Case Law Details

Case Name : Harminder Kaur Vs ITO (ITAT Delhi)
Appeal Number : ITA No.2656/Del./2017
Date of Judgement/Order : 10.02.2021
Related Assessment Year : 2011-12

Harminder Kaur Vs ITO (ITAT Delhi)

In the instant case, the assessee has claimed deduction under section 54 of the Act against booking of flat before the due date of filing of return under section 139(4) of the Act.

The Assessing Officer and the Learned CIT(A) has denied the deduction on two grounds. Firstly, the amount of sale consideration has not been invested in the capital gain scheme, prior to due date of filing of return under section 139(1) of the Act and therefore, assessee is not entitled for deduction under section 54 of the Act. Secondly, construction of the flat was not completed within the period specified in section 54 of the Act i.e. three years after the sale of the property and therefore, the assessee is not entitled for the deduction under section 54 of the Act.

For the purpose of section 54, the due date for deposit under the capital gain has been held as due date of filing of return under section 139(4) Act in the case of Principal Commissioner of Income-tax Vs Shankar Lal Saini (supra).

Section 54 Deduction allowable if Investment made within prescribed time, even if Construction is not competed

In the instant case, the assessee has made entire payment within the period of three years from the date of the transfer of original asset, and therefore, the amount has to be treated as invested in purchase/construction. The provisions of section 54 nowhere prescribe construction of the house should be completed. The prime requirement is investment in new residential house within the prescribed period. Thus, respectfully following the Tribunal in the case of Ramprakash Miyav Bazaz (supra), we are of the opinion that the assessee has complied the provision of section 54 of the Act in substance and therefore Ld. CIT(A) is not justified in confirming rejection of deduction under section 54 of the Act.

FULL TEXT OF THE ITAT JUDGEMENT

This appeal by the assessee is directed against order dated 28/02/2017 passed by the Learned Commissioner of Income-tax (Appeals)-12, New Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2011-12 raising following grounds:

1. Under the facts and circumstances of the case, the disallowance of exemption u/s 54 of the Act amounting to Rs. 78,80,819 made by the Id. A.O. and confirmed by the Id. First Appellate Authority is highly injudicious, unwarranted, against the facts of the case and bad at law as the appellant has duly complied with all the conditions for claiming exemption u/s 54 of the Act.

2. Under the facts and circumstances of the case, the finding of the Id. First Appellate Authority that circular No. 471 dt. 15.10.1986 and 672 dt. 16.10.1993 as well as judicial precedents relied upon by the appellant are not applicable in her case and her claim that booking of flat is be considered as construction for the purpose of section 54 is without any basis is grossly injudicious, unwarranted, against the facts of the case and bad at law.

3. Under the facts and circumstances of the case, the Id. First Appellate Authority has grossly erred in disregarding the claim of appellant that the amount invested before the filing of return of income u/s 139(4) of the Act is eligible for claiming exemption u/s 54 of the Act which is highly injudicious, unwarranted, against the facts of the case and bad at law.

4. Under the facts and circumstances of the case, the Id. First Appellate Authority has grossly erred in affirming the action of Id. A.O. denying exemption u/s 54 of the Act on the ground that the appellant has not yet received the possession of the flat and also sale deed has not been executed till date which is highly injudicious, unwarranted and against the settled principle of law.

5. Under the facts and circumstances of the case the finding of the ld. First Appellate Authority that there is contradiction in the appellant’s claim of payment of Rs.89,50,000/- made to the builder for which exemption is claimed u/s 54 of the Act is grossly erroneous and against the facts of the case as the appellant ahs duly made the said payments to the builder before the date of filing of return of income for the year under consideration.

6. Under the facts and circumstances of the case the ld. First Appellate Authority has grossly misinterpreted the beneficial provisions of sec. 54 of the Act without appreciating the intention of the legislature behind introduction of these provisions.

7. The appellant prays for leave to add, amend, alter or withdraw any grounds of appeal.

2. Briefly stated facts of the case are that the assessee was co-owner of a property located at Panchkula alongwith two other persons namely i.e. Ms. Jaswinder Kaur and Ms. Harsawar Kaur. In the case of those two co-owners, their Assessing Officer disallowed the exemption claimed by them under section 54 of the Income-Tax Act, 1961 (in short ‘the Act’). In view of disallowance of exemption in the case of two other co-owners, assessment in the case of the assessee was reopened by way of issue of notice under section 148 of the Act. In the reassessment completed on 25/03/2015 in the case of the assessee, the Assessing Officer disallowed the claim of deduction under section 54 of the Act amounting to ₹ 78,80,819/-. On further appeal, the Ld. CIT(A) also upheld the finding of the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.

