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2015 (12) TMI 1075 - PUNJAB AND HARYANA HIGH COURT

2015 (12) TMI 1075 - PUNJAB AND HARYANA HIGH COURT - [2016] 382 ITR 56 - Entitlement for claim for exemption under section 54F - whether the same amount of sale consideration had not been utilized towards the purchase of property prior to the date of sale as per the said provisions? - whether the assessee in order to avail benefit of Section 54F of the Act is required to utilize the amount for the purchase of the new asset from the sale proceeds of the original capital asset only? - ITAT deleted .....

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e assessee has to utilize the amount received by him on sale of original capital asset for the purposes of meeting the cost of the new asset. Once that is so, the assessee was entitled for benefit under section 54F of the Act.

It has been categorically recorded by the Tribunal that the assessee had made investment in between February 2008 upto August 2008 i.e. well within the stipulated period. The property was purchased for ₹ 3.32 crores whereas the shares which were sold had r .....

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ings recorded by the CIT(A) and the Assessing Officer, warranting interference by this Court. - Decided against revenue - ITA No. 12, 26 and 161 of 2015(O&M) - Dated:- 4-11-2015 - MR. AJAY KUMAR MITTAL AND MR. HARI PAL VERMA, JJ. For The Appellant : Mr. Tejinder K.Joshi, Advocate, Mr. Denesh Goyal, Advocate For The Respondent : Mr. Sanjay Bansal, Sr.Advocate with Mr. B.M.Monga, Advocate Ajay Kumar Mittal,J. 1. This order shall dispose of ITA Nos.12, 26 and 161 of 2015 as learned counsel for the .....

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her on the facts and in the circumstances of the case, the Tribunal was legally correct in reversing the finding of the CIT (A) and that of the Assessing Officer whereby the addition of ₹ 1.21 crores was made by disallowing the claim for exemption under section 54F of the Income Tax Act, 1961 as the same amount of sale consideration had not been utilized towards the purchase of property prior to the date of sale as per the said provisions? 3. A few facts relevant for the decision of the co .....

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t from capital gain receipts. On appeal by the assessee, the Commissioner of Income Tax (Appeals) [CIT (A)] vide order dated 11.3.2013, Annexure A.II, upheld the addition made by the Assessing Officer. Aggrieved thereby, the assessee filed appeal before the Tribunal. The Tribunal vide order dated 16.7.2013, Annexure A.III allowed the appeal relying upon decision of the Kerala High Court in Income Tax Officer vs. K.C.Gopalan, (1999) 107 Taxman 591 (Ker.) holding that section 54F of the Act did no .....

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1.2008 and 16.3.2009 and it was not from the said sale proceeds that the property worth ₹ 3.22 crores was purchased by the assessee. It was urged that in such circumstances, capital gains amounting to ₹ 1.3 crores were exigible to tax as benefit under Section 54F of the Act was not available to the assessee. Reliance was placed upon sub section 4 of Section 54F of the Act to support the contention. 6. Mr. Denesh Goyal, learned counsel for the appellant in ITA Nos.26 and 161 of 2015 s .....

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no benefit could be derived by the assessee from Section 54F of the Act or any other provision which had followed the said judgment. 7. On the other hand, learned counsel for the respondent-assessee supported the impugned order and relied upon judgments in K.C.Gopalan's case (supra), CIT vs.Anandraj, (2015) 56 Taxmann.com 176 (Karn.), CIT vs. Rajesh Kumar Jalan, (2006) 286 ITR 274 (Gau.) and CIT vs. V.R.Desai, (2011) 197 Taxman 52 (Ker.). 8. The issue that arises for consideration relates t .....

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-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 .....

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ned in this sub-section shall apply where- (a) the assessee,- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such .....

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; (3) xx xx xx xx xx xx xx xx (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 tha .....

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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 utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) the amount by which- (a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the ne .....

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assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid. 10. Under sub section (1) of Section 54F of the Act, the amount of capital gains exempt under this provision is equal to the difference between the cost of the new asset and the net consideration received from the transfer of the original asset. Where the cost of the new asset is equal to or exceeds the net consideration received, in that situation, the entire amount of capital gains is exempt .....

