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TMI Blog2021 (2) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... llant are not applicable in her case and her claim that booking of flat is be considered as construction for the purpose of section 54 is without any basis is grossly injudicious, unwarranted, against the facts of the case and bad at law. 3. Under the facts and circumstances of the case, the Id. First Appellate Authority has grossly erred in disregarding the claim of appellant that the amount invested before the filing of return of income u/s 139(4) of the Act is eligible for claiming exemption u/s 54 of the Act which is highly injudicious, unwarranted, against the facts of the case and bad at law. 4. Under the facts and circumstances of the case, the Id. First Appellate Authority has grossly erred in affirming the action of Id. A.O. denying exemption u/s 54 of the Act on the ground that the appellant has not yet received the possession of the flat and also sale deed has not been executed till date which is highly injudicious, unwarranted and against the settled principle of law. 5. Under the facts and circumstances of the case the finding of the ld. First Appellate Authority that there is contradiction in the appellant's claim of payment of Rs. 89,50,000/- made to the builde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income. The assessee further submitted that entire amount of capital gain arising on the sale of 'Panchkula Property' was invested in residential house at 'YOO - Project' of M/s Eon Hadsaper Infrastructure P Ltd, Pune, jointly with another two co- owners of Panchkula Property i.e. Mrs. Jaswinder Kaur and Mrs. Harsawar Kaur before 31/10/2012. The agreement with the said company was made on 15/10/2012. The assessee filed return of income for the year under consideration on 31/10/2012 i.e. within the time allowed under section 139(4) of the Act and, therefore, claimed that she has complied with the conditions prescribed under section 54 of the Act and therefore she is eligible for deduction under section 54 of the Act. The assessee submitted that in view of the CBDT Circular No. 471 and 672, booking of flat is to be considered as a case of construction for the purpose of section 54 of the Act. However, the Assessing Officer rejected the claim of the deduction under section 54 of the Act on following grounds: (i) The amount of capital gain has neither been invested in purchase or construction of residential house within the stipulated period, nor deposited in capital gain sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming exemption u/s 54 are not fulfilled by her. I am in agreement with Assessing Officer that Section 54 nowhere provides that grant of possession is a mere formality and that the payments made within the prescribed time limits would be sufficient to claim exemption u/s 54. Further, in the judgment of Hon'ble Delhi High Court in the case of CIT vs. R.L. Sood, 245 ITR 727, it is seen that judgment is on different facts. In that case, possession was delivered after the prescribed date of one year and the Sale Deed was registered thereafter whereas in the case of Appellant, it is seen that possession has not been handed over till date i.e. beyond the period of prescribed date and Sale Deed has also not been executed till date. Therefore, in such a situation, if exemption u/s 54 is allowed then the provisions of Section 54 become otiose as none of the conditions have been fulfilled even after the prescribed date is over. Though the provisions of Section 54 and Section 54F are beneficial provisions, provisions cannot be interpreted so as to be detrimental of the intent of the provisions. Hon'ble Supreme Court in the case of Orissa State Warehousing Corporation vs. CIT, 237 ITR 589 have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with law. She also submitted that similar claim of deduction under section 54 of the Act has been allowed by the respective Learned Commissioner of Income-tax (Appeals) in the case of Mrs Jaswinder Kaur and Mrs Harsarwar Kaur. In support of the contention that amount of capital gain utilized in purchase of the property within the due date of filing return under section 139(4) would qualify for deduction under section 54 of the Act, the Learned Counsel relied on following decisions: (a) Principle Commissioner of Income-tax Vs. Shankar Lal Saini, (2018) 89 taxmann.com 235 (Rajasthan). (b) Commissioner of Income-tax Vs Ms. Jagriti Aggarwal (2011) 15 taxmann 146 (Punjab & Haryana). (c) Commissioner of Income-tax Vs Jagtar Singh Chawla (2013) 33 taxmann.com 38 (Punjab and Haryana). (d) Fatima Bai Vs. Income Tax Officer, ITA No. 435 of 2004] (Karnataka) (e) Income Tax Appellate Tribunal - Cochin in case of Muthuletchumi Janardhahanan. 