TMI Blog2016 (11) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... rect the AO to delete the disallowance - Decided in favour of assessee - I.T.A. No. 996/Ahd/2014 - - - Dated:- 18-10-2016 - Shri N. K. Billaiya, Accountant Member And Shri Mahavir Prasad, Judicial Member Appellant by : Smt. Arti N. Shah Respondent by : Mr.Prasoon Kabra, Sr.DR ORDER Per Shri Mahavir Prasad, Judicial Member This appeal by the Assessee is directed against the order of the Commissioner of Income Tax(Appeals)-I, Ahmedabad, dated 03/02/2014 for the Assessment Year (AY) 2010-11. The assessee has received the following effective ground:- 1. The Learned Commissioner of Income Tax (Appeals)-I, Ahmedabad has erred in law and on facts of the case by confirming that the Assessing Officer has rightly rejected the claim of the Appellant made u/s.54F, and accordingly, has erred in confirming the disallowance of ₹ 23,95,405/- made by the Assessing Officer. 2. The relevant facts as culled out from the assessment order are as under:- 2.1. Assessee is an individual and derives income from business or profession. The assessee was asked by the Assessing Officer to show reason why the deduction u/s.54F should not be restricted to ₹ 42,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the filing of return of income as per provision of section 139(1) of the Act. In the case of the assessee the due date was 30/11/2011 as per the provision of section 139(1). The assessee failed to furnish any reasonable cause which compels him to delay in the investment in new residential house or in Capital Gain Accounts Scheme. In the case referred by the assessee CIT vs. Rajesh Kumar Jalan (286 ITR 274) the facts of the case was totally different. In that case, the assessee took possession of the property and the documents suggested part performance of the contract. In the instant case, the assessee did not take possession of the property ad there was no transfer of the property till the due date. In view of the above, the amount of deduction claimed u/s.54F is restricted to the date 30/11/2010. The assessee has invested amount of ₹ 42,00,000/-. Assessee claimed deduction u/s.54F at ₹ 65,95,405/- which is restricted to ₹ 42,00,000/- and balance amount of ₹ 23,95,405/- is added to the total income of the assessee. Assessee filed his return of income on 15/10/2010 declaring the total income at ₹ 8,98,740/-. The case was selected for scrutiny and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No.3 is of general nature, no separate order needs to be passed for the same. 8. In the result, the appeal is dismissed. 2.3. Aggrieved by the order of ld.CIT(A), Assessee is now in appeal before us. 3. The ld.AR reiterated the submissions made before the ld.CIT(A) and submitted that the present issue is covered by the decision of Hon ble High Court of Karnataka in the case of CIT-Bangalore vs. K. Ramachandra Rao (56 taxmann.com 163). On the other hand, ld.Sr.DR supported the orders of the authorities below and relied on the decision of Hon ble High Court of Bombay in the case of Humayun Suleman Merchant vs. Chief CIT (73 taxmann.com 2). 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the decisions relied upon by both the parties. We find in this case the solitary issue raised by the assessee is covered by the judgement of Hon ble High Court of Karnataka in the case of CIT vs. K. Ramachandra Rao (supra). In this case, it is held that exemption in the case of investment in residential house was given in favour of assessee because all investments made under constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is attracted only to a case where the sale consideration is not utilized either for purchase or for construction of a residential house. It has no application to a case where the assessee invests the sale consideration derived from the transfer either in purchasing the property or constructing the residential house within the period stipulated in Section 54F(1). ■ The proviso to section 54F puts an embargo on the application of section 54F to cases which are mentioned in the said proviso. That is to be eligible for the benefit under section 54F(1) the assessee should not be owning more than one residential house other than the new asset acquired or he should not purchase any residential house other than the new asset within a period of one year after the date of transfer of residential asset or constructs any residential house other than the new asset within a period of three years after the date of transfer of the residential asset. ■ In the entire scheme there is no prohibition for the assessee putting up construction out of sale construction received by such transfer of a site which is owned by him as is clear from the language used. It is open for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the judgement of Hon ble High Court of Bombay - In the case of Hymayun Suleman Merchant v/s CCIT ■ Section 54F is part of Chapter IV 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 thereunder. Section 54F introduced into the Act with effect from 1-4-1983 by the Finance Act, 1982 provides exemption from Capital gain on transfer of any long-term capital asset in case the same is invested in a residential house. However, section when introduced provided that any capital gain arising from transfer of long term capital asset would not be chargeable to capital gains tax, if the same were utilized for purchase of an housing accommodation within a year before or after the date on which the transfer of an capital asset took place or was used for construction of a residential house within a period of three years from the date of transfer of the Capital Asset.[Para 6(e)] ■ Thus, section 54F as incorporated made available the benefit of exemption t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove broad analysis, the facts of the instant case need to be analysed. The sale of capital asset took place on 29-4-1995 for a consideration of ₹ 85.33 lakhs. The agreement for purchase of construction of flat for consideration of ₹ 69.90 lakhs was entered into by the assessee on 16-7-1996. An amount of ₹ 35 lakhs were utilized by the assessee in purchase of flat before the return of income was filed on 4-11-1996 under section 139. However, the mandate under subsection (4) of section 54F is that the amount not utilized towards the purchase of the flat has to be deposited before the due date of filing return of Income under section 139(1) in the specified bank account. In this case admittedly the entire amount of capital gains on sale of asset which is not utilized has not been deposited in a specified bank account before due date of filing of return under section 139(1). Therefore, where the amounts of capital gains is utilized before filing of the return of income in purchase/construction of a residential house, then the benefit of exemption under section 54F is available. It is an undisputed position that except ₹ 35 lakhs, the balance of the amounts subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived on sale of capital asset is appropriated towards consideration which has been paid for purchase of the flat. The instant case is concerned with the purchase/construction of residential housing, after the sale of capital asset. This requires the amount which is to be subjected to capital gain has to be utilized before the date of filing of return of Income under section 139 by the assessee. Section 54F(4) itself clearly states that the amount not utilized in purchase/construction of flat/house should be deposited in the specified Bank notified by the Government. Thus the plain language employed in section 54F(4) makes a clear distinction between cases of appropriation (purchase prior to sale of capital asset) and utilization (purchase/construction after the sale of capital asset). Therefore the word 'appropriated' would have no application in cases of purchase/construction of a house after the sale of capital asset which is of concern in the instant case.[Para 6(u)] ■ In the instant case, the return of income is admittedly filed on 4-11-1996. In terms of section 54F(4) interpreted by the Gauhati High Court in CIT v.Rajesh Kumar Jalan [2006] 286 ITR 274/157 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ached to the words the tax found in the latter part of that provision. It may be noted that the ex-pression used is not tax but the tax . The definite article the must have reference to something said earlier. It can only refer to the tax, if any, payable by the assessee mentioned in the first part of s. 271 (1) (a) (i). It is true the expression tax is defined in s. 2(43) thus : tax in relation to the assessment year commencing on the 1st day of April, 1965 and any subsequent assessment year means income- tax chargeable under the provisions of this Act. and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date. But the difficulty in this case is, as mentioned Carrier the expression used is not tax but the tax . That expression can be reasonably understood as referring to the expression earlier used in the provision namely the amount of the tax, if any payable by the assessee. At any rate, the provision in question is capable of more than one reasonable interpretation. Two high courts namely Calcutta and Mysore have taken the view that the expression the tax in s. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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