Case Law Details
Case Name : Humayun Suleman Merchant Vs CCIT (Bombay High Court)
Appeal Number : IT Appeal No-545/2002
Date of Judgement/Order : 18/08/2016
Related Assessment Year :
Brief of the case:
- The Hon’ble Bombay HC in the above stated case held that when the wordings of law are quite clear then law should be applied in its letter and no space could be made for logical or beneficial or constructive interpretation.
- Therefore, when the section 54F(4) clearly set a condition for claiming the exemption , the non-compliance would lead to denial of exemption , section being very clear here provide no room for beneficial or constructive interpretation.
Facts of the case:
- Assessee on 29th April,1995 sold a plot of land in Mumbai for a consideration of Rs.85,33,250/-.On 16th July, 1996, the assessee entered into an agreement to purchase a flat for a consideration of Rs.69,60,000/-.The assessee paid two installments of Rs.10,00,000/- each on 17th July, 1996 and 23rd October, 1996 to the developer / builder i.e. before the due date for filing of return of Income under Section 139(1) of the Act i.e. 31st October, 1996.
- On 1st November, 1996 the assessee paid to the developer a further installment of Rs.15,00,000/- for purchase of flat pursuant to the agreement dated 16th July, 1996.
- During the course of assessment proceedings the AO allowed the exemption only in respect of 35 lacs pad to builder before 31st Oct,1996 (i.e. due date of furnishing of return) , AO denied exemption of 15 15 lacs paid to developer on 1st Nov ,1996 (i.e after due date of furnishing of return).
- As per AO , the assessee was required to park the sum of Rs. 15 lacs to be invested in house property in the specified capital gain account as the investment was made after return due date. Having failed to do so the assessee is not eligible to claim exemption in respect of such sum.
- Upto the tribunal stage the order of AO was upheld , aggrieved assessee is now in appeal before High court.
Held by Hon’ble Bombay HC:
- As per Sec 54F(4) of the I.T Act ,1961 where the consideration received on sale of capital asset is not appropriated (where purchase was earlier than sale) or utilized (where purchase is after the sale) then the same would be subject to the charge of capital gain tax, unless the un-utilized amounts are deposited in specified bank account as notified in terms of Section 54F(4) of the Act.
- In the present case, the entire amount of capital gains on sale of asset which is not utilized has not been deposited in a specified bank account before due date of filing of return under Section 139(1) of the Act.Therefore, the balance unutilized capital gain not deposited in specified bank account shall be chargeable to tax and as such Rs. 15 lacs even if invested to buy house cannot be allowed as exemption because the same remain unutilized on the due date of furnishing return which was not deposited in specific bank account on or before such due date.
- Therefore, on plain interpretation of Section 54F of the Act, it appears that the impugned order of the Tribunal cannot be faulted.
- It was next contented by the learned counsel for the assessee that liberal / beneficial construction should be given to the provision of Section 54F of the Act as its object was to encourage the housing sector which would result in the benefit being extended to the appellant assessee. But the court here disagreed to same and stated that it is a settled position in law that no occasion to give a beneficial construction to a statute can arise when there is no ambiguity in the provision of law which is subject to interpretation. Thus in the face of the clear words of the Statute the intent of parties and/or beneficial construction is irrelevant
- Therefore, when the section 54F(4) clearly set a condition for claiming the exemption , the non-compliance would lead to denial of exemption , section being very clear here provide no room for beneficial or constructive interpretation
(Compiled by CA Saurabh Chokhra)