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TMI Blog2016 (1) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in the aforesaid terms. Disallowance of the claim of exemption u/s.54F - Held that:- Transfer of any rights in the capital asset would constitute transfer within the meaning of section 2(47) of the Act and the assessee is eligible to claim benefit u/s. 54 on such transfer. In view of our above findings, we hold that the assessee is eligible to claim exemption u/s.54F of the Act. - Decided in favour of assessee. - ITA No. 1786/PN/2013 - - - Dated:- 6-11-2015 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri V.L. Jain For The Revenue : Shri B.C. Malakar ORDER PER VIKAS AWASTHY, JM : The appeal has been filed by the assessee against the order of CIT(A)-III, Pune dated 01-08-2013 for the A.Y. 2003-04. 2. The assessee has assailed the order of CIT(A) on the following grounds : 1. The Ld.CIT(A) has erred on facts and in law in confirming the assumption of jurisdiction u/s.148. 2. The Ld.CIT(A) has further erred on facts and in law in confirming the addition of ₹ 70,00,000/- on account of full long term capital gain on transfer of development rights of a co-owned property. 3. The Ld.CIT(A) has further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee preferred an appeal before CIT(A). The CIT(A) vide impugned order upheld the finding of AO on both the above accounts. The assessee had also impugned the assessment proceedings u/s.147 on the ground that the objections of the assessee were not decided by the AO separately. Thus, there was violation of the principles of nature justice. The CIT(A) rejected the contentions of the assessee on the ground of jurisdiction as well. Now the assessee is in second appeal before the Tribunal assailing the finding of the CIT(A) on the ground of jurisdiction as well as on merits. 6. Shri V.L. Jain appearing on behalf of the assessee submitted that no reason for invoking the jurisdiction u/s.147 was mentioned in the notice issued u/s.148 to the assessee. No separate speaking order was passed by the AO on the objections filed by the assessee. The AO was duty bound to decide the objections of the assessee in the first instances before taking up the assessment proceedings. The CIT(A) in his order has admitted the fact that the AO has not passed speaking order on the objections yet he upheld the action of the AO in invoking the jurisdiction u/s.147 of the Act. In support of his submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in denying deduction of section 54F to the assessee. As per the provisions of section 54F, the assessee is eligible to get benefit of deduction if the capital gain arising from transfer of any long term capital asset is utilized within a period of 1 year before or 2 years after the date of the transfer of capital asset. In the present case, the assessee had made investment towards purchase of flats on 28-08-2000. The assessee had executed development agreement with respect to her 1/4th share on 28-07-2001. The confirmation deed was executed in pursuance to the original development agreement on 13-12-2002. Thus, the assessee had made investment within 1 year before the transfer of development rights. The authorities below have erred in computing the period of one year from the date of confirmation deed. 9. The Ld. AR further submitted that the term transfer as defined u/s. 2(47) of the Act would include the extinguishment of any rights in the capital asset. Thus, after the execution of transfer of development agreement there was extinguishment of rights in the share of property acquired by the assessee through WILL. To support his submissions the Ld. AR placed reliance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as placed reliance in support of his submissions. We would like to first take up Ground Nos. 2 and 3 in the appeal assailing the order of CIT(A) on merits. In Ground No.2 the assessee has assailed the finding of CIT(A) in confirming the addition of ₹ 70 lakhs on account of long term capital gain on transfer of development rights of undivided share in a property. The assessee had acquired the property from her mother through WILL dated 25-09-1991. The relevant extract of recital in the WILL is reproduced hereunder : The remaining part of the ground floor which is now used by the firm of M/s. Indira Maternity Home, Ist Floor, and 2nd Floor of my property called as Madhu Ranjan situated at 1277, Shivajinagar, Jangali Maharaj Road, Pune 411 004, shall pass on to my daughter Dr. Mrs. Ranjana who can occupy and enjoy that property till her death with a reservation that she has no right to gift, donate, sale leaseout, alienate or dispose off the same in any form or nature and after her death, property will pass on to my grand children, i.e. Gauri, Rohit and Radhika in equal proportion. A perusal of the aforesaid recital shows that the assessee has only lifetime interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceed to decide this issue it would be essential to have the glimpse of the important dates. Dates Events 28-08-2000 Assessee purchased two flats 801 and 802 at Twin Towers, Aundh, Pune 28-07-2001 Assessee entered into a Development Agreement with Smt. Komal Kewal Kumar Jain of Kumar Group for surrender of her occupancy/tenancy rights in respect of her 1/4th share in property 1277, Bhamburda Town, Jangali Maharaj Road, Pune. 13-12-2002 Deed of confirmation executed between assessee and other co-owners on the one part and Smt. Komal Kewal Kumar Jain and others (Kumar Group) on the second part in pursuance to development agreement dated 28- 07-2001 17. The contention of the Revenue is that initial development agreement with Kumar Group could not be materialized, therefore, the assessee entered into another development agreement with Kumar Jain of the same group on 28-07-2001. The revenue has not placed on record any document to show that the initial agreement entered into between the assessee and Kumar group was can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s elaborately dealt with the term transfer in relation to section 54. The relevant extract of the findings of Hon'ble Apex court are reproduced hereunder : 17. Upon plain reading of Section 54 of the Act, it is very clear that so as to avail the benefit under Section 54 of the Act, one must purchase a residential house/new asset within one year prior or two years after the date on which transfer of the residential house in respect of which the long term capital gain had arisen, has taken place. 18. In the instant case, the following three dates are not in dispute. The residential house was transferred by the appellants and the sale deed had been registered on 24th September, 2004. The sale deed had been executed in pursuance of an agreement to sell which had been executed on 27th December, 2002 and out of the total consideration of ₹ 1.32 crores, ₹ 15 lakhs had been received by the appellants by way of earnest money when the agreement to sell had been executed and a new residential house/new asset had been purchased by the appellants on 30th April, 2003. It is also not in dispute that there was a litigation wherein the Will of late Shri Amrit Lal had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. Now in the light of definition of transfer as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset. In the light of the aforestated definition, let us look at the facts of the present case where an agreement to sell in respect of a capital asset had been executed on 27th December, 2002 for transferring the residential house/original asset in question and a sum of ₹ 15 lakhs had been received by way of earnest money. It is also not in dispute that the sale deed could not be executed because of pendency of the litigation between Shri Ranjeet Lal on one hand and the appellants on the other as Shri Ranjeet Lal had challenged the validity of the Will under which the property had devolved upon the appellants. By virtue of an order passed in the suit filed by Shri Ranjeet Lal, the appellants were restrained from dealing with the said residential house and a law-abiding citizen cannot be expected to violate the direction of a court by executing a sale deed in favour of a third party while being restrained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. Commissioner of Income Tax [(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 subserve 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 aforestated 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. definition of transfer , which would enable the appellants to get the benefit under Section 54 of the Act. 23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are ..... 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