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2017 (6) TMI 771 - ITAT MUMBAI

2017 (6) TMI 771 - ITAT MUMBAI - TMI - Disallowance of exemption u/s 54 - non deposit unutilized amount in the capital gain account before the due date of furnishing of return u/s 139(1) - Held that:- The assessee shall be entitled for deduction u/s 54 to the extent the amount is invested by the assessee in purchase/construction of the new asset till the date of furnishing of return by the assessee on 31/03/2009, for which the Assessing Officer is directed to allow the deduction in accordance wi .....

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ect to the deposits of ₹ 60 lakhs made with the capital gain account with the bank. See Humayun Suleman Merchant (2016 (9) TMI 70 - BOMBAY HIGH COURT) - Decided against assessee. - ITA NO.4174/Mum/2015 - Dated:- 3-4-2017 - Shri Joginder Singh, Judicial Member, And Shri N.K. Pradhan, Accountant Member For The Assessee : Shri Sanjay Kapadia For The Revenue : Shri Purushottam Kumar-DR ORDER Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 31/03/2014 o .....

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60 lakh was to be deposited on or before 31/03/2009, which is the last date of utilization. It was contended that the assessee deposited the amount on 17/11/2008. It was submitted that the assessee is entitled to exemption. Reliance was placed upon the decision in the case of Smt. Rita Chetan Naik vs Income Tax Officer (ITA No.3986/Mum/2012) order dated 10/07/2013, CIT vs Ms. Jagriti Agarwal (2011) 15 taxman.com 146 (P & H), CIT vs Rajesh Kumar Jalan (2006) 157 taxman.398 (Gauhati), Miss. E .....

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considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee HUF sold residential property on 18/02/2008 for a consideration of ₹ 85 lakh and thus earned capital gain of ₹ 59,58,733/-. The assessee claimed exemption of the capital gain amount u/s 54F of the Act. The amount of ₹ 60 lakh was deposited in the capital gain account as under:- Date of Deposit Amount in Rs. 01/11/2008 20 lakhs 14/11/2008 9 lakhs 17/11/2008 3 .....

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e assessee is aggrieved and is in appeal before this Tribunal. 2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that the issue has been elaborately discussed by the Hon'ble jurisdictional High Court in the case of Humayun Suleman Merchant vs Chief CIT in ITA No.545 of 2002, order .....

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her on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in applying the provisions of Section 54(1) (4) of the Income Tax Act, 1961? (b) Whether on the facts and in the circumstances of the case, the Appellate 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 ₹ 35,00,000/- and thus restricting the exemption u/s. 54F of .....

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i.e. before the due date for filing of return of Income under Section 139(1) of the Act i.e. 313' October, 1996. (d) On 1s' November, 1996 the petitioner paid to the developer a further installment of ₹ 15,00,000/- for purchase of flat pursuant to the agreement dated 16111July, 1996. (e) On 4'h 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 13t h March, 2001, the Assess .....

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ment dated 16th July, 1996 was brought to tax under the head Capital Gains. This on account of appellant's failure to deposit the unutilized consideration for purchase of the flat in specified bank accounts in accordance with the scheme of Central Government as provided under Section 54F(4) of the Act. (g) Being aggrieved, the appellant-assessee filed an appeal to the Commissioner of Income Tax (Appeals) (CIT(A)). By order dated19t October, 2001, the CIT(A) did record the fact that the appel .....

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f filing the return of income. Further, the balance of the net consideration had not been deposited in the specified bank account as mandated by Section 54F(4) of the Act. Thus dismissing the appeal of the appellant-assessee. 4. It is in the backdrop of the above facts that the two substantial questions of law arise for our consideration: 5. Regarding question No.1:- (a) No submissions were made specifically by the appellant in support of the question raised herein i.e. applicability of Section .....

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erein above. Therefore not repeated here. (b) Mr.Chatterji, learned Senior Counsel in support of the appeal submits as under:- (1)The issue arising herein is no longer res-integra as it standscovered by the decision of this Court in Commissioner ofIncome Tax Vs. Mrs.HiIIa J.B.Wadia [1995]261 ITR 376 read with Circulars dated 15 1h October, 1986 and 161h December, 1993 issued by the Central Board of Direct Taxes. So also the decision of Madhya Pradesh High Court in Smt. Shashi Varma Vs. Commissio .....

