TMI Blog2019 (5) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... e available to assessee. The booking of bare shell of a flat 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 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 CIT(A) on the issue in dispute and reject the ground raised by the Revenue. Disallowance of deduction u/s.54EC - scope of provisions of latest amendments made to section 54EC by the Finance Act 2014 - AO had restricted the deduction claimed u/s.54EC in part - HELD THAT:- 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 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 lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts that the assessee has entered into buyer seller purchase agreement on 10.02.2006, thereby purchasing the said house on 10.02.2006 only. 2. 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. 3. 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. 4. 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. 2. The brief facts of the case are that the assessee company filed its return on 01.08.2012 declaring an income of ₹ 72,38,440/-. The case was selected for scrutiny under CASS. Notice u/s. 143(2) of the Income Tax Act, 1961 (in short Act ) was duly served upon the assessee. Subsequently, notice u/s. 142(1) of the Act alongwith questionnaire was issued on 28.8.2014. In compliance to notices, the AR of the assessee attended the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer and reiterated the contentions raised in the grounds of appeal and stated AO made the disallowance of deduction under section 54 was made on the ground that the assessee entered into an agreement dated 10.2.2006 and therefore the date of agreement be treated as the date of acquisition and which falls beyond the period of one year prior to the date of transfer prescribed under section 54 of the Income Tax Act, following the judgment of Hon ble Delhi High Court 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), which does not need any interference. She further stated that 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 per the details in the impugned assessment order dated 4.2.2015, hence, requested to cancel the order of the Ld. CIT(A) on the issue in dispute. She further stated that AO has rightly observed that addition of ₹ 14,07,474/- in the rental income of above said amount on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subsequently sold during the subject AY on 28.12.2011 for a sum of ₹ 6 Crores. 2.3. As the said property was a long-term capital asset, the Assessee claimed benefit of indexation whereby the indexed cost of acquisition was arrived at ₹ 79,12,653/- resulting in capital gains of ₹ 5,20,87,347/-. Against the same, the Assessee claimed exemption u/s 54 of the Act of ₹ 3,00,26,154/- towards the amounts paid to M/s DLF towards construction of house at DLF Magnolias Golf Links, and a further sum of ₹ 1,10,19,424/- towards bank charges and cost of improvement on the same. It may also be stated at this juncture that the above amounts were paid to M/s DLF in pursuance of an agreement dated 10.02.2006. 2.4. Further, the Assessee, on 31.01.2012 also purchased eligible bonds u/s 54EC of the Act worth ₹ 50,00,000/-, and further, on 31.05.2012, also purchased additional eligible bonds u/s 54EC of the Act worth ₹ 50, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 transfer of original asset. It is the contention of the Assessee herein that by virtue of the agreement dated 10.02.2006, the Assessee had contracted with M/s DLF for construction bare residential house, which thereafter the Assessee undertook to get completed and furnished with all the necessary amenities, which was offered only as on 31.10.2013, possession of which was duly taken and is not disputed, and this period is within three years of sale of the original asset. 3.3. However, the AO has contended that the present is a case of purchase of new asset, which purchase, as per the AO, was carried out on 10.02.2006, which is the date of entering into the agreement with M/s DLF, and therefore, the period mandated for purchase u/s 54 of the Act (one year before or within two years of sale) was alleged to have been violated, thereby disentitling the Assessee to claim the subject exemption. 3.4. In this regard, the Assessee, at the outset wishes to contend that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 noticed that the assessee has entered into an Apartment Buyer Agreement' with M/s Standard Farms Pvt. Ltd. and Tata Housing Development Co. Ltd. on 27/08/2010. In this regard on consideration of facts and submission of the assessee, the AO was of the view that the impugned acquisition on new property by the assessee through Apartment Buyer Agreement , amounted to purchase of new house... 7. After perusing the aforesaid finding as well as the case laws and CBDT Circular discussed therein, we are of the view that booking of flat with the builder has to be treated as construction of flat by the assessee and hence period of three years would apply for construction of new house from the date of transfer of long term capital asset. Therefore, the Ld. CIT(A) has rightly allowed the exemption u/s 54 of the Act, because in the present case also the flat booked with the builder by the assessee has to be considered as a case of construction of flat... 3.8. