Case Law Details
Joseph K. Zachariah Vs ACIT (ITAT Bangalore)
Section 54(2) of the Act has two conditions for availing deduction u/s 54(1) of the Act. Firstly, the assessee has to utilize the capital gain in purchase of new property before the due date of furnishing the return of income u/s 139 of the Act, which encompasses sub-section (1), subsection (4) & sub-section (5) of section 139 of the Act. Secondly, if it is not done so, it has to be deposited in a capital gain account scheme before the due date of furnishing return of income as provided u/s 139(1) of the Act. In the present case, the assessee filed the return of income for the assessment year 2014-15 on 13.6.2014 before the due date of filing return u/s 139(1) of the Act. However, by that time, he has not utilized the amount of Rs.2,59,03,849/- in construction of new residential house or deposited the same in capital gain account scheme as notified by the Central Government. In other words, unutilized capital gain should have been deposited in capital gain account before due date of filing of return u/s 139(1) of the Act. Now the contention of the Ld. A.R. is that even if the assessee deposited unutilized portion of capital gain after the due date provided u/s 139(1) of the Act, assessee is entitled for deduction u/s 54 of the Act. This argument cannot be upheld. To avail benefit u/s 54 of the Act, unutilized portion of capital gains shall be deposited by assessee in capital gain account scheme before due date of filing of return of income u/s 139(1) of the Act as prescribed u/s 54(2) of the Act.
Assessee made an alternative argument that the assessee made investment in purchase of house at Chicago in USA within the stipulated time u/s 139(4) of the Act. Even the investment in residential property in foreign country, he has also entitled the assessee to claim such deduction. As held by coordinate bench in IT(IT)A No.15/Bang/2019 in the case of Shri Rajasugumar Subramani dated 10.1.2020, we are completely agreed with this proposition.
However, we make it clear that assessee shall furnish necessary evidences of construction or purchase of new residential property in Chicago, USA. The A.O. has to examine the same and decide the issue in the light of the order cited (supra).
FULL TEXT OF THE ITAT JUDGEMENT
This appeal filed by the assessee is directed against order of the Ld. CIT(A)-12, Bengaluru dated 30.3.2019. The assessee has raised following grounds of appeal:
1. The order passed by the Learned Commissioner of Income Tax (Appeals) in the case of the appellant, in the facts and under the circumstances, is grossly opposed to law, erroneous, and unsustainable.
2. The Learned Commissioner of Income Tax (Appeals) was grossly in error in holding that the appellant was not entitled to the benefit of exemption u/s. 54 of the Act in respect of the sum of Rs. 2.59 Crores that was invested in the construction of the new residential house after the due date for filing of the return of income u/s. 139(1).
3. The Learned Commissioner has grossly erred in not following the ratio laid down by the Hon’ble High Court of Karnataka in its judgment in the case of Shri. K. Ramachandra Rao (ITA No. 47/2014, 46/2014, 494/2013 and 495/2013) to hold that where the intention was not to retain cash but to invest in construction of a new residential house, the appellant cannot be denied the benefit of exemption u/s. 54 for not depositing the unutilized capital gain in the capital gains account, so long as the construction of the residential house is complete within the time permissible u/s. 54(1) of the Act.
4. Without prejudice, and having regard to the meaning of the expression “a residential house” appearing in Sec.54(1) as clarified by various courts including the jurisdictional High Court of Karnataka, the Learned Commissioner of Income-tax (Appeals) was in error in holding that the appellant was not entitled to the benefit of the exemption u/s. 54 in respect of the new residential house constructed in Bangalore as well as the residential house purchased in Chicago, USA within the time stipulated under the provisions of Sec.54(1).
2. In this case, the assessee has claimed exemption u/s 54 of the Income-tax Act, 1961 [‘the Act’ for short] on the following reasons:
1. The total sum Rs.7,59,92,601/- has been invested in the new asset i.e. residential house under construction within the due date u/s. 139(1) i.e. 31.7.2014 as opposed to the Capital Gains of Rs.10,80,96,500/- which actually had to be invested.
2. The balance Capital Gain of Rs. 2,59,03,899/- which had to be either invested in the construction of residential house or deposited in the Capital Gain account, could not be done in view of the tax withheld by the buyer of the property, which was yet to be refunded by the department.
3. Application u/s. 119(2) of the IT Act, 1961 was made to the CBDT on 01.2.2014 i.e. before the filing of the return of income for condonation of delay in making the investment in the new residential house which was a pre-condition for the claim of u/s. 54.
4. Deposited a sum of Rs.3.30 crores on 15.6.2015 in the Capital Gains account when the refund claim for 2014-15 was received.
5. Since, the delay in the investment in the new asset for claim of exemption u/s. 54 was attributable beyond the control of the assesse it was requested that the exemption may be allowed.
