Vinay Ramchandra Somani Vs ACIT (ITAT Mumbai)
We notice that the assessee has sold the residential land and entered into a separate deal with the buyer for allotment of a flat in the up–coming project. The part sale consideration received by the assessee as payment in kind. In that process, the assessee entered into an escrow arrangement with Satguru Corporate Services Pvt. Ltd., against the allotment of new flat. As per escrow arrangement, the assessee made full payment against the allotment of the flat.
Due to certain dispute with the builder, the builder could not complete the flat against which the assessee issued a public notice in the newspaper and also filed a suit in the Hon’ble Jurisdictional High Court against the builder. The assessee also filed a copy of the order dated 16th June 2014, passed by the Hon’ble Jurisdictional High Court and also filed a copy of public notice in the newspaper as part of paper book from Page–155–164 of the paper book.
From the record, it is clear that the assessee has received part of sale consideration as in kind for allotment of flat for which the value was determined and kept under escrow arrangement. From the record, it is also given to understand that it has not received this portion of the sale consideration up to now since there is a separate arrangement was entered with the buyer of the land and the builder for consideration and allotment of the disputed flat which later ended up in dispute. Because of dispute, the builder has refused to confirm to the Assessing Officer that there is no arrangement and allotment of the aforesaid flat to the assessee.
However, the documents submitted before us clearly indicate that the stand of the builder is not correct and proper. Considering the decision of the Hon’ble Jurisdictional High Court which was filed before us clearly indicate that there exist dispute with regard to above flat.
In our considered view, there is no dispute that the assessee had entered into escrow arrangement with a clear purpose of purchasing the above said flat and accordingly and based on the agreement with the buyer of the land, the assessee has left a portion of the sale consideration in escrow arrangement. Therefore, when the taxing authorities intend to tax the whole sale consideration as taxable consideration which includes the portion of the cost of flat then the assessee has deemed to have paid for the flat as purchase consideration.
We notice that the Assessing Officer has taken a stand that in order to claim deduction under section 54F of the Act, the assessee has to demonstrate documentary evidences of the new property and the assessee should have invested / purchased new residential property within the prescribed time. We notice that in this situation the assessee has already kept the agreed settlement amount for purchase of flat with buyer of the land and accepted to receive the promised allotted flat within the prescribed time. Since there was a dispute between the assessee and the builder the flat was not allotted to the assessee within the prescribed time.
We notice that the Courts have held that when the assessee performs his part of the duty before the prescribed time and incase there is a reasonable delay or default on the part of builder and failed to comply the agreement within the prescribed time and when the assessee demonstrated the reasonableness of the time frame of investment then the Courts have taken liberal view in giving deduction under section 54F of the Act. Therefore, in our considered view, in the given case the assessee has not received sale consideration to the extent of value of flat and there is no mistake on the part of the assessee, therefore, in our considered view, the assessee had paid full purchase consideration for flat, therefore, the assessee is eligible for the claim under section 54F of the Act.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The appeal filed by the assessee challenging the impugned order dated 17th March 2017, and the appeal filed by the Revenue is against the order dated 31st March 2017, passed by the learned Commissioner of Income Tax (Appeals)–3, Mumbai, pertaining to the assessment year 2012–13.
ITA no.3642/Mum./2017
Assessee’s Appeal – A.Y. 2012–13
[Shri Vinay Ramchandra Somani]
2. Ground no.1, relates to disallowance of ` 4,65,214, made under section 14A of the Income Tax Act, 1961 (for short “the Act”).
3. During the course of hearing before us, the learned Counsel for the assessee submitted that he did not wish to press this ground. The learned Departmental Representative has not raised any objection. Consequently, we dismiss this ground as not pressed.
4. Ground no.2, relates to cost of acquisition of 925 shares of Somani & Company.
5. Brief facts are, during the assessment proceedings, the Assessing Officer observed that the assessee has declared long term capital gain on sale of 3,425 equity shares of M/s. Somany & Co. Pvt. Ltd. When the assessee was asked to provide details of the same, the assessee filed the details of acquisition of shares as per below table:–