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 construction of the new asset was commenced before sale / transfer of the original asset. In its decision, the Hon ble High Court of Allahabad, while approving the above-cited decision of the Hon ble High Court of Karnataka, observed as under: In the case before the Karnataka High Court, the date of the sale of the old building was February 9, 1977. The completion of the construction of the new building was in March, 1977, although the commencement of construction started in 1976. On these facts, the Karnataka High Court held that it was immaterial that the construction of the new building was started before the sale of the old building. We fully agree with the view taken by the Karnataka High Court. The Appellate Tribunal was right in holding that capital gains arising from the sale of the Golf Link house to the extent it got invested in the construction of the Surya Nagar house, will be exempted under section 54 of the Act. 3.12. The finding of the Hon ble Tribunal in the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 view that provisions of section 54F do not prescribe any condition as to the date of commencement of construction of new house property, meaning thereby that the construction of house property may be commenced even before the date of transfer of original asset... 3.15. In view of the above-cited position of law and interpretation of section 54 of the Act, the Assessee wishes to contend that firstly, the acquisition of house from M/s DLF is a case of construction of house and not purchase of a house, secondly, the Assessee submits that the fact that the construction was commenced earlier would not have any bearing on the allowability of the claim under section 54 of the Act. 4. CLAIM U/S 54EC IS ALLOWABLE 4.1. The relevant facts regarding this claim are that against the capital gains arising out of sale of the residential house on 21.12.2011, as detailed above, the Assessee purchased eligible bonds of the Rural Electrification Corporation ( REC ) worth ₹ 50 Lakhs o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 within a period of six months, invested the whole or any part of capital gains in the long-term specified asset, out of the whole of the capital gain, shall not be charged to tax. The proviso to the said subsection provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakh rupees. However, the wordings of the proviso have created an ambiguity. As a result the capital gains arising during the year after the month of September were invested in the specified asset in such a manner so as to split the investment in two years i.e., one within the year and second in the next year but before the expiry of six months. This resulted in the claim for relief of one crore rupees as against the intended limit for relief offifty lakh rupees. Accordingly, it is proposed to insert a proviso in sub-section (I) so as to provide that the investment made by an assessee in the long-term specified asset, out of capital gains arising from transfer of one or more origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1 Crore was claimed as a deduction under section 54EC of the Act, by purchase of REC bonds worth ₹ 50 Lakhs each on 31.03.2009 and 30.04.2009. While dismissing the appeal of the Revenue, the High Court affirmed its earlier above-cited decision and dismissed the appeal by the Revenue. 4.7. The aforesaid decision of the Madras High Court has also, inter alia, been referred to and followed, inter alia, in the following decisions: ACIT v. Ajay Kalia (ITA/6907/Del/2015; order dated September 2017) Bharatkumar M Jain (HUF) v. ACIT (ITA/169 170 / Mum/2015; order dated 07.09.2016); Ms. Lilavati M. Sayani v. ITO (2014) 151 ITD 659 (Mum.); Shri Vivek Jairazbhoy v. CIT (ITA No. 236/Bang/2012; order dated 14.12.2012) Tulika Devi Dayal v. JCIT (2018) 89 taxmann.com 442 4.8. In view of the above position of law, the Assessee submits that subject ground of appeal may kindly be decided in favour of the Assessee and against the Revenue. 5. WRONG ADDITION OF PURPORTED RENTAL AMOUNTS RECEIVED FROM M/S DT CINEMAS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlooked that the amounts still need to represent the Assessee s income, which is not even the case of the AO herein. Therefore, in this view of the matter, even if these amounts had been received by the Assessee (though denied), no addition thereof could have been validly made. 5. Ld. counsel for the assessee also in support of his contention, has filed a Paper Book of compilation of cases i.e. copy of Circular 672 issued by the Central Board of Direct Taxes (1994) 205 ITR (St.) 47; CIT vs. Smt. Brindra Kumari (2002) 253 ITR 343 (Del.); ACIT vs. Vineet Kumar Kapila ITA /6868/Del/2015; CIT vs. JR Subramanya Bhat (1987) 165 ITR 571 (Karnataka); CIT vs. HK Kapoor (1998) 234 ITR 753 (Allahabad); CIT vs. Bharti Mishra (2014) 265 CTR 374 (Delhi); Tarun Jalali vs. DDIT ITA/2376/Del/2014; CIT vs. C. Jaichander (2015) 370 ITR 579 (Madras) and ACIT vs. Ajay Kalia ITA/6907/DEL/2015. 