Case Law Details
Brief of the Case
ITAT Chandigarh held In the case of ACIT vs. Ms. Harjinder Dhiman that time limit for deposit in capital gains scheme is to be taken as due date of filing of return of income u/s 139(4). In the instant case, the sale proceeds were deposited in the capital gains scheme on 05.02.2009 which is well before the date of filing of return u/s 139(4) and so the appellant has not violated this condition. Hence, it is held that the sale proceeds were deposited within time limit in the capital gain scheme. Hence exemption u/s 54F is allowed.
Facts of the Case
ITA 148/2013 (Departmental Appeal)
Loss on shares/securities held in PMS
The assessee had adjusted short term capital loss of Rs. 1,41,33,145/- against long term capital gain. The short term capital loss was on account of investment in PMS of M/s BNP Paribas Investment Services India (P) Ltd. The Assessing Officer called for information from M/s BNP. M/s BNP supplied profit and loss account and balance sheet of PMS account of the assessee. The Assessing Officer was of the view that the loss claimed could be verified from the DEMAT statement only and so he asked the assessee to give a copy of DEMAT statement, which was not given by her. According to the Assessing Officer, only the DEMAT account could authenticate the purchase and sale of shares by the assessee and so he disallowed the loss claimed of Rs. 1,41,33,145.
Capital gain deduction u/s 54F
The assessee had sold her entire shareholding of 25000 shares in M/s Span Consultants (P) Ltd. for Rs. 9,62,67,773/- during the year under consideration. In the revised computation of income filed before the Assessing Officer, the assessee reduced an amount of Rs. 44,44,328/-, the unrealized sale proceeds, from total sale consideration. Regarding unrealised sale proceeds of Rs. 44,44,328/-, the assessee had submitted that this amount was held in the shape of bank guarantee as per the terms of share purchase agreement and was received in the accounting year 2008-09 and was shown in the return of income of A.Y. 2009-10. The Assessing Officer was not satisfied with the explanation of the assessee.
Further with regard to deduction u/s 54F claimed by the assessee, AO held that the said deduction was not available to the assessee because the sale proceeds of shares were deposited in the capital gains scheme on 05.02.2009, which was beyond the date on which the appellant was supposed to have invested in the capital gains scheme i.e. 31.07.2008 and also assessee hold three residential properties as on date of transfer of shares. AO further observed that the appellant had made investments of sale proceeds in the residential property – B-361, Defence Colony, New Delhi. As per
Assessing Officer, the investment was not made within the time limit prescribed in section 54F.
Contention of the Assessee
ITA 148/2013 (Departmental Appeal)
Loss on shares/securities held in PMS
The ld counsel of the assessee submitted that the assessee had suffered loss of Rs. 1.41 crores, details of which were as per Audit Financial Statement of assessee’s portfolio with M/s BNP. It has also been submitted that the assessee had used portfolio management services from M/s BNP under which securities were held in a pool account by the Portfolio Manager for its clients and there was no requirement for maintaining a separate DEMAT account. Reliance has been placed by the assessee on the decision of Hon’ble ITAT, Pune Bench in the case of M/s ARA Trading and Investments (P) Ltd. (47 SOT 172).
Capital gain deduction u/s 54F
The ld counsel of the assessee submitted that Madangir village properties are shops and Assessing Officer has mentioned Mumbai flats as office flats in the assessment order. Bangalore property was commercial property which is proved from the electricity bill and report of the Executive Engineer.
He further submitted that the CIT (A) was satisfied with explanation of the assessee. The sale proceeds were deposited in the capital gain scheme on 05.02.2009 which was well before the date of filing of the return under section 139(4) and relied upon decision of the Hon’ble Punjab & Haryana High Court in the case of CIT V Jagriti Aggarwal 339 ITR 610. He has also relied upon decision of the Hon’ble Punjab & Haryana High Court in the case of CIT Vs Jagtar Singh Chawla in ITA 71 of 2012 dated 20.03.2013 in which the departmental appeal was dismissed as the assessee has proved the payment of substantial amount of sale consideration for purchase of residential property within the extended period of limitation for filing of the return.
Contention of Revenue
ITA 148/2013 (Departmental Appeal)
Loss on shares/securities held in PMS
The ld counsel of the revenue relied upon order of the Assessing Officer and submitted that no information was supplied to the Assessing Officer and additional evidence was produced before ld. CIT (A), therefore, matter may be remanded to the Assessing Officer.
Capital gain deduction u/s 54F
The ld counsel of the revenue relied upon order of the Assessing Officer and submitted that properties at Mumbai (PB-8) are residential houses. Electricity bill for commercial property would not prove it to be commercial property. Capital gain amount was not deposited on time, allowed under section 139(1).
Held by CIT (A)
ITA 148/2013 (Departmental Appeal)
Loss on shares/securities held in PMS
CIT (A) allowed the appeal of the assessee. It was held that the Assessing Officer disallowed the short term capital loss claimed by the appellant on the ground that the loss was verifiable only if the DEMAT account of the appellant was on record, but the reason given by the Assessing Officer for disallowing the loss is not correct, since under the PMS, the shares remain in the pool account and are not transferred to the DEMAT account of the person concerned.
Capital gain deduction u/s 54F
CIT (A) partly allowed the appeal of the assessee. It was held that the contention of AO that assessee holding 3 residential property as on the date of transfer is not correct. Out of 3 properties one is shop and the second property at Bangalore was though a flat, but was being used for commercial purposes and hence cannot be treated as a residential property.