3. Before us, the parties appeared through Video Conferencing facility and filed documents electronically.

4. All the grounds raised by the assessee revolve around deduction under section 54 of the Act, which has been disallowed by the lower authorities.

5. The facts in brief qua the issue in dispute are that the assessee along with other two co-owners, sold property located at Panchkula (Haryana) for a sale consideration of ₹ 4,75,00,000/-. In the return of income, the assessee shown 1/3rd share of sale consideration in the property at ₹ 1,53,85,000/- and capital gain of ₹ 74,32,514/-, against which exemption under section 54 of ₹ 74,32,514/-was claimed. During the course of the re-assessment proceedings, the assessee stated that actual sale consideration was of ₹ 1,58,33,333/- and the amount of ₹ 1,53,85,000/- was inadvertently declared as sale consideration in the return of income. The assessee further submitted that entire amount of capital gain arising on the sale of ‘Panchkula Property’ was invested in residential house at ‘YOO – Project’ of M/s Eon Hadsaper Infrastructure P Ltd, Pune, jointly with another two co-owners of Panchkula Property i.e. Mrs. Jaswinder Kaur and Mrs. Harsawar Kaur before 31/10/2012. The agreement with the said company was made on 15/10/2012. The assessee filed return of income for the year under consideration on 31/10/2012 i.e. within the time allowed under section 139(4) of the Act and, therefore, claimed that she has complied with the conditions prescribed under section 54 of the Act and therefore she is eligible for deduction under section 54 of the Act. The assessee submitted that in view of the CBDT Circular No. 471 and 672, booking of flat is to be considered as a case of construction for the purpose of section 54 of the Act. However, the Assessing Officer rejected the claim of the deduction under section 54 of the Act on following grounds:

(i) The amount of capital gain has neither been invested in purchase or construction of residential house within the stipulated period, nor deposited in capital gain scheme account within limit provided section 139(1) of the Act.

(ii) The booking of flat is not purchase of flat because as per agreement to sale, construction of the flat was to be carried out and it was not completed till completion of assessment.

(iii) The booking of the flat is also not construction because under CBDT Circulars No. 471 dated 15/10/1986 and No. 672 dated 16/10/1993, allotment through booking was considered as construction of residential house in the case of self financing scheme of Delhi Development Authority and similar institutions such as housing board of Central/State Governments only and not in case of private builder

(iv) Construction of the flat in question was not completed and the assessee had not got possession of the flat till the completion of assessment and therefore also it was not construction of the residential house within a period of three years from the date of the original asset.

5.1 The Ld. CIT(A) concurred with the finding of the Assessing Officer. She also rejected the finding of the Ld. Commissioner of income-tax (Appeals) in the case of other two co-owners i.e. Mrs Jasvinder Kaur and Mrs Harsawer Kaur. The relevant finding of Ld. CIT(A) is reproduced as under:

“9.9 Further, it is seen that Appellant has not received the possession till date neither the Sale Deed has been executed. Appellant’s claim that amount has been invested before the filing of return u/s 139(4) will make her eligible for exemption does not establish Appellant’s case as the judgment of Hon’ble Punjab &’Haryana High Court in the case of Jagriti Aggarwal & other, 15 taxman.com 146 have to be considered in the context of the provisions of Section 54 whereas in the case of Appellant, it is seen that Appellant has not received the possession till date neither the sale deed has been executed. The judgment of Hon’ble Punjab & Haryana High Court is only limited to the issue of furnishing the return of income within the extended time for filing the return as per Section 139(4) and it does not presuppose a situation where the agreement has been entered after the period of 2 years from the date of sale of property. Therefore, the judgment of Hon’ble Punjab & Haryana High Court is on its own facts which is different from Appellant’s case. Therefore, judgments relied on by the Appellant does not help her as the primary / basic conditions to claiming exemption u/s 54 are not fulfilled by her. I am in agreement with Assessing Officer that Section 54 nowhere provides that grant of possession is a mere formality and that the payments made within the prescribed time limits would be sufficient to claim exemption u/s 54. Further, in the judgment of Hon’ble Delhi High Court in the case of CIT vs. R.L. Sood, 245 ITR 727, it is seen that judgment is on different facts. In that case, possession was delivered after the prescribed date of one year and the Sale Deed was registered thereafter whereas in the case of Appellant, it is seen that possession has not been handed over till date i.e. beyond the period of prescribed date and Sale Deed has also not been executed till date. Therefore, in such a situation, if exemption u/s 54 is allowed then the provisions of Section 54 become otiose as none of the conditions have been fulfilled even after the prescribed date is over. Though the provisions of Section 54 and Section 54F are beneficial provisions, provisions cannot be interpreted so as to be detrimental of the intent of the provisions. Hon’ble Supreme Court in the case of Orissa State Warehousing Corporation vs. CIT, 237 ITR 589 have held that a fiscal statute has to be interpreted on the basis of the language used therein and not de hors the same. Hon’ble Supreme Court in the case of IPCA Laboratory Ltd. vs. DCIT, 266 ITR 521 have held that where there is no ambiguity in the provisions of statute, provisions cannot be interpreted to confer benefit on the Assessee and benefits which are not available cannot be conferred by ignoring or misinterpreting clear word in the section. In my view, the intent of legislature was not to allow exemption u/s 54 if none of the conditions mentioned in the Section are fulfilled even after the prescribed period or otherwise, there was no requirement for specifying the conditions for claiming exemption u/s 54 or 54F. Facts of the cases relied on by the Appellant are different. Therefore, in my view, Learned CIT(A) has not examined the facts of the case in the case of Mrs. Jasvinder Kaur and Mrs. Harsawer Kaur carefully and, therefore, I respectfully differ with her and hold that Appellant is not entitled to the claim of exemption u/s 54.”

6. Before us, both the parties appeared through Video Conferencing facility. The Learned counsel of the assessee filed a paper-book containing pages A-1 to A-64 along with copies of few judgments relied upon by him.

7. The learned Counsel of the assessee referred to provisions of section 54, 139 (1) and 139 (4) of the Act and submitted that the finding of the Ld. CIT(A) that payment/investment made after due date of filing return of income under section 139(1) of the Act does not qualify for exemption under section 54 of the Act, is not correct. She submitted that in view of the various decisions, if the amount of sale consideration is actually utilized by the assessee before the due date of the furnishing of return under section 139(4) of the Act, there is no requirement to deposit the amount in capital gain scheme. According to her, the section 139 referred in the section 54 would include all the subsection thereof i.e. 139(1) as well as 139(4) of the Act. Further, she referred to page A-56 and A-57 to 61 of the paperbook and submitted that entire payment for purchase of the flat for which deduction has been claimed under section 54 of the Act, was made before due date of filing return of income under section 139(4) of the Act and therefore the assessee is entitled for deduction under section 54 of the Act in accordance with law. She also submitted that similar claim of deduction under section 54 of the Act has been allowed by the respective Learned Commissioner of Income-tax (Appeals) in the case of Mrs Jaswinder Kaur and Mrs Harsarwar Kaur. In support of the contention that amount of capital gain utilized in purchase of the property within the due date of filing return under section 139(4) would qualify for deduction under section 54 of the Act, the Learned Counsel relied on following decisions:

(a) Principle Commissioner of Income-tax Vs. Shankar Lal Saini, (2018) 89 com 235 (Rajasthan).

(b) Commissioner of Income-tax Vs Ms. Jagriti Aggarwal (2011) 15 taxmann 146 (Punjab & Haryana).

(c) Commissioner of Income-tax Vs Jagtar Singh Chawla (2013) 33 com 38 (Punjab and Haryana).

(d) Fatima Bai Vs. Income Tax Officer, ITA No. 435 of 2004] (Karnataka)

(e) Income Tax Appellate Tribunal – Cochin in case of Muthuletchumi Janardhahanan.

8. As far as finding of learned CIT(A) that in absence of actual possession of the flat, the exemption under section 54 cannot be allowed, the learned Counsel submitted that delay in receipt of possession was beyond the control of the assessee and therefore the assessee cannot be made to suffer for disallowance under section 54 of the Act, which is a beneficial section and for that purpose only thing to be ensured is that capital gains consideration arising on sale of long-term capital asset are reinvested in residential property. She further submitted that even as per section 54 of the Act, there is no requirement that the assessee should have actually received the physical possession of the flat within the prescribed time limit of 2/3 years.

