9911796707
TMI Blog2024 (1) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are purchased or constructed . Here in this case, there is no doubt that the assessee has fulfilled the condition precedent for claiming benefit under section 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete, and it is not such a watertight condition to be fulfilled and does not disentitle the assessee to claim section 54F relief. To reach this conclusion the bench has considered the circular no. 471 dated 15.10.1986 and circular no. 672 dated 06.10.1993. The bench also considered the various judicial precedents cited by the assessee in the written submission. So, conspectus of the facts suggest that the assessee is entitled for deduction u/s. 54F of the Act as claimed, merely the postdated cheque was not cleared or the details thereof for an amount not mentioned in the agreement will not disentitle the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. The fact as culled out from the records is that the assessee filed her return of income on 14.12.2016 declaring total income of Rs. 14,99,850/- which was processed u/s 143(1) of the Act. The case of the assessee was selected for limited scrutiny under CASS. Notice u/s 143(2) of the Act was issued on 26.09.2017 and served upon the assessee. Subsequently, a notice u/s 142(1) of the Act has been issued along with questionnaire through ITBA/E- mail on 24.07.2018 fixing the date of hearing on 08.08.2018. The ld. AR of the assessee submitted his reply online through e-filing portal. He has submitted copy of return of income along with computation of income, bank statements, balance sheets, sale and purchase deed of the property sold/purchased etc. for the financial year 2015-16 relevant to assessment year 2016-17. Document submitted has been checked and placed on record. During the year under consideration, the assessee has sold two immovable property for a total sale consideration of Rs. 1,49,00,000/-. In the computation of capital gain, assessee has claimed deduction u/s 54F for an amount of Rs. 1,03,06,141/-. In support of his claim, assessee has submitted copy of agreement t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also been perused. 5. Ground No.1: In ground No. 1, the appellant has challenged that the AO has erred by denying the exemption u/s 54F. In the modified ground No. 1, the appellant has stated the unutilized amount was Rs. 80,22,354/- in the capital gain account out of total investible/exempted amount u/s 54F Rs. 1,08,22,354/-. In the original ground No.1 the unutilized amount was mentioned as Rs. 75,06,141/- in the Capital Gain Account out of total investible/exempted amount u/s 54F Rs. 1,03,06,141/-. 5.1. The appellant filed her return of income for the A.Y. 2016-17 on 14.12.2016 declaring total income of Rs. 14,99,850/-, which was processed u/s 143(1). During the year under consideration, the appellant has sold two immovable property for a total sale consideration of Rs. 1,49,00,000. In the computation of capital gain, appellant has claimed deduction u/s 54F for an amount of Rs. 1,03,06,141/-. The appellant submitted copy of agreement to sell of residential property purchased by her for a consideration of Rs. 1,08,22,354/- before the AO. The AO noted that as per agreement to sale submitted by her, she had paid a sum of Rs. 28,00,000/- only at the time of agreement. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 1,13,610/-) was disallowed and the AO recomputed the indexed cost of acquisition accordingly. 5.1.2. The AO found that the appellant had invested a sum of Rs. 50,00,000 in specified bonds of NHAI to claim deduction u/s 54EC and in the return of income, she had claimed Rs. 39,68,855/- only as against admissible claim of whole amount of Rs 50 Lakh. The AO observed that in view of the disallowance made u/s 54F, the appellant was given full deduction of Rs 50 Lakh admissible u/s 54EC of the Income Tax Act. Order u/s 143(3) was passed on 22.12.2018, determining the income at Rs. 81,41,102/-. 5.2. The appellant has stated that she had earned capital gains of Rs. 1,42,74,996/- arising due to sale of agricultural land located at village Mahurana Patwar, Halka Sinta, Tehsil Taleda, Distt. Bundi through two sale deeds (Khasra No. 1203 Rakba 6 Bigha 1 Biswa and 1/4 of Khasra No.752, Rakhba 4 Bigha 19 Biswa) for a total consideration of Rs. 1,49,90,000/- on 16/10/2015. The appellant invested Rs. 50,00,000/- in eligible bonds of National Highway Authority of India (NHAI) and claimed the exemption u/s 54EC of the Income Tax Act, 1961. The appellant also booked a new residential house i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O did not allow the part of the claim of exemption u/s 54F for failure to deposit the balance consideration in Capital Gains Account and restricted the deduction u/s 54F to Rs. 28,00,000/- and disallowed the balance claim of Rs. 80,22,354/- (Difference of total consideration of Rs. 1,08,22,354/- minus en-cashed amount of Rs. 28,00,000/-). The appellant's main argument is that she had issued cheques on the date of agreement itself i.e. 01/03/2016; the builder mentions that he was given post-dated cheques. The cheques were encashed as late as 01/03/2019. This explanation of the appellant is hard to accept and confusing. The deposit in the Capital Gains Account Scheme is mandatory requirement and the appellant has failed to fulfill the said requirement. I find no reason to interfere with the AO's order on this issue. Appeal on Ground no. 1 is dismissed. 