TaxTMI 
TaxTMI 
2020 (11) TMI 312
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....from the records are that the assessee is an individual having distributorship of Hindustan Unilever Ltd. Assessee filed its original return of income on 30.09.2013 u/s 139(4) declaring total income at Rs. 1,62,51,730/-. The case was selected for scrutiny through CASS and notice u/s 143(2) was issued on 04.09.2014 followed by issuance of questionnaire u/s 142(1) on 13.10.2015. During the course of assessment proceedings Ld. A.O observed that there was a transaction of sale of property during the year. Assessee has earned Long Term Capital Gain and exemption u/s 54F of the Act at Rs. 1,06,95,941/- was claimed on account of utilizing the sale consideration to give advance for purchase of residential house at Bhopal and Thane for a consideration of Rs. 1,97,12,200/-. On examining the details Ld. A.O observed that before filing of return of income for Assessment Year 2013-14 assessee had invested Rs. 39,28,746/- only and remaining amount was not deposited in the capital gain deposit account scheme. Ld. A.O taking the basis of Rs. 39,28,746/- as an investment in residential house before the due date computed the eligible amount for deduction u/s 54F of the Act at Rs. 31,12,173/- and fur....
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....ion 54F(4) and did not make any deposit in the special bank account under the Capital Gains Accounts Scheme is upheld and confirmed. 8. In ground No. 2 it has been requested that the payment made to builder at Rs. 39,28,746/- should be allowed in full. It is observed :that the A.O._has determined the Proportionate deduction as per the provision of section 54F(1)(b). Accordingly, the deduction amount came to Rs. 31,12,173/-. I find no infirmity in the computation made by the A.O. This ground is therefore, rejected. 9. Another issue in ground No. 2 to be decided is whether the deduction should be allowed in full or restricted to 50 in view of joint ownership with wife of the new house. It has been argued that the determination of proportionate deduction u/s 54F(1)(b) Rs. 31,12,173/- should be allowed in full as the entire investment was made by applicant and the co owner has not made any investment in this flat. 10. It is observed that the entire investment before submission of return was made by the appellant. In support of payments the account of M/s. K.D. Reality Pvt. Ltd., where the appellant is a director, has been filed showing withdrawal of Rs. 10,00....
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....e consideration came out to Rs. 135,00,000/- * This sale agreement of the plot was registered in March 2013 and thus the capital gain arose in AY2013-14 as under: Assessee's share of sale consideration Rs. 1,35,00,000/- Less- Indexed cost of acquisition Rs. 28,04,059/- Long Term Capital Gain Rs. 1,06,95,941/- Clamed exempt in the return u/s 54F Rs. 1,06,95,941/- * The assessee in order to claim exemption u/s 54F, was required to invest an amount of Rs. 1,35,00,000/- before 31/03/2015 towards purchase of another residential house. * The assessee had entered in a purchase agreement ofa flat for Rs. 1,97,12,200/- on 22/5/14 and also made part payments amounting to Rs. 39,28,746 before the due date of filing return u/s 139(1) - page 2 of assessment order total of sl.no. 1 to 4. Upto 31.03.2015, the assesse had made total payments towards purchase of flat as under: Date Amount Reference 04.04.2013 10,00,000 Pg 2 of assessment order 30.04.2013 15,00,000 Pg 2 of assessment order 31.05.2013 13,18,072 Pg 2 of assessment order 19.06.2013 1,10,674 Pg 2 of assessment order Upto due date ....
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....mount under capital gain account scheme. * The present appeal lies against the order dated 23.05.2018 of Ld. CIT (A)-1, Bhopal for the assessment year 2013-14. GROUND That on the facts and in circumstances of the case and in law, the Ld CIT(A) erred in maintaining the disallowance of Rs. 75,83,229/- made by the Ld. AO u/s 54F of the I.T. Act. (Exemption claimed u/s 54F - Rs. 1,06,95,941 - claim restricted by ld AO to - 15,56,356 Addition made by AO - Rs. 91,39,585 - Further relief by CIT(A) - 15,56,356 Therefore net disputed disallowance = Rs. 75,83,229/- which is under appeal before Hon'ble ITAT} To avail the exemption u/s 54F the applicant qualified all the necessary conditions: * Investment of net sales consideration in the purchase of new residential house completed within two years from the date of transfer. * The new Unit purchased is also registered with Sub registrar, before competent authority. * The evidences are placed on record. * On the basis of above, exemption as claimed should be allowed. Following are the circumstances under which exemption is not available u....
