TaxTMI 
TaxTMI 
2017 (11) TMI 1734
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.... Term Capital Gain (LTCG) on - sale of property at Pune on account of denial of exemption u/s 54 of the Act and other variations in computation of capital gains 3,16,74,073/- (ii) P.F accumulated Balance - 37,93,588/- (iii) Interest thereon - 44,07,195/- (iv) Annuity from LIC - 15,391/- 2.2 Aggrieved by the order of assessment dated 19/2/2015 for asst. year 2012-13, the assessee preferred an appeal before the CIT(A) - 1, Bangalore. The ld CIT(A) disposed the assessee's appeal vide order dated 28/1/2016 allowing partial relief. In this order, inter alia, the ld CIT(A) deleted the addition made by the Assessing Officer ('AO') on account of denial of exemption u/s 54 of the Act, but has not rendered any finding on the variations made by the AO to the computation of LTCG. In respect of the addition on account of withdrawal from PF amount, the ld CIT(A) has deleted the entire addition of Rs. 82,00,783/-without rendering any finding in respect of the interest received on PF balance. 3. Aggrieved by the order of the CIT(A)-1, Bangalore dated 28/1/2016 for asst. year 2012-13, Revenue has preferred this appeal raising the following grounds:- "1. ....
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....ly by adjudicating the issue of non-completion of project within the prescribed time limit and without adjudicating on the several other issues considered by the Assessing Officer for concluding the assessee to be ineligible for the benefit of exemption u/s.54. 7. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) be reversed and that of the Assessing Officer restored. 8. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of appeal." 4. The assessee has also filed cross objections ('CO') which are as under: "1. The order passed by the Commissioner of Income tax (Appeals) is bad in law to the extent that the ground raised on re-computation of the long term capital gain by reducing the cost of acquisition by the assessing officer has not been dealt at all by the Commissioner of Income tax (Appeals). The Commissioner of Income tax (Appeals) may be directed to consider this ground being appealed before him. 2. The order passed by the Commissioner of Income tax (Appeals) is bad in law to the extent that t....
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....accumulated balance due to an employee will be only upto the date of cessation of employment. In the case of the assessee, employment with Wipro Ltd., ceased in the financial year 2002-03. The interest portion on the maturity amount withdrawn after retirement which becomes taxable in the hands of the assessee under the head 'income from other sources' has not been declared and offered to tax by the assessee in the asst. years 2003-04 to 2012-13. The ld DR for Revenue was heard in support of the grounds raised and submitted that since the assessee did not make the claims for exemption u/s 10(12) of the Act in the return of income, the same is not allowable in terms of the decision of the Hon'ble Apex Court in the case of Goetze India Ltd., (284 ITR 383) (SC). 6.2 Per contra, the ld AR reiterated the submissions put forth before the ld CIT(A) (placed at pg. 69 to 76 of paper book) which are extracted hereunder:- 3.1 The appellant was an employee of Wipro Ltd., 3.2 The appellant retired from this company on April 1, 2002 after serving the company approximately for a period of 26 years (from 15th May 1976 to 31st March 2002). 3.3 In the course of employmen....
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....lant, the addition is made. 3.13 The relevant provisions of law are as under:- Sub-section 12 of Section 10, "The accumulated balance due and becoming payable to an employee participating in a Recognized Provident Fund to the extent provided in Rule 8 of Part A of the 4th Schedule." 3.14 Rue 8 of Part A of the 4th Schedule reads as under:- "The accumulated balance due and becoming payable to an employee participating in a Recognized Provident Fund shall be excluded from the computation of his total income - (i) If he has rendered continuous service with his employer for a period of 5 years or more Or (ii) If, though he has not rendered such continuous service, the service has been terminated for reason of the employee's ill-health or by the contraction or discontinuance of the employer's business or other cause beyond the control of the employee. 3.15 Dissecting section 10(12) of the Act, one would get the following. a) The exemption is for the accumulated balance due and becoming payable b) To an employee c) Who is participating in a RECOGNISED PROVIDENT FUND d) To t....
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....e to him is transferred from the recognized provident fund maintained by the former employer to a recognized provident fund maintained by the new employer. In view of the position that an employee does not receive any immediate benefit by the mere transfer of the amounts to his credit from one account to another and remains in virtually the same position as he would have been, had former employer, the withdrawal of the tax relief in such cases results in hardship to the employees. With a view to avoiding this hardship, the Finance Act, 1974 has made a specific provision in the aforesaid rule 8 to secure that exemption from income-tax is not withdrawn in such cases. Further, it has also been provided that in cases where the accumulated balance due and becoming payable to an employee includes any amount transferred from any other recognized provident fund maintained by his former employer, then, in computing the period of continuous service of 5 years for the purposes of the aforesaid provision, the continuous service rendered by the employee with such former employer will also be taken into account." 3.18 In this connection, it is also relevant to refer to sub Rule 3 of Rul....
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.... not applicable to the case at hand. 3.26 In any case, the appellant further wishes to submit as follows a) Under Section 4 of the Act, tax is to be levied on the total income of the previous year. b) Total income is defined in Section 2(45) as the income referred in Section 5 computed in manner laid down in the Act. c) Article 265 of the constitution of India reads as under: "No tax shall be levied or collected except by authority of law". d) Assuming (without admitting) there was an oversight of not mentioning this as Tax- Exempt Income in the relevant year; it is a well-established principle of law that nobody can take advantage of legal mistake committed by anybody. The taxability of a receipt under the Income tax Act, 1961 depends on / governed by the provisions of the said Act and not on the view which the parties may take as to their rights and liabilities. It is open for an assessee to avail the remedy and point out the mistake, if he is not really liable to tax, even though he might have, by his conduct, acquiesced to the taxability. There can be no estoppel against statute. [CIT v. Bharat General Reinsurance Co. Ltd [1971] 81 I....
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....er is not estopped from pointing out a mistake in the assessment though such mistake is the result of evidence adduced by the taxpayer. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done due to some mistakes on its part. Proceedings before the tax authorities are not adversarial proceedings and the assessee should not be placed at under advantage because of his inadvertent and bona fide mistakes. 3.27 From the above, it is very clear that the entire amount withdrawn from PF account is not liable for taxation and the addition made on both the counts is to be deleted in entirety." 6.3.1 We have heard the rival contentions and perused and carefully considered the material on record: The facts of the case as emanate from a perusal of the records in that the assessee, was an employee of Wipro Ltd., and retired from the company on 1/4/2002. As on the date of retirement the accumulated provident fund balance of contributions plus interest was 37,93,588/-. The assessee did not withdraw the same immed....
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....ccordance with law. In coming to this view, we, inter alia, draw support from the decision of the Hon'ble Apex Court in the case of NTPC Ltd., (229 ITR 383). We are therefore of the view that it was incumbent on the ld CIT(A) to examine the assessee's claim which was admittedly put forward before the AO in the course of assessment proceedings. 6.3.3 However in respect of the accrued interest of Rs. 44,07,195/- from 1/4/2002 to 11/4/2011 on the accumulated balance of Rs. 37,93,588/- as on 1/4/2002, the same has accrued to the assessee after he retired from Wipro Ltd., and it cannot be said that such accrual of the interest was qua an employee. The exemption u/s 10(12) of the Act is limited to the accumulated balance due and payable to an employee upto the date of retirement/end of employment. In this view of the matter, we are of the considered opinion that the accumulated interest of Rs. 44,07,195/- post retirement of the assessee on 1/4/2002 is not eligible for exemption u/s 10(12) of the Act. We therefore hold that the AO was right in holding that the said interest was exigible to tax in the assessee's hands. However, since the assessee is following mercantile system of accoun....
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....on u/s 54 of the Act mainly on the ground that the construction of the new house property was not completed within a period of three years from the date of sale of the Pune property. The AO was also of the view that since the Pune property was sold on 3/11/2011 and that the assessee had commenced investing in new property on 15/10/2010 itself; which was more than one year prior to the date of sale of the said property; the assessee was not entitled for exemption u/s 54 of the Act for construction of the new house. 7.2.3 On appeal, the ld CIT(A) allowed the assessee's claim for exemption u/s 54 of the Act on the ground that exemption sections are to be construed liberally and the assessee having done whatever was legally required of him was entitled to exemption u/s 54 of the Act. 7.3 The ld DR for Revenue was heard in support of the grounds raised (Supra). According to the ld DR since the construction of the new house has not been completed within the eligible period of 3 years from the date of sale of the old property, the assessee has failed to comply with the provisions of law and hence is not eligible for exemption u/s 54 of the Act. The ld DR further contended that since....
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....d not be denied the benefit of exemption u/s 54 of the Act for no fault on his part. In support of the above contentions, the ld AR of the assessee has inter alia, cited/placed reliance on the following judicial pronouncements:- (i) ITO v Bina Gupta (ITA No: 4074/Delhi/2012) wherein the view, that the assessee cannot be penalized and denied the benefit u/s 54/54F of the Act for the default by the builder which is beyond the control of the assessee, was upheld. (ii) CIT v R.L. Sood (2000) 245 ITR 727 (Del); (iii) CIT v B.S. Shantakumari (2015) 60 Taxman.com 74 (Karnataka): (iv) CIT v Sambandam Udaykumar (2012) 345 ITR 389 (Karnataka): (v) CIT v Sardarmal Kothari (2008) 302 ITR 288 (Mad). The ld AR for the assesee contends, that in view of the ratio of the above judicial pronouncements, despite the non completion of the construction of the new property by the builder, the assessee would be entitled to the benefit of exemption u/s 54 of the Act. 7.4.3 With respect to the exemption claimed u/s 54F of the Act on account of construction of the new house, the ld AR submitted that what was material was not the dates of payment but that the....