6. Ground No. 2 is general in nature and therefore not adjudicated. 7. In the result, the appeal is dismissed. 5. Feeling dissatisfied with the above order of the ld. CIT(A) the assessee has preferred the present appeal before the Tribunal on the grounds as stated in para 2 above. In support of the various grounds so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finally the registration and possession of the flat was completed on 08/07/2021. Encashment of the cheques by builder was also delayed accordingly.(Please see the registered deed at the PB No. 45 - 72) 4. ITR was picked up for Limited Scrutiny vide Notice u/s 143(2) dated 26/09/2017 for the following reasons: i) Whether Deduction from capital gains has been claimed correctly? ii) Whether Investment and Income relating to properties duly disclosed? 5. Vide the assessment order dated 22/12/2018, the Ld. AO granted the part exemption of Rs. 2800000/- out of the claimed amount of Rs. 103,06,141/- u/s54F(1), and rejected the balance claim on the ground that: a) Issuing of post-dated cheque does not discharge the liability of payment on the date of writing the cheque as the drawee cannot encash it before the date of cheque, and b) assessee has failed to deposit the balance amount of Rs. 80,22,354/- in the Capital Gain Account Scheme (CGAS) before the due date of filing ITR u/s 139, as stipulated u/s 54F(4) of the Income Tax Act, 1961 and, recomputed the Capital Gain Tax as under: S. NO. PARTICULARS AMOUNT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, Kota from her Savings Bank Account No. 1703080072 which were encashed by the builder on 02/03/2016 and on 29/03/2016 respectively. While executing the Agreement on 01/03/2016, the balance amount of 84,27,600/-was also paid through undated/postdated cheques drawn in favor of the builder on SB A/c at Central Bank of India, Dadabari, Kota. 1.3 In spite of continuous reminders by the assessee for encashment of the cheques for balance consideration, the builder did not encash the cheques as the project could not be completed in time due to following main reasons: i) The project was started in FY 2013-14 and the builder had applied for permission for 0+9 floors construction from Nagar Nigam, Kota. ii) The builder constructed the building up to the 7th floor in anticipation of the permission from Nagar Nigam, Kota. iii) Nagar Nigam, Kota did not give permission for 0+9 floors and stopped the construction activities in FY 2017-18. iv) The site plan of the project was finally approved by the Nagar Nigam, Kota vide their order No NNK/18/23948-51 dated 18/03/2018. v) The Project was also approved by Real Estate Regulatory Authority (RERA), Rajasthan vide its registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8224/- 1,08,224/- TDS DEDUCTED AND DEPOSITED @ 1% U/S 194IA TOTAL 10822354/- 962681/- 11785035/- 1.6 Ld. CIT(A) and Assessing Officer ignored the genuine difficulties of the assessee and, held that assessee has failed in depositing the unused amount by 31/07/2016 in `Capital Gains Account Scheme (CGAS) and considered the payment of Rs. 28 Lacs only as eligible for exemption u/s 54F. `Doctrine of Impossibility lays down that Law does not compel any one to do anything which is not possible. A law cannot be interpreted in vacuum. It has to be interpreted having regard to the facts and circumstances involved in each case. Lower authorities ignored the plea that when the assessee had already issued post-dated/undated cheques to builder pursuant to a legally binding contract, it was impossible on assessee s part to arrange separate funds to make deposits under CGAS also. 1.7 In order to buttress her point of having issued the post-dated cheques to builders at the time of agreement, Assessee had pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the contention that the assessee has not deposited the amount in the Bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct. (Para 4.1 of the judgement) 1.9.2 Commissioner of Income-Taxvs. Venkata Dilip Kumar [2019] 111 taxmann.com 180 (Madras) Held that any amount utilized towards the purchase or construction of a new asset would be eligible for exemption even if it has not been deposited into any account as per the Capital Gains Account scheme. In this case however, it must be noted that the petitioners therein did create an account but the expenses incurred were more than what was estimated and deposited into the account and thus it was held that the expenses incurred over and above the amount deposited would also be eligible for exemption. 