3. The Ld. A.R. for the assessee placed reliance on the judgement of Hon’ble Karnataka High Court in the case of CIT Vs. K. Rama Chandra Rao (277 CTR 522), However, the lower authorities rejected the claim of the assessee on the reason that unutilized amount of Capital Gains should be invested in the Capital Gain Scheme notified by the Central Government before the due date of filing the return of income. Since the assessee has not deposited the unutilized portion of capital gains into the capital gain deposit scheme before the due date of filing of return of income, same was denied. Now the contention of the Ld. A.R. is that section 54 of the Act does not mention the due date as mentioned in section 139(1) of the Act. As such, it should be understood that extended date is available as per section 139(4) of the Act. Accordingly, the assessee is entitled for exemption u/s 54 of the Act if the unutilized capital gain is invested before the due date as mentioned in section 139(4) of the Act.
4. On the other hand, the Ld. D.R. relied on the order of the lower authorities.
5. We have considered the rival submissions. We have also carefully gone through the judgement of jurisdictional High Court in the case of CIT Vs. K. Rama Chandra Rao (supra). In the present case, assessee earned long term capital gain at Rs.10,18,96,500/- . The assessee has invested in construction of new residential house at Rs.7,59,92,601/- within the due date u/s 139(1) of the Act i.e. 31.7.2014. The assessee is having balance capital gains of Rs.2,59,03,899/-, which ought to have been used for construction of residential house or should have been deposited in the capital gain account notified by the Central Government in terms of section 54(2) of the Act. Thus, it is very clear that the assessee has not invested an amount of Rs.2,59,03,899/- which should have been invested in capital gain account scheme. In other words, as per section 54(2) of the Act, if the capital gain is not appropriated towards purchase of the new asset before one year from the date of transfer of the original asset or is not utilized for the purchase or construction of a new asset before the date of furnishing the date of return of income u/s 139 of the Act, such unutilized capital gain has to be deposited in a capital account scheme, before the due date of furnishing the return of income provided u/s 139(1) of the Act. Thus, section 54(2) of the Act has two conditions for availing deduction u/s 54(1) of the Act. Firstly, the assessee has to utilize the capital gain in purchase of new property before the due date of furnishing the return of income u/s 139 of the Act, which encompasses sub-section (1), subsection (4) & sub-section (5) of section 139 of the Act. Secondly, if it is not done so, it has to be deposited in a capital gain account scheme before the due date of furnishing return of income as provided u/s 139(1) of the Act. In the present case, the assessee filed the return of income for the assessment year 2014-15 on 13.6.2014 before the due date of filing return u/s 139(1) of the Act. However, by that time, he has not utilized the amount of Rs.2,59,03,849/- in construction of new residential house or deposited the same in capital gain account scheme as notified by the Central Government. In other words, unutilized capital gain should have been deposited in capital gain account before due date of filing of return u/s 139(1) of the Act. Now the contention of the Ld. A.R. is that even if the assessee deposited unutilized portion of capital gain after the due date provided u/s 139(1) of the Act, assessee is entitled for deduction u/s 54 of the Act. This argument cannot be upheld. To avail benefit u/s 54 of the Act, unutilized portion of capital gains shall be deposited by assessee in capital gain account scheme before due date of filing of return of income u/s 139(1) of the Act as prescribed u/s 54(2) of the Act.
6. On the other hand, the assessee made an alternative argument that the assessee made investment in purchase of house at Chicago in USA within the stipulated time u/s 139(4) of the Act. Even the investment in residential property in foreign country, he has also entitled the assessee to claim such deduction. As held by coordinate bench in IT(IT)A No. 15/Bang/2019 in the case of Shri Rajasugumar Subramani dated 10.1.2020, we are completely agreed with this proposition, wherein it was held by the bench as follows:
“We have heard the rival submissions. The Id. counsel for the assessee placed reliance on the decision of the Bangalore Bench of the Tribunal in the case of /TO(/T), Ward 1(1), Bangalore v. Arshia Basith. IT(IT)A No.2768/Bang/2017 AY 2014-15, order dated 14.8.2018 wherein this Tribunal held that assessee would be entitled to benefit of deduction u/s. 54/54F of the Act on the property purchased outside India and that the amendment made to section 54F of the Act by the Finance Act, 2014 w.e.f. 2015 is applicable only prospectively from AY 2015-16 and not to earlier assessment year. By the said amendment, the provisions of section 54F(1) were amended whereby it was laid down that the new asset purchased or constructed by utilising the capital gain must be in India. He also relied on the decision of the ITAT Mumbai Bench in the case of ACIT v. Jai Kumar Gupta HUF, ITA No. 5303/Mum/2017 AY 2013-14, order dated 28.2.2019 and decision of ITAT Bangalore in the case of Mrs. Suma v. ITO, ITA No. 568/B an g/2018 for AY 2006-07, order dated 20.7.2018. It was held that deduction u/s. 54F can be considered and allowed even though the assessee has made claim for deduction only u/s. 54 of the Act provided the conditions laid down in section 54F are satisfied.
8. The Id. DR submitted that the issue should be directed to be examined by the AO afresh in the light of decision cited by the id. counsel for the assessee.