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Ravinder Kumar Arora [2012] 342 ITR 38; (iii) Section 54F(4) of the Act has deliberately used the word appropriation while extending its benefit. It is used in addition to be utilized with a view to extend the scope of its benefit. The word appropriation means setting apart. Therefore once an agreement to purchase the flat was executed on 16th July, 1996 and the consideration was set aside though not paid it would be considered to be appropriated (set apart) towards the purchase of the flat and .....

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learned Counsel for the revenue in response submits as under (i) On plain interpretation of Section 54F(4) of the Act the petitioner has not utilized the entire net consideration taxable under the head Capital Gains for purchase of the flat. Nor had the appellant deposited the balance unutilized consideration in a specified bank account as notified in terms of Section 54F(4) of the Act. Therefore, the assessee is not entitled to the benefit of exemption from Capital Gains under Section 54F of th .....

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word appropriation towards purchase of the new flat used in Section 54F(4)of the Act only covers cases where the flat has already been purchased within one year before date on which capital gains arose on the transfer of the asset. In the present facts, there is no purchase of a flat prior to the sale of the capital asset but the purchase is post sale of the capital asset. This requires utilization and deposit in specified account to the extent not utilized; and (iv) The decision of Gauhati Hig .....

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g 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 g .....

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rs to the net consideration, shall not be charged under Section 45: Provided that nothing contained in this sub-Section shall apply where the assessee owns on the date of the transfer of the original asset, or purchases, within the period of one year after such date, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head Income from house property , other than the new asset. (2) …………&h .....

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he due date applicable in the case of the assessee for furnishing the return of income under subSection (1) of Section 139] in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall he accompanied by proof of such deposit; and for the purposes of sub-Section(1), the amount, if any, already utilized by the assessee for the pu .....

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as provided in clause (a) or, as the case may be, 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 subSection(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 .....

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e Act introduced into the Act with effect from l April, 1983 by the Finance Act, 1982 provides exemption from Capital gain on transter of any long term capital asset in case the same is invested in a residential house. However, the Section when introduced provided that any capital gain arising from transfer of long term capital asset would not be chargeable to capital gains tax, it the same were utilized for purchase of an housing accommodation within a year before or after the date on which the .....

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hat at times assessments were completed prior to the expiry of above period of two I three years from the date of sale of the Capital Asset and the assessee had not utilized the amount within the prescribed period provided in Section 54F of the Act. This would lead to Assessment orders being rectified by appropriate orders, to determine the availability of benefit of exemption under\ Section 54F of the Act. (g) This led to the introduction of sub-section (4) to Section 54F of the Act by the Fina .....

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sset or within 2 years after the date of sale of the capital asset or where a residential house is constructed within 3 years from the date of sale of the capital asset, is now subject to the provisions of Section 54F(4) of the Act. Thus, where the consideration received 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 un-utilized amounts a .....

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cases,Capital Gain under Section 45 of the Act would be charged on the unutilized 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 ₹ 85.33 lakhs. The agreement for purchase of construction of flat for consideration of ₹ 69.90 lak .....

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ase 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) of the Act. 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 of the Act is available. Before us it is an undisputed position that except ₹ 35 lakhs, the b .....

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meaning of Section 54P of the Act. (k) Reliance placed by the Appellant upon the decision of this Court in Mrs.Hilla J. B. Wadia (supra) to contend that the issue stands concluded in favour of the appellant-assessee is not acceptable. This for the reason that the only issue for consideration before the Court in the above case was the interpretation of Section 54 of the Act. In the above case the assessee had sold her residential property and invested a substantial amount in a Society for constru .....

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ion to consider the provisions of Section 54(2) of the Act which is similar to Section 54F(4) of the Act, with which we are concerned. (I) Mr. Chatterji, then placed reliance on the observation of this Court in Mrs. Hilla J. B. Wadia (supra) that the Circular issued by the Central Board of Direct Taxes dated lS1h 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 devel .....

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r the purchase of flat. It did not even remotely concern itself with the provision of Section 54(2) and/or 541(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 16t h December1993 by the Central Board of Direct Taxes relied upon by the Appellant, only extended the meaning of constructed within a period of three years to allotment .....

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would govern the issue so as to conclude the issue in favour of the Appellant. (m) The reliance upon the decision of the M. P. High Court in Smt. Shashi Varma (supra), also does not advance the case of the Appellant. We find that the facts in the above case are similar to the one in Mrs. Hula J. B. Wadia (supra) and for the same reasons, will not govern the present dispute. In fact, the issue stood covered by the Circular dated 15th October, 1986 as the property purchased therein was of the Delh .....

