TaxTMI 
TaxTMI 
2025 (1) TMI 29
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....he AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. 3. During the course of assessment proceedings the Assessing Officer noted that the assessee has shown sale consideration of Rs. 10 crores on which long term capital gain has been computed at Rs. 6,55,84,209/- after deducting the indexed cost of acquisition of Rs. 3,07,79,191/- and sales expenses of Rs. 36,36,600/-. From the details furnished by the assessee, the Assessing Officer noted that the assessee has sold developmental rights to M/s. Kumar Matunga Projects LLP vide development agreement dated 29.12.2014 for Rs. 7.5 crores. The assessee has also sold the lease rights to Shri Paresh Dedhia and Shri Jayesh Dedhia vide agreement dated 03.09.2014 for Rs. 2.5 crore. Thus, the assessee has received Rs. 10 crores from the sale of development rights and lease rights. On this sale, long term capital gain is worked out at Rs. 6,55,84,209/- and the same amount is claimed being invested for purchase of house property. He, therefore, asked the assessee to substantiate the claim of deduction u/s 54F of the Act by submitting a copy of purchase deed which was shown as investment....
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....4, the holder of the occupancy rights of this property are with Dr. Vimal M Randive, Dr. Veena P Damale. Dr. Sheela Gharpure and Smt. Leela K Gharpure. Thus, this extract shows that Kumar Housing Corporation Pvt Ltd was not having full rights transferred to its name. Kumar Housing Corporation Pvt Ltd was not the owner of the disputed property. In spite of this fact that the rights in the property have been disputed and the property has not been transferred in the name of Kumar Housing Corporation Pvt Ltd, the assessee has entered into an MOU to purchase the disputed property. He further noted that the Kumar Housing Corporation Ltd. is a related concern of the assessee and the same was amalgamated in Kumar Urban Development Pvt. Ltd. (KUD). 100% shares were held by the KUD. The assessee is holding 6.31% in the said company. 5. In view of the above, the Assessing Officer summarized the facts which are as under: "4.9 The facts of the case are summarized as under 1) The assessee has claimed exemption u/s 54F of the IT Act of Rs. 6,54,84,209/- 2) It is claimed that the assessee has invested Rs: 10.6 crores for the purchase of house and the amount have been ....
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....ith Kumar Housing Corporation Pvt. Ltd. on 21.08.2015. It was submitted that Kumar Housing Corporation Pvt. Ltd. vide Conveyance Deed dated 03.05.1995 had purchased 3/4th undivided share in the above referred property from Dr. Vimala Mahadeo Randive, Smt. Dr. Veena Pradip Damale and Smt. Dr. Sheela Shashank Katre. Thus, Kumar Housing Corporation had ownership rights of 3/4th share in the above referred property. Subsequently, Mrs. Leela Gaur had entered into an oral agreement with Kumar Housing Corporation for transfer of her 1/4th share in the said property on 21.02.1995. However, Kumar Housing Corporation subsequently came to know that Mrs. Leela Gaur was trying to assign her 1/4th share in the said property to a third party, for which Kumar Housing Corporation filed a suit against Mrs. Leela Gaur, which is still pending. It was submitted that Kumar Housing Corporation had clear title of 3/4th of the share in the said property. Since subsequently Kumar Housing Corporation merged with Kumar Urban Development Pvt. Ltd., therefore, Kumar Urban Development (P.) Ltd. had entered into sale deed on 19.04.2018 and transferred the 3/4th share to the assessee and Shri Pranay Jain. 8. So....
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....ned by the family members of the assessee. 9) The MOU dated 21.08.2015 is nothing but a document made with the family members and related concerns with the purpose to suite the assessee. 10) The MOU is nothing but a colourable device prepared with the sole purpose of evading taxes. 6.3 Thus the addition in the case was made as the appellant was not able to produce any registered document to establish that she has purchased a residential house. 6.4 During the course of appellate hearing the appellant has submitted that: 2.1] In this case, during the year under consideration the assessee had sold long term capital assets and had earned capital gain of Rs. 6,55,84,209/-. In the return of income, the assessee claimed exemption u/s 54F of Rs. 6,55,84,209/- on account of investment in residential property. The learned A.O. has discussed the issue in paras 4-4.14 of his order. According to the learned A.O., the claim made by the assessee is not correct. He has stated that the assessee has claimed exemption u/s 54F on account of purchase of residential house from Kumar Housing Corporation Pvt. Ltd. The assessee had shown total payment of Rs. 10.....