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sidential house within a period of one year before or two years after the date on which transfer takes place or has constructed a residential house within three years after the said date, the capital gains shall be computed as per clauses (a) and (b) of sub section (1) of Section 54F of the Act. 11. Finance Act, 1987 had inserted sub section (4) of Section 54F of the Act effective from 1.4.1988. According to sub section (4) of Section 54F of the Act where the amount of net consideration is not u .....

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laborated in the departmental circular No.495 dated 22nd September 1987 reported in (1987) 168 ITR (St.) 87. The relevant portion thereof reads thus:- New scheme for deposits in respect of exemption from capital gains - 26.1 Under the existing provisions of sections 54, 54B, 54D and 54F, long term capital gains arising from the transfer of any immovable property used for residence, land used for agricultural purposes, compulsory acquisition of lands and buildings and other capital assets are exe .....

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r the net consideration, as the case may be, is not appropriated or utilized by the tax payer for acquisition of the new asset before the date for furnishing the return of income, it shall be deposited by him on or before the due date of furnishing the return of income, under section 139(1) in an account with a bank or institution and utilized in accordance with a scheme framed by the Central Government in this regard. The amount already utilized together with the amounts of deposits shall be de .....

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e entitled to withdraw such amount in accordance with this scheme. This scheme will be applicable in relation to the new section 54G also. 13. The combined reading of the aforesaid provisions shows that in order to avail benefit under Section 54F of the Act, the assessee is required to either purchase a residential house within a period of one year before or two years after the date on which transfer takes place or construct a residential house within a period of three years after that date. In .....

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ion under Section 54F of the Act. 14. The assessee has to purchase or construct a house property during the period specified under Section 54F of the Act in order to get benefit thereunder. Section 54F of the Act nowhere envisages that the sale consideration obtained by the assessee from the original capital asset is mandatorily required to be utilized for the purchase or construction of a house property. No provision has been made by the statute that in order to avail benefit of Section 54F of .....

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ad resulted in capital gain of ₹ 1.93 crores. The investment was more than the capital gain earned by him. The relevant finding reads thus:- In the present case, the first date of capital gain is November 8, 2008. The assessee can acquire a house within a period November 8, 1997 upto November 2010 i.e. one year prior to transfer of original capital assets and two years after the transfer of capital assets. The assessee had made investment in between February 2008 upto August 2008 i.e. well .....

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the purpose of acquisition of new property. Similar are the other orders of the ITAT relied upon by the assessee. On perusal of section 54F(1) and sub section (4), it reveals that these sections do to put any restriction that only capital gain would be utilized for purchase of the new house. The law permits utilization of capital gain within the specified time, the assessee may use such funds for other purposes and may find resources from other source for investment in time. The section provides .....

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ied upon an order of the ITAT reported in 27 SOT 61. In that case, the ITAT has held that if investment was made out of loan amount then exemption under section 54F(1) will not be available. In the opinion of the ITAT, the assessee has to demonstrate source of funds,if investment was made by the assessee from his own source and not from loan taken from the bank then exemption would be available. In our opinion, the section does not put any such restriction. Hon'ble Kerala High court has expl .....

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ore than the capital gain earned by him. Therefore, we allow the appeal of the assessee and delete the addition of ₹ 121,32,636/- in the total income of the assessee under the head long term capital gain . 16. Adverting to the judicial pronouncements, in K.C.Gopalan's case (supra), while considering identical issue, it was observed by the Kerala High Court as under:- xxxxxxxThe assessee has to construct or purchase a house property for his own residence in order to get the benefit of s .....

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f two years after the date of transfer. Clauses (i) and (ii) of section 54 would also make it clear that no provision is made by the statute that the assessee should utilise the amount which he obtained by way of sale consideration for the purpose of meeting the cost of the new asset. 6. A reading of sections 53 and 54 of the Act would make it clear that a special provision is made in respect of capital gains arising out of transfer of particular type of capital asset, namely, house property whi .....

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the view that the assessee had already appropriated the entire capital gain for purchase of the new asset within the stipulated time. In this regard, we find support from the decision of the Kerala High Court in the case of K.C. Gopalan wherein it was held that the assessee is entitled to exemption under Section 54 even though for the construction of the new house, the amount that was received by way of sale of his old property as such was not utilised. It was held by the Kerala High Court that .....

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