9. Regarding the finding of the Learned CIT(A) that CBDT Circular No. 672 dated 16/10/1993 and Circular No. 471 dated 15/10/1986 are not applicable on booking of flat with private builder, the learned Counsel of the assessee submitted that various courts in following decisions have held that booking of flat with private builder is to be considered as case of construction for the purpose of section 54 of the Act:

(a) Commissioner of Income-tax Vs RL Sood (2000) 108 taxman 227 (Delhi)

(b) Commissioner of Income-tax Vs Mrs. Hilla JB Wadia (1995) 216 ITR 376 (Bombay)

(c) Ram Prakash Miyan Bazaz Vs. DCIT (2014) 45 com 550 (Jaipur-Trib)

(d) Smt Usha Vaid Vs ITO (2012) 25 taxmann.com 188 (Amitsar-Trib)

10. On the contrary, the learned DR relied on the finding of Ld. CIT(A) and submitted that in the case of the assessee construction was completed beyond the period of the three years i.e in the year 2018 and therefore the assessee is not entitled for deduction under the provisions of section 54 of the Act.

11. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record, including the decisions relied upon by the parties. In the instant case, the assessee has claimed deduction under section 54 of the Act against booking of flat before the due date of filing of return under section 139(4) of the Act. The chronological events of sale of the original asset and investment in new residential house submitted by the assessee are reproduced as under:

S.NO. Particulars Remark
1. Sale of residential house Property at 211, Sector-6 , Panchkula 23.06.2010
Capital Gain arising there from 78,80,819
3.                    Date of agreement with M/S Hadapsar Infrastructure Pvt. Ltd. 15.10.2012
4.                    Due Date of Filling of Income Tax Return U/S 139(1) 31.07.2012
5.                    Date of Filling of Income Tax Return by assessee U/S 139(4) 31.10.2012
6.                    Due date of filing of Income Tax return u/s 139(4) 31.03.2013

11.1 The Assessing Officer and the Learned CIT(A) has denied the deduction on two grounds. Firstly, the amount of sale consideration has not been invested in the capital gain scheme, prior to due date of filing of return under section 139(1) of the Act and therefore, assessee is not entitled for deduction under section 54 of the Act. Secondly, construction of the flat was not completed within the period specified in section 54 of the Act i.e. three years after the sale of the property and therefore, the assessee is not entitled for the deduction under section 54 of the Act.

11.2 As far as condition of deposit of the sale consideration in capital gain scheme account is considered, the relevant provision of section 54 is reproduced as under:

“Profit on sale of property used for residence.

54. (1) ………………………………..

(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of  section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—

(i) the amount not so utilized shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.”

11.2.1 For the purpose of above section, the due date for deposit under the capital gain has been held as due date of filing of return under section 139(4) Act in the case of Principal Commissioner of Income-tax Vs Shankar Lal Saini (supra). The relevant finding of the Hon’ble High Court of Rajasthan is reproduced as under:

“19. The contention of Mr. Singhi that under Section 139, investment is to be made before the return is filed otherwise it will render the provision nugatory is to be considered in the light that while considering the case, Karnataka High Court in para no. 6 & 7 (supra) has considered the provisions and interpreted the same. Even the same is accepted by the Punjab and Haryana High Court and Gauhati High Court which has taken the view contrary to Kerala High Court decision.

20. In that view of the matter, three High Courts have taken the view and the Tribunal has followed the Karnataka High Court which has followed the earlier Gauhati judgment which has been independently supported by the Punjab Harayana High Court.”

11.2.2 In the above decision, Hon’ble High Court of Rajasthan has relied on the decision of the Hon’ble Karnataka High Court in the case of Fatima Bibi Vs ITO (2009) 32 DTR 243 (Kar), Hon’ble Punjab and Haryana High Court in the cae of Jagtar Singh Chawala (2013) 87 DTR 217 ( P & H) and CIt vs jagriti Aggarwal (supra). The relevant finding of Hon’ble Punjab and Haryana High Court in the case of Jagriti Aggarwal (supra) has held that “Sub-s. (4) of s. 139 is in fact, a proviso to sub-s. (1) and provides for extension of period of due date for filing the return in certain circumstances and, therefore, exemption under s. 54 was allowable where the assessee had purchased new property before the extended due date of filing of return as per s. 139(4) and filed return within such extended time.” The relevant finding of the Hon’ble High Court is reproduced as under:

“5. It may be noticed that the assessee sold her residential house on 13th Jan., 2006 for a sum of Rs. 45 lacs and purchased another property jointly with Mr. D.P. Azad, her father-in-law on 2nd Jan., 2007 for a consideration of Rs. 95 lacs. The due date of filing of return as per s. 139(1) of the Act was 31st July, 2006, but the assessee filed her return on 28th March, 2007 and that extended due date of filing of return as per s. 139(4) is 31st March, 2007.