8. As far as finding of learned CIT(A) that in absence of actual possession of the flat, the exemption under section 54 cannot be allowed, the learned Counsel submitted that delay in receipt of possession was beyond the control of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by assessee U/S 139(4) 31.10.2012 6. Due date of filing of Income Tax return u/s 139(4) 31.03.2013 11.1 The Assessing Officer and the Learned CIT(A) has denied the deduction on two grounds. Firstly, the amount of sale consideration has not been invested in the capital gain scheme, prior to due date of filing of return under section 139(1) of the Act and therefore, assessee is not entitled for deduction under section 54 of the Act. Secondly, construction of the flat was not completed within the period specified in section 54 of the Act i.e. three years after the sale of the property and therefore, the assessee is not entitled for the deduction under section 54 of the Act. 11.2 As far as condition of deposit of the sale consideration in capital gain scheme account is considered, the relevant provision of section 54 is reproduced as under: "Profit on sale of property used for residence. 54. (1) ......................................... (2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njab Harayana High Court." 11.2.2 In the above decision, Hon'ble High Court of Rajasthan has relied on the decision of the Hon'ble Karnataka High Court in the case of Fatima Bibi Vs ITO (2009) 32 DTR 243 (Kar), Hon'ble Punjab and Haryana High Court in the cae of Jagtar Singh Chawala (2013) 87 DTR 217 ( P & H) and CIt vs jagriti Aggarwal (supra). The relevant finding of Hon'ble Punjab and Haryana High Court in the case of Jagriti Aggarwal (supra) has held that "Sub-s. (4) of s. 139 is in fact, a proviso to sub-s. (1) and provides for extension of period of due date for filing the return in certain circumstances and, therefore, exemption under s. 54 was allowable where the assessee had purchased new property before the extended due date of filing of return as per s. 139(4) and filed return within such extended time." The relevant finding of the Hon'ble High Court is reproduced as under: "5. It may be noticed that the assessee sold her residential house on 13th Jan., 2006 for a sum of Rs. 45 lacs and purchased another property jointly with Mr. D.P. Azad, her father-in-law on 2nd Jan., 2007 for a consideration of Rs. 95 lacs. The due date of filing of return as per s. 139(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction of the new asset within the period specified in sub-s. (1), then,- (i) the amount not so utilised shall be charged under s. 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid." 7. The question which arises is; whether the return filed by the assessee before the expiry of the year ending with the assessment year is valid under s. 139(4) of the Act ? 8. Learned counsel for the Revenue has argued that the assessee was required to file return under sub-s. (1) of s. 139 of the Act in terms of sub-s. (2) of s. 54 of the Act. It is contended that sub-s. (4) is not applicable in respect of the assessee so as to avoid payment of long-term capital gain. 9. On the other hand, learned counsel for the respondent relies upon a Division Bench judgment of Karnataka High Court in Fathima Bai vs. ITO (2009) 32 DTR (Kar) 243 where in somewhat similar circumstances, it has been held that time-limit for deposit under scheme or utilisation can be made before the due date for filing of return under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of Karnataka and Gauhati High Courts in Fatima Bai and Rajesh Kumar Jalan cases (supra) respectively. 13. In view of the above, we find that due date for furnishing the return of income as per s. 139(1) of the Act is subject to the extended period provided under sub-s. (4) of s. 139 of the Act." 11.2.3 Further, the Hon'ble High Court of Punjab and Haryana in the case of Jagtar Singh Chawla (supra) has held that "The unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income Tax under Section 139 of the Act and that would include extended period to file return in terms of Sub Section 4 of Section 139 of the Act." The relevant finding of the Hon'ble High Court is reproduced as under: "9. A Division Bench of this Court in which one of us (Hemant Gupta, J.) was a member, had an occasion to consider the provisions of Section 54(2) of the Act, wherein it has been held that sub- section(4) of Section 139 of the Act is in fact a proviso to Section 139(1) of the Act. Therefore, since the assessee has invested the sale proceeds in a residential house within the extended perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the view taken by the Income Tax Appellate Tribunal." 