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....e date of transfer of the original asset and hence, the claim of the assessee for exemption u/s 54F was not maintained. In view of above, the learned A.O. has denied the claim of exemption u/s 54F to the assessee. 2.5] The assessee submits that the denial of exemption u/s 54F is not justified at all. It is submitted that the assessee had entered into MOU with Kumar Housing Corporation Pvt. Ltd. It is to be noted that Kumar Housing Corporation Pvt. Ltd. had vide Conveyance Deed dated 03.05.1995 had purchased 3/4th undivided share in the above referred property from Smt. Dr. Vimala Mahadeo Randive, Smt. Dr. Veena Pradip Damale and Smt. Dr. Sheela Shashank Katre. Thus, Kumar Housing Corporation had ownership rights of 3/4th share in the said above referred property. Subsequently, Mrs. Leela Gaur had entered into an oral agreement with Kumar Housing Corporation for transfer of her 1/4 share in the said property on 21.02.1995. However, Kumar Housing subsequently, came to know that Mrs. Leela Gaur was trying to assigned her 1/4th share in the said property to a third party. Accordingly, Kumar Housing had filed the suit against Mrs. Leela Gaur which was still pending. 2.....
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....not disputed. The only dispute was pertaining to 1/4th share of Mrs. Leela Gaur. Now, there is no bar u/s 54F that the assessee cannot purchase a disputed property. Further, the 3/4 share which has been purchased was not disputed at all. Accordingly, the contention of the A.O. that the MOU was entered into to avoid taxes is totally incorrect 2.9] The learned A.O. has held that the MOU was a sham MOU since not registered. He has further stated that the assessee was aware of the respect of the said property. In para 4.13, the learned A.O. has was aware of the fact that the said property was transferred to Kumar Housing Corporation Pvt. Ltd. it was dispute in stated that the assessee under dispute and was not In this context, the assessee submits that as clarified earlier, Kumar Housing had 3/4th share in the said property by way of a valid sale deed. The dispute was regarding balance 1/4th share Now, as Kumar Housing had 3/4th share in the said property, one cannot say that it had no right title in the said property. Kumar Housing Corporation had also given possession receipt of 3/4th share in the said property to the assessee and her brother. Copy of the same is enclosed he....
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....ngs. Copy of the letter with the possession receipt is filed to the Assessing Officer along enclosed herewith. 3] The assessee submits that she had paid the entire consideration of 3/4th share to Kumar Housing Corporation Pvt. Ltd. before the due date of filing the return of income. Now, ultimately, the assessee along with her brother has purchased the property by way of sale deed. The assessee submits that for the exemption claiming u/s 54F the money should be utilized for purchase of house property. Even if, the physical possession has not been given, the exemption can be allowed u/s 54F. For this proposition, reliance is placed on the decision of Hon'ble Karnataka High Court in the case of B. S. Shanthakumar [233 Taxmann 347]. The relevant para of the decision of Hon'ble High Court is as under- "the words used in the sectioned are purchased or constructed. For such purpose, the capital gain realized should have been invested in a residential house. The condition precedent for claiming benefit under the said provision is the capital gain realized from sale of capital should have been parted by the assessee and invested either in purchasing a residential ....
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....as the appellant has submitted that now the sale deed is registered thus the conditions laid down in 54F have been satisfied. It further needs to be brought on record that a remand report in the case was called but it has not been received till date even after the lapse of time given to the assessing officer for filing of the remand report, thus the case is being finalized on the basis of material available on record. In view of the reply given by the appellant that since the conditions laid down in section 54F are satisfied thus the addition made is directed to be deleted. Thus the Ground of appeal of the appellant is allowed." 10. Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds: 1. Whether on the facts and in the circumstances of the case & in the law, the CIT (A) is correct in deleting the addition made by the AO on account of disallowance of exemption claimed by the assessee u/a 54F amounting to Rs. 6,55,84,209/- completely disregarding the findings of the AO on the impugned issue? 2. Whether on the facts and in the circumstances of the case & in the law, the CIT (A) erred in ....
