground No. 2, we find that there is a confusion in appreciation of facts. From the papers before us, it appears that the registration has taken place on 6-11-2000 only. A certified copy was obtained from the Registrar on 4-10-2002 and by mistake this date is taken as a date of transfer. As both the parties have submitted that the issue be set aside to the file of the AO for verification, we remit the matter to the file of the AO.
21. In the result, the appeal of the assessee is allowed in part.
Order pronounced in the open court on 3rd Dec.. , 2010.
Sd/- Sd/-
(Asha Vijayraghavan) (J. Sudhakar Reddy)
Judicial Member. Accountant Member
Mumbai,
Dated: 3rd Dec., 2010.
Wakode
12
Copy to :
1. Appellant
2. Respondent
3. C.I.T.
4. CIT(A)
5. DR, I-Bench
(True copy)
By Order
Asstt. Registrar,
ITAT, Mumbai Benches,
Mumbai.