9911796707
TMI Blog2025 (1) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... led the requisite details. 3. During the course of assessment proceedings the Assessing Officer noted that the assessee has shown sale consideration of Rs. 10 crores on which long term capital gain has been computed at Rs. 6,55,84,209/- after deducting the indexed cost of acquisition of Rs. 3,07,79,191/- and sales expenses of Rs. 36,36,600/-. From the details furnished by the assessee, the Assessing Officer noted that the assessee has sold developmental rights to M/s. Kumar Matunga Projects LLP vide development agreement dated 29.12.2014 for Rs. 7.5 crores. The assessee has also sold the lease rights to Shri Paresh Dedhia and Shri Jayesh Dedhia vide agreement dated 03.09.2014 for Rs. 2.5 crore. Thus, the assessee has received Rs. 10 crores from the sale of development rights and lease rights. On this sale, long term capital gain is worked out at Rs. 6,55,84,209/- and the same amount is claimed being invested for purchase of house property. He, therefore, asked the assessee to substantiate the claim of deduction u/s 54F of the Act by submitting a copy of purchase deed which was shown as investment in house property. The assessee was also asked to submit whether the residential hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Veena P Damale. Dr. Sheela Gharpure and Smt. Leela K Gharpure. Thus, this extract shows that Kumar Housing Corporation Pvt Ltd was not having full rights transferred to its name. Kumar Housing Corporation Pvt Ltd was not the owner of the disputed property. In spite of this fact that the rights in the property have been disputed and the property has not been transferred in the name of Kumar Housing Corporation Pvt Ltd, the assessee has entered into an MOU to purchase the disputed property. He further noted that the Kumar Housing Corporation Ltd. is a related concern of the assessee and the same was amalgamated in Kumar Urban Development Pvt. Ltd. (KUD). 100% shares were held by the KUD. The assessee is holding 6.31% in the said company. 5. In view of the above, the Assessing Officer summarized the facts which are as under: "4.9 The facts of the case are summarized as under 1) The assessee has claimed exemption u/s 54F of the IT Act of Rs. 6,54,84,209/- 2) It is claimed that the assessee has invested Rs: 10.6 crores for the purchase of house and the amount have been paid to Kumar Housing Corporation Pvt Ltd. 3) Assessee has not submitted any registered document to establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undivided share in the above referred property from Dr. Vimala Mahadeo Randive, Smt. Dr. Veena Pradip Damale and Smt. Dr. Sheela Shashank Katre. Thus, Kumar Housing Corporation had ownership rights of 3/4th share in the above referred property. Subsequently, Mrs. Leela Gaur had entered into an oral agreement with Kumar Housing Corporation for transfer of her 1/4th share in the said property on 21.02.1995. However, Kumar Housing Corporation subsequently came to know that Mrs. Leela Gaur was trying to assign her 1/4th share in the said property to a third party, for which Kumar Housing Corporation filed a suit against Mrs. Leela Gaur, which is still pending. It was submitted that Kumar Housing Corporation had clear title of 3/4th of the share in the said property. Since subsequently Kumar Housing Corporation merged with Kumar Urban Development Pvt. Ltd., therefore, Kumar Urban Development (P.) Ltd. had entered into sale deed on 19.04.2018 and transferred the 3/4th share to the assessee and Shri Pranay Jain. 8. So far as the allegation of the Assessing Officer that the assessee had entered into MoU with erstwhile Kumar Housing Corporation to evade taxes is concerned, it was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of evading taxes. 6.3 Thus the addition in the case was made as the appellant was not able to produce any registered document to establish that she has purchased a residential house. 6.4 During the course of appellate hearing the appellant has submitted that: 2.1] In this case, during the year under consideration the assessee had sold long term capital assets and had earned capital gain of Rs. 6,55,84,209/-. In the return of income, the assessee claimed exemption u/s 54F of Rs. 6,55,84,209/- on account of investment in residential property. The learned A.O. has discussed the issue in paras 4-4.14 of his order. According to the learned A.O., the claim made by the assessee is not correct. He has stated that the assessee has claimed exemption u/s 54F on account of purchase of residential house from Kumar Housing Corporation Pvt. Ltd. The assessee had shown total payment of Rs. 10.6 Crs. to Kumar Housing Corporation Pvt. Ltd. 2.2] The learned A.O. has stated that the assessee had filed an