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 ORDER OF ITAT DELHI
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:
