Case Law Details
ACIT Vs Siva Jyothi Palam (ITAT Visakhapatnam)
ITAT Visakhapatnam held that denial of deduction under section 54F of the Income Tax Act merely because date of registration was beyond the stipulated period as entire consideration paid within the stipulated period.
Facts- The case of the assessee was selected for scrutiny under CASS. During the assessment proceedings, AO noticed that the assessee sold vacant land at Gollapudi, Vijayawada for a consideration of Rs. 5,40,31,000/-. Further, the assessee has also purchased a house property at Chennai for a consideration of Rs. 6,06,10,000/- and claimed deduction U/s. 54F of the Act. AO completed the assessment U/s. 143(3) of the Act and disallowed the assessee’s claim of exemption U/s. 54F of the Act by holding that the impugned property was purchased by the assessee only on 17/12/2019, which is beyond the stipulated period of 24 months from the date of sale of the land. Accordingly, AO determined the assessed income of the assessee at Rs. 3,55,55,297/-.
CIT(A) allowed the appeal. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Hon’ble Karnataka High Court in the case of CIT vs. Sambandam Udaykumar is concerned has held that “the condition precedent for claiming benefit under the said provision is the capital gain realized from the sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favour of the assessee before the period stipulated it cannot be denied the benefit of section 54F of the Act”.
Held that since the assessee has paid the complete consideration to vendor of the land, which is duly acknowledged by the vendor, merely because of the registration is pending, we are of the view that deduction allowable U/s. 54 of the Act should not be rejected.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
The captioned appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. CIT(A)-NFAC”] in DIN & Order No. ITBA/NFAC/S/250/2024-25/1063980015(1), dated 08/04/2024 arising out of the order passed U/s. 143(3) of the Income Tax Act, 1961 [“the Act”] for the AY 2017-18. The Cross Objection is filed by the assessee. Since the appeal of the Revenue and the CO raised by the assessee are interconnected, these two appeals are clubbed, heard together and disposed of in this consolidated order. Firstly we shall take up the Revenue’s appeal.
ITA No. 268/Viz/2024 (AY 2017-18)
(By Revenue)
2. At the outset, is noticed from the record that the Revenue has filed the appeal before the Tribunal with a delay of 24 days. With respect to belated filing of the appeal, the Revenue has filed petition for condonation of delay along with the affidavit and the relevant paras of the affidavit is extracted herein below for reference:
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4. I submit that I have taken charge as the ACIT, Circle-1(1), Vijayawada on 09/05/2024. As a new joinee, it has taken some time for the allocation of RSA token and role allocation on the ITBA portal for me. As such there was an inadvertent delay in accessing the information related to the case. Further, it has taken some time to appraise myself on the facts of the case and perusal of the case history for taking necessary action in the instant case.
5. That in view of the above reasons, there is a delay of 23 days in filing the appeal. It is respectfully submitted that the delay in filing the appeal is neither wilful nor deliberate but for the reasons stated herein above. It is submitted that there are good grounds to succeed in the appeal. It is therefore just and necessary to condone the delay in filing the appeal.
6 ………. “
3. On perusal of the explanation given by the Revenue with respect to filing of the appeal before the Tribunal beyond the prescribed time limit, we find that the Revenue was prevented by a reasonable and sufficient cause to file the appeal beyond the stipulated time. Therefore, we hereby condone the delay of 24 days in filing the appeal of the assessee before the Tribunal and proceed to adjudicate the appeal on merits.
4. Briefly stated the facts of the case are that the assessee is an individual having income from salary and income from house property besides income from capital gains filed her return of income for the impugned AY 20 17-18 on 27/03/20 18 admitting a total income of Rs. 16,15,580/-. The case was selected for scrutiny under CASS. Accordingly, statutory notices U/s. 143(2) and 142(1) of the Act were issued and in response to the notices, the assessee e-filed the information called for. During the assessment proceedings, the Ld. AO noticed that the assessee sold vacant land at Gollapudi, Vijayawada for a consideration of Rs. 5,40,31,000/-. Further, the assessee has also purchased a house property at Chennai for a consideration of Rs. 6,06,10,000/- and claimed deduction U/s. 54F of the Act. After considering the submissions of the assessee as well as the material available on record, the Ld. AO completed the assessment U/s. 143(3) of the Act and disallowed the assessee’s claim of exemption U/s. 54F of the Act by holding that the impugned property was purchased by the assessee only on 17/12/20 19, which is beyond the stipulated period of 24 months from the date of sale of the land. Accordingly, the Ld. AO determined the assessed income of the assessee at Rs. 3,55,55,297/-. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A)-NFAC.
