TMI Blog2014 (6) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature is to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of the law – the assessee cannot be treated owner of Noida/Chandigarh flats on 05/06/2010 - he to be allowed benefit of section 54F because he has invested the capital gain as per the requirement of the Act. 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 - the 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 - 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 - the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a total consideration of Rs. 5,81,19,891/-. Particulars of the entire land acquired are as under:- Khasara No. Area Date of purchase Amount Share of the assessee 731 0.43 feet 25.01.1991 42000 share / Rs. 21000 28 0.63 feet 31.05.1994 151200 share / Rs. 75600 27.29 1.51 feet 01.06.1994 362400 share of Rs. 90600 2.1 Income under the head 'long term capital gain' of Rs. 77,23,448/-has been computed by the assessee as under:- Sale consideration of Vimalpura Land on 03/10/2008 Rs. 20881079 Less: Vimalpura land - 1. Indexed cost of acquisition F.Y. 1991-92 42000/199 582 = 122834 2. Vimalpura Land F.Y. 1991-92 170000/259 582 = 382008 Rs. 504842 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,275/- which was subsequently cleared time to time. The stamp paper date is not so important as it is evident from record that assessee has given booked flat within due time. The registration of documents etc. is subsequent process. 10 SOT 139 Mumbai Angela J Kazi v. ITO 75 Taxman 145 (Bomb.) Placed letter of booking of new flat record, copy cheque to builder and ultimate sale agreements. Hence assessee's intention was clear for purchasing new flat with in period of furnishing of return. So claim of assessee is well justified and within ambit of income-tax law. 2. The assessee is having only one residential house at S-225, Mahaveer Nagar, Jaipur, as appearing in balance sheet of Rs. 43,50,534/-. The above mentioned flat is only another residential flat within condition of section 54F as prior to it assessee is having only Mahaveer Nagar residential house. The other alleged flats are not residential flats as appearing in balance sheet as assessee has never occupied them for residential purposes, as these are for investment purposes, according also shown under investments is balance sheet. The assessee has invested in ATS Paradiso, Greater Noida (U.P.) amounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for claiming exemption under section 54F of the Act. Further, advance payment made for the purchase of residential flat has not been treated as investment/utilization of the capital gain in the purchase of a residential house. That is why on both these counts, the Assessing Officer has rejected this claim of the assessee. He has not treated the deposit of Rs. 40 Lakhs in the capital gain account scheme. He has distinguished the decisions/case law on which the assessee placed reliance in support of his claim. The claim of payment of Rs. 10 Lac to the Civil Engineer on account of supervision was also declined on the reasoning that on the receipt issued by Shri Mukesh Aren, he has not mentioned his degree and amount was paid in cash. The Assessing Officer has computed the income of the assessee as under:- A Income from Long Term Capital Gain 2,04,37,654/- B Income from other sources 1,34,63,204/- Gross Total Income 3,39,00,858/- Deduction under Chapter VIA ( i ) u/s 80C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore it remains a 'Right to Acquire Flat' only. 4. Without prejudice to the above grounds, the Ld. CIT(A) had erred in holding that no exemption would be available to the assessee for the new asset acquired for residence u/s 54F where the assessee has made the payment of the booking only and not obtained the possession of the new house before due date of filing the return. While holding so, the Ld. CIT(A) has ignored the CBDT Circular No. 471 dated 15/10/1986 which lays down that payment to builder is sufficient compliance for claiming exemption u/s 54F. 5. That the appellant craves leave to reserve to itself the right to additional, alter, amend, substitute, withdraw and/or any ground(s) of appeal at or before the time of hearing. 5. We have heard rival submissions and have carefully perused the entire record. Both the parties have reiterated their arguments taken before Ld. CIT(A). After considering rival submissions in the light of the evidence available on record including the paper book filed by the assessee, we have found that the following facts are not disputed by the parties:- (1) that the assessee got his share in the compensation of Rs. 208.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim made under section 54F of the Act, we have to incorporate this section in its entirety herein as under:- 54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.- (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say, (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable under the head Capital gains relating to long-term capital assets of the previous year in which such new asset is transferred. (4) The amount of the net consideration 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 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions via a provision appended thereto. And we are concerned only with the provision 54F(b)(a)(i) as extracted above and we are required to answer the dispute between the parties by using this provision alone. This provision proscribes that the individual/HUF must not own more than one residential house on the date of transfer of the original asset. They have excluded new-asset i.e. new residential house from being counted at the time of such transfer because the section provides a leeway of one year for purchasing/constructing the residential house before this transfer. The date of transfer of the original asset in this case is 05/06/2008. Let use examine if the assessee had more than one residential house on that date or not. The chart extracted at pages 9 10 of this order makes it amply clear that on 05/06/2008, this assessee did not own more than one residential house. However, he had booked two flats (residential houses) - one each at ATS-Noida and ATS-Chandigarh. Regarding these 'bookings' and the investments made the contention of the assessee is that the booking of flats does not tantamount to 'ownership' of the flats unless these are completed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the law the flats booked at ATS-Noida and ATS-Chandigarh 'owned' by the assessee as on 05/06/2008. 