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....lature does not want him to be burdened with tax on the long-term capital gain and, therefore, relief has been given to him in respect of paying income-tax on the long-term capital gain. The intention of the Legislature or the purpose with which the said provision has been incorporated in the Act, is also very clear that the assessee should be given some relief. Though it has been very often said that common sense is a stranger and an incompatible partner to the Income-tax Act and it is also said that equity and tax are strangers to each other, still this court has often observed that purposive interpretation should be given to the provisions of the Act. In the case of Oxford University Press v. CIT [2001] 3 SCC 359 this court has observed that a purposive interpretation of the provisions of the Act should be given while considering a claim for exemption from tax. It has also been said that harmonious construction of the provisions which sub-serve the object and purpose should also be made while construing any of the provisions of the Act and more particularly when one is concerned with exemption from payment of tax. Considering the afore stated observations and the princi....
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....Humayun Suleman Merchant vs. Chief Commissioner of Income Tax (supra) will not be applicable on the assessee since Hon'ble Supreme Court in the case of Sanjeev Lal v/s CIT (supra) 365 ITR 389 has laid down the purpose of interpretation of Section 54 holding that liberal approach should be given to the assessee who clearly intend to claim the benefit of Section 54. Hon'ble Apex Court further held that Section 54 is a beneficial provision and is to consider keeping in view the intention of the legislature to give relief in the matter of payment of tax on the Long Term Capital Gain. 10. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments and decisions referred by both the parties. The sole grievance of the assessee is against the finding of Ld. CIT(A) confirming the disallowance of Rs. 75,83,299/- u/s 54F of the Act. We observe that on 22.2.2008 the property was purchased from Trimurti Enterprises, Thane and assessee having 60% share of the property made an investment at Rs. 18,13,950/-. This property was sold in March, 2013 for a consideration of Rs. 2,25,00,000/-, the assessee being 60% owner received the sale ....
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....by way of purchase before one year or within two year after the date on which the transfer took place or within 3 years from the date of transfer has constructed residential house. There is one more condition wherein if the assessee is not able to apply the sale consideration for purchase of new residential house before the due date of filing of return of income then such sale consideration in view of Section 54F(4) of the Act shall deposit the unused sale consideration in a capital gain account with the authorized banks as notified by the Central Government. In the instant case Ld. CIT(A) observed that the assessee after having paid an advance sum of Rs. 39,28,746/- has not deposited the remaining amount in a capital gain account before making the final payment of Rs. 97,44,260/-. Ld. CIT(A) thus held that since the assessee has violated the provisions of Section 54F(4) of the Act and has not deposited the amount in capital gain account the assessee should be denied the benefit of exemption/capital gain u/s 54F of the Act at Rs. 75,83,299/-. 12. Now the question before us is that in a situation where the assessee has utilized the sale consideration in purchase of residential ho....
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....owned on the date of transfer of the original asset, is chargeable under the head "Income from house property". Explanation.-For the purposes of this section,- "net consideration", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, 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 such new asset as provided in clause (a), or, as the case may be, clause (b), of subsection (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. ....
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....rged 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 unutilised amount in accordance with the scheme aforesaid. Explanation.-[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] 14. The contention of the Ld. Counsel for the assessee is that since the assessee has utilized the total sale consideration for the purchase of new house property within two years from the date of transfer of original asset and substantive condition has been fulfilled, no adverse action should have been taken by the Ld. A.O for not fulfilling the procedural requirement i.e. depositing the unutilized sale consideration in capital gain account framed by the Central Government before the due date of filing of return of income u/s 139 of the Act. 15. Ld. Counsel for the assessee has submitted that the decisions of Co-ordinate Bench Kolkatta in the case of Sunayana Devi V/s ITO (supra) and the decision of Co-ordinate Bench of Chandigarh in the case of Mrs. Seema Sabharwal v/s ITO (supra) are squarely applicable in the case of the assessee ....