6. Sec. 54 of the Act contemplates that the capital gain arises from the transfer of a long-term capital asset, but if the assessee within a period of one year before or two years after the date on which the transfer took place purchases residential house, then instead of the capital gain, the income would be charged in terms of provisions of sub-s. (1) of s. 54. As per sub-s. (2), if the amount of capital gains is not appropriated by the assessee towards the purchase of new asset within one year before the date on which the transfer of the original asset took place, or which is not utilized by him for the purchase or construction of the new asset before the date of furnishing the return of income under s. 139, the amount shall be deposited by him before furnishing such return not later than due date applicable in the case of assessee for furnishing the return of income under sub-s. (1) of s. 139 in an account in any such bank or institution as may be specified. Relevant sub-s. (2) of s. 54 of the Act reads as under :

“(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilized by him for the purchase or construction of the new asset before the date of furnishing the return of income under s. 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-s. (1) of s. 139 in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazettee, frame in this behalf and such return shall be accompanied by proof of such deposit, and for the purposes of sub-s. (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in sub-s. (1), then,

(i) the amount not so utilised shall be charged under s. 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.”

7. The question which arises is; whether the return filed by the assessee before the expiry of the year ending with the assessment year is valid under s. 139(4) of the Act ?

8. Learned counsel for the Revenue has argued that the assessee was required to file return under sub-s. (1) of s. 139 of the Act in terms of sub-s. (2) of s. 54 of the Act. It is contended that sub-s. (4) is not applicable in respect of the assessee so as to avoid payment of long-term capital gain.

9. On the other hand, learned counsel for the respondent relies upon a Division Bench judgment of Karnataka High Court in Fathima Bai vs. ITO (2009) 32 DTR (Kar) 243 where in somewhat similar circumstances, it has been held that time-limit for deposit under scheme or utilisation can be made before the due date for filing of return under s. 139(4) of the Act. Learned counsel for the respondent also relies upon a Division Bench judgment of Gauhati High Court in CIT vs. Rajesh Kumar Jalan (2006) 206 CTR (Gau) 361 : (2006) 286 ITR 274 (Gau).

10. Having heard learned counsel for the parties, we are of the opinion that sub-s. (4) of s. 139 of the Act is, in fact, a proviso to sub­s. (1) of s. 139 of the Act. Sec. 139 of the Act fixes the different dates for filing the returns for different assessees. In the case of assessee as the respondent, it is 31st day of July of the assessment year in terms of cl. (c) of the Expln. 2 to sub-s. (1) of s. 139 of the Act, whereas sub-s. (4) of s. 139 provides for extension in period of due date in certain circumstances. It reads as under :

“(4) Any person who has not furnished a return within the time allowed to him under sub-s. (1), or within the time allowed under a notice issued under sub-s. (1) of s. 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier :

Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988 or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.”

11. A reading of the aforesaid sub-section would show that if a person has not furnished the return of the previous year within the time allowed under sub-s. (1) i.e., before 31st day of July of the assessment year, the assessee can file return before the expiry of one year from the end of the relevant assessment year.

12. The sale of the asset having taken place on 13th Jan., 2006, falling in the previous (sic—assessment) year 2006-07, the return could be filed before the end of relevant asst. yr. 2007-08 (sic— 2006-07) i.e. 31st March, 2007. Thus, sub-s. (4) of s. 139 provides extended period of limitation as an exception to sub-s. (1) of s. 139 of the Act. Sub-s. (4) is in relation to the time allowed to an assessee under sub-s. (1) to file return. Therefore, such provision is not an independent provision, but relates to time contemplated under sub-s. (1) of s. 139. Therefore, such sub-s. (4) has to be read along with sub-s. (1). Similar is the view taken by the Division Bench of Karnataka and Gauhati High Courts in Fatima Bai and Rajesh Kumar Jalan cases (supra) respectively.

13. In view of the above, we find that due date for furnishing the return of income as per s. 139(1) of the Act is subject to the extended period provided under sub-s. (4) of s. 139 of the Act.”

