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Shri Sanjay K. Rana Versus The Income Tax Officer

2016 (11) TMI 532 - ITAT AHMEDABAD

Claim of deduction u/s.54F - Held that:- As the Hon’ble Apex Court has held in the case of CIT vs. Vegetable Products Ltd.(1973 (1) TMI 1 - SUPREME Court ) as well as supported by several decisions of Superior Court that where there are two different decisions have been taken by the different High Court and there is no direct judgement of Jurisdictional High Court on the subject matter, then whichever judgement is in favour of the assessee, shall apply. Therefore keeping in view the ratio laid d .....

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urchase a residential site and then putup construction., we set aside the order of the ld.CIT(A) and direct 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 .....

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ulled 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 ₹ 42,00,000/-. The assessee also asked to show reasons why sales consideration of ₹ 87,500,000/- received out of sale of land at survey No.290/2 admeasuring 1840 sq.mtr. of non-agriculture land should not be treated as Short Term Capital Gai .....

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ould not be restricted to ₹ 42,00,000/- as the assessee has invested a new capital assets being new residential house. The assessee is also asked to show reason why the deduction of u/s.54F should not be disallowed as the assessee has already one house property in his possession on the basis of which he took housing loan. The assessee vide reply dated 0/01/2013 submitted that before the due date as per section 139(4), i.e. 31-03-2012, he has duly made investment in residential property and .....

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of sub-section (2) of section 54 of the Act it is clear that only section 139 has been mentioned therein in the context that the unutilized portion of the capital gains on the sale of properly used for residence should be deposited before the due date of furnishing the return of income under section 139 of the I.T.Act, 1961. The AO did not accept the argument of the assessee for the reasons that the provision of Section 54F(4) imposes the requirement in the part of the assessee for availing the .....

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ase 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 amou .....

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2013 and the total income was determined at ₹ 32,94,150/-. Aggrieved by the order of the Assessing Officer (AO), assessee carried the matter before the ld.CIT(A), who vide order dated 03/02/2014 (in Appeal No.CIT(A)- I/Wd.7(1)/308/2013-14) dismissed the appeal of the assessee. 2.2. The ld.CIT(A) has dismissed the assessee s appeal by observing as under:- 6. I have gone through the assessment order and submissions of the A.R. of the appellant carefully. The only contention of the appellant .....

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ay when the appellant had filed his return of income the investment in the new property purchased was only to the extent of ₹ 42,00,000/-. In the said return of income the appellant could not claim deduction u/s.54F of the investments he had not yet made. It is settled law that deduction can only be claimed if the investment has already been made. There cannot be a case when the claim of deduction is made without actually making the specified investment. The mechanism for making investment .....

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d u/s.139(1) of the Act. 6.2. In view of the above, it is clear that the appellant is not entitled to deduction of the amounts invested after the filing of return of him. The addition made by the AO is justified. The same is confirmed. 7. Ground 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 th .....

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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 construction of residential house within a stipulated period and exemption was duly g .....

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t citation of Hon ble Jurisdictional High Court, then benefit of citation which is in favour of assessee to be applied. We therefore reproduce the relevant portion of the aforesaid judgements hereunder:- 1. Portion of Judgement of Hon ble High Court of Karnataka - in the case of CIT vs. K. Ramachandra Rao ■ Section 54(F) deals with capital gains on transfer of certain capital assets not to be charged in case of investment on house. ■ Section 54F(1) provides, in the case of an assesse .....

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32; Sub-section (4) stipulates if the amount of 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 transfer of the original asset took place or which is not utilized 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 in any case not later than the due date applicable in the c .....

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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 residentia .....

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t up a residential construction or to purchase a residential house. It is not the requirement of law that he should purchase a residential site and then put-up construction. ■ Therefore, in the instant case admittedly the assessee has purchased a vacant site on 31-3-2001. He sold the original asset on 27-8-2003 on which date he already owned a site. In fact even before sale of the original asset he had started construction on such site by availing loan from the bank. In terms of section 54 .....

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bstance. Both the appellate authorities have rightly extended the benefit to the assessee and there is no error committed by them which calls for interference. ■ As is clear from sub-section (4) in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in section 54F(1), if the assessee wants the benefit of section 54F, then he should deposit the said capital gains in an accoun .....

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the Bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct.[Para 4] ■ For the aforesaid reasons both the substantial questions of law are answered in favour of the assessee and against the revenue. Therefore, all the four appeals are dismissed.[Para 5] 2. Portion 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 Cha .....

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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 inco .....

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section 54F. This would lead to Assessment orders being rectified by appropriate orders,to determine the availability of benefit of exemption under section 54F.[Para 6(f)] ■ This led to the introduction of sub-section (4) to section 54F by the Finance Act, 1987 with effect from 1-4-1988. Besides introducing sub-section (4) to section 54F the Finance Act, 1978, also amended sub-section (1) of section 54F to make it subject to provision of sub-section (4) thereof.[Para 6(g)] ■ As the .....

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ed on sale of capital asset is not appropriated (where purchase was earlier than sale) or utilized (where purchase is after the sale) then the same would be subject to the charge of capital gain tax, unless the unutilized amounts are deposited in specified bank account as notified in terms of section 54F(4). The exemption would be available to the unutilized amounts only if the mandate of subsection (4) of section 54F is complied with. Further the proviso to sub-section (4) of section 54F, safeg .....

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ed. 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 .....

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exemption under section 54F is available. It is an undisputed position that except ₹ 35 lakhs, the balance of the amounts subject to capital gains tax has not been utilized before date of furnishing of return of income, i.e., 4-11-1996 under section 139.Therefore, on plain interpretation of section 54F, it appears that the impugned order of the Tribunal cannot be faulted. [Para 6(i)] ■ The mandate of section 54F(4) is clear that amount which has not been utilized in construction and/ .....

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ccasion to give a beneficial construction to a statute can arise when there is no ambiguity in the provision of law which is subject to interpretation. Thus, in the face of the clear words of the Statute the intent of parties and/or beneficial construction is irrelevant. In the instant facts the provision of section 54F(4) are very clear. There is no ambiguity. Thus, there is no occasion to apply liberal/beneficial construction while interpreting the section as contended by the assessee.[Para 6( .....

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pital 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 instant facts we are concerned with the second class, i.e., purchase post the sale of the capital asset.[Para 6(t)] ■ 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 asset and the amount r .....

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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)] ` .....

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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) before filing the return of income. It is also to be noted that, the Assessing Officer had taken into account all amounts utilized for construction of a house before filing the return of income on 4- 11-1996 for extending the benefit of exemption under section 54F. There .....

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invested. [Para 6(x)] ■ In the above view, the appeal is dismissed. [Para 7] 3. Portion of the judgement of Hon ble Apex Court - In the case of CIT vs. Vegetable Products Ltd. We must first determine what is the meaning of the expression the amount of the tax, if any, payable by him in 271 (1) (a) (i), Does it mean the amount of tax assessed under s. 143 or the amount of tax payable under s. 156. The word assessed is a term often used in taxation laws. It is used in several provisions in .....

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e next come to the question what is the meaning to tic attached 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 1s .....

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