TMI Blog2017 (9) TMI 1701X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed the appeal of the assessee and reversing the view taken by the CIT(A) as well as AO. 2. This court while admitting the appeal on 12.7.2016 framed following substantial question of law:- Whether on the facts and in circumstances of the case, the ITAT was justified in law in deleting the addition of ₹ 1,27,14,208/- made on account of long term capital gain by disallowing the claim u/s 54F as the assessee was having more than one residential house as on date of transfer of the original asset? 3. Counsel for the appellant Mr. Mathur has taken us to the order of AO more particularly detail with regard to assessee and reply filed thereto which reads as under:- Please refer to your rely dt. 18.7.2011: you have submitted a copy of booklet of EMAAR MGF Land Limited and form regarding booking of a flat of total value ₹ 79,66,275/- which includes charges of ₹ 5,33,250/- for IDC EDC ₹ 2,50,000/- for car parking slot and ₹ 75,000/- for club membership. The agreement as per stamp paper it was purchase on 10th Dec. 2009 from HP Singh Stamp Agent Patiala House, New Delhi. It means you have entered into agreement for purchase of flat after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.1 He also pointed out the finding on the points raised before AO which reads as under:- 14. After going through rival submissions following points emerge:- 1. Section 54F applicable as the original asset transferred is not a residential house: This is not disputed that for the purpose of computing tax of LTCG, Section 54F provisions have to be taken into account. According to Section 54F(1) the appellant can claim exemption of LTCG if a residential house is purchased or constructed from the net consideration from the transfer of the original asset. 2. As per Proviso to Section 54F(1) exemption not available if the assessee owns more than one residential house on the date of transfer of the original asset: As per Proviso (a) and (b) to Section 54F(1) if the assessee owns more than on residential house on the date of transfer of the original asset, no exemption can be allowed to him on account of investment of capital gains in the residential flat constructed or purchased. 3. Date of transfer of original asset should be taken as 5.6.08 and not 3.10.08 it is not disputed that RICO acquired land of the appellant, for which the appellant received consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its self-financing scheme, on payment of the first installment of the cost of construction, the allottee gets title to the property and such allotment should be treated as cost of construction for the purpose of capital gains. Therefore substantial amount invested in flats even if the possession not formally handed over to the appellant would be taken as flats allotted to the appellant or constructed/acquired/owned by the appellant, and investment in Gurgaon MGF flat would have qualified for exemption u/s 54F had the appellant not been owning other than Mahaveer Nagar, Jaipur residential flat, on 5.6.2008 or 3.10.2008. But the flats at Noida and Chandigarh in which substantial amounts had been invested and the flats are appearing in the Balance sheet of the appellant as on 31.3.2008 (copy of balance sheet enclosed as Annexure-2 of this order) have to be taken as residential flats owned by the appellant on the date of transfer whether this date is taken at 5.6.2008 which is the date of RICCO order of as informed by the appellant because as ruled by Hon ble Delhi High Court in the case of CIT vs R L Sood-245 ITR 727 (Del) and as clarified by substantial investment in reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s record. The reply dated 6.7.2011 is enclosed as Annexure-4 of this order. With this reply, computation of income was enclosed and summary of prepaid taxes like TDS etc, but no copy of return was filed. 4.3 He contended that the tribunal has committed serious error in reversing the view taken by the CIT(A) AO. 5. Counsel for the respondent has taken us to the order of tribunal which reads as under:- Undisputedly, the assessee became owner of the Noida flat only on 10.7.2010 and has not acquired ownership of the Chandigarh flat till date. Thus, picture becomes clear in respect of proviso (a)(i) to section 54F of the Act that the residential house mentioned therein has a different connotation because house means a building in its normal residential conditions which is found fit for living by human-beings and not a house under construction and this house should be completely owned by the assessee at the relevant time. The Legislators in their wisdom have used two different terms to refer to the original residential house sold as old asset and by referring to the new residential house to be purchased or constructed as the case may be, as new asset . The colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning of term owns used in section 54F (conditions) - owns more than one residential house on the date of transfer of the capital asset - has a different meaning. That house needs to be. This owner means a legal owner who is entitled to receive income from the property in his own right. This house should be real and not symbolic. In the absence of possession, registration title etc. question of assessing income from house property under section 22 of the Act does not arise. Thus, Ld. CIT(A) has failed to differentiate between the nature of asset owned by the assessee when a flat is booked he has a right to acquire and this right to acquire , is not equivalent to own a house. On the other hand the parameters which apply to investment of capital gain in the construction or in the purchase of a house within two years of sale of the original asset. That is why the CBDT has issued circular No. 471 dated 15.10.1986 and circular No. 672 dated 6.12.1993 which clarify that the amount paid towards booking as to be treated towards construction for the purpose of section 54/54F. This assessee made payment to the builder Emaar MGF Gurgaon before 30.9.2009 for buying a II reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed exemption under section 54F (1)(b) of the Act to the extent of ₹ 1,26,52,789/- as against total investment of ₹ 1,29,66,275/-. Thus, by now we have come to the conclusion that the assessee did not own more than one residential house on the date of transfer of the original asset. Therefore, one condition of this provision stands satisfied. 