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....construction received by such transfer of a site which is owned by him as is clear from the language used. It is open for the assessee to put up a residential construction or to purchase a residential house. It is not the requirement of law that he should purchase a residential site and then put-up construction. Therefore, in the instant case admittedly the assessee has purchased a vacant site on 31.3.2001. He sold the original asset on 27.8.2003 on which date he was already owning a site. In fact even before sale of the original asset he had started construction on such site by availing loan from the Bank. In terms of Section 54F(1) all investments made in the construction of the residential house of the said site within a period of one year prior to 27.8.2003 would be eligible for exemption under Section 54F(1). Similarly all investments in the said construction after 27.8.2003 within a period of three years there from is also eligible for exemption. Therefore, the argument that such investment in putting up a residential construction cannot be made on a site owned by him to be eligible for exemption is without any substance. Both the Appellate Authorities have ....
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....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 specifically provides that the amounts which have not been invested either in purchase / construction of house have to be deposited in the specified accounts before the due date of filing of return of income under Section 139(1) of the Act. The aforesaid aspect it appears was not noticed by the Karnataka High Court. In any case, the entire basis of the decision of the Karnataka High Court in K. Ramchandra Rao (supra) is the intent of the parties. In interpreting a fiscal statute one must have regard to the strict letter of law and intent can never override the plain and unambiguous letter of the law. It is true that normally while construing an all India Statute like the Income Tax A....
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....dra Rao (supra) was pronounced on 14.07.2014 and that of Hon'ble High Court of Bombay in the case of Humayun Suleman Merchant Vs CIT (supra) was pronounced on 18.08.2016. Subsequently on November 05, 2019 Hon'ble High Court of Madras in the case of Venkata Dilip Kumar V/s CIT, Chennai (supra) (2019) 111 Taxman.comm 180 (Madras) while adjudicating the similar issue relating to provisions of Section 54 of the Act referred to the judgment of Hon'ble High Court of Karnataka in the case of CIT V/s K Ramachandra Rao (supra) and followed the ratio laid down therein. Relevant extract is reproduced below:- "17. Having come to the conclusion that the assessee had utilised the net consideration in construction of a house within the period of three years from the date of transfer, the question would be whether the absence of deposit of unutilised net consideration in a specific bank account as is required u/s 54F(4) of the Act, should the Assessee be denied the benefit of deduction u/s 54F of the Act. On this issue the Id. counsel for the assessee brought to our notice the decision of the Hon'ble Karnataka High Court in the case of CIT v. K Ramochondra Rao 2015 56 Taxman.c....
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....a) are in favour of the assessee laying down ratio that in case of exemption claimed u/s 54F of the Act if the assessee fulfills the substantive conditions provided u/s 54F(1) of the Act then the assessee should not be denied the exemption for not complying to the procedural requirement of Section 54F(4) of the Act relating to deposit of unutilized sale consideration up to the due date of filing of return of income in the capital gain account scheme. On the other hand Hon'ble High Court of Bombay in the case of Humayun Suleman Merchant Vs CIT (supra) holding against the assessee has held that since the provisions of Section 54F(4) are very clear and there is no ambiguity, thus there is no occassion to apply liberal/beneficial construction while interpreting the section and therefore the assessee who has not utilized the sale consideration from sale of capital asset for purchase of residential house before one year and after two years from the date of sale of original asset or has not constructed new residential house within three years then the unutilized sale consideration as on the due date of filing of return of income for the year in which original asset is sold has to be d....