6. We have heard both the parties and perused the records, Paper Book filed by the assessee; submissions of both the parties, case laws cited by the Ld. counsel for the assessee and especially the impugned order passed by the Ld. CIT(A). With regard to ground no. 1 relating to disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case, the period of three years would apply for construction of new from the date of transfer of the original asset. The above circulars are binding on revenue authorities under s. 119 of the Act. He referred the decision rendered by Honorable High Court of Bombay in the case of Mrs. Hilla J. B. Wadia (216 ITR 376), wherein the Honorable High Court has held that it is a case of Construction . Reliance was placed on the judgment of Honorable Karnataka High Court in the case of CIT Vs. J.R. Subramanya Bhatt (1887) 165 ITR 571 (Karn), wherein it has been held at it is immaterial whether the construction of the new house was started before the ate of transfer, it should be completed after the date of transfer of the original house. In the present case, he had booked a semi finished flat with the builder, namely DLF Universal Limited in the residential group housing complex named as Magnolias DLF Golf Links) and as per agreement, he was to make payment in installments and the builder was to construct the unfinished bare shell of flat for finishing by the buyers on their own to make it live-able (having specifications set out in Annexure-V) as per clause 10.1 of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal difficulties faced by the assessee in such situations, the CBDT issued a circular No. 471, dt. 15th Oct,. 1986. The relief extending instructions of the CBDT, in wake of realization of practical difficulties faced by the assessees, by way of circular extending relief to even marginally non compliant assessees in its literal sense of hyper technicalities, cannot be used as a tool to interpreted instructions of the board or decision of the law Courts, to deny the very relief to the otherwise compliant assessees. In a recent reference to Honorable Delhi High Court, in the case of CIT vs Kuldeep Singh, the Honorable Court has observed and discussed various decision of the other Honorable High Courts and Honorable Supreme Court; as follows; A. CIT Andhra Pradesh vs. T. N. Aravinda Reddy (1979) 4 SCC 721; B. Civil Appeal nos. 5899-5900/2014 titled Sh Sanjeev Lai etc etc vs. CIT Chandigarh Anr decided on 01/07/2014, 2014 (8) SCALE 432 C. Reference was made to the decision of Supreme court in CIT vs J.H. Gotla [1985] 156 ITR 323 (SC). D. Moreover in CIT vs Bharati C Kothari (2000) 244ITR 352 In the instant cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 54EC. Therefore, the interpretation of ITAT, Jaipur Bench in ACIT Circle-2 vs. Shri Raj Kumar Jain Sons HUF, is misplaced, in total disregard to juagment of the higher authority (i.e. Honorable Madras High Court) which has elaborately discussed the issue involved, ambiguity of law and the provisions of latest amendments made to section 54EC by the Finance Act 2014 including the Notes on clauses Finance Bill 2014 and Memorandum : Explaining the provisions in the Finance (No. 2) Bill, 2014; placing restriction on lent to ₹ 50 lakhs with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of addition fo ₹ 14,07,474/- made on account of rental income received from D.T. Cinemas is concerned. We find that the Assessing Officer had made addition in the rental income on the ground that the assessee had received 20,10,672/- from the tenant M/S D.T. Cinema Ltd. as per the calculation given in the impugned assessment orders dated 04.02.2015 and allowing deduction there from 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/-, however, the assessee submitted that the Assessing officer has miserably failed to arriving at any Annual value of the property under section 23(1)(a) and 23(1)(a) of the Income tax Act. The Assessing Officer has erred in treating the clubbed up Income as composite rent under the head 'Income from House Property' and in the process has failed to segregate composite rent into the rent of the premises taxable under the head 'Income from House Property' and taxable income of maintenance/service charges received by the appellant for provisioning of services under the head 'Income from business Profession'. The Assessing Officer has misplace ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the effect that no maintenance charges have been paid by them. The observation of the Assessing Officer in paragraph 4 is contrary as to the fact that the : The appellant has not shown any proof that the charge is not received by him. As per the para 1(c) of the said deed nowhere mentions that the maintenance charge is not taken by the lessor (assessee). It is case of receiving the maintenance charges from the M/S D T Cinema and then paying to mall Management Company of the maintenance work. Even the appellant has not shown any proof with regard to this that he has not been receiving any maintenance charge. While in the said deed at para no. 8 (v) it is clearly mentioned that the assessee is receiving maintenance charge along with the rent in advance. 6.3.1 Keeping in view of the facts and circumstances of the case as explained above, we find that no maintenance charges were received by the assessee as confirmed by the tenant. This fact also gets confirmed from perusal of the bank statement, TDS certificate and details reflected in Form 26AS. Since, no maintenance charges were received or receivable by the assessee, hence, Ld. CIT(A) has rightly d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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