Further held that the Assessing Officer has also mentioned in the assessment order that the appellant had not deposited the sale proceeds in the capital gains scheme before the due date mentioned in section 54F. The appellant has relied upon the decisions of Hon’ble Punjab and Haryana High Courts in the case of M/s Jagriti Aggarwal (245 CTR 629) and Hon’ble Karnataka High Court in the case of Fathima Bai (32 DTK 243). A perusal of these judgements reveals that Their Lordships have held that time limit for deposit in capital gains scheme is to be taken as due date of filing of return of income u/s 139(4). In the instant case, the sale proceeds were deposited in the capital gains scheme on 05.02.2009 which is well before the date of filing of return u/s 139(4) of the Act and so the appellant has not violated this condition. Hence, it is held that the sale proceeds were deposited within time limit in the capital gain scheme.
The appellant has submitted that as the property was purchased within the stipulated period she was eligible for deduction u/s 54F. The appellant has relied upon the decisions of Hon’ble Karnataka High Court in the case of Sambandam Udhay Kumar (206 Taxman 150) and of Hon’ble ITAT, Chandigarh in the case of Smt. Rajneet Sandhu [133 TTJ (UO) 64)]. It has been held in these judgements that the intention of the legislature is to encourage investment in the acquisition of residential house and completion of construction or occupation is not the requirement of law. It has also been held that after making the entire payment, merely because a registered sale deed had not been executed before the stipulated period, the benefit of deduction u/s 54 of the Act could not be denied. In the instant case, the appellant had entered into an agreement to sell on 08.07.2009 for purchase of the impugned property i.e. First Floor of D-361, Defence Colony, New Delhi from four persons. The appellant had made payment of Rs. 4,00,00,000/- + Stamp Duty of Rs. 18,00,000/- within two years of the sale of shares and so she was entitled for benefit of Rs. 4,18,00,000/- under section 54F of the Act. The benefit of the payment made of Rs. 50,00,000/- on 05.02.2010 cannot be given to the appellant, since this payment is beyond two years from the sale of shares
Regarding unrealised value of sale proceeds of Rs. 44,44,328/-, it has been submitted that this amount was retained by the purchaser and it has been offered for taxation in the next year and so is not taxable in this year, but this argument cannot be accepted because this amount is part of sale proceeds, income from which is taxable as capital gain. Since, capital gain is being assessed in this year and so these proceeds, even though unrealised, have to be taken into account in this year.
Held by ITAT
ITA 148/2013 (Departmental Appeal)
Loss on shares/securities held in PMS
We have considered rival submissions and do not find any merit in this ground of appeal of the revenue. The assessee produced complete details before Assessing Officer. The Assessing Officer has also obtained information from M/s BNP Paribas Investment Services India (P) Ltd. under section 133(6) of the Income Tax Act. The Portfolio Manager also filed detailed reply before Assessing Officer. The assessee also produced Profit & Loss Account and other details to show that genuine transactions were conducted through Pool Securities Account of Portfolio Manager. The complete details through audited financial statement of PMS Portfolio of the assessee with M/s BNP Paribas Investment Services India (P) Ltd. were produced on record which shows that M/s BNP Paribas Investment Services India (P) Ltd. had its PMS operations through a Pool Bank Account and Pool Securities Account. The said Pool Bank Account and Pool Securities Account were opened and maintained by M/s BNP with BNP Paribas Bank which is a scheduled commercial bank and is a depository participant of NSDL. SEBI regulations noted above also support explanation of assessee. All the transactions were received and delivered through Pool Securities Account. M/s BNP has confirmed that all the transactions in their account on behalf of the assessee were delivery based.
The Assessing Officer disallowed claim of assessee because DEMAT account was not filed but reason given by the Assessing Officer was incorrect because there was no requirement to maintain separate DEMAT account by assessee. The CIT (A) rightly relied upon decision of Pune Bench in the case of M/s ARA Trading & Investments (P) Ltd. for the purpose of deleting the addition. No material is produced before us to contradict finding of fact recorded by CIT (A).Thus, assessee has been able to prove that it has incurred loss on shares/securities handled by Portfolio Manager. No errors have been pointed out in the order of the CIT (A). We, therefore, do not find any justification.
Capital gain deduction u/s 54F
We have considered rival submissions and do not find any merit in this ground of appeal of the revenue. The CIT (A) considered the entire factual things in his findings in which no infirmity has been pointed out by the ld. DR. The ld. DR submitted that Mumbai properties are residential houses, however, Assessing Officer in the assessment order has mentioned the Mumbai properties to be office flat and even no adverse view have been taken by the Assessing Officer in the assessment order. Therefore, whatever case is not made out by the Assessing Officer could not be made out by the Departmental Representative.
Further CIT (A) has rightly relied upon decision of the jurisdictional Punjab & Haryana High Court in the case of Ms. Jagriti Aggarwal (245 CTR 629 in which it was held that, “Date of furnishing of the return for the purpose of claiming exemption on account of capital gain could be up to the date under section 139(4). This issue is, therefore, covered in favour of the assessee and no interference is called for on this matter.
The CIT (A) has also considered and discussed with regard to purchase of the property within the time prescribed under the Act and found that part payments have been made within the stipulated period and as such, correctly given benefit of the same by relying upon decision of the Karnataka High Court and order of ITAT Chandigarh Bench. The decision of the Hon’ble Punjab & Haryana High Court in the case of Jagtar Singh Chawla ITA 71 of 2012 dated 20.03.2013 also apply in the case of the assessee.
Considering the totality of the facts and circumstances, and finding of fact recorded by the CIT (A), we do not find any merit in this ground of appeal of the revenue, the same is accordingly dismissed.
Accordingly appeal of the revenue dismissed.