11.2.3 Further, the Hon’ble High Court of Punjab and Haryana in the case of Jagtar Singh Chawla (supra) has held that “The unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income Tax under Section 139 of the Act and that would include extended period to file return in terms of Sub Section 4 of Section 139 of the Act.” The relevant finding of the Hon’ble High Court is reproduced as under:

“9. A Division Bench of this Court in which one of us (Hemant Gupta, J.) was a member, had an occasion to consider the provisions of Section 54(2) of the Act, wherein it has been held that sub- section(4) of Section 139 of the Act is in fact a proviso to Section 139(1) of the Act. Therefore, since the assessee has invested the sale proceeds in a residential house within the extended period of limitation, the capital gain is not payable. The judgments in Rajesh Kumar Jalan’s case and Fathima Bai’s case (supra) were referred to. It has been held as under:-

“Having heard learned counsel for the parties, we are of the opinion that sub-section (4) of Section 139 of the Act is, in fact, a proviso to sub-section (1) of Section 139 of the Act. Section 139 of the Act fixes the different dates for filing the returns for different assesses. In the case of assessee as the respondent, it is 31st day of July, of the Assessment Year in terms of clause (c) of the Explanation 2 to sub­section 1 of Section 139 of the Act, whereas sub-section (4) of Section 139 provides for extension in period of due date in certain circumstances. It reads as under:-

“(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub- section (1) of Section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier;

Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.”

A reading of the aforesaid sub-section would show that if a person has not furnished the return of the previous year within the time allowed under sub-section (1) i.e. before 31st day of July of the Assessment Year, the assessee can file return before the expiry of one year from the end of ever relevant Assessment Year.”

10. In the present case, the assessee has proved the payment of substantial amount of sale consideration for purchase of a residential property on or before 31.3.2008, that is within extended period of limitation of filing of return. Only a sum of Rs.24 lacs was paid out of total sale consideration of Rs. Two Crores on 23.4.2008, though possession was delivered to the assessee on execution of the power of attorney on 30.3.2008. Since the assessee, has acquired a residential house before the end of the next Financial Year in which sale has taken place, therefore, the assessee is not liable to pay any capital gain. Such is the view taken by the Income Tax Appellate Tribunal.”

11.3 In the case of the assessee, the agreement to purchase of flat has been made on 15/10/2012. The assessee has provided detail of payments made, which are available on page A-56 of the paper-book, and same are reproduced as under:

Particulars Date Mode of Payment Amount (in Rs.)
Investment       in

yoo project

5.02.2010 Cheque No. 153816 before the due date u/s 139(1) 700,000
Investment       in

yoo project

18.5.2011 RTGS   before    the

due date u/s 139(1)

60,83,200
Amount paid for stamp duty on

registration      of
agreement to sell

16.7.2012 Cheque No. 35875

entry      in      bank
statement

7,50,000
Investment       in

yoo project

29.8.2012 RTGS 14,16,800
TOTAL: 89,50,000

11.3.1 On perusal of the paper-book pages A-57 to A-61, it is also evident that the all above payment have been cleared from the bank account of the assessee before the due date of the filing of return under section 139(4) of the Act which was 31/03/2013 in the case of the assessee.

11.4 As the investment in property has been made prior to due date of filing of return of income under section 139 (4) of the Act i.e 31/03/2013, therefore Respectfully following the decision of the Hon’ble High Court reproduced above, we are of the opinion that the assessee cannot be denied deduction on the ground that amount of sale consideration has not been invested in capital gain account scheme before the due date of the filing of return under section 139(1) of the Act.

11.5 Further, as per the provisions of section 54 for eligibility of deduction, the assessee is required to purchase or construct one residential house in India within following periods:

– Purchase of residential house within one year before or two years after the date on which the transfer of original asset took place or

– Construction of residential house within three years after the date of transfer of original asset

11.6 The assessee claimed that investment in flat is equivalent to construction of residential house and since investment has been made within three years from transfer of the original asset therefore assessee is entitled to deduction under section 54 of the Act. The Learned Counsel of the assessee has submitted that the CBDT in the Circular No. 471 dated 15/10/1986 and circular No. 672 dated 16/10/1993 has considered booking of the flat as construction for the purpose of section 54 of the Act, whereas according to the Learned DR, those circulars are only applicable to booking of flats under self financing schemes of Delhi Development Authority and similar institutions. For ready reference, the aforesaid Circular No. 471, dated 15.10.1986 is reproduced as under:

“CIRCULAR NO. 471 DATED 15TH OCTOBER, 1986

Capital gains tax—Whether investment in a flat under the Self-Financing Scheme of the Delhi Development Authority would be construction for the purpose of ss. 54 and 54F of the IT Act, 1961

CAPITAL GAINS
SECTION 54

SECTION 54F

Secs. 54 and 54F of the IT Act, 1961, provide that capital gains arising on transfer of a long-term capital asset shall not be charged to tax to the extent specified therein, where the amount of capital gain is invested in a residential house. In the case of purchase of a house, the benefit is available if the investment is made within a period of one year before or after the date on which the transfer took place and in case of construction of a house, the benefit is available if the investment is made within three years from the date of the transfer.

