Referred Sections:
Section 54 and 54F of the Act.
Section 2(47) of the Act,
Referred Cases / Judgments:
Varun Seth vs. ACIT ITA No.1388/Del/2019 dated 14.05.2019,
CIT vs. Sh. S. Sudhakar (HUF) in TC (A) No.692 of 2015 dated 25.08.2015
ITAT Chennai in the case of Smt. VA Tharabai vs. DCIT ITA No.1894 (MDS) of 2011 dated 12.01.2012.
ITAT in the case of Varun Seth vs. ACIT ITA No.1388/Del/2019 dated 14.05.2019,
The Hon’ble Supreme Court in the case of Sanjeev Lal Vs. CIT [2014] 365 ITR 389 (SC)
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A" NEW DELHI
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
I.T.A. No.5114/DEL/2016
Assessment Year: 2013-14
Abodh Borar, vs. ITO, Ward-1(1),
H. No.99, Sector-9, Faridabad.
Faridabad.
TAN/PAN: AAQPB 2015A
(Appellant) (Respondent)
Appellant by: Shri Ved Jain, Adv., Shri Ashish Goel,
CA & Mrs. Surabhi Goyal, CA
Respondent by: Shri P.S. Jhuingaleng, Sr.D.R.
Date of hearing: 12 09 2019
Date of pronouncement: 18 11 2019
ORDER
PER AMIT SHUKLA, JM
The aforesaid appeal has been filed by the assessee
against impugned order dated 21.07.2016, passed by Ld. CIT
(Appeals), Faridabad for the quantum of assessment passed
u/s 143(3) for the A.Y. 2013-14. In the grounds of appeal,
following grounds have been raised:-
"1.On the facts & circumstances of the case, the order passed by
the Learned CIT (A)is bad, both in the eye of law and on the
facts.
2. a) That having regard to facts and circumstances of the case,
the Ld. CIT (A) has erred in law and facts in confirming the
disallowance of deduction claimed u/s 54F of Rs.24,12,480/-&
deduction u/s 54 of Rs.28,77,944/- without taking into
consideration of the facts that the assessee had invested the
I.T.A. No.5114/DEL/2016 2
long term capital gain on purchase of residential plot and remain
invested for more than three years.
b) That the Ld. CIT (A) had not considered the fact that the
assessee has been allotted a residential plot by the builder, but
due to possession of the plot was given by the builder after
expiry of three years from date of capital gain hence it was not
possible for the assessee to complete the construction before the
time stipulated for claiming exemption u/s 54 and 54F of the
Income Tax Act, 1961.
It is prayed that disallowance of deduction claimed u/s 54F of
Rs.24,12,480/- & deduction u/s 54 of Rs.28,77,944/- is
unjustified, unwarranted and bad in law, which is liable to be
deleted, be deleted.
1. That the appellant begs leave and reserves the right to alter or
add to the grounds of appeal."
2. Facts in brief are that, the assessee is an individual and
had filed her return of income of Rs.29,47,390/-. In the
return the assessee has claimed an exemption of
Rs.52,90,424/- on account of the capital gain arisen to her
during the year under section 54 and 54F of the Act. The
assessee had sold two properties, against which she had
claimed deduction of Rs. 24,12,480/- u/s 54F; and deduction
of Rs. 28,77,944/- u/s 54. The entire capital gain was
invested in a residential plot in Omaxe Chandigarh Extension.
Assessee has made payment of Rs. 54,36,000/- to Omaxe on
various dates starting from 22.03.2011 to 23.06.2011. It was
further stated that possession of plot was offered by the
developer only on 11.09.2015. Assessing officer disallowed the
same on the ground that the assessee has not completed the
construction of the residential house within the period of 3
I.T.A. No.5114/DEL/2016 3
years so from the date when the capital gain has arisen to
her.
3 The CIT (A) has confirmed the order of the Assessing
Officer on same reasoning.
4. Before us, it was submitted by the AR of the assessee
that the assessee has made an investment of Rs.54,36,000/-
in acquiring a residential property at Chandigarh from Omaxe
Chandigarh Extension Developers Pvt. Ltd. by 23.06.2011 as
against exemption of Rs.52,90,424/- claimed by her. The
assessee has filed copy of the allotment letter. The assessee
also submitted the copy of agreement dated 05.06.2011
entered into by the assessee with the developer. As regard the
construction he submitted that the same could not be done
as the developer could not transfer the possession to the
assessee despite there being a clear condition in the
agreement that the possession will be given within a period of
18 months for the date of the allotment letter. Thus, the
reason for delay in construction was beyond assessee's
control. It was submitted by the Ld. AR that the total cost was
Rs.63,03,005/- and the same stood paid and hence the
assessee had discharged all her obligation. Further, there is
no dispute about the fact that the assessee had made
investment it is only because of the construction being not
done within a period of 3 years, the benefit of section 54/54F
has been denied. The Ld. AR placed reliance on the judgment
of coordinate bench of the ITAT in the case of Varun Seth vs.
I.T.A. No.5114/DEL/2016 4
ACIT ITA No.1388/Del/2019 dated 14.05.2019, where on
similar facts it was held that the assessee having utilized the
amount in the acquisition of the land the intention of the
statute as provided in section 54 has been stand satisfied as
the delay in construction was by reason beyond the control of
the assessee. The Ld. AR also relied upon the following
judgment:
1. CIT vs. Sh. S. Sudhakar (HUF) in TC (A) No.692 of 2015
dated 25.08.2015
2. ITAT Chennai in the case of Smt. VA Tharabai vs. DCIT
ITA No.1894 (MDS) of 2011 dated 12.01.2012.