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....he Ld. CIT(A) / NFAC submitted that the assessee earned capital gain on account of sale of developmental rights to M/s. Kumar Matunga Projects LLP vide development agreement dated 29.12.2014 for Rs. 7.5 crores. The assessee had also sold the lease rights to Shri Paresh Dedhia and Shri Jayesh Dedhia vide agreement dated 03.09.2014 for Rs. 2.5 crore. Thus, the receipt of long term capital gain is not in dispute. It is also not in dispute that such long term capital gain which has been worked out at Rs. 6,55,84,209/- is after the deduction of the indexed cost of acquisition and the expenses of Rs. 36,36,600/-. Referring to pages 4 to 26 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the MoU with Kumar Housing Corporation Pvt. Ltd. on 21.08.2015. Referring to pages 31 to 136 of the paper book, he drew the attention of the Bench to the actual sale deed that has been registered on 21.04.2018. He submitted that the asset in question i.e. bungalow was owned by four sisters. During 1995, three sisters sold 3/4th share of the property to Kumar Housing Corporation which is also not in dispute. He submitted that the assessee has purchased the said 3/4th ....
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....of deduction u/s 54F. 18. Referring to the decision of Bangalore 'A' Bench of the Tribunal in the case of Dr. Sheela Puttabuddi vs. ITO (2022) 143 taxmann.com 436 (Bangalore - Trib.), he submitted that the Tribunal in the said decision has held that the assessee can claim deduction u/s 54F even if new asset was registered in name of assessee beyond the prescribed period. 19. Referring to the decision of Hon'ble Supreme Court in the case of Fibre Boards (P) Ltd. vs. CIT (2015) 62 taxmann.com 135 (SC), he submitted that the Hon'ble Supreme Court in the said decision has held that advances paid for purpose of purchase and / or acquisition of plant / machinery, and land / building amount to utilization by assessee of capital gains under section 54G. 20. Referring to the decision of the Hon'ble High Court of Karnataka in the case of CIT vs. Mrs. Shakuntala Devi (2016) 75 taxmann.com 222 (Karnataka), he submitted that the Hon'ble High Court in the said decision has held that the utilization of capital gains in construction of residential house within a period of two years would suffice to claim exemption under section 54 irrespective of fact that neither sale transaction....
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....which have already been reproduced in the preceding paragraphs. 24. We do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. There is no dispute to the fact that Kumar Housing Corporation Pvt. Ltd. with whom the assessee had entered into MoU on 21.08.2015 was the absolute owner of 3/4th share in the property situated at House No.2409, Survey No.390/2533, General Thimaiya Road, Camp, Pune. There is also no dispute to the fact that an amount of Rs. 10.60 crores has been transferred from the account of the assessee to Kumar Housing Corporation on the date of MoU. There is also no dispute to the fact that the actual sale deed which was executed on 21.04.2018 contains the reference to the MoU dated 21.08.2015 by which date the assessee has made the payment of Rs. 10.60 crores. Under these circumstances, it has to be seen as to whether the assessee is entitled to claim deduction u/s 54F of the Act when the actual sale deed has not been entered into within the specified period and such an MoU has been entered into with a concern where the assessee and the family members are shareholders. 25. We find the Hon'ble Bombay High Court in the case of CIT vs. Dr. La....
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....claim exemption under section 54 irrespective of fact that neither sale transaction was concluded, nor registration had taken place within 2 years. The relevant observations of Hon'ble High Court read as under: "11. A reading of the above Section would make it explicitly clear that proceeds of sale of the property is to be reinvested within a period of two years, which would not be chargeable to tax. The intention of Legislature was to encourage the investment in the acquisition of residential house or construction thereof. The condition precedent for claiming benefit under said provision is that the capital gains realized from sale of a capital asset should be reinvested either in purchasing a residential house or utilised for constructing a residential building. If it is established that consideration so received on alienation of property has been invested in either purchasing a residential building or spent on construction of residential building, an assessee would be entitled to the benefit flowing from Section 54 of the Act irrespective of the fact that transaction not being complete in all respects. In other words, it has to be examined or discerned from the facts of....