5. On appeal, after considering the submissions of the assessee and by following the decision of the Hon’ble Supreme Court as well as judicial pronouncements of various Hon’ble High Courts and various Benches of the Income Tax Appellate Tribunal [“ITAT”], the Ld. CIT(A)-NFAC allowed the appeal of the assessee. On being aggrieved by the order of the Ld. CIT(A)-NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds of appeal:
“1. The Ld. CIT(a) has erred in not considering the fact that the AO during the course of assessment proceedings has obtained confirmation from the sellers Sri Selvarathanam and S. Jayalakshmi vide letter dated 19/12/2019 that the land was sold, possession was handed over and registered on 17/12/2019.
2. The Ld.CIT(A) has erred in considering the date of possession as 14/11/2016 based on the sale agreement and payment of sale consideration, which is not acceptable and is beyond the fact that the transfer of new property was effectively conveyed on the date of registration of the sale deed ie 1 7/12/2019.
3. The Ld. CIT(A) has erred in ignoring the fact that the purchase of the new asset ie., residential property at Chennai, as well as its possession has actually taken place on the date of registration ie 17/12/2019.
4. The Ld. CIT(A) has erred by confirming himself to the fact that the assessee has offered rental income of Rs. 60,000/- for 3 months from the property in question for income through her ROI for the AY 2017-18 without considering any documentary proofs in support of the assessee’s claim like the rental agreement. Hence, mere submission of rental income cannot be the ground for admission of the ownership and by implication, purchase of property in question;
5. The Ld. CIT(A) has erred by ignoring the fact that a transfer of immovable property by way of sale can only be by a deed of conveyance (sale deed) duly stamped and registered as required by law. Any contract of sale (agreement of sale) which is not a registered deed of conveyance (sale deed) would fall short of the requirements of section 54 and 55 of the Transfer of Property Act and will not confer any title nor transfer any interest in any immovable property (except for the limited right U/s. 53A of Transfer of property Act (Suraj Lamp & Industries (P) Ltd vs. State of Haryana (2011) 202 Taxman 607) (SC)].
6. The Ld. CIT(A) has ignored the fact that an individual becomes the rightful legal owner of a property only when the sale deed is registered, which in the instant case was done on 17/12/2019. Therefore for all the purpose of law and for the purpose of section 54 of the Act “purchase” of the said property occurred only on 17/12/2019 when the sale deed was registered. The sale ie. , purchase by the assessee can be said to have taken place on the date of execution of the sale deed and not on the date of the agreement of sale (Hall & Adresons (P) Ltd vs. CIT (1963) 47 ITR 790 (Cal.)].
7. Thus, it can be established beyond reasonable doubt that the assessee has purchased the new property (as required U/s. 54F of the Act) and become the legal owner (ie., title is conferred on him) of the said property in question only on 17/12/2019 which is when the sale deed was registered. Therefore, the relaxation from the charging of the LTCG to tax U/s. 54F of the act cannot be applicable to the assessee as the new asset was “purchased” , assessee becoming the legal owner of the said asset is much after, after the two years limit.
