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2019 (5) TMI 1003

use on 10.02.2006 only - HELD THAT:- 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 [2005 (4) TMI 518 - ITAT MUMBAI] and therefore booking of the flat with the builder has to be treated as construction of flat by the assessee. It is it is clear that the facts of the present case that it was a case of construction of flat and not purchase of flat as held by the AO. Since, the case pertains to construction, benefit of section 54 of the Act are 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 cl .....

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to delete the addition in dispute. - Appeals filed by the Revenue stand dismissed. - ITA No. 5899/DEL/2015 - 15-5-2019 - Sh. H.S. Sidhu, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Sh. Salil Kapoor, Adv. & Sh. Shivansh Pandya, Adv. For the Department : Smt. Naina Soin Kapil, Sr. DR ORDER PER H.S. SIHU, JM This appeal is filed by the Revenue against the Order dated 21/08/2015 passed by the Ld. CIT(A)-17, New Delhi relating to assessment year 2012-13 on the following grounds:- 1. The Ld. CIT(A) has erred in deleting the addition of ₹ 4,10,45,578/- 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 10.02.2006, 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 pa .....

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tutory deduction under section 24(a) of the Income Tax Act resulting into the net addition of ₹ 14,07,474/- (₹ 6464112/- add maintenance charges (as per para 8v of the Lease Deed) ₹ 2010672/- and total rent received comes to ₹ 8474784/- and less deduction u/s. 24(a) ₹ 2542435). 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 order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal. 3. Ld. CIT(DR) relied upon the order of the Assessing Officer 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 Soo .....

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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 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 .....

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r 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 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 .....

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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 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 pr .....

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see 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 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 .....

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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 on 31.01.2012 vide No. 0900848, and worth ₹ 50 Lakhs on 31.05.2012 vide No. 0912416. 4.2. Before addressing the merits of the instant claim, .....

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le 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 original asset, 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. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessme .....

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llowed, 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 5.1. The Assessee submits that the instant addition is completely devoid of any factual basis and has been made by the AO based solely on conjectures and surmises. 5.2. The Assessee submits that the AO has placed reliance on the clause 8(v) of the lease deed, which has been reproduced in the assessment order, whereunder the lessee was required to pay monthly maintenance charges at the prescribed rate (₹ 12/- per sq. ft. per month) and has observed that the presence of this clause in the rent agreement was sufficient to ma .....

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ataka); 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 disallowance of deduction u/s. 54 of the Act is concerned, we find that the assessee declared long term capital ₹ 6,00,00,000/- from the sale of property at 146, 1st floor Jorbagh, New Delhi on 28.12.2011 on which he claimed deduction u/s 54 amounting to ₹ 4,00,97,217/-. However, the AO disallowed the claim on the grounds that the assessee had entered into an agreement dated 10.02.2006 and therefore the date of agreement be treated as the date of acquisition, which falls beyond the period of one year prior to the date of transfer prescribed under section 54 of the Income-tax Act, owing the judgment of Honorable Delhi High Court in the case of Gulshan Malik Vs. .....

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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 agreement. It is also noted that Builder Company offered vide letter dated 30.12.2011 that the Occupation certificate has been received from the Competent Authorities and the six months period for completing the interiors, in terms of agreement shall commence from 01.01.2012 and is to be completed before 30.06.2012. Builder Company's letter dated 20.03.2012 and 20.01.2012 offered to finalise the details of interiors and extended the time for completion of interior to 30.09.2012 and finally possession was granted on 30.10.2013. It has therefore to be considered as a case of construction of new residential house and not purchase of a flat. Since the flat has been allott .....

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e 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 case, since the assessee entered into an agreement for construction of a bare shell of a house by periodic payment of installments and he had to carry the internal fit-outs to make it liveable as per Annexure-V of the agreement with the Builder Company, within Six months from the date of certificate of occupation from the competent Authorities, this is to be treated as the case of construction. Further, the construction has been completed within three years of the sale of original asset, which is accepted by the Assessing Officer, the relief under section 54 is genuinely claimed by him and therefore, disallowance made under section 54 amounting to ₹ 4,00,97,217/- needs to be deleted. It is it is clear that the facts of the present case that it was a cas .....

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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 effect from 01.04.2015 by inserting a second proviso, assessing officer has totally ignored his reply in as much as reliance placed on the judgment of the Honorable Madras High Court. The Honorable High of Madras has held as under:- The legislature has chosen to remove the ambiguity in the proviso to Section 54EC(1) of Act by inserting a second proviso with effect from 1.4.2015. The memorandum explaining the provisions in the Finance (No.2) Bill, 2014 also states that the same will applicable from 1.4.2015 in relation to assessment year 2015-16 and the subsequent years. The intention of the legislature probably appears to be that this amendment should be for the assessment year 2015- 2016 to avoid unwanted litigations of the previous years. Even otherwise, w .....

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s 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 misplaced reliance on the judgment of Honorable Delhi High Court in the case of CIT vs. H.G. Gupta & Sons [19841 149 ITR 253 (Delhi) and Honorable High Court at Calcutta in the case of Indian City Properties vs. CIT [1965] 55 ITR 262 (Cal). The facts and rationale of both the Honorable high Courts in the respective judgment are totally different footings and facts, which are not relevant to the instant appeal. The cases pertain to the allowablity of certain deductions on income from House property. Whereas, in the instant case, the Assessing Officer as presumed that the assessee is in receipt of certain amount towards the provisioning of certain services which have not been disclosed which is patently false and based on his own conjecture and surmises, and without fully appreciating records and explanations placed before him. Further, the Assessing Officer has n .....

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