11.3 In the case of the assessee, the agreement to purchase of flat has been made on 15/10/2012. The assessee has provided detail of payments made, which are available on page A-56 of the paper-book, and same are reproduced as under: Particulars Date Mode of Payment Amount (in Rs.) Investment in yoo project 5.02.2010 Cheque No. 153816 before the due date u/s 139(1) 700,000 Investment in yoo project 18.5.2011 RTGS before the due date u/s 139(1) 60,83,200 Amount paid for stamp duty on registration of agreement to sell 16.7.2012 Cheque No. 35875 entry in bank statement 7,50,000 Investment in yoo project 29.8.2012 RTGS 14,16,800 TOTAL: 89,50,000 11.3.1 On perusal of the paper-book pages A-57 to A-61, it is also evident that the all above payment have been cleared from the bank account of the assessee before the due date of the filing of return under section 139(4) of the Act which was 31/03/2013 in the case of the assessee. 11.4 As the investment in property has been made prior to due date of filing of return of income under section 139 (4) of the Act i.e 31/03/2013, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine as to whether the acquisition of a flat by an allottee under the Self-Financing Scheme of the Delhi Development Authority amounts to purchase or its construction by the Delhi Development Authority on behalf of the allottee. Under the Self-Financing Scheme of the Delhi Development Authority the allotment letter is issued on payment of the first instalment of the cost of construction. The allotment is final unless it is cancelled or the allottee withdraws from the Scheme. The allotment is cancelled only under exceptional circumstances. The allottee gets title to the property on the issuance of the allotment letter and the payment of instalments is only a follow-up action and taking the delivery of possession is only a formality. If there is a failure on the part of the Delhi Development Authority to deliver the possession of the flat after completing the construction, the remedy for the allottee is to file a suit for recovery of possession. 3. The Board have been advised that under the above circumstances, the inference that can be drawn is that the Delhi Development Authority takes up the construction work on behalf of the allottee and that the transaction involved is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17th Feb., 1983 and the sale deed in his favour was registered on 26th Feb., 1985. 3. During the course of the assessment proceedings for the relevant assessment year, the AO brought the difference between the sale price of the residential flat sold by the assessee and the cost of acquisition of the said house to tax as capital gains on the ground that the assessee had failed to satisfy the conditions laid down in s. 54(1) of the Act inasmuch as he had failed to purchase the flat within the stipulated period of one year. The assessee's appeal to the CIT (A) was unsuccessful. 4. The assessee took the matter in further appeal to the Tribunal, who took the view that the assessee having purchased the new flat within one year of the sale of his old residential house, the provisions of s. 54(1) of the Act stood satisfied and, therefore, no income by way of capital gains could be taxed in the hands of the assessee. The Revenue's application under s. 256(1) having been dismissed by the Tribunal the present petition had been filed. 5. We have heard Mr. Sanjiv Khanna, the learned senior standing counsel on behalf of the Revenue. 6. In our view the Tribunal was justified in declining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Emaar-MGF, Gurgaon is not covered under section 54F of the Act. To meet such recurrence of situations in the modern days where properties are booked and thereafter purchased, the CBDT in their wisdom further clarifies vide circular No. 672 dated 16/12/1993 that if any amount out of net sale consideration of the original asset is paid to any builder or developer, this amount should be considered towards the terms 'purchase/construct' for the purpose of sections 54/54F of the Act. It is not disputed by the Revenue that the assessee has not made payment for purchase of residential house in Gurgaon in view of the above clarifications of CBDT, this is enough compliance of the provision of section 54F of the Act and the assessee became entitled to this exemption. 12. We have found that section 54F of the Act is a beneficial provision aimed at promoting existence of new residential houses to further the needs of the society. Thus, the intention of the Legislator is to encourage investment in the acquisition of residential houses and section 54F of the Act prescribes and proscribes the conditions for availing its benefit. The terms/words used in this section have been very se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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