8. Any other grounds of appeal that emerge out of the appeal proceedings from the time to time.”
6. At the outset, it was the submission of the Ld Departmental Representative [“Ld. DR”] that the assessee had purchased the house property vide registered sale deed No. 3019/2019, dated 17/12/2019. Further, it was the contention of the Ld. DR that the assessee has sold four bits / plots of vacant land for an amount of Rs. 5,40,31,000/- on October / November of 2016. The Ld. DR further submitted that the Ld. AO has rightly denied the exemption claimed by the assessee U/s. 54F of the Act by observing that the assessee had purchased the property on 17/12/2019 out of the capital gains arising from the sale of the property / vacant land which was occurred in the month of October / November, 2016. Considering the time duration between the sale of the property / vacant land and purchase of the house property by the assessee, ie., much after 24 months of the stipulated period as prescribed in the Act, the Ld. AO has rightly denied the exemption claimed by the assessee U/s. 54F of the Act. The Ld. DR further submitted that while allowing assessee’s claim, the Ld. CIT(A)-NFAC observed that the assessee has paid the entire consideration for purchase of the house property much prior to the date of registration of the property ie., 17/12/2019 and therefore it can be treated as the total sale consideration was paid within the stipulated time as allowed U/s.54F of the Act. The Ld. DR therefore submitted that the Ld. CIT(A)-NFAC has not considered the fact of date of registration of the property is beyond the stipulated time and also the fact that the assessee has become owner of the property only after 24 months from the sale of the vacant land. Therefore, the Ld. DR pleaded to set aside the order of the Ld. CIT(A)-NFAC and to uphold the order of the Ld. AO. The Ld. DR heavily relied on the decision of the Hon’ble Supreme Court in the case of Suraj Lamp & Industries (P.) Ltd vs State of Haryana [2012] 340 ITR 1 (SC) and the decision of the Hon’ble Kolkata High Court in the case of Hall and Anderson (P.) Ltd vs. CIT [1963] 47 ITR 790 (Cal.).
7. On the other hand, the Ld. Authorized Representative [“Ld. AR”] has submitted that the assessee has entered into an agreement of sale immediately after selling of the vacant land and the payment for the purchased house property was also made much prior to the stipulated time allowed U/s. 54F of the Act. The Ld. AR further submitted that the assessee has also taken over the possession of the property within the stipulated time and further more since the house property was let out, the rental income earned during the period was also offered in the return of income filed for the respective AY. The Ld. AR further submitted that subsequently on 17/12/2019 the house property was registered in the name of the assessee but, the date of registration of the property cannot be taken as the criteria to grant exemption U/s. 54F of the Act. According to section 54F of the Act, the property should be purchased within two years after the receipt of the sale consideration of transferred immovable property. The Ld. AR also submitted that in the present case, the entire sale consideration was paid by the assessee much prior to the date of possession of the property ie., 14/11/2016. This fact also reflects in the sale deed as well as in the agreement of sale. Further, the assessee has also taken over the possession of the property on 14/11/2016 and has let out the property and generated the rental income which was also reflected in the return of income filed by the assessee. Therefore, the Ld. AR submitted that the Ld. CIT(A)-NFAC has rightly appreciated the facts and circumstances of the case and also by relying on various judicial pronouncements on the issue, the Ld. CIT(A)- NFAC has granted the relief to the assessee. The Ld. AR therefore pleaded that the decision of the Ld. CIT(A)-NFAC need not be disturbed as there is no infirmity in the order. The Ld. AR also relied on the decision of the Hon’ble High Court of Delhi in the case of Balraj vs. CIT [2002] 254 ITR 22 (Delhi); the decision of the Hon’ble Karnataka High Court in the case of CIT vs. Sambandam Udaykumar [2012] 345 ITR 389 (Karnataka) as well as the decision of this Tribunal in the case of Smt. Suryakantham Seelam vs. ITO, Ward-5(2), Visakhapatnam in ITA No. 563/Viz/2013, dated 18/08/2017.
8. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. It is an admitted fact that assessee has sold the property / vacant plots during October / November, 2016. It is also an admitted fact that the assessee has made the entire payments for the house property purchased within the period of two years from the date of sale of the immovable property. It is also a fact that the house property was registered on 17/12/20 19 and therefore there was a time gap of more than 24 months between the date of transfer of capital asset and the date of purchase of the new house property and denied exemption U/s. 54F of the Act. The only grievance of the Ld. AO is that the assessee has become the owner of the newly purchased house property only on 17/12/20 19. Since the assessee has become the owner of the property only on 17/12/20 19 which is beyond the stipulated period of 24 months as provided U/s. 54F of the Act, the assessee is not eligible to claim exemption U/s. 54F of the Act and thus, the Ld. AO denied the assessee’s claim. The Ld. DR also relied on two decisions viz., Hon’ble Supreme Court in the case of Suraj Lamp & Industries (P.) Ltd vs State of Haryana [2012] 340 ITR 1 (SC) and the decision of the Hon’ble Kolkata High Court in the case of Hall and Anderson (P.) Ltd vs CIT [1963] 47 ITR 790 (Cal). So far as the judgment of the Hon’ble Supreme Court in the case of Suraj Lamp & Industries (P.) Ltd (supra) is concerned, the core issue before the Hon’ble Supreme Court is “whether transactions of nature of General Power of Attorney Sales (‘GPA Sales’) or Sale Agreement / General Power of Attorney / Will transfers (‘SA/GPA/ WILL’ transfers) do not convey title and do not amount to transfer – Held Yes. ”. However, this judgment of the Hon’ble Supreme Court is not applicable to the facts of the present case on hand because there is no dispute with respect to the title. The Ld. DR also relied on the judgment of the Hon’ble Kolkata High Court in the case of Hall and Anderson (P.) Ltd (supra). The crux of the issue involved in this case relates to the ownership of the property which is not the issue in the case before us. Therefore, this case relied on by the Ld. DR is not applicable to the facts of the case on hand. The core issue involved in the present appeal is whether the assessee has purchased the house property within the stipulated time mentioned U/s. 54F of the Act or not? On this issue, it is an undisputed fact that the assessee had paid the entire sale consideration on 14/11/2016 and the possession of the property was also given to the assessee on the same day itself. It is also an admitted fact that the assessee has let out the said house property and offered the rental income earned therefrom and also shown it in her return of income for the assessment year 20 16- 17. Therefore, merely because the registration of the house property (new) was delayed or done beyond the prescribed time limit of 24 months from the date of disposal of the capital asset, it cannot be a ground to deny the exemption claimed U/s. 54F of the Act. The Ld. AR also relied on the decision of the Hon’ble High Court of Delhi in the case of Balraj vs. CIT [2002] 254 ITR 22 (Delhi); the decision of the Hon’ble Karnataka High Court in the case of CIT vs. Sambandam Udaykumar [2012] 345 ITR 389 (Karnataka) as well as the decision of this Tribunal in the case of Smt. Suryakantham Seelam vs. ITO, Ward-5(2), Visakhapatnam in ITA No. 563/Viz/2013, dated 18/08/2017. So far as the judgment of the Hon’ble Delhi High Court is concerned, it was observed that “for the purpose of attracting the provisions of section 54, it is not necessary that the assessee should become the owner of the property”. Further, the Hon’ble Karnataka High Court in the case of CIT vs. Sambandam Udaykumar is concerned has held that “the condition precedent for claiming benefit under the said provision is the capital gain realized from the sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favour of the assessee before the period stipulated it cannot be denied the benefit of section 54F of the Act”. As well, this Tribunal in the case of Smt. Suryakantham Seelam (supra) has also relied on the ratio laid down by the Hon’ble Delhi High Court in the case of Balraj vs. CIT (supra) and held that “since the assessee has paid the complete consideration to vendor of the land, which is duly acknowledged by the vendor, merely because of the registration is pending, we are of the view that deduction allowable U/s. 54 of the Act should not be rejected”. Therefore, after considering the facts and circumstances of the case and the case laws relied on by the Ld. AR, we are of the view that there is no infirmity in the order passed by the Ld. CIT(A)-NFAC and thus it need no interference. Accordingly, the grounds raised by the Revenue are dismissed.
9. In the result, appeal filed by the Revenue is dismissed.
C.O. No. 04/Viz/2024 (AY 2017-18)
(By Assessee)
10. This Cross Objection is raised by the assessee and the grounds of cross objections revolve around supporting the decision of the Ld. CIT(A)-NFAC. While adjudicating the Revenue’s appeal in ITA No. 268/Viz/2024, AY 2017-18 in the foregoing paras of this order, we have upheld the decision of the CIT(A)-NFAC and dismissed the Revenue’s appeal. Therefore, considering the supportive nature, the adjudication of the grounds raised by the assessee in her cross objection becomes infructuous and hence they are dismissed.
11. In the result, CO raised by the assessee is dismissed.
12. Ex-consequenti, the appeal of the Revenue and the CO raised by the assessee are dismissed.
Pronounced in the open Court on 09th October, 2024.
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