2014 (4) TMI 467 - AT - Income Tax

Deduction u/s 54/54F - Deletion of addition made on a/c of Long Term Capital Gain - CIT(A) stated that appellant is eligible to get benefit u/s 54/54F as claimed and AO is not legally correct in withdrawing benefit for default of builders not to allow possession of residential flat within stipulated time Held that - Certificate given by assessee has not been disputed by Revenue despite a specific query - Considering grounds agitated by Revenue on merit, no substance in them - As admittedly payments were made by assessee on specific dates pursuant to agreement entered with M/s Golden Gate Properties Ltd, Banglore on 18.12.2008 i.e within specified time - Delivery was scheduled to take place before 30.09.2009 i.e very much within the stipulated time - The fact that there was no relationship between the assessee and the builder has not been assailed by Revenue as such no connivance or collusion can be read into the Agreement - In these peculiar circumstances looking at the settled legal position on the said issue as considered by the Jurisdictional High Court amongst others, no infirmity in impugned order - Satisfied with reasoning and finding of CIT(A) Decided against Revenue.

Summary

Issues Involved:
1. Deletion of addition made on account of Long-Term Capital Gain (LTCG) by accepting additional evidence.
2. Deletion of addition made on account of LTCG relying on an agreement where possession was not given.
3. Extension of the ratio laid down in case laws regarding condonation of delay in taking possession.
4. Extension of the meaning of Cooperative Housing Societies to builders and developers.
5. Deletion of addition made on account of LTCG by holding that perceived reasonable cause can do away with the requirement of acquisition of residential property.
6. Deletion of addition made on account of LTCG by holding that AO has not proved any connivance between assessee and builder.

Detailed Analysis:

1. Deletion of Addition Made on Account of LTCG by Accepting Additional Evidence:
The Revenue's first ground of appeal was that the CIT(A) erred in law by deleting the addition of Rs. 36,40,283/- made on account of LTCG by accepting additional evidence in violation of Rule 46A of IT Rules, 1962. However, the Tribunal found this ground to be misplaced as no new evidence was filed before the CIT(A). The facts related to the agreement were already recorded in the assessment order, and the Revenue did not dispute the certificate given by the assessee. Thus, this ground was rejected.

2. Deletion of Addition Made on Account of LTCG Relying on an Agreement Where Possession Was Not Given:
The AO had disallowed the claim of Rs. 42,50,000/- and made an addition of Rs. 36,40,283/- on the grounds that the assessee had not taken possession of the flat within the stipulated period. The CIT(A) concluded that the delay in possession was due to the builder's failure, not the assessee's fault. The CIT(A) relied on various judicial pronouncements, stating that the assessee need not complete the construction and occupy the house to claim benefits under sections 54/54F. The Tribunal upheld this view, finding no substance in the Revenue's argument as the payments were made within the specified time, and the delay was beyond the assessee's control.

3. Extension of the Ratio Laid Down in Case Laws Regarding Condonation of Delay in Taking Possession:
The CIT(A) applied the principle from various case laws, including CIT vs R.L. Sood (2000) and CIT vs Sardrmal Kothari, which allowed for the condonation of delay in taking possession due to reasons beyond the assessee's control. The Tribunal agreed with the CIT(A), noting that the assessee had made substantial compliance by investing the required funds within the stipulated period.

4. Extension of the Meaning of Cooperative Housing Societies to Builders and Developers:
The CIT(A) extended the meaning of Cooperative Housing Societies, as mentioned in CBDT Circulars No. 471 and 672, to include builders and developers. The Tribunal found this extension justified, considering the assessee had made the necessary investments and the delay was due to the builder's default.

5. Deletion of Addition Made on Account of LTCG by Holding that Perceived Reasonable Cause Can Do Away with the Requirement of Acquisition of Residential Property:
The CIT(A) held that the assessee was eligible for the benefit under sections 54/54F despite the delay in possession, as the investment was made within the required period. The Tribunal agreed, emphasizing that the assessee could not be penalized for the builder's failure to deliver possession on time.

6. Deletion of Addition Made on Account of LTCG by Holding that AO Has Not Proved Any Connivance Between Assessee and Builder:
The CIT(A) noted that there was no evidence of connivance between the assessee and the builder. The Tribunal upheld this finding, as the Revenue did not challenge the lack of relationship or collusion between the assessee and the builder.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order to allow the deduction under sections 54/54F. The Tribunal found that the assessee had made the required investments within the stipulated time, and the delay in possession was due to the builder's default, not the assessee's fault. The Tribunal relied on established judicial precedents and CBDT circulars to conclude that the assessee was entitled to the claimed deductions.