TMI Blog2019 (5) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... is a construction of house property and not purchase, therefore, the date of completion of construction is to be looked into which is as per provision of section 54 , therefore, the Ld. CIT(A), has rightly directed the AO to allow benefit to the assessee as claimed u/s.54 , which does not require any interference on our part, hence, we uphold the action of the ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. Disallowance of deduction u/s.54EC - HELD THAT:- The restriction of ₹ 50,00,000/- in a financial year was placed for evenly distributing the invest into the capital gains bonds on continued basis throughout the year. Therefore, the alternative was put into operation were in the capital gain bonds are available on tap throughout the year without stopping but the limit of investment has been capped to ₹ 50,00,000/- per assessee per financial year. This has resulted in even distribution of benefit to public at large. Had the intention of the legislation was cap the total investment to ₹ 50,00,000/-, the amendment in statute would have prescribed the limit on deduction allowed under the section 54EC and not on investment allowed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the two appeals are reproduced hereunder:- ITA NO. 5900/DEL/2015 (AY 2012-13) i) The Ld. CIT(A) has erred in deleting the addition of ₹ 4,01,93,262/- and ₹ 50,00,000/- on account of exemption u/s. 54 and 54EC of the Act treating the said house as being Constructed by the assessee and not considering the facts that the assessee has entered into buyer seller purchase agreement on 10.2.2006, thereby purchasing the said house on 10.2.2006 only. ii) The Ld. CIT(A) has erred in deleting the addition of ₹ 50,00,000/- on account of exemption u/s. 54EC of the Act without considering the date of purchase of REC bonds. iii) The Ld. CIT(A) has erred in deleting the addition of ₹ 14,07,474/- without considering the facts that as per para 8(v) in lease deed of M/s DT Cinema, the assessee has received maintenance charges as income in disguise. iv) The appellant craves leave to add, alter or amend any / all the grounds of appeal before or during the course of hearing of the appeal. ITA NO. 5901/DEL/2015 (AY 2012-13) i) The Ld. CIT(A) has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Gulshan Malik vs. CIT in ITA No. 55 of 2014 and CIT vs. RL Sood (2008) 109 taxman 227/245 ITR 727 (Delhi). Thereafter, AO made the disallowance of ₹ 50,00,000/- u/s. 54 of the Act as against the deduction claimed by the assessee amounting to ₹ 1,00,00,000/- following the decision of the ITAT, Jaipur Bench in ACIT Circle-2 vs. Sh. Raj Kumar Jain Sons HUF, January 31, 2012 as p the details in the impugned assessment order dated 4.2.2015. Further, AO observed that AO made the addition of ₹ 14,07,474/- in the rental income of above said amount on the grounds that the assessee has received ₹ 2010672/- from the tenant M/s DT Cinema Ltd. as per the calculations given in the impugned assessment orders dated 4.2.2015 and allowing deduction therefrom of 30% on account of statutory deduction under section 24(a) of the Income Tax Act resulting into the net addition of ₹ 14,07,474/- Z(₹ 20,10,672/- less 30% ₹ 603202/-). Against the assessment order, the assessee appealed before the Ld. CIT(A), who vide his impugned order dated 21.08.2015, has deleted the additions in dispute and allowed the appeal of the assessee. Aggrieved with the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, and after seeking multiple clarifications / explanations, the assessment was framed u/s 143(3) by making disallowance of claim u/s 54 of the Act at ₹ 4,01,93,262/-, disallowance of claim u/s 54EC of the Act at ₹ 50,00,000/- and addition of ₹ 14,07,474/- towards purported amounts received from M/s DT Cinemas Ltd. 1.2. Aggrieved by the said order, the Assessee preferred an appeal before the Commissioner of Income-tax (Appeals) (hereinafter referred to as CIT(A) ) whereby vide order dated 21.08.2015,the appeal of the assessee was allowed and the additions made by the Assessing Officer ( AO ) were deleted. 1.3. The Revenue did not accept the abovereferred order of the CIT(A) and instead preferred an appeal before this Hon ble Tribunal, seeking restoration of the additions made in the assessment order. 2. FACTUAL BACKGROUND 2.1. With regard to the above additions, the Assessee wishes to bring to the attention of this Hon ble Tribunal the following facts, as under: 2.2. The Assessee had acquired a property at Jor Bagh during Financial Year ( FY ) 2002- 03, which was subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say (i) If the amount of capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) ... 3.2. In terms of the said provision, an assessee, in order to avail of the exemption u/s 54, is required to purchase a new asset one year before or within two years after the date of sale of the original asset, or construct a new asset within a period of three years after the date of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der: 4. We find substance in the assessee s stand. The Tribunal has, inter alia, recorded a positive finding in the following terms: In the present case on the facts there is no dispute that the late Maharani advanced a sum of ₹ 5,25,000 for the specific purpose of construction offlats for her on third floor of the Akash Deep Building. The Akash Deep Building was constructed after demolishing 9, Hailey Road, which was sold by late Maharani to Ansal Sehgal Properties (P.) Ltd. If therefore, the latter constructed the flats on behalf of the late Maharani with the funds advanced by her, there appears to be no difficulty in treating the construction as the construction made by her. In view of the afore said findings, which are factual, no question of law arises... 