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ment letter in installments would not in any manner affect the assessee having satisfied Section 54F(1) of the Act. This submission ignores the fact that Sub Section (1) of Section 54F has been made subject to Sub Section (4) of the Act. The requirement under Section 54F(4) of the Act is the deposit of the unutilized amount in the specified bank account till it is utilized. This requirement has not been done away with in either of the above two Circulars dated 15110ctober, 1986 and 16111 Decembe .....

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t, 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(E) of the Act then Section 54E(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 w .....

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esaid aspect it appears was not noticed by the Karnataka High Court. In any case, the entire basis of the decision of the Karnataka High Court in K. Ramchandra Rao (supra) is the intent of the parties. In interpreting a fiscal statute one must have regard to the strict letter of law and intent can never override the plain and unambiguous letter of the law. It is true that normally while construing an all India Statute like the Income Tax Act, we would not easily depart from a view taken by anoth .....

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find that the decision of the Karnataka High Court in K.Ramchandra Rao (supra) was rendered subsilentlo i.e. no argument was made with regard to the requirement of deposit in notified bank account in terms of Section 54F(4) of the Act before the due date as provided in Section 139(1) of the Act. As observed in Salmond's Jurisprudence 12th Edition The rule that a precedent sub silentio is not authoritative goes back at least to 1661(m) when Counsel said : 'An hundred precedents sub silen .....

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Pillai vs. Sivathanu Pillai AIR 1137 1979 (SC) 1937 to hold that it is well settled that decision of one High Court is not a binding precedent upon another High Court and at best can only have persuasive value. However, at the cost of repetition we must emphasize that the decision of another High court rendered in the context of an all India Act would have persuasive value and normally to maintain uniformity and certainty we would adopt the view of the other High Court. However, with the greate .....

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rt, 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 54P 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 54P of the Act stood satisfied. Therefore the observation of the Delhi High C .....

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nterpretation in the following words: In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statute be interpreted on any presumption or assumptions.... It must interpret a taxing statute in the light of what is clearly expressed ... Recently, the Supreme Court in Mathuram Agrawal vs. State of Madhya Pradesh [1999] 8 SCC 667 has observed as under:- The intention of the Legislature in a taxation statute is to be gathered from the language of the prov .....

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to give a meaning to the statute which will serve the spirit and intention of the Legislature.......(emphasis supplied) Similarly this Court in Thana Electricity (Supra) had observed as under: If the provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favorable to the assessee has got to be accepted. This is a we// accepted view of law. It is the satisfaction of the court interpreting the law that the language of the taxing statute is ambiguous .....

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s no occasion to apply liberalIbeneficial 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. .....

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al 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 asset and the amount received on sale of capital asset is appropriated towards consideration which has been paid for purchase of the flat. In this case we are concerned with the purchase I 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 .....

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sale of capital asset). Therefore the word appropriated would have no application in cases of purchase I construction of a house after the sale of capital asset with which we are concerned. (v) Lastly and in the alternative, it is submitted by Mr.Chatterji, t h a t a s t h e e n t i r e a m o u n t h a s b e e n p a i d t o t h e developer/builder before the last date to file the return of Income under Section 139 of the Act, the exemption is available to the appellant under section 541(4) of t .....

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Act has not to be restricted only to the date specified in Section 139(1) of the Act but would include all sub section of Section 139 Including sub section (4) of the Act. On the above basis it concluded that i1 the amount is utilized before the last date of filing of the return under Section 139 of the Act then the provision of Section 54(2) of the Act would not hit the assessee before it. It is not very clear in the above case whether the amounts were utilized before the assessee filed its re .....

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urn of Income. It is not disputed that on 411 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 .....

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e and against the appellant assessee. 7. In the above view, the Appeal is dismissed. No order as to costs. 2.4. We note that the Hon'ble jurisdictional High Court vide aforesaid order dated 18/08/2016 in the case of Humayun Suleman Merchant (supra) duly considered the provisions of the Act, various case laws and thereafter reached to particular conclusion. In the present appeal, the assessee sold the residential property on 18/02/2008 and claimed exemption u/s 54 of the Act. As per section 5 .....

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of the return of income u/s 139 of the Act which includes belated return filed by the assessee u/s 139(1) as well as 139(4) of the Act, but if the investment is not made by the assessee in the purchase/construction of new asset within the time stipulated for filing of return u/s 139 of the Act, the said unutilized amount is compulsory required to be deposited in the specified capital gain account maintained with the bank and as specified by the Central Government. The tax laws are to be strictl .....

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