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TMI Blog2025 (1) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... was developing housing project, could not be a ground to deny benefit of deduction u/s 54F. Hon'ble Supreme Court in the case of Fibre Boards (P) Ltd. [ 2015 (8) TMI 482 - SUPREME COURT ] 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 Thus, considering the fact that the assessee has admittedly entered into MoU and paid an amount of Rs. 10.60 crores to M/s. Kumar Housing Corporation, which finds mention in the sale deed executed subsequently, therefore, merely because the assessee and his family members are the shareholders in KUD and that the sale deed has been executed after a period of two years, the assessee in our opinion cannot be denied the benefit of deduction u/s 54F of the Act - Decided in favour of assessee. - Shri R. K. Panda, Vice President And Ms Astha Chandra, Judicial Member For the Assessee : Shri Nikhil S Pathak For the Department : Shri Amol Khairnar CIT-DR ORDER PER R.K. PANDA, VP : This appeal filed by the Revenue is directed against the order dated 05.03.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the bank account, the Assessing Officer noted that the assessee has received the payments from the sale of rights in immovable properties and most of the amount was transferred to Shri Lalit Jain and subsequently, the amount has been returned by Shri Lalit Jain on 22.08.2015 and 24.08.2015. After receipt from Shri Lalit Jain, the assessee has transferred Rs. 10.6 crores to Kumar Housing Corporation Ltd. on various dates and claimed the same as investment for purchase of the house. The assessee submitted a copy of the MoU dated 21.08.2015 in support of the investments made for purchase of residential house. From the MoU, the Assessing Officer noted that the MOU is not a registered document and hence does not carry any evidentiary value. The MOU is in between Kumar Housing Pvt. Ltd and the assessee. As per the MOU, Kumar Housing Corporation Ltd is having 3/4th undivided share in the property situated at General Thimaiya Road, Camp Pune (House No.2409. Survey no 390/2533). It was claimed that Smt. Leela Gaur has entered into an oral agreement dated 21.02 1995 for sale of 1/4th share in the property. This transfer of 1/4th right to Kumar Hosing Corporation Pvt. Ltd. in this propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f making the MOU. 8) The assessee is holding the shares in Kumar Urban Development Pvt Ltd in which Kumar Housing Corporation Ltd is merged. The entire share of KUD are owned by the family members of the assessee. 9) The MOU dated 21.08.2015 is nothing but a document made with the family members and related concerns with the purpose to suit the assessee. 10) The MOU is nothing but a colourable device prepared with the sole purpose of evading taxes. 6. Relying on decisions of Hon'ble Supreme Court in the case of McDowell and Co. Ltd. (1985) 154 148 (SC), CIT vs. Durga Prasad More 82 ITR 540 (SC) and various other decisions, the Assessing Officer held that the intent of MoUs is to subterfuge and clearly defraud the revenue. According to the Assessing Officer, the assessee has diverted the money to the family concern without purchase of any residential house and the entire transaction for claiming exemption u/s 54F is manipulated and doctored. According to the Assessing Officer, since the assessee was fully aware of the fact that the said property was under dispute and the same has not been transferred to Kumar Housing Corporation Pvt. Ltd., therefore, even if it is assumed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) / NFAC deleted the addition by observing as under: 6. Adjudication:- 6.1 The 1st Ground of appeal taken by the appellant is 1. The Ld AO erred in disallowing appellants claim of Rs. 6,55,84,209/- for deduction u/s 54F of the IT Act, 1961. The appellant pleads Your Honor to kindly direct the Ld AO to delete the disallowance of Rs. 6,55,84,209/- of appellants claim u/s 54F of the IT Act, 1961. 6.2 During the course of assessment hearing the assessing officer has noted that 4.9 The facts of the case are summarized as under 1) The assessee has claimed exemplion is 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 that she has purchased a residential house. 4) Assessee submitted a copy of MOU dated 21.08.2015 as an evidence for purchase of property. 5) This MOU dated 21.08.2015 is unregistered. 6) As per the MOU, the assessee has purchased the rights of Kumar Housing Pvt Ltd in the residential house situated at Camp, Pune 7) As per the clauses of MOU, the rights in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Kumar Housing Corporation Pvt. Ltd. in the above property are itself disputed and the suit in this regard has been pending since 1995 However, the rights in disputed property of Kumar Housing Corporation Pvt. Ltd, have shown to have been transferred to the assessee by the MOU dated 21.08.2015. As per the extract from the General Land Registrar, Cantonment Board Pune generated on 15.09.2014, the holder of the occupancy rights of this property are with Dr. Vimal M Randive, Dr. Veena P Damale, Dr. Sheela Gharpure and Smt Leela K. Gharpure. Thus, according to the A O this extract shows that Kumar Housing Corporation Pvt. Ltd. was not having full rights in its name Hence, he has stated that Kumar Housing Corporation Pvt. Ltd. was the owner of the disputed property and in spite of