3.7. The Assessee also wishes to place reliance on a decision of the Delhi Bench of this Hon ble Tribunal in the case of ACIT v. Vineet Kumar Kapila [ITA/ 6868/ DEL/ 2015], wherein the facts of the case and the finding of the Hon ble Tribunal were recorded thus: 2. ... During the assessment proceedings the AO also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... menced before the sale of the original asset. The Hon ble High Court, while dismissing the appeal of the Revenue, had the occasion to observe as under: 6. So too the next conclusion reached by the Tribunal. The date of the sale of the old building was 9-2-1977. The completion of construction of the new building was in March 1977 although the commencement of the construction started in 1976. It is immaterial as the Tribunal, in our opinion, has rightly observed about the date of commencement of the construction of new building. Since the assessee has constructed the building within two years from the date of sale of the old building, he was entitled to relief under section 54. 3.11. The Assessee also wishes to place reliance on a decision of the Hon ble High Court of Allahabad in the case of CIT v. U.K. Kapoor, reported as [1998] 234 ITR 753 (Allahabad). In the said case, the facts were as follows: assessee therein sold a residential house on 10.07.1963, whereas construction of the new asset was commenced on 10.03.1963. The claim for deduction u/s 54 of the Act was rejected by the concerned AO on the ground that constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 subsection 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 asset, is ill- founded and misconceived.... 14. Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in the form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted... .14. Lastly, reference may also be made to a recent decision of Delhi Bench of this Hon ble Tribunal in the case of Tarun Jalali v. DDIT (ITA/2376/Del/2014] wherein it has been observed as under: 5. ... Accordingly, respectfully following the ratio laid down by the Hon ble Delhi High Court and the Hon 'ble Karnataka High Court as aforementioned, we are of the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gains so invested in the long-term specified asset out of total capital gain shall not be charged to tax. The proviso to the said sub-section provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakh rupees. It is proposed to insert a proviso below first proviso in said sub-section (1) so as to provide that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees... 4.4. The Assessee further wishes to bring to the attention of this Hon ble Tribunal the Memorandum explaining the provisions of the Finance Act, 2014 issued by the Central Board of Direct Taxes ( CBDT or the Board ), which to the extent relevant, provides as under: The existing provisions contained in sub-section (I) of section 5 4 EC of the Act provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has, at any time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the first proviso to Section 54EC(1) of the Act, as it stood in relation to the assessees. 11. In any event, from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. It would have made a difference, if the restriction on the investment in bonds to ₹ 50,00,000/- is incorporated in Section 54EC(1) of the Act itself. However, the ambiguity has been removed by the legislature with effect from 1.4.2015 in relation to the assessment year 2015- 16 and the subsequent years. 4.6. The above decision was subsequently applied by the Hon ble Madras High Court in the case of CIT v. Coromandel Industries Ltd., reported as [2015] 370 ITR 586 (Madras), wherein the facts were that a capital asset (land) was sold for ₹ 1,13,74,000/- on which capital gains were declared at ₹ 1,09,98,256/-, out of which a sum of ₹ 1 Crore was claimed as a deduction under section 54EC of the Act, by purchase of REC bonds worth ₹ 50 Lakhs each on 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement to the owners (i.e. M/s Akshay Sobti, Pradeep Sobti and Seema Sobti) as per the TDS certificates already issued to them and no other payment has been made to them on any account whatsoever under above mentioned lease agreement. Further, this is clarify that the during FY 2011-12, maintenance of said property are done by ourselves and not paid any charges to M/s Akshay Sobti, Pradeep Sobti and Seema Sobti on account of that. 5.5 Despite the above-stated clear confirmation from the lessee, the AO proceeded to disregard the same and make the subject addition, despite the Assessee never having even received the said amounts. In view of this, it is submitted that the subject addition is liable to be deleted. 