AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 70
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....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 Rs. 35,00,000/- and thus restricting the exemption u/s. 54F of the Act proportionately to the amount invested? 3 The undisputed facts leading to this appeal are as under: - (a) On 29th April, 1995, the appellant sold a plot of land in Mumbai for a consideration of Rs. 85,33,250/-. (b) On 16th July, 1996, the appellant entered into an agreement to purchase a flat for a consideration of Rs. 69,60,000/-. (c) The appellant paid two installments of Rs. 10,00,000/- each on 17th July, 1996 and 23rd October, 1996 to the developer / builder i.e. before the due date for filing of return of Income under Section 139(1) of the Act i.e. 31st October, 1996. (d) On 1st November, 1996 the petitioner paid to the developer a further installment of Rs. 15,00,000/- for purchase of flat pursuant to the agreement dated 16th July, 1996. (e) On 4th November, 1996 the appellant filed his return of income for the Assessment year 1996-97. This was after the due date of f....
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....irmative i.e. in favour of the respondent-revenue and against the appellant- assessee. 6 Regarding Question No.2: (a) The facts leading to this question have been set out in Para 2 herein above. Therefore not repeated here. (b) Mr.Chatterji, learned Senior Counsel in support of the appeal submits as under:- (i) The issue arising herein is no longer res-integra as it stands covered by the decision of this Court in Commissioner of Income Tax Vs. Mrs.Hilla J.B.Wadia [1995] 261 ITR 376 read with Circulars dated 15th October, 1986 and 16th December, 1993 issued by the Central Board of Direct Taxes. So also the decision of Madhya Pradesh High Court in Smt. Shashi Varma Vs. Commissioner of Income Tax [1997] 224 ITR 106. In any event, the decision of the Karnataka High Court in Commissioner of Income Tax Vs. K. Ramchandra Rao (2015) 277 CTR 0522 also covers the issue; (ii) Section 54F of the Act has been brought into the Act with the object of encouraging the housing sector. Therefore a liberal /beneficial interpretation/construction be given to Section 54F(4) of the Act. In support reliance is placed upon the decision of the Delhi High Court in Commissioner of I....
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....t 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 High Court in Rajesh Kumar Jalan (supra) would have no application in the present facts as admittedly the amounts have not been utilized or deposited in the specified bank account before the assessee filed his return of income on 4th November, 1996. (d) For a proper appreciation of the rival submissions, it is necessary to reproduce the relevant portion of Section 54F of the Act which arises for our consideration : "54F(1) [Subject to the provisions of sub-Section(4), where, in the case of an assessee being 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), ....
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....- (a) the amount of capital gain arising from the transfer of the original asset not charged under Section 45 on the basis of the cost of the new asset 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 sub-Section(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 shall be entitled to withdraw the unutilized amount in accordance with the scheme aforesaid." (e) We shall first examine the scheme of Section 54F of the Act. Section 54F is part of Chapter IV of the Act which inter alia provides for computation of total Income and for that purpose, sets out the various heads of income. Part E of Chapter VI deals with the head of income viz. Capital Gains. It provides for Computation of Capital gains and also for exemption available there under. Section 54F of the Act intr....
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....sale) then the same would be subject to the charge of capital gain tax, unless the un-utilized amounts are deposited in specified bank account as notified in terms of Section 54F(4) of the Act. The exemption would be available to the un-utilized amounts only if the mandate of sub-section(4) of Section 54F of the Act is complied with. Further the proviso to sub-section(4) of Section 54F of the Act, safe guards the Revenue where the assessee had not invested the amounts chargeable to Capital Gains within the time prescribed under sub-section(1)of Section 54F of the Act. This by providing that in such cases,Capital Gain under Section 45 of the Act would be charged on the un-utilized 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 Rs. 85.33 lakhs. The agreement for purchase of construction of flat for consideration of Rs. 69.90 lakhs was entered into by the appellant on 16th July, 1996. An amount of Rs. 35 lakhs were utili....
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....Court had no occasion 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. (l) 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 15th 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 developer / builder to construct the house and give possession of the same to the assessee. The Central Board of Direct Taxes Circular dated 15th October, 1986 was issued only in the context of Section 54 and 54(F) of the Act to clarify that an investment in a flat under the self finance scheme of Delhi Development Authority would be treated as construction for the purpose of capital gain, where an allotment letter has been issued by the Authority and facility of payment in installment is provided for the purchase of flat. It did not even remotely concern itself with the provision of Section 54(2) and/or 54F(4) of the Act with which we are concerned. The Circular only exten....
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....rji, learned Senior Counsel next submitted that in any case the issue now stands concluded in favour of the Appellant by the decision of the Karnataka High Court in K. Ramchandra Rao (supra) wherein an identical question came up for consideration and it was held that even where the assessee had not deposited the un-utilized Capital Gain in an account which was duly notified by the Central Government in terms of Section 54F(4) of the Act, 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(F) of the Act then Section 54F(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 which has not been utilized in construction and/or purchase of property before filing the return of income, must necessarily be deposited in an account duly notified by the Central Government, so as to be exempted. (p) Further, Section 54F(4) of the Act speci....
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....cedent 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 tomaintain uniformity and certainty we would adopt the view ofthe other High Court. However, with the greatest respect, we find that the decision of Karnataka High Court in K.Ramchandra Rao (supra) has been rendered sub-silentio. Therefore, we cannot place any reliance upon it to conclude the issue on the basis of that decision. (r) It was next contented by Mr.Chatterji, that liberal / beneficial construction should be given to the provision of Section 54F of the Act as its object was to encourage the housing sector which would result in the benefit being extended to the appellant assessee. In support, 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 54F 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 m....
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....gued forcefully or that one such view which is favourable to the assessee has been accepted by some Tribunal or High Court, by itself will not be sufficient to attract the principle of beneficial interpretation" In the present facts the provision of Section 54F(4) of the Act are very clear. There is no ambiguity. Thus, there is no occasion to apply liberal / beneficial 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.Malhotra, learned Counsel appearing for the revenue, Section 54F(4) of the Act deals with two classes of cases, one where purchase of new residential house is within a period of one year before the date on which capital asset is sold by assessee and second class of cases where the amount subjected to capital gains are utilized for purchase constructing ....