6. He has relied upon the following decisions:- 6.1 In Commissioner of Income Tax-II vs. Kuldeep Singh ITA No.117/2014 decided on 12.8.2014 wherein Delhi High Court held as under:- 8. The word 'purchase' can be given both restrictive and wider meaning. A restrictive meaning would mean transactions by which legal title is finally transferred, like execution of the sale deed or any other document of title. 'Purchase' can also refer to payment of consideration or part consideration along with transfer of possession under Section 53A of the Transfer of Property Act, 1882. Supreme Court way back in 1979 in CIT Andhra Pradesh vs. T.N. Aravinda Reddy MANU/SC/0302/1979MANU/SC/0302/1979 : (1979) 4 SCC 721, however, gave it a wider meaning and it was held that the payment made for execution of release dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced or extinguished rights of the assessee. This, it was observed was sufficient for the purpose of Section 2(47), which defines the term transfer in relation to a capital asset. In the light of the factual matrix, it was observed that the intention behind Section 54 was to give relief to a person who had transferred his residential house and had purchased another residential house within two years of transfer or had purchased a residential house one year before transfer. It was only the excess amount not used for making purchase or construction of the property within the stipulated period, which was taxable as long term capital gain while on the amount spent, relief should be granted. Principle of purposive interpretation should be applied to subserve the object and more particularly when one was concerned with exemption from payment of tax. The assessee, therefore, succeeded. The observations made in the said decision are also relevant on the question whether the payments made by the assessee to the person with whom he had entered into an earlier agreement to sell should be allowed to be set off as expenses incurred in relation to the sale deed which was executed. 10. More ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this is the longer period specified in the sub-section (1) to Section 54. It is only the balance amount which is not utilized which is to be brought and charged to tax. The entire amount of sale consideration or the capital gains is not to be brought to tax, but the unspent amount/figure is taxed. 6.2 In Commissioner of Income Tax vs. R.L. Sood (2000) 245 ITR 727 wherein Delhi High Court held as under:- 7. In our view, the Tribunal was justified in declining to make a reference on the proposed question to this court. Admittedly, the assessed had paid a sum of ₹ 2,39,850 out of the total sale consideration of ₹ 2,75,000 for the purchase of the flat within the period of one year from the date of sale of his old residential house. Thus, on payment of a substantial amount in terms of the agreement of purchase dated September 25, 1981, i.e., within four days of the sale of his old property, the assessed acquired substantial domain over the new residential flat within the specified period of one year and complied with the requirements of Section 54 of the Act. Merely because the builder failed to hand over possession of the flat to the assessed within the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property. Section 54 of the said Act speaks of purchase. Moreover, the ownership of the property may have different connotation in different statutes. It was concluded that the Tribunal in that case went wrong in holding that for the purpose of applicability of Section 54, registration of document is imperative. In Dr. P.K. Vasanthi Rangarajan v. CIT MANU/TN/1474/2012MANU/TN/1474/2012 : (2012) 252 CTR 336 the Assessee and her husband were co-owners to the extent of 50% share in a building that had a clinic and a residential house. It was held that since the entire property was not an exclusive residential property and 50% of the ownership was with reference to the clinic on the ground floor, the harshness of the proviso to Section 54F cannot be applied unless and until there are materials to show that the Assessee is the exclusive owner of the residential property. 