5. In reply the Ld. DR placed reliance on the order passed
by the AO and the CIT (A).
6. We have heard the rival submission and perused the
relevant finding given in the impugned orders passed by the
authorities below and the paper book filed by the assessee.
The only issue in the appeal is the denial of deduction
claimed by the assessee under section 54 and 54F of the Act.
It is an undisputed fact that, firstly, the assessee has earned
capital gain and has invested the same in purchase of a
residential plot; secondly, the assessee has made a total
investment of Rs.63,03,005/- which is more than the
exemption of Rs.52,90,424/- claimed by her; and lastly, the
assessee made this investment within the prescribed period.
This payment was made to the developer Omaxe Chandigarh
I.T.A. No.5114/DEL/2016 5
Extension Developers Pvt. Ltd. Consequent to that, the
developer issued allotment letter and also entered into an
agreement dated 05.07.2011. As per the agreement the
developer was supposed to hand over the possession of plot
within 18 months from the date of allotment letter. However,
the developer did not deliver the possession. Hence, the
assessee could not complete the construction within the
prescribed period of 3 years. This delay in construction was
not attributable to the assessee. Thus, the AO and the CIT (A)
have denied the exemption in view of the provision of section
54 and 54F of the Act. Further, the AO and the CIT (A) both
have ignored the fact that the assessee has made a full
payment to the developer and such payment was more than
the amount of the deduction claimed by the assessee. Since,
the delay was not on the part of the assessee but on the part
of the developer and thus it was beyond the control of the
assessee. In such circumstances, we are of the view that
benefit of deduction cannot be denied to the assessee. Our
view is supported by the judgment of coordinate bench of the
ITAT in the case of Varun Seth vs. ACIT ITA
No.1388/Del/2019 dated 14.05.2019, wherein it has been
held as under:-
"9. The real issue in the present case is that new residential
house has not been constructed within a period of three years
from the date of the transfer of the residential property which
resulted in the long-term capital gain. On this issue, the
assessee's contention has been that inspite of having made
payment for the plot, the Jaypee (Developer) failed to offer
possession and execute sale deed even up till the expiry of three
I.T.A. No.5114/DEL/2016 6
years from the date of sale of property by him, because of
reasons beyond his control which cannot be disputed. This vital
fact assumes great significance as assessee had taken all the
steps to make the investment for the purchase of house, and also
assessee had deposited 25,10,000/- in the capital gain account
with PNB so as to construct the house. This unequivocally
demonstrate that assessee really intended to construct the new
residential house thereon. It was based on this bonafide intention
assessee had claimed exemption under section 54 of the Act.
Without the purchase of land, house could not have been
constructed. The first step was to purchase the land, which was
done. Thereafter the developer was to handover the plot, so that
assessee could have constructed the house within time allowed of
2 years. However, no step could be put forward thereafter
because possession of land was not given by the Developer, for
reasons beyond the control of the assessee. If an assessee sells
his house property and utilises the money for acquiring a plot for
the construction of the house and if facts and circumstances point
out that assessee intended to construct the house, which has
been found so, then it is clear that he wants to avail exemption as
provided under the law. Now if the developer after receiving the
money could not fulfill the obligation within time, then can
assessee be held responsible for not complying the law.
10. The Hon'ble Supreme Court in the case of Sanjeev Lal Vs. CIT
[2014] 365 ITR 389 (SC) has laid down the purposive
interpretation of section 54 to give a liberal approach to the
assessee who clearly intended to claim benefit of section 54. Their
Lordships held that section 54 is a beneficial provision and is to
be construed keeping in view the intention of the Legislature to
give relief in the matter of payment of tax on the long-term capital
gain, relevant observation of their Lordships reads as under: -
"22. In addition to the fact that the term "transfer" has
been defined under section 2(47) of the Act, even if looked
at the provisions of section 54 of the Act which gives
relief to a person who has transferred his one residential
house and is purchasing another residential house either
before one year of the transfer or even two years after
I.T.A. No.5114/DEL/2016 7
the transfer, the intention of the Legislature is to give
him relief in the matter of payment of tax on the long-
term capital gain. If a person, who gets some excess
amount upon transfer of his old residential premises and
thereafter purchases or constructs a new premises
within the time stipulated under section 54 of the Act,
the Legislature 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 principles with regard to the
interpretation of statute pertaining to the tax laws, one
can very well interpret the provisions of section 54 read
with section 2(47) of the Act, i.e., the definition of
"transfer", which would enable the appellants to get the
benefit under section 54 of the Act."
11. If we apply the law as clarified by the Hon'ble Apex Court, on
the facts of the instant case, then we are of the opinion that the
amount utilized by the assessee in the acquisition of land should
be construed as amount invested in purchase/ construction of
residential house. The intention of the statute as provided in
section 54 has been fully satisfied by the assessee in the present
I.T.A. No.5114/DEL/2016 8
case. Thus, on the facts of the present case, we hold that the
assessee is entitled for exemption under section 54 of the Act and
AO is directed to allow the exemption us/ 54."
7. Respectfully following the above decision which is
applicable on the facts of the present case also, we hold that
assessee is entitled to the exemption claimed by her and
direct the AO to delete the disallowance.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 18th November, 2019.
Sd/- Sd/-
[N.K. BILLAIYA] [AMIT SHUKLA]
[ACCOUNTANT MEMBER] JUDICIAL MEMBER
DATED: 18th November, 2019
PKK:
|