1.9.3 Kishore H. Galaiya v/s ITO [2012] 24 taxmann.com 11 (Mumbai) Headnote of the case law reads as under: Section 54, read with section 139, of the Income-tax Act, 1961 - Capital gains - Exemption of, on profit from sale of property used for residence - Assessment year 2006-07 - Assessee sold share of his residential flat on 7- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is that the assessee has violated the provisions of sec. 54(2) of the Act. However, the contention of the assessee is that he had issued cheques on the date of the agreement itself i.e., 26.7.2012, which is before the date of furnishing of return of income. However, those cheques have been encashed by the builder belatedly and hence the assessee should not be penalized for that. The contention of the Ld A.R was that once cheques have been issued, the assessee s liability gets fulfilled and the same constitutes utilization of sale proceeds of the old house. We find merit in the submissions of the assessee. There is no dispute that the assessee has issued cheques to the seller of the house property on 26.7.2012, which is prior to the date of furnishing of the return of income of the instant year. Accordingly, we are of the view that there is no requirement to comply with the provisions of section 54(2) of the Act in the facts and circumstances of the case. 1.11 Ld. AO has rejected the claim of exemption of appellant on the following basis in the assessment order( Para No. 4.3 on page No. 3) : .A post dated cheque cannot be encashed before the date of cheque. Issuing of po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed, the payment related back to the dates of the receipt of the cheques and in law the dates of payment were the dates of the delivery of the cheques. 1.11.2 K Saraswathy alias K Kalpana (Dead) By Legal Heirs v/s PSS Somasundaram Chettiar, 1989 AIR 1553 (SC) Hon ble Apex court held: It is contended before us on behalf of the appellant that the cheque for Rs. 6,02,000 was tendered in Court on 29 May, 1980 and that it was duly honoured by the Bank and money was realised under the cheque, and therefore it must be taken that payment had been effected by the appellant on 29 May, 1980 within the time stipulated by this Court in its order dated 29 November, 1979. In Commissioner of Income Tax, Bombay South, Bombay v. Messrs Ogale Glass Works Ltd. Ogale Wadi, A.I.R. 1954 S.C. 429 it was laid down by this Court that payment by cheque realized subsequently on the cheque being honoured and encashed relates back to the date of the receipt of the cheque, and in law the date of payment is the date of delivery of the cheque. Payment by cheque is an ordinary incident of present-day life, whether commercial or private, and unless it is specifically mentioned that payment must be in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slative intent was duly met, when the entire sale consideration was out of the pocket of the appellant. Moreover, technically speaking there is no much difference between an ordinary Fixed Deposits and a Capital Gain Account Scheme. The facts of assessee also fall in line with the above law. Assessee kept the money in FD Account, without using them for any purpose other than the investment in the house. 1.13 The real purpose of the enabling provision is the compliance of the substantial provision of sub-section (1) to section 54F of the Act. Subsection (4), in fact, regulates the procedure for the substantive rights of the exemption provisions u/s 54F of the Act. This enabling section cannot abridge or modify the substantive rights given vide subsection (1) of section 54F of the Act, otherwise, the real purpose of substantive provision i.e.,sub-section (1) will be defeated. The primary goal of exemption provisions of section 54/54F is to promote housing. The procedural and enabling provisions of sub-section (2) thus cannot be strictly construed to impose strict limitations on the assessee and in default thereof to deny him the benefit of exemption provisions. While the plain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the builder and the assessee has complied with the necessary condition of payment as required. (Please see the Affidavit of assessee at PB Page No 76 77) GROUND NO. 2: That under the facts and circumstances of the case, the Ld. CIT (A) NFAC has erred in law by ignoring the circular No. 471 dt. 15/10/1986 and 672 dt. 16/10/1993 which lays down that payment to the builder in instalments is sufficient compliance for claiming exemption u/s 54F. SUBMISSIONS: 2.1 The assessee had entered into the `Flat Purchase Agreement with the builder on 01/03/2016, after selling the land on 16/10/2015. 