2. The Board had occasion to examine as to whether the acquisition of a flat by an allottee under the Self-Financing Scheme of the Delhi Development Authority amounts to purchase or its construction by the Delhi Development Authority on behalf of the allottee. Under the Self-Financing Scheme of the Delhi Development Authority the allotment letter is issued on payment of the first instalment of the cost of construction. The allotment is final unless it is cancelled or the allottee withdraws from the Scheme. The allotment is cancelled only under exceptional circumstances. The allottee gets title to the property on the issuance of the allotment letter and the payment of instalments is only a follow-up action and taking the delivery of possession is only a formality. If there is a failure on the part of the Delhi Development Authority to deliver the possession of the flat after completing the construction, the remedy for the allottee is to file a suit for recovery of possession.

3. The Board have been advised that under the above circumstances, the inference that can be drawn is that the Delhi Development Authority takes up the construction work on behalf of the allottee and that the transaction involved is not a sale. Under the Scheme, the tentative cost of construction is already determined and the Delhi Development Authority facilitates the payment of the cost of construction in instalments subject to the conditions that the allottee has to bear the increase, if any, in the cost of the construction. Therefore, for the purpose of capital gains tax, the cost of the new asset is tentative cost of construction and the fact that the amount was allowed to be paid in instalments does not affect the legal position stated above. In view of these facts, it has been decided that cases of allotment of flats under the Self-Financing Scheme of the Delhi Development Authority shall be treated as cases of construction for the purpose of capital gains.”

11.6.1 The relevant part of the circular no. 672 is reproduced as under:

“Attention is invited to Board’s Circular No. 471, dated 15th October, 1986 (F. No. 207/27/85-ITA.II) [published in (1987) 59 CTR (St) 19]. It was clarified therein that cases of allotment of flats under the self financing scheme of the Delhi Development Authority (DDA) should be treated as cases of construction for the purposes of sections 54 and 54F of the Income-tax Act. The Board has since received representations that even in respect of allotment of flats/houses by co-operative societies and other institutions, whose schemes of allotment and construction are similar to those of Delhi Development Authority, a similar view should be taken.

2. The Board has considered the matter and has decided that if the terms of the schemes of allotment and construction of flats/houses by the c-ooperative societies or other institutions are similar to those mentioned in Para 2 of Board’s Circular No. 471, dated 15th October, 1986, such cases may also be treated as cases of construction for the purposes of sections 54 and 54F of the Income-tax Act.”

11.6.2 Regarding applicability of the circulars for booking of flats, the Hon’ble Delhi High Court in the case of RL Sood (supra) has observed as under:

“2. The assessee was the owner of a residential house which he sold on 22nd Sept., 1981, for a total consideration of Rs. 2,75,000. On 25th Sept., 1981, he entered into an agreement for purchase of a residential flat and by September, 1982 paid a sum of Rs. 2,39,850 to the builder of the said flat. The actual possession was delivered to the assessee on 17th Feb., 1983 and the sale deed in his favour was registered on 26th Feb., 1985.

3. During the course of the assessment proceedings for the relevant assessment year, the AO brought the difference between the sale price of the residential flat sold by the assessee and the cost of acquisition of the said house to tax as capital gains on the ground that the assessee had failed to satisfy the conditions laid down in s. 54(1) of the Act inasmuch as he had failed to purchase the flat within the stipulated period of one year. The assessee’s appeal to the CIT (A) was unsuccessful.

4. The assessee took the matter in further appeal to the Tribunal, who took the view that the assessee having purchased the new flat within one year of the sale of his old residential house, the provisions of s. 54(1) of the Act stood satisfied and, therefore, no income by way of capital gains could be taxed in the hands of the assessee. The Revenue’s application under s. 256(1) having been dismissed by the Tribunal the present petition had been filed.

5. We have heard Mr. Sanjiv Khanna, the learned senior standing counsel on behalf of the Revenue.

6. In our view the Tribunal was justified in declining to make a reference on the proposed question to this Court. Admittedly, the assessee had paid a sum of Rs. 2,39,850 out of the total sale consideration of Rs. 2,75,000 for purchase of flat within the period of one year from the date of sale of his old residential house. Thus, on payment of a substantial amount in terms of the agreement of purchase dt. 25th Sept., 1981, i.e., within four days of the sale of his old property, the assessee acquired substantial domain over the new residential flat within the specified period of one year and complied with the requirements of s. 54. Merely because the builder failed to hand over possession of the flat to the assessee within the period of one year, the assessee cannot be denied the benefit of the said benevolent provision. This would not be in consonance with the spirit of s. 54 of the Act.

