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TMI Blog2018 (11) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the property within the stipulated time also we hold that the assessee is entitled for deduction u/s 54F on the amount invested for purchase of new property from the bank loans also. - decided in favour of assessee. - I.T.A.No.322/Viz/2016 - - - Dated:- 14-11-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D. S. SUNDER SINGH, ACCOUNTANT MEMBER For The Assessee : Shri D. L. Narasimha Rao, AR For The Revenue : Shri Suman Malik, DR ORDER PER D. S. SUNDER SINGH, Accountant Member: This appeal is filed by the assessee against the order of the Commissioner of Income Tax(Appeals) [CIT(A)], Vijayawada vide ITA No. 205/CIT(A)/VJA/2012-13 dated 12. 02. 2016 for the assessment year 2010-11. 2. Originally, the assessee has filed as many as 11 grounds of appeal along with Form No. 36. Since the grounds of appeal are argumentative, the assessee filed revised and concise grounds on 10. 09. 2018. In the revised grounds of appeal, the assessee raised 4 grounds in total and all the grounds of appeal are related to the deduction u/s 54F of the Income Tax Act, 1961 (hereinafter called as Act ). 3. Brief facts of the case are that the assessee filed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 435 of 2004 dated 17. 10. 2018 (2010) 032 DTR 0243 which supports the contention of the assessee. The Ld. CIT(A) held that the assessee is eligible for exemption u/s 139(4) of the Act even if the property was purchased before the extended due date u/s 139(4) of the Act. However, the Ld. CIT(A) observed that the assessee has purchased the new property on 01. 12. 2010 by availing housing loan for sum of ₹ 9,00,000/- from Divan Housing Finance Corporation, which had issued Axis Bank Cheque No. 702485/- dated 30. 11. 2010 for a sum of ₹ 8,74,246/- in favour of the seller of the apartment and the remaining amount of ₹ 5,16,754/- was paid through DD No. 035218 dated 30. 11. 2010 drawn on Axis Bank Ltd. Since the assessee has invested in purchase of house by taking a loan from Divan Housing Finance Corporation ,the Ld. CIT(A) held that the assessee is not entitled for deduction on the said sum of ₹ 8,74,246/- which was invested out of the loan taken. However, the Ld. CIT(A) allowed the balance amount of deduction of ₹ 5,16,754/- which was paid through DD drawn on Axis Bank,since there was cash balance of ₹ 7,05,395/- in the account of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to claim deduction u/s. 54F of the I. T. Act, 7. In view of the above reasons, the long term capital gains arising out of the sale of property at Door No. 21-9-38, Madhuranagar, Vijayawada are chargeable to tax in your case for the Asst. Year 2010- 11. In this regard, it is proposed to bring to tax the long term capital gains on sale of the above property for the Asst. Year 2010-11. In this regard, you are requested to file your objections, if any, on or before 20/09/2012, failing which it will be presumed that you do not have any objection for the above proposed charging of capital gains for the Asst. Year 2010-11 and accordingly the assessment will be completed without giving any further opportunity in this regard. Assessee s Authorized Representative did not address this issue in his reply dated 24. 09. 2012. Sri J. Ajay Babu, Senior Executive - Accounts of Dewan Hosing Finance Corporation Limited in his letter dated 25. 09. 2012 addressed to the AO confirmed the following: With reference to your letter dated 24. 092012 we provide here with the complete loan account statement of App. Mr. Kancharapalli Veeraganapathi Co Applicant K Hemalatha, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capital gain arising from the transfer will be treated in a concessional manner as under:- (i) if the cost of house that has been purchased or constructed is not less than the net consideration in respect of the capital asset transferred, entire capital gain arising from the transfer will be exempt from tax. (ii) . In appellant's case as borrowed funds were utilized to the extent of ₹ 8,74246/- for purchase of new property, as confirmed by Dewan Housing Finance Corporation Limited, in view of decision of Hon ble Mumbai ITAT mentioned supra, appellant is not entitled for deduction u/s. 54F of the Act to this extent of ₹ 8,74,246/-. As regards the balance amount of ₹ 5,16,754/-, it was paid through DD No. 03218 dated 30. 11. 2010 drawn on Axis Bank Limited. There was cash balance of ₹ 7,05,395/- in the bank account of appellant on 30. 11. 2010. There is an entry of withdrawal of ₹ 5,18,180/- on 30. 11. 2010 by cheque No. 663934 with remarks (particulars) Y/S DD. As this amount may represent purchase of DD for ₹ 5,16,754/- and DD commission etc. , appellant might have applied this amount for purchase of flat. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven if the assessee acquired the property within the time limit allowed u/s 139(4) for filing the return of income. The only issue in this case is whether the assessee would be entitled for deduction u/s 54F even if the assessee acquired the new property from the bank loan instead of utilizing the sale consideration for the purpose of acquiring the new property. This issue has been considered by the Hon ble Madras High Court in the case of CIT Vs. R. Srinivasan (2010) 45 DTR 298 (Mad) relied upon by the assessee and held that the assessee is entitled for deduction u/s 54F even if the source was funded from the bank loan. The coordinate bench of ITAT, Mumbai, 'SMC' also considered the similar issue u/s 54 in Hansa Shah v. Income-tax Officer, Ward- 21 (1) (4), Mumbai, reported in [2018] 98 taxmann. com 393 (Mumbai - Trib. ) and held as under: 7. Even, assuming that the housing loan was utilised for the purpose of purchase of new house property, it needs to be examined whether by the reason of utilisation of housing loan in purchase of new house property, the assessee will not be eligible to claim deduction under section 54 of the Act. For this purpose, it is necessary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os. 6, 7 and 11 of the order which reads as under: 6. Ld. AR, Shri R. M. Narayanan, appearing for the assessee argued that the assessee has sold the property on 17. 9. 2012 and acquired the new property on 30. 1. 2013 i. e within two years from the date of the sale of the original asset. The sale consideration of the asset sold was ₹ 90 lakhs and the cost of the new asset was 1,44,59,800/-. Since the assessee has invested the sale consideration within two years from the end of the relevant assessment year, the assessee is entitled for the claim of deduction u/s 54F of the Act. The Ld. AR further submitted that though the assessee along with her son and daughter-in-law borrowed money from the State Bank of India over and above the sum of ₹ 56,54,000/- the same should not come on in the way of income tax Department for allowing the deduction u/s 54F of the Act. The only requirement of sec. 54F is that the new asset required to be acquired within two years but not the source of investment. The assessee is free to invest from the sale proceeds his own source of income and also from borrowed funds. The Assessing Officer's observation that the balance has been funded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment made by the assessee being within the stipulated time and more than the capital gain earned by him, the addition was rightly deleted by the Tribunal under the head long-term capital gain. [Para 7. The Delhi High Court in CIT vs. Ravindra Kumar Arora(ITA No. 1106 of 2011) held that Section 54F mandates that the house should be purchased by the taxpayer and it does not stipulate that the house should be purchased in the name of the taxpayer only. Objective of section 54F of the Act and the like provision such as section 54 of the Act is to provide impetus to the house construction and so long as the purpose of house construction is achieved, such hyper technicality should not impede the way of deduction which the legislature has allowed. Purposive construction is to be preferred as against the literal construction, more so when even literal construction also does not say that the house should be purchased in the name of the taxpayer only. Section 54F of the Act is the beneficial provision which should be interpreted liberally in favour of the exemption/deductionto the taxpayer and deduction should not be denied on hyper technical ground. The Honourable HC also relied onth ..... 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