2.2 Circular No. 471 dated 15-10-1986 reads as under: 1. Sections 54 and 54F provide that capital gains arising on transfer of a long-term capital asset shall not be charged to tax to the extent specified therein, where the amount of capital gain is invested in a residential house. In the case of purchase of a house, the benefit is available if the investment is made within a period of one year before or after the date on which the transfer took place and in case of construction of a house, the benefit is available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of flats under the Self- Financing Scheme of the Delhi Development Authority (DDA) should be treated as cases of construction for the purposes of sections 54 and 54F of the Income-tax Act. The Board has since received representations that even in respect of allotment of flats/houses by cooperative societies and other institutions, whose schemes of allotment and construction are similar to those of Delhi Development Authority, a similar view should be taken. 2. The Board has considered the matter and has decided that if the terms of the schemes of allotment and construction of flats/houses by the co-operative societies or other institutions are similar to those mentioned in para 2 of Board s Circular No. 471, dated 15-10-1986 (Sl. No. 428), such cases may also be treated as cases of construction for the purposes of sections 54 and 54F of the Income-tax Act. 2.4 Contents of both Circulars can be summarized as under: a) Date of booking the flat would be treated as `Date of Construction and subsequent payments in installments or handing over the possession are of no relevance. b) In respect of allotment of flats by builders/co-operative so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular No. 471, dated 15-10-1986 that when an allotment letter is issued to an allottee under this scheme on payment of the first instalment of the cost of construction, the allotment is final unless it is cancelled. The allottee, thereupon, 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 delivery of possession is only a formality. The Board has directed that such an allotment of flat under this scheme should be treated as cost of construction for the purpose of capital gains. 2.2.2 Mrs. Seetha Subramanian v. ACIT [1996] 59 ITD 94 (Mad. - Trib.) Held: . . . The assessee also relied upon certain circulars issued by the CBDT. One of the circulars was [Circular No. 471, dated 15th October, 1986. This was issued by the CBDT clarifying the position that where an assessee acquires a flat by an allotment under the self-financing scheme of the Delhi Development Authority, the allotment itself is sufficient compliance for getting the benefit under section 54F, even though the assessee has not paid all the instalments due under the said scheme. Later by another Circular No. 672, dated 16th De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the allotment and construction of the flat by co-operative societies and other institutions are to be considered in similar manner for the purpose of allowing exemption under section 54. The above circulars are binding on the revenue authorities under section 119 of the Act. Since the flat has been allotted to the assessee by the builder who would fall in the category of other institutions mentioned in the circulars, it has to be taken as a case of construction of the residential flat and not as a purchase of a residential flat. 2.3 There cannot be any dispute with the `Construction of the property for which the agreement was entered by the appellant with M/s Paarth Infrawork Private Limited on 01/03/2016 had already begun and whether the above agreement finally fructified is a different matter altogether. Assessee had for all purposes satisfied the conditions u/s 54F of the IT Act, 1961, and earnestly demonstrated her intention to invest the capital gain in a residential house. Therefore, the assessee ought not to have been denied the claim u/s 54F of the IT Act, 1961. GROUND NO. 3: Under the facts and circumstances of the case the Ld. CIT (A), N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be occupied does not disentitle the assessee to claim s. 54F relief. 2. Smt. Rajneet Sandhu vs. DCIT (2010) 133 TTJ 0064 (Chandigarh) In this case the construction of the house was not completed within the prescribed period. It was held that section 54F does not prescribe that the residential house should be completed within the prescribed period and benefit under s. 54F was allowed. It was held that thrust was on investment and not on completion. 3. Satish Chandra Gupta vs. Assessing Officer, 54 ITD 508 (ITAT, Delhi Bench) The facts of this case were, the assessee had purchased a site and could not complete the construction of the house within the prescribed period of three years. However, the house was constructed and completed subsequently. Relief was given on the ground that the delay had occurred on account of reasons beyond the control of the assessee. 