7. Now, we have to see as to whether appellant has fulfilled all the requisite conditions of this section or not? As per Ld. CIT(A), the assessee owned two residential houses, situated at ATS-Noida flat and ATS-Chandigarh flat, on the date of transfer of the original asset, which is a proscribed condition and, therefore, this benefit is not available to the assessee. As against this, the case of the assessee, throughout has been that he neither possessed nor owned these houses which are flats, on the date of transfer of original asset which fall on 05/06/2008. In fact, under proviso a(i) to section 54F (1) of the Act, the assessee is not entitled to this benefit, in case, he owns more than one residential house other than the new asset on the date of transfer of the original asset. 8. Now we have to see as to whether on the date of transfer of the original asset, which is of 05/06/2008, the assessee owned more than one residential house other than the new asset or not? As per the above chart, the facts which remained undisputed. On 05/06/2008, the assessee had one re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as a house property and its income can be charged under the law. Therefore, the ratio of this judgment is that on the date of transfer of the original asset owned by the assessee if should be a 'house' ready for living therein. Further Delhi Bench in the case of Smt. Bina Kedia v. ITO, Ward 23(2), New Delhi (discussed at pages 4 5 in written submissions) has taken a similar view. The relevant portion of this judgment reads as under:- The Ld. CIT(A) has mentioned that as on the date of transfer (i.e. 04/10/1999), the assessee was owner of another house (DDA Flat Booking) and hence benefit of sec. 54F was not available. We find that the flat in Dwarka was allotted on 28/06/2001 (possession taken on 21/07/2001). Thus the assessee was not owner of any house on the date of transfer (i.e. 04/10/1999) of capital assets. Ld. CIT(A) has also held that benefit of sec. 54F cannot be granted as the assessee had purchased residential house other than the new asset within the period of one year after the date of transfer of capital asset as DDA flat was acquired by her within one year. In this case the assessee sold 125 shares of Castrol on 21/08/1999 for a sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not arise. The Ld. CIT(A) has misdirected himself has treating even 'right to acquire a flat' as owned by the assessee. In our considered opinion, the conclusion of Ld. CIT(A) is not correct. Thus with regard to Noida Chandigarh flats it can be safely concluded that these were not owned by the assessee on 05/06/2008 in terms of section 54F of the Act. The Ld. CIT(A) has observed (at page 14 of her order) that the argument that the flats at Noida and Chandigarh are just booked and not possessed does not hold water, because if the same logic is applied, no exemption would be available to the appellant because the flat at the Gurgaon with respect to which exemption is being sought from capital gain is also just booked and possession has not been given to the appellant in the assessment year under consideration . The above observation seems to be plausible at the first reading. Why - the booking at Noida/Chandigarh is to be treated differently from the booking of Gurgaon flat. But, when this aspect is examined in depth with ratiocination the above observation becomes wrong and contrary to the intention of the Act. The meaning of term 'owns' used in section 54F (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icient compliance for exemption under section 54F of the Act. Ld. 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 exemption. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of houses is tackled to some extent. Therefore, keeping in view the aim and object of the legislator and in view of that clarifications of the CBDT, in our considered opinion, Ld. CIT(A) has misdirected himself in giving the same meaning to the residential house owned at the time of transfer of the original asset and the investment made out of the capital gain in the purchase or construction of new house, which has been defined as 'new asset' in the Act. Therefore, any payment made towards acquisition of a new residential house by way of making payment in advance even by booking or by paying installments within the prescribed has to be is treated as investment towards purchase / construction of a new house. Accordingly, we hold that the assessee is entitled for exemption under section 54F of the Act of LTCG of Rs. 2,04,37,654/-. We further derive support for our above finding from the following decisions:- 1. Sardarmal Kothari [2008] 302 ITR 286 (Mad) 2. CIT v. Sambandam Udaykumar (2012) 345 ITR 389. 3. Smt. Ranjeet Sandhu v. DCIT [2011] 16 taxmann.com 201 (Chandigarh) 4. Smt. Usha Vaid v. ITO, Dasuaya [2010] 25 taxmann.co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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