Memorandum of Understanding (MOU) entered between Kumar Housing and the assessee. He has does not carry any evidentiary value. Corporation Ltd. was having 3/4th stated that the said MOU is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee had entered into MOU with Kumar Housing Corporation Pvt. Ltd. It is to be noted that Kumar Housing Corporation Pvt. Ltd. had vide Conveyance Deed dated 03.05.1995 had purchased 3/4th undivided share in the above referred property from Smt. Dr. Vimala Mahadeo Randive, Smt. Dr. Veena Pradip Damale and Smt. Dr. Sheela Shashank Katre. Thus, Kumar Housing Corporation had ownership rights of 3/4th share in the said above referred property. Subsequently, Mrs. Leela Gaur had entered into an oral agreement with Kumar Housing Corporation for transfer of her 1/4 share in the said property on 21.02.1995. However, Kumar Housing subsequently, came to know that Mrs. Leela Gaur was trying to assigned her 1/4th share in the said property to a third party. Accordingly, Kumar Housing had filed the suit against Mrs. Leela Gaur which was still pending. 2.6] From the above, it is to be appreciated that Kumar Housing had clear title to 3/4th of the share in the said property and the dispute was only pertaining to the 1/4th share of Mrs Leela Gaur Now, as per the said MOU, which was entered into between Kumar Housing and the assessee along with her brother Shri Pranay Jain, it was agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned A.O. has held that the MOU was a sham MOU since not registered. He has further stated that the assessee was aware of the respect of the said property. In para 4.13, the learned A.O. has was aware of the fact that the said property was transferred to Kumar Housing Corporation Pvt. Ltd. it was dispute in stated that the assessee under dispute and was not In this context, the assessee submits that as clarified earlier, Kumar Housing had 3/4th share in the said property by way of a valid sale deed. The dispute was regarding balance 1/4th share Now, as Kumar Housing had 3/4th share in the said property, one cannot say that it had no right title in the said property. Kumar Housing Corporation had also given possession receipt of 3/4th share in the said property to the assessee and her brother. Copy of the same is enclosed herewith and was also furnished to the learned A.O. Accordingly, the contention of the A.O., that as the said property was disputed and was not transferred to Kumar Housing is not correct because 3/4th share in the said property was owned by Kumar Housing and it had a valid title for the said property. As regards, the other contention of the learned A.O. th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee submits that for the exemption claiming u/s 54F the money should be utilized for purchase of house property. Even if, the physical possession has not been given, the exemption can be allowed u/s 54F. For this proposition, reliance is placed on the decision of Hon'ble Karnataka High Court in the case of B. S. Shanthakumar [233 Taxmann 347]. The relevant para of the decision of Hon'ble High Court is as under- "the words used in the sectioned are purchased or constructed. For such purpose, the capital gain realized should have been invested in a residential house. The condition precedent for claiming benefit under the said provision is the capital gain realized from sale of capital should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favour of the assessee before the period stipulated, he cannot be denied the benefit of Section 54F of the Act. Similarly, if he has invested the money in construction of a residential house, merely because the construction was not complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of the reply given by the appellant that since the conditions laid down in section 54F are satisfied thus the addition made is directed to be deleted. Thus the Ground of appeal of the appellant is allowed." 10. Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds: 1. Whether on the facts and in the circumstances of the case & in the law, the CIT (A) is correct in deleting the addition made by the AO on account of disallowance of exemption claimed by the assessee u/a 54F amounting to Rs. 6,55,84,209/- completely disregarding the findings of the AO on the impugned issue? 2. Whether on the facts and in the circumstances of the case & in the law, the CIT (A) erred in holding that the assessee has fulfilled all the conditions laid down u/s 54F of the IT Act even when the assessee has grossly failed to fulfill the primary condition of purchasing the residential property within the stipulated period of two years? 