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....eneficial provision we would like to take a liberal approach in the case of assessee for computing the tax on Long Term Capital Gain. 23. On perusal of the decision of Co-ordinate Bench Kolkatta in the case of Sunayana Devi Vs ITO dated 13.9.2019 (supra), we find that similar issue came for adjudication and the same has decided in favour of the assessee after placing reliance on the Judgment of Hon'ble Karnataka High Court in the case of CIT v/s K. Ramachandra Rao (supra). Relevant extract of the decision of Coordinate Bench is reproduced below:- 17. Having come to the conclusion that the assessee had utilised the net consideration in construction of a house within the period of three years from the date of transfer, the question would be whether the absence of deposit of unutilised net consideration in a specific bank account as is required u/s 54F(4) of the Act, should the Assessee be denied the benefit of deduction u/s 54F of the Act. On this issue the Id. counsel for the assessee brought to our notice the decision of the Hon'ble Karnataka High Court in the case of CIT v. K Ramochondra Rao 2015 56 Taxman.com 163/230 Taxman 334 Kar. In the aforesaid decision t....
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....isions of section 54 of the Act herein under:- "Profit on sale of property used for residence. 54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (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, one residential house in India, 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 the 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 betwee....
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....planation.--[Omitted by the Finance Act, 1992, w.e.f. 1.4.1993" 9. A perusal of the above reproduced provisions of section 54 of the Act reveals that it deals with the capital gains earned on sale of property used for residence and as per the provisions of sub section (1) of section 54 of the Act, if an assessee, after sale of his residential property, has with in a period of one year before or two years after the date of such transferor with in a period of three years , constructs a residential house, the capital gains will not be charged to tax upto the extent of the amount spent on the purchase or construction of residential house. Sub Section (1) of section 54 of the Act is a substantive provision enacted with the purpose of promoting purchase / construction of residential houses. However, sub section (2) of section 54 is an enabling provision which provides that the assessee should deposit the amount earned from capital gains in a scheme framed in this respect by the Central Government till the amount is invested for the purchase / construction of the residential house. This provision, in our view, has been enacted to gather the real intention of the assessee to inves....
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....oves that he has already invested the capital gains on the purchase / construction of the new residential house within the stipulated period, the benefit under the substantive provisions of section 54(1) cannot be denied to the assessee. Any different or otherwise strict construction of sub section (2), in our view, will defeat the very purpose and object of the exemption provisions of section 54 of the Act. Our above view, is fortified with the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Shri K Ramachandra Rao, ITA No. 47 of 2014 c/w ITA No. 46/2014, ITA No. 494/2013 and ITA No. 495/2013, decided vide order dated 14.7.2014 wherein the Hon'ble High Court has directly dealt with this issue while interpreting the identical worded provisions of section 54F(2) of the Act. The following question of law was framed by the Hon'ble High Court on this issue:- "2) When the assessee invests the entire sale consideration in construction of a residential house within three years from the date of transfer can he be denied exemption under Section 54F on the ground that he did not deposit the said amount in capital gains account scheme before th....
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....e case of Sunayana Devi V/s ITO (supra) and Chandigarh Bench in the case of Mrs. Seema Sabharwal V/s ITO (supra) reliance has been placed on the judgment of Hon'ble High Court of Karnataka in the case of CIT V/s K. Ramachandra Rao (supra) ITA No.47/2014 dated 14.7.2014 and a liberal view has been taken for the benefit of an assessee if he/she purchases within two years or construct within 3 years a residential house then the exemption u/s 54F cannot be denied for the reason that the assessee failed to deposit un utilized amount in capital gain account scheme before the due date prescribed u/s 139(1) of the Act. 26. Examining the facts of the instant case in the light of above two decisions, we find that both are squarely applicable in the case of assessee as in the instant case also after giving advance of Rs. 39,28,746/- the remaining amount of the sale consideration i.e. Rs. 95,71,254/- was not deposited in the capital gain account but finally within two years the assessee has purchased new residential house at Thane and against the sale consideration of Rs. 1.35 crores received from sale of original capital amount has invested Rs. 1,36,73,006/-. 27. Here we would like ....