9. We have given a careful consideration to the rival submissions. We find that in the decision rendered in the case of Jai Kumar Gupta HUF (supra) on identical facts the assessee had made a claim for deduction u/s. 54 of the Act instead of 54F of the Act. The Tribunal held that the assessee’s claim for deduction u/s. 54F should be examined. In the case of Arshia Basith (supra) the Bangalore Bench of the Tribunal held that assessee would be entitled to deduction u/s. 54F of the Act even in respect of property purchased which is located outside India. The following were the relevant observations of the Tribunal:-
“3. Having carefully examined the orders of authorities below in the light of rival submissions, we find that the assessment year in this appeal is 2014-15 and the provision in section 54F comes w.e.f. 01.04.2015 according to which it was clarified that the residential house is to be acquired only in India meaning thereby before this amendment it was not clear as to whether the benefit of section 54F can be given to residential house acquired in India or abroad. This issue was examined by the Tribunal in the case of ACIT Vs. Iqbal Jafar (supra) which was authored by one of the members of this Bench and it was held by the Tribunal that before the amendments, the benefit can also be given to the residential house acquired in abroad. The relevant observation of the Tribunal is extracted hereunder for the sake of reference:
“9. Having heard the rival submissions and from a careful perusal of the orders of the authorities below, find that it has been repeatedly held by the Hon ‘ble Apex Court and various High Courts that cardinal rule of interpretation is that the statute must be construed according to its plain language and neither should anything be added nor subtracted therefrom unless there are adequate grounds to justify the inference that the legislature clearly so intended. It is also well settled that in a taxing statute one has to look merely at what is clearly stated The meaning and extent of the statute must be collected from the plain and unambiguous expression used therein, rather than from any notions which may be entertained by the Court as to what is just or expedient.
10. In the case of TV. Sundaram Iyengar & Sons (P.) Ltd. (supra), their Lordships have held that if the language of the statute is clear and unambiguous, the court cannot discard the plain meaning, even if it leads to an injustice.
11. Again in the case of Smt. Tarulata Shyam v. CIT (supra), it was held that there is no scope for importing into the statute words which are not there. Such importation would be, not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by Legislation and not by judicial interpretation.
13. Further, in the case of Sodra Devi (supra), it was held by the Hon’ble Apex court that unless there is an ambiguity, it would not be open to the Court to depart from the normal rule of construction which is that the intention of the legislature should be primarily to gather from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and considered on surrounding circumstances and constitutionally proposed practices.
14. We have also examined the order of the Tribunal in the case of Vinay Mishra (supra), in which it has been held that the words ‘in India; cannot be read into section 54F when Parliament in its legislative wisdom has deliberately not used the words ‘in India’ in section 54F of the Act. The Tribunal accordingly held that assessee ‘s claim for exemption under section 54F of the Act shall be allowed since all conditions laid down in this section are satisfied for availing the said exemption, though he has acquired house property in U.S.A.
15. Similarly in the case of Mrs. Prema P. Shah (supra), the Tribunal has again held that the assessee was entitled to the benefit under section 54 of the Act, which does not exclude the right of the assessee to claim property purchased in a foreign country, if all other conditions laid down in the section are satisfied, merely because the property acquired was in a foreign country.
16. Again in the case of Dr. Girish M Shah (supra), the Mumbai Bench of the Tribunal has taken a view by holding that the assessee is entitled for exemption under section 54F of the Act for of house property outside India i.e. in Canada.
17. Having carefully examined various judicial pronouncements and the order of the Id. CIT(A), we find pt in the case of Leena J. Shah v. Assts. (2006) 6 SOT 72 I (Ahd.), the Tribunal has taken a t view that the words “in India” cannot be inserted in section 54F of the Act and as per plain of section 54F of the Act, the sale proceeds of capital asset shall be invested in residential house or outside India. We, accordingly, following the judgment of the Hon’ble Apex Court in the case v. Vegetable Products Ltd [1973j 88 ITR 192, hold that the view favourable to the assessee taken ous Benches of the Tribunal should be followed and accordingly following the same, we hold that the assessee is entitled for exemption under section 54F of the Act. We, therefore, do not find any infirmity in the order of the Id. CIT(A), who has rightly adjudicated the issue in the light of the ratio laid down by the Tribunal in a number of cases. Accordingly, the order of the ld. CIT(A) is confirmed and the appeal of the Revenue is dismissed.”
4. Since the Tribunal has taken a view in similar set of facts, we find no justification to take a contrary view in this appeal. Accordingly, following the same, we hold that the assessee is entitled for deduction under section 54F of the Act. Therefore, we find no infirmity in the order of the CIT(A). We accordingly confirm the same.”
10. We are of the view that in the case of assessee the deduction claimed should be examined in the parameters of section 54F of the Act in the light of decision cited before us. The AO is directed to apply the ratio laid down in the aforesaid decision and allow the claim of deduction of assessee in accordance with the law, after affording assessee opportunity of being heard.”
7. However, we make it clear that assessee shall furnish necessary evidences of construction or purchase of new residential property in Chicago, USA. The A.O. has to examine the same and decide the issue in the light of the order cited (supra). We have also carefully gone through the judgement of jurisdictional High Court in the case of CIT Vs. K. Rama Chandra Rao (supra). We are of the opinion that it is appropriate to remit the issue to examine the claim of the assessee and decide in accordance with law.
8. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 23rd Dec, 2020.