3. Whether on the facts and in the circumstances of the case & in the law, the CIT (A) has erred in holding the date of entering into MOU i.e. 21.08.2015 as the date of purchase of prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term capital gain which has been worked out at Rs. 6,55,84,209/- is after the deduction of the indexed cost of acquisition and the expenses of Rs. 36,36,600/-. Referring to pages 4 to 26 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the MoU with Kumar Housing Corporation Pvt. Ltd. on 21.08.2015. Referring to pages 31 to 136 of the paper book, he drew the attention of the Bench to the actual sale deed that has been registered on 21.04.2018. He submitted that the asset in question i.e. bungalow was owned by four sisters. During 1995, three sisters sold 3/4th share of the property to Kumar Housing Corporation which is also not in dispute. He submitted that the assessee has purchased the said 3/4th portion of the bungalow and claimed the deduction u/s 54F of the Act. 13. Referring to the copy of the sale deed dated 21.04.2018, the Ld. Counsel for the assessee drew the attention of the Bench to the copy of MoU which has been mentioned in the sale deed, according to which an amount of Rs. 10,60,00,000/- has been paid on execution of said MoU. 14. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Dr. Laxmichand Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) Ltd. vs. CIT (2015) 62 taxmann.com 135 (SC), he submitted that the Hon'ble Supreme Court in the said decision has held that advances paid for purpose of purchase and / or acquisition of plant / machinery, and land / building amount to utilization by assessee of capital gains under section 54G. 20. Referring to the decision of the Hon'ble High Court of Karnataka in the case of CIT vs. Mrs. Shakuntala Devi (2016) 75 taxmann.com 222 (Karnataka), he submitted that the Hon'ble High Court in the said decision has held that the utilization of capital gains in construction of residential house within a period of two years would suffice to claim exemption under section 54 irrespective of fact that neither sale transaction was concluded, nor registration had taken place within 2 years. 21. Referring to the decision of the Hon'ble High Court of Karnataka in the case of CIT vs. Smt. B.S. Shantakumari (2015) 60 taxmann.com 74 (Karnataka), he submitted that the Hon'ble High Court in the said decision has held that once it is established by the assessee that she had invested entire net consideration in construction of residential house within stipulated period, it would meet requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.60 crores has been transferred from the account of the assessee to Kumar Housing Corporation on the date of MoU. There is also no dispute to the fact that the actual sale deed which was executed on 21.04.2018 contains the reference to the MoU dated 21.08.2015 by which date the assessee has made the payment of Rs. 10.60 crores. Under these circumstances, it has to be seen as to whether the assessee is entitled to claim deduction u/s 54F of the Act when the actual sale deed has not been entered into within the specified period and such an MoU has been entered into with a concern where the assessee and the family members are shareholders. 25. We find the Hon'ble Bombay High Court in the case of CIT vs. Dr. Laxmichand Narpal Nagda (supra) has held that when the whole consideration was paid, possession of the flat was obtained and the flat was actually put to use for dwelling, deduction u/s 54 cannot be denied for mere non-registration of the flat. The relevant observations of the Hon'ble High Court read as under: "4. The Supreme Court in the case of CIT v. T N. Aravinda Reddy though in the context of a different factual background observed that the word "purchase" in section 54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction thereof. The condition precedent for claiming benefit under said provision is that the capital gains realized from sale of a capital asset should be reinvested either in purchasing a residential house or utilised for constructing a residential building. If it is established that consideration so received on alienation of property has been invested in either purchasing a residential building or spent on construction of residential building, an assessee would be entitled to the benefit flowing from Section 54 of the Act irrespective of the fact that transaction not being complete in all respects. In other words, it has to be examined or discerned from the facts of each case as to whether the assessee had undertaken such an exercise or not? 12. The main purpose of Section 54 of the Act is to give relief in respect of profits on the sale of a residential house. Necessary conditions to be fulfilled for the applicability of Section 54 are: (i) Assessee should be an individual or a Hindu Undivided Family; (ii) Capital assets should result from the transfer of a long term capital asset; (iii) Capital gain must arise from transfer of building which is chargeable as 'income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of capital gains in construction of residential house would suffice to claim the benefit of Section 54 of the Act. 15. Following the same and for the reasons aforestated, we are of the considered view that substantial question of law is to be answered in the affirmative i.e., in favour of assessee and against the revenue and accordingly, it is answered." 