9911796707
TMI Blog2016 (9) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal was right in holding that the Assessing Officer has rightly computed the deduction u/s. 54F of the Income Tax Act, 1961, restricting the investment in the new asset at Rs. 35,00,000/- and thus restricting the exemption u/s. 54F of the Act proportionately to the amount invested? 3 The undisputed facts leading to this appeal are as under: - (a) On 29th April, 1995, the appellant sold a plot of land in Mumbai for a consideration of Rs. 85,33,250/-. (b) On 16th July, 1996, the appellant entered into an agreement to purchase a flat for a consideration of Rs. 69,60,000/-. (c) The appellant paid two installments of Rs. 10,00,000/- each on 17th July, 1996 and 23rd October, 1996 to the developer / builder i.e. before the due date for filing of return of Income under Section 139(1) of the Act i.e. 31st October, 1996. (d) On 1st November, 1996 the petitioner paid to the developer a further installment of Rs. 15,00,000/- for purchase of flat pursuant to the agreement dated 16th July, 1996. (e) On 4th November, 1996 the appellant filed his return of income for the Assessment year 1996-97. This was after the due date of filing the return of income. (f) On 13th March, 2001, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t- assessee. 6 Regarding Question No.2: (a) The facts leading to this question have been set out in Para 2 herein above. Therefore not repeated here. (b) Mr.Chatterji, learned Senior Counsel in support of the appeal submits as under:- (i) The issue arising herein is no longer res-integra as it stands covered by the decision of this Court in Commissioner of Income Tax Vs. Mrs.Hilla J.B.Wadia [1995] 261 ITR 376 read with Circulars dated 15th October, 1986 and 16th December, 1993 issued by the Central Board of Direct Taxes. So also the decision of Madhya Pradesh High Court in Smt. Shashi Varma Vs. Commissioner of Income Tax [1997] 224 ITR 106. In any event, the decision of the Karnataka High Court in Commissioner of Income Tax Vs. K. Ramchandra Rao (2015) 277 CTR 0522 also covers the issue; (ii) Section 54F of the Act has been brought into the Act with the object of encouraging the housing sector. Therefore a liberal /beneficial interpretation/construction be given to Section 54F(4) of the Act. In support reliance is placed upon the decision of the Delhi High Court in Commissioner of Income Tax vs. Ravinder Kumar Arora [2012] 342 ITR 38; (iii) Section 54F(4) of the Act has de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utilized; and (iv) The decision of Gauhati High Court in Rajesh Kumar Jalan (supra) would have no application in the present facts as admittedly the amounts have not been utilized or deposited in the specified bank account before the assessee filed his return of income on 4th November, 1996. (d) For a proper appreciation of the rival submissions, it is necessary to reproduce the relevant portion of Section 54F of the Act which arises for our consideration : "54F(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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (b) of sub-Section (1), exceeds (b) the amount that would not have been so charged had the amount actually utilized by the assessee for the purchase or construction of the new asset within the period specified in sub-Section(1) been the cost of the new asset, shall be charged under Section 45 as 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 the unutilized amount in accordance with the scheme aforesaid." (e) We shall first examine the scheme of Section 54F of the Act. Section 54F is part of Chapter IV of the Act which inter alia provides for computation of total Income and for that purpose, sets out the various heads of income. Part E of Chapter VI deals with the head of income viz. Capital Gains. It provides for Computation of Capital gains and also for exemption available there under. Section 54F of the Act introduced into the Act with effect from 1st April, 1983 by the Finance Act, 1982 provides exemption from Capital gain on transfer of any long termcapital asset in case the same is invested in a residential house. However, the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -utilized amounts only if the mandate of sub-section(4) of Section 54F of the Act is complied with. Further the proviso to sub-section(4) of Section 54F of the Act, safe guards the Revenue where the assessee had not invested the amounts chargeable to Capital Gains within the time prescribed under sub-section(1)of Section 54F of the Act. This by providing that in such cases,Capital Gain under Section 45 of the Act would be charged on the un-utilized amount as Income of the previous year in which the period of three years from the date of transfer of the capital asset expires. (i) On the basis of the above broad analysis, we shall now examine the facts of the present case. The sale of capital asset took place on 29th April, 1995 for a consideration of Rs. 85.33 lakhs. The agreement for purchase of construction of flat for consideration of Rs. 69.90 lakhs was entered into by the appellant on 16th July, 1996. An amount of Rs. 35 lakhs were utilized by the Appellant in purchase of flat before the return of income was filed on 4th November, 1996 under Section 139 of the Act. However, the mandate under sub Section (4) of Section 54F of the Act is that the amount not utilized towards th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia (supra) that the Circular issued by the Central Board of Direct Taxes dated 15th October, 1986 in relation to construction of a home by Delhi Development Authority should also be extended to cities like Mumbai, as there is no control over the time taken by the developer / builder to construct the house and give possession of the same to the assessee. The Central