4. Narasimha Raju Rudra Rao vs. ACIT (35 taxmann.com 90) (Hyderabad-Tribunal) 1. Provision contained under section 54F being a beneficial provision has to be constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee is to purchase a new property and that is fulfilled by the facts on record, then enabling the provision of keeping the amount in a particular scheme whether that is fulfilled or not should not destroy the ultimate bonafide intention of the assessee as enshrined in section 54F(1). The procedural and enabling provision of sub-section (4) of section 54F cannot be strictly construed to impose strict limitations on the assessee and any default thereof to deny her the benefit of exemption under the provision. 5.1 The ld. AR of the assessee filed additional written submission which reads as under:- GROUND NO. 2: That under the facts and circumstances of the case, the Ld. CIT (A) NFAC has erred in law by ignoring the circular No. 471 dt. 15/10/1986 and 672 dt. 16/10/1993 which lays down that payment to the builder in instalments is sufficient compliance for claiming exemption u/s 54F. In support of the above ground of appeal, Appellant submits that her case has similar factual matrix which has been decided by Hon ble Supreme Court, High Court and Hon ble ITATs in following case laws. Appellant is placing the copies of these jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sale of Capital Asset: AY 2006-2007 b) Date of Booking Flat: 31/07/2006 c) Name of Builder: Shweta Estates Pvt. Ltd. d) Date of Actual Possession Not given till 23/12/2008 e) Held by Hon ble ITAT: i) As per the circulars, allotment of flats shall be treated as construction for the purpose of capital gains. ii) The department has failed to demonstrate how the scheme of Shweta Estates Pvt. Ltd. is different from the SFS of DDA 5. PCIT Vs.Vembu Vaidyanathan (2019) 108 Taxmann.com 339 (Supreme Court). Rejected the SLP filed by department in case of PCIT Vs.Vembu Vaidyanathan (2019)101 Taxmann.com 436/261 Taxman 376 (Bombay) (PB No. 38 to 42) Key Takeaways from the Hon ble High court judgement: i) Allottee gets title to the property on the issue of allotment letter and the payment of installments was only a follow up action and taking the delivery of possession is only a formality. ii) There is nothing on record to suggest that the allotment in the construction scheme promised by the builder in the present case was materially different from the terms of allotment and construction by DDA. In that view of the matter, Tribunal correctly held that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on that he prayed for a consequential relief to the assessee. 7. We have heard the rival contentions, perused the material placed on record and gone through the judicial precedent cited by both the parties to drive home their respective contentions. The apple of discord in this case is only whether considering the overall facts presented on record the assessee has made in the investment in the residential house and consequently the claim of the assessee u/s. 54F is allowable or not. The assessee in the year under consideration, sold two immovable properties for a total sale consideration of Rs. 1,49,00,000/-. In the computation of capital gain, the assessee has claimed deduction u/s 54F for an amount of Rs. 1,03,06,141/-. In support of this claim, the assessee has submitted copy of agreement to sell of residential property purchased by her for a consideration of Rs. 1,08,22,354/-. However, as per the agreement to sale submitted by assessee, she has paid a sum of Rs. 28,00,000/- only at the time of agreement out of the total sale consideration of Rs. 1,08,22,354/- towards the purchase of flat. As the assessee has not paid full amount the ld. AO called for proof of deposit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt by the assessee and the assessee has placed on record the relevant evidence that the payment has been made and there is a requirement to make the payment in installments. The bench noted that the intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are purchased or constructed . Here in this case, there is no doubt that the assessee has fulfilled the condition precedent for claiming benefit under section 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete, and it is not such a watertight condition to be fulfilled and does not disentitle the assessee to claim section 54F relief. To reach this conclusion the bench has considered the circular no. 471 dated 15.10.1986 and circular no. 672 dated 06.10.1993. The bench also considered the various judicial precedents cited by the assessee in the written submission. So, conspectus of the facts su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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