7. We may note that realising the practical difficulty faced by the assessee in such situations, the CBDT issued a Circular No. 471, dt. 15th Oct., 1986, clarifying that when the DDA issues the allotment letter to an allottee under its self-financing scheme, on payment of first instalment of cost of construction, the allottee gets title to the property and such allotment should be treated as cost of construction for the purpose of capital gains. On the same analogy, the assessee having been allotted the flat, he having paid a substantial amount towards its cost within the stipulate period of one year, he cannot be denied the benefit of the said section because the flat purchased by him had come into his full domain within the period of one year, though the sale deed in his favour was registered subsequently

11.6.3 Further, regarding eligibility of deduction 54 of the Act for booking of flat with private builders, the Tribunal in the case of Rampraksh Miyan Bazaz (supra) has held as under:

“11. Now coming to a concomitant situation that if booking offlats does not tantamount to ownership of the house then how come the assessee claim that by booking a flat it has acquired ‘new house ‘ and becomes entitle for this exemption. Similar situations repeatedly arose and to settled them, the CBDT issued a circular No. 471 dated 15/10/1986 clarifying that payment made to a builder/developer is a sufficient compliance for exemption under section 54F of the Act. Id. CIT(A) has gone by sheer technicalities to hold that the flat at Emaar-MGF, Gurgaon is not covered under section 54F of the Act. To meet such recurrence of situations in the modern days where properties are booked and thereafter purchased, the CBDT in their wisdom further clarifies vide circular No. 672 dated 16/12/1993 that if any amount out of net sale consideration of the original asset is paid to any builder or developer, this amount should be considered towards the terms ‘purchase/construct’ for the purpose of sections 54/54F of the Act. It is not disputed by the Revenue that the assessee has not made payment for purchase of residential house in Gurgaon in view of the above clarifications of CBDT, this is enough compliance of the provision of section 54F of the Act and the assessee became entitled to this exemptio

12. We have found that section 54F of the Act is a beneficial provision aimed at promoting existence of new residential houses to further the needs of the society. Thus, the intention of the Legislator is to encourage investment in the acquisition of residential houses and section 54F of the Act prescribes and proscribes the conditions for availing its benefit. The terms/words used in this section have been very selectively & prudentially used by the legislature. This benefit is against the capital gain arising out of transfer of any long term capital asset not being a residential house and which has been referred to as an ‘original asset’ subject to a condition that if the ‘net-sale-consideration’ is invested either in purchasing/constructing a residential house or in constructing the same within the period prescribed in this section. However, if the assessee owned more than one residential house other than the new asset on the date of transfer of the original asset, this benefit is not available to him. In the given case, undisputedly, the assessee had sold a capital asset in the form of land on 03/10/2008 and earned long term capital gain of Rs. 2,03,76,237/- (this LTCG has been calculated by the Assessing Officer at Rs. 2,04,37,654/-) as there was some error in the computation filed by the assessee with the return because in the indexing of the cost of land in F. Y. 1991-92, the assessee’s half share was not considered. The assessee has claimed exemption under section 54F (l)(b) of the Act to the extent of Rs. 1,26,52,789/-as against total investment of Rs. 1,29,66,275/-. Thus, by now we have come to the conclusion that the assessee did not own more than one residential house on the date of transfer of the original asset. Therefore, one condition of this provision stands satisfied.”

11.7 In the instant case also, the assessee has made entire payment within the period of three years from the date of the transfer of original asset, and therefore, the amount has to be treated as invested in purchase/construction. The provisions of section 54 nowhere prescribe construction of the house should be completed. The prime requirement is investment in new residential house within the prescribed period. Thus, respectfully following the Tribunal in the case of Ramprakash Miyav Bazaz (supra), we are of the opinion that the assessee has complied the provision of section 54 of the Act in substance and therefore Ld. CIT(A) is not justified in confirming rejection of deduction under section 54 of the Act.

11.8 In view of the above discussion, we set aside the finding of the Learned CIT(A) on the issue in dispute and direct the Assessing Officer to allow the deduction claim under section 54 of the Act. The grounds of the appeal of the assessee are accordingly allowed.

12. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 10th February, 2021

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