Board of Direct Taxes Circular dated 15th October, 1986 was issued only in the context of Section 54 and 54(F) of the Act to clarify that an investment in a flat under the self finance scheme of Delhi Development Authority would be treated as construction for the purpose of capital gain, where an allotment letter has been issued by the Authority and facility of payment in installment is provided for the purchase of flat. It did not even remotely concern itself with the provision of Section 54(2) and/or 54F(4) of the Act with which we are concerned. The Circular only extended the meaning of constructing a residential house within a period of three years from the sale of the capital asset. The subsequent Circular issued in 16thDecember, 1993 by the Central Board of Direct Taxes relied upon by the Appellant, only extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even where the assessee had not deposited the un-utilized Capital Gain in an account which was duly notified by the Central Government in terms of Section 54F(4) of the Act, the benefit of Section 54F(1) of the Act would still be available. The Court held that if the intention was not to retain the capital gains but was to invest it in construction of property within the period stipulated in Sub Section (1) of Section 54(F) of the Act then Section 54F(4) of the Act is not at all attracted. We are with respect unable to accept the reasoning adopted by Karnataka High Court in K. Ramchandra Rao (supra). The mandate of Section 54F(4) of the Act is clear that amount which has not been utilized in construction and/or purchase of property before filing the return of income, must necessarily be deposited in an account duly notified by the Central Government, so as to be exempted. (p) Further, Section 54F(4) of the Act specifically provides that the amounts which have not been invested either in purchase / construction of house have to be deposited in the specified accounts before the due date of filing of return of income under Section 139(1) of the Act. The aforesaid aspect it appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mity and certainty we would adopt the view ofthe other High Court. However, with the greatest respect, we find that the decision of Karnataka High Court in K.Ramchandra Rao (supra) has been rendered sub-silentio. Therefore, we cannot place any reliance upon it to conclude the issue on the basis of that decision. (r) It was next contented by Mr.Chatterji, that liberal / beneficial construction should be given to the provision of Section 54F of the Act as its object was to encourage the housing sector which would result in the benefit being extended to the appellant assessee. In support, reliance was placed upon the decision of Delhi High Court in Ravindra Kumar Arora (supra). We find that observation of the Delhi High Court in Ravindra Kumar Arora (supra) that Section 54F of the Act should be liberally construed was in the context of the benefit being denied as the name of the wife was added to purchase made by the assessee of a new flat. This denial was even though all the requirements of Section 54F of the Act stood satisfied. Therefore the observation of the Delhi High Court would have no application to the present facts. (s) It is a settled position in law that no occ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ambiguity. Thus, there is no occasion to apply liberal / beneficial construction while interpreting the Section as contended by the Appellant. (t) It was next contended by Mr. Chatterji, learned Senior Counsel for the appellant that the word "appropriation" used in Section 54F(4) of the Act would also apply in the present case where the capital asset has been sold and sale proceeds are earmarked to be invested in construction of house. A plain reading of Section 54F(4) of the Act militates against it. As pointed out by Mr.Malhotra, learned Counsel appearing for the revenue, Section 54F(4) of the Act deals with two classes of cases, one where purchase of new residential house is within a period of one year before the date on which capital asset is sold by assessee and second class of cases where the amount subjected to capital gains are utilized for purchase constructing a flat, post the sale of the capital asset. In the present facts we are concerned with the second class i.e. purchase post the sale of the capital asset. (u) The parliament has used the word "appropriated" in the first class of cases i.e. where property has already been purchased prior to the sale of capital ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent. The return of income is admittedly filed on 4th November, 1996. In terms of Section 54F(4) of the Act as interpreted by the Gauhati High Court in Rajesh Kumar Jalan (supra) the amounts subject to capital gain on sale of the capital asset for purpose of exemption, has to be utilized before the date of filing of return of income. In this case 4th November, 1996 is the date of filing the return of Income. It is not disputed that on 4th November, 1996 when the return of income was filed, the entire amount which was subject to capital gain tax had not been utilized for the purpose of construction of new house nor were the unutilized amounts deposited in the notified Bank Accounts in terms of Section 54F(4) of the Act before filing the return of income. It is also to be noted that in line with the interpretation of Gauhati High Court on Section 54F(4) of the Act, the Assessing Officer had taken into account all amounts utilized for construction of a house before filing the return of income on 4th November, 1996 for extending the benefit of exemption under Section 54F of the Act. Therefore, in the present facts, the decision of the Gauhati High Court in Rajesh Kumar Jalan (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