27. We find the Hon'ble Karnataka High Court in the case of CIT vs. Smt. B.S. Shantakumari (supra) has held that once it is established by the assessee that she had invested entire net consideration in construction of residential house within stipulated period, it would meet requirement of section 54F and she would be entitled to get benefit of section 54F even if the construction was not completed within a period of three years. The relevant observations of Hon'ble High Court read as under: "8. Section 54F of the Act is a beneficial provision which promotes for construction of residential house. Such provision has to be construed liberally for achieving the purpose for which it is incorporated in the statute. The intention of the legislature, as could be discerned from the reading of the provision, would clearly indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding is yet to be completed fully or the building not being in a fit condition for being occupied, would by itself not be a ground for the assessee to be denied the benefit under Section 54F of the Act. It has been held by the co-ordinate bench as under: "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'. For such purpose, the capital gain realized should have been invested in a residential house. The condition precedent for claiming benefit under the said provision is the capital gain realized from sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favour of the assessee before the period stipulated, he cannot be denied the benefit of Section 54F of the Act. Similarly, if he has invested the money in construction of a residential house, merely because the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e term "purchase" employed in sub-section (2) of section 54, is not used in the sense of legal transfer and therefore, the holding of a legal title within a period of one year is not a condition precedent for availing deduction u/s. 54. The relevant paragraph of the judgment is reproduced below : "6. Taking into consideration the letter as well as the spirit of section 54 and the word "towards" used before the word "purchase" in sub-section (2) of section 54, it seems to us that the said word is not used in the sense of legal transfer and, therefore, the holding of a legal title within a period of one year is not a condition precedent for attracting section 54. In the instant case, the whole consideration was paid, possession of the flat was obtained and it was actually put to use for dwelling within four months, as a result exemption contemplated under section 54 was clearly attracted. 7. Our pointed attention was drawn by the Revenue to the decision of the Supreme Court in the case of Alapati Venkataramiah v. CIT wherein the word "transfer" as found in section 12(b) of the Indian Income-tax Act, 1922, is interpreted as meaning "passing of title". Since the word interpreted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se" is not defined under the Act and therefore, has to be construed in the commercial sense. In many dictionaries, the word "purchase" means the acquisition of property by party's own act as distinguished from acquisition by act of law. In the context in which the expression issued by the Legislature requires first to be understood and interpretation that suits the context requires to be adopted. Exemption of capital gains under Section 54G of the Act can be claimed on transfer of assets in cases of shifting of industrial undertaking from urban area to any other non-urban area. This exemption may be claimed if the capital gains arising on transfer of any of assets of existing industrial unit is utilized within one year or three years after the date on which the transfer took place for purchase of new machinery or plant for the purposes of the business of the industrial undertaking in the area to which the said undertaking is shifted. The Legislature consciously has not used the expression "towards the purchase of plant and machinery" as in Section 54(4) of the Act in contrast to Section 54(2) of the Act wherein the words "towards" is used before the word "purchase". The expression ..... X X X X Extracts X X X X X X X X Extracts X X X X
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