20. In the present case, as pointed out by the CIT (A), the sale deed dated 13th March 1996 does show that what was purchased by the Appellant (Assessee herein) is an agricultural land bearing Khasra Nos. 75 and 90. Khasra Girdawri also clarifies that while there is a kothi, i.e., house on Khasra No. 76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section that the construction must begin after the date of sale of the original/old asset. There is no condition or reason for ambiguity and confusion which requires moderation or reading the words of the said sub-section in a different manner. The apprehension of the Revenue that the entire money collected or received on transfer of the original/capital asset would not be utilised in the construction of the new capital asset, i.e., residential house, is ill-founded and misconceived. The requirement of subsection (4) is that if consideration was not appropriated towards the purchase of the new asset one year before date of transfer of the original asset or it was not utilised for purchase or construction of the new asset before the date of filing of return under Section 139 of the Act, the balance amount shall be deposited in an authorized bank account under a scheme notified by the Central Government. Further, only the amount which was utilised in construction or purchase of the new asset within the specified time frame stand exempt and not the entire consideration received. 13. Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [See CTT v. DSM Group of Industries[MANU/SC/1044/2004MANU/SC/10 44/2004 : (2005) 1 SCC 657] (SCC para 26); TISCO Ltd. v. State of Jharkhand [MANU/SC/0237/2005MANU/SC/0237/2005 : (2005) 4 SCC 272] (SCC paras 42-45); State Level Committee v. Morgardshammar India Ltd. [MANU/SC/0129/1996MANU/SC/0129/1996 : (1996) 1 SCC 108]; Novopan India Ltd. v. CCE Customs [MANU/SC/1216/1994MANU/SC/1216/1994 : 1994 Supp (3) SCC 606]; A.P. Steel Re- Rolling Mill Ltd. v. State of Kerala[MANU/SC/8792/2006MANU/SC/8792/ 2006 : (2007) 2 SCC 725] and Reiz Electrocontrols (P) Ltd. v. CCE. [MANU/SC/3456/2006MANU/SC/3456/2006 : (2006) 6 SCC 213]. 6.6 In Commissioner of Income Tax vs. Girish L. Ragha (2016) 289 CTR (Bom)213 wherein Bombay High Court held as under:- 2. We are in respectful agreement with the view taken by the Delhi High Court to come to the conclusion that the purchase would be computed when the consideration is duly paid by the assessee for the purpose of purchasing the premises and the construction had already commenced by the builder which remained to be completed on account of the litigation. In the present case, the learned Tribunal has noted that the assessee has sold the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the provisions contained in s. 54F(1), as it stood at the relevant point of time, shows that exemption from payment of tax on the capital gains arising on the transfer of any long-term capital asset not being a residential house is available to an assessee being an HUF or an individual, if the long-term capital gain is invested in purchasing a residential house or constructing the residential house within the time stipulated therein. Proviso to sub-s. (1) states that the exemption contemplated under sub-s. (1) would not be available where an assessee owns a residential house as on the date of the transfer and that the income from the residential house is chargeable under the head Income from house property . The Finance Act, 2001 amended the proviso w.e.f. 2001-02 to permit exemption under s. 54F, even if the assessee has owned one residential house as on the date of transfer, other than the new asset, or purchased in investments any residential house other than the new asset within a period of one year or three years, as the case may be, but after the date of transfer of the original asset and the income from such residential house other than the one owned on the date of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly points out that the holding of the residential house as on the date of transfer has relevance to the status of the assessee as an individual or HUF. On the admitted fact that the assessee herein, as an individual, does not own any property in the status of an individual as on the date of transfer, we have no hesitation in accepting the case of the assessee, thereby allowing the appeal. As far as the issue on the purchase of four flats Is concerned, the unreported decision of this Court in Tax Case No. 656 of 2005, dt. 4th Jan., 2012 (supra) answers this issue. We do not find any inhibition in the assessee claiming the benefit on the investment made in the four flats, thereby gaining the benefit under s. 54F of the IT Act. 6.9 In Commissioner of Income Tax vs. Sri Sambandam Udaykumar (2012) 345 ITR389 (KAR) wherein Karnataka High Court held as under:- 11. Section 45 of the Act makes it very clear that any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save or otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H is chargeable to income tax under the head 'capital gains' and shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transfer, has to construct a residential house in order to become eligible for exemption. In the cases on hand, it is not in dispute that the assessees have purchased the lands by investing the capital gain and they have also constructed residential houses. In order to establish the same, the assessees submitted before the CIT(A) several material evidences, viz., invitation card printed for the house warming ceremony to be held on 12th July, 2003. The assessees have also produced the completion certificates from the municipal authority on 30th Jan., 2004. On the basis of the above documents, the CIT(A) concluded that the requirement of the statutory provision has been complied with by the assessees and that was reconfirmed by the Tribunal in the orders impugned. 13. The said Judgment of the Madras High Court has been affirmed by the Apex Court and the appeal was dismissed at the stage of preliminary hearing in CC Nos. 39533954/2009 decided on 6.4.2009. 14. In the instant case, the material on record discloses that the assessee had invested ₹ 2,16,61,670/- as on 31.10.2006 within twelve months from the date of realization of sale proceeds of shares. The developer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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