Case Law Details
Shri Pankaj Chimanlal Patel (HUF) Vs DCIT (ITAT Ahmedabad)
The essential controversy in the instant case is whether deduction under 54F of the Act is available in respect of capital gains arising from sale of more than one long term capital assets, not being residential house (original asset) against the construction or purchase of one residential house (new asset). The incidental issue that arises is whether capital gains of multiple years can be claimed against purchase/construction of same new residential house i.e. new asset subject to fulfillment of other conditions. The Revenue seeks to deny the deduction on two grounds (i) the expression used in Section 54F(1) is ‘transfer of any long term asset’, which connotes singularity and (ii) the action of ‘purchase’ can happen only once.
Deduction under s.54F of the Act essentially depends upon the extent of utilization of the sale proceeds in the new asset. The benefits of Section 54F of the Act also stands denied where the assessee owns more than one residential house other than new asset on the date of transfer of the original asset. The object of Section 54F is to encourage an assessee to convert any of his long term assets into a residential house subject to the condition that assessee does not own more than one residential house other than the new residential house on the date of transfer of long term asset. The Section, thus, in essence, offers some incentives to a tax payer to change its unproductive assets into a residential house. The action of the assessee is thus in conformity with the object and purpose of Section 54F of the Act. To say that the assessee is entitled for deduction in respect of capital gains arising from sale of only one long term capital asset and conversion thereof in residential property would in effect seriously limit the object and purpose of Section 54F of the Act.
To delineate further, an incidental situation may also crop up whether capital gains deduction with reference to Section 54F of the Act would apply with respect to a solitary transaction and not on whole of several different transactions of capital assets in the form of equity, mutual fund and so on. If the interpretation of ‘any long term asset’ as suggested by Revenue is read to mean deduction in respect of only one transaction of transfer is endorsed, it will seriously curtail the application of Section 54F of the Act. Such interpretation would lead to absurd results and requires to be shunned. Significantly, we also notice the use of broader expression ‘any’ long term asset in distinction to expression ‘a’ long term asset as used in Section 10(38) of the Act. Thus, the legislative intent when gathered from the distinct language used, it is clear that a narrower interpretation would fail to achieve manifest purpose of the deduction provision. We thus, prefer to avoid a construction which would reduce the legislation to futility and grant broader construction to bring effective result on availability of such deduction.
As a corollary, the decision of the co-ordinate bench in favour of the assessee is, in effect, harmonious interpretation of Section 54F of the Act and not necessarily a liberal interpretation of the deduction provision. We are thus of the view that the decision of the Hon’ble Supreme Court in Dilipkumar & Co. (supra) does not hinder the claim of assessee.
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OFFHAND
The concluding observations of the ITAT in para. 13 seem to make for a sound and valid reason for dismissing the stance of the Revenue placing heavy reliance on the SC Judgment in Dilip Kumar & Co’s case. Why to say so ?- Suggest to find the Answer, which should be more than obvious, from a mindful reading of the concluding Para. 53 of that Judgment. For a dilation, look up the related Post on FB and LInkedin.
courtesy.