5.6 Without prejudice to the above, the Assessee submits that the AO also appears to have formed a misplaced view that as deduction of maintenance expenses is not permitted for the purposes of computation of income chargeable to tax under the head of house property , the maintenance amounts can be taxed. However, the AO has completely overlooked that the amounts still need to represent the Assessee s income, which is not even the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Honorable High Court at Delhi in the case of Gulshan Malik Vs. CIT in ITA no. 55 of 2014 and CIT vs R. L. Sood [2008] 109 taxman 227/245 ITR 727 (Delhi). However, the assessee submitted that in order to avail the benefit under section 54 of Income-tax Act he is required to purchase a residential house property either one year before or within two year after the date of transfer of original asset; or within a period of three years after that date he is required to construct a residential house. We note that it has been clarified by the CBDT in Circular No.672 dated 16.12.1993 in which it has been made clear that the earlier circular No. 471 dated 15.10.1986 in which it was stated that acquisition of flat through allotment by DDA has to be treated as a construction of flat would apply to co-operative societies and other institutions. The builder would fall in the category of other institutions as held by Mumbai Bench of Tribunal in the case Smt. Sunder Kaur Sujan Singh Gadh and therefore booking of the flat with the builder has to be treated as construction of flat by the assessee. Thus, in the present case, the period of three years would apply for construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e house property during 2013 vide letter dated 30.10.2013 offering occupation of House property. Further, the assessee has claimed the deduction on amount invested till the due date of filing of return under section 139(1) of the Income Tax Act. Further, the reliance placed by the Assessing officer on the judgment of Honorable Delhi High Court in the case of Gulshan Malik Vs. CIT in ITA no. 55 of 2014 is not relevant to the facts of the case under appeal, since the issue involved in the case of Gulshan Malik was pertaining to the period of holding of an asset for the purpose of establishing whether resultant gain is long term capital gain or is short term capital gain. It was held a right or interest in an immovable property can accrue only by way of an agreement embodying consensus ad idem as against the confirmation letter that does confer any right to claim title. Similarly in the case of CIT vs. R.L.Sood [2008] 109 man 227/245 ITR 727 (Delhi), the Honorable High Court has declined request of the revenue to call for reference on the proposed question. It has further been clarified at realizing the practical difficulties faced by the assessee in such situations, the CBDT issued a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed u/s.54 of the I.T. Act, which does not require any interference on our part, hence, we uphold the action of the ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. 6.1 As regards ground no. 2 which relates to disallowance of deduction u/s.54EC to the extent of ₹ 50,00,000/- is concerned, we find that the AO had restricted the deduction claimed u/s.54EC to ₹ 50,00,000/- as against the deduction claimed by the appellant amounting to ₹ 1,00,00,000/- following the decision of the Honorable Income tax Appellate Tribunal, Jaipur Bench in the case of ACIT Circle-2 vs. Shri Raj Kumar Jain Sons HUF, January 31 2012. However, the assessee submitted that the Assessing Officer has strangely and obliquely stopped short of making observation / mention of the very recent Judgment of Honorable High Court of Madras dated December 16, 2014 in case of Commissioner of Income tax Vs. Coromandal Industries Limited placed before him for the reason best known to him only. This is to be understood that the restriction of ₹ 50,00,000/- in a financial year was placed for evenly distributing the invest into the capital gains bonds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e benefit claimed by the appellant cannot be denied. It would have made a difference, if the restriction on the investment in bonds to ₹ 50,00,000/- is incorporated in Section 54EC(1) of the Act itself. However, the ambiguity has been removed by the legislature with effect from 1.4.2015 in relation to the assessment year 2015-16 and the subsequent years. For the foregoing reasons, we find no infirmity in the orders passed by the Tribunal warranting interference by this Court. The substantial questions of law are answered against the Revenue and these appeals are dismissed. 6.2 After going through the facts and circumstances of the case, we find that the judgement of the Hon ble Madras High Court is applicable on the facts of the present case. Therefore, following the decision of Hon'ble High Court, Ld. CIT(A) has rightly allowed the ground of the, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. 6.3 As regards ground no. 3 which relates to deletion of addition fo ₹ 14,07,474/- made on account of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y DLF Utilities Limited which reads as under; This is confirmed that We, M/S DLF utilities Limited, have made payment of rent under the lease agreement to the owners (i.e. Akshay Sobti, Pradeep Sobti and Seema Sobti) as per TDS certificates already issued to them and no other payment has been made to them on any account whatsoever under the above mentioned lease agreement. Further this is clarify that during the FY 2011-12. Maintenance of the said property are done by ourselves ana not paid any charges to M/S Akshay Sobti, Pradeep Sobti and Seema Sobti on account of that . The reconciliation of rent received with the entries in the bank accounts have already been placed on the file of the department, which has been ignored by the Assessing officer. The Assessing officer has not placed on record even an iota of evidence as to receipt of any amount on account of maintenance by the appellant despite having examined the books of account and other details to support his assertion that the appellant has received any maintenance charges from the tenant despite having placed a confirmation from the tenant to the effect that no maintenance charges have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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