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....uch, Tribunal has rightly held that date of purchase was to be taken as the basis for reckoning the period of two years prescribed under Section 54 of the Act for extending the benefit flowing therefrom. In the instant case consideration paid by assessee under Memorandum of Understanding dated 08.09.2003 would fully cover the consideration of capital gains portion for being eligible to claim exemption under Section 54 of the Act. 14. Coordinate Bench of this Court in the case of PRINCIPAL COMMISSIONER OF INCOME-TAX vs. C. GOPALASWAMY reported in [2016] 384 ITR 307 (KAR) has held that utilization of capital gains in construction of residential house would suffice to claim the benefit of Section 54 of the Act. 15. Following the same and for the reasons aforestated, we are of the considered view that substantial question of law is to be answered in the affirmative i.e., in favour of assessee and against the revenue and accordingly, it is answered." 27. We find the Hon'ble Karnataka High Court in the case of CIT vs. Smt. B.S. Shantakumari (supra) has held that once it is established by the assessee that she had invested entire net consideration in construction of r....
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.... Udaykumar's case (supra) referred to supra has examined similar issue and has held that the words used in Section 54F are 'purchased' or 'constructed' and held that the condition precedent for claiming benefit under such provision is the capital gain realized from sale of a Long-Term capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. It has also been held that if the assessee has invested money in constructing the residential house, merely because the construction was not complete in all respects or such building is yet to be completed fully or the building not being in a fit condition for being occupied, would by itself not be a ground for the assessee to be denied the benefit under Section 54F of the Act. It has been held by the co-ordinate bench as under: "The intention of the legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are 'purchased' or 'constructed'. For such purpose, the capital gain realized....
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....pose of section 54 and the date when the possession and control of the property is given to the purchaser's hands. Reliance can be made to the decision of Hon'ble Andhra Pradesh High Court in the case of CIT Vs. Shahzada begum (1988) 173 ITR 397 and also the decision of Hon'ble Bombay High Court in the case of CIT Vs. Dr. Laxmichand Narpal Nagda (deceased) 211 ITR 804 wherein the Hon'ble High Court after referring to the decision of Hon'ble Supreme Court in the case of CIT Vs. T.N.Aravinda Reddy (1979) 120 ITR 46 and the decision of Hon'ble Andhra Pradesh High Court in the case of CIT Vs. Mrs. Shahzada Begum (1988) 173 ITR 397 held that the term "purchase" employed in sub-section (2) of section 54, is not used in the sense of legal transfer and therefore, the holding of a legal title within a period of one year is not a condition precedent for availing deduction u/s. 54. The relevant paragraph of the judgment is reproduced below : "6. Taking into consideration the letter as well as the spirit of section 54 and the word "towards" used before the word "purchase" in sub-section (2) of section 54, it seems to us that the said word is not used in the sense of legal transfer and....
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....cquire machinery and building or land. This is why the expression used in 54G(2) is "which is not utilized by him for all or any of the purposes aforesaid....". It is clear that for the assessment year in question all that is required for the assessee to avail of the exemption contained in the Section is to "utilize" the amount of capital gains for purchase and acquisition of new machinery or plant and building or land. It is undisputed that the entire amount claimed in the assessment year in question has been so "utilized" for purchase and/or acquisition of new machinery or plant and land or building. 37. The High Court is not correct when it states:- "31. The word "purchase" is not defined under the Act and therefore, has to be construed in the commercial sense. In many dictionaries, the word "purchase" means the acquisition of property by party's own act as distinguished from acquisition by act of law. In the context in which the expression issued by the Legislature requires first to be understood and interpretation that suits the context requires to be adopted. Exemption of capital gains under Section 54G of the Act can be claimed on transfer of assets in case....