this fact, the rights in the disputed property have been transferred to the assessee by way of MOU. 2.4] Accordingly, the learned A.O. has stated that the unregistered MOU entered into by the assessee was only to avoid tax. According to him, the entire transaction is colourable and self-serving. The learned A.O. has also referred to certain decisions in the context of tax planning. He has also state that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rified earlier, Kumar Housing had clear title to 3/4th share in the said property. The dispute was only pending pertaining to 1/4th share of Mrs. Leela Gaur. As the said dispute could not be settled, ultimately Kumar Housing which was merge with Kumar Urban Development Pvt. Ltd. entered into sale deed on 19.04.2018 and transferred 3/4 share to the assessee and Shri Pranay Jain. The copy of the sale deed is enclosed herewith. Accordingly, it is to be appreciated that ultimately, the assessee has purchased the property from Kumar Urban Development Pvt. Ltd. on the basis of the MOU which was entered into in 2015. 2.8] The learned A.O. has stated that the said MOU entered into by the assessee with erstwhile Kumar Housing was entered into to avoid tax. The assessee submits that this contention of the learned A.O. is not correct. It is to be noted that erstwhile Kumar Housing was having 3/4th share in the said property. It is not a case that Kumar Housing was not having any right in the property in respect of which the MOU was entered into. Finally, Kumar Urban has transferred its 3/4th share in the said property to the assessee and her brother. The assessee submits that since ultimately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the claim of exemption u/s 54F is allowable. It is to be appreciated that finally the sale deed has been entered into and wherein the assessee along with her brother has purchased 3/4th share in the said property. It is submitted that all the conditions laid down u/s 54F have been duly complied and hence, the claim of exemption u/s 54F may kindly be allowed. Appellant further submitted reply stating that 1] This has a reference to your letter dated 12.02.2024 wherein Your Honour has informed us regarding calling for remand report from the learned A O. in respect of the additional evidence submitted by me. In this context, we would like to state that till date we have not received any communication from the learned A.O. However, in addition to my submission dated 08.08.2022, I am making following legal submission in respect of the claim made u/s 54F of the Act 2] As clarified in the earlier submission, Kumar Housing Corporation Pvt. Ltd. was owning 3/4th share in the said property which was purchased vide conveyance dated 03.05.1995. The said fact has been also mentioned in the MOU as well as the sale deed dated 19.04.2018. It is also submitted that Kumar Housing Corporation Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance deed dated 03.05.1995. However, since the property is in the cantonment board area, the owner of occupancy rights is not changed and hence, the names of Dr. Vimal M. Randive, Dr. Veena P. Damle, Dr. Sheela Gharpure and Smt. Leela K Gharpure continued to be shown. It is submitted that the assessee was the owner of 3/4th share in the said property and this fact is clearly mentioned in the MOU as well as the sale deed. 5] The assessee submits that the learned A.O. has not appreciated that the possession of the property was taken and the entire consideration for 3/4th share was only paid by the assessee before filing the retum of income for the year under consideration. Accordingly, the conditions laid down in section 54F have been duly complied with. In this context, reliance is placed on the decision of Karnataka High Court in the case of CIT v/s Sambandam Udaykumar [19 Taxmann.com 17] wherein it has been held once the consideration has been shown to have been invested in a residential property, fact that transactions involved in purchase or construction of such residential property are not complete in all respects would not disentitle assessee from benefit of exemption under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleting the disallowance of deduction u/s 54F of the Act. He submitted that the assessee has claimed deduction of Rs. 6.55 crores u/s 54F of the Act based on an un-registered MoU with a concern where the assessee is a shareholder. Further, the sale deed was entered into after the assessment was over and the conditions prescribed u/s 54F of the Act were not fulfilled. Referring to the decision of Hon'ble Supreme Court in the case of Suraj Lamp Industries (P.) Ltd. vs. State of Haryana (2012) 340 ITR 1 (SC), he submitted that an immovable property can be legally and lawfully transferred / conveyed only by a registered deed of conveyance. The transactions of nature of General Power of Attorney Sales or Sale Agreement / General Power of Attorney / Will transfers do not convey title and do not amount to transfer, nor can they be recognized as valid mode of transfer of immovable property. He accordingly submitted that in view of the non-fulfillment of all the conditions prescribed u/s 54F of the Act, the assessee is not entitled to claim deduction. He accordingly submitted that the order of the Ld. CIT(A) / NFAC be reversed and that of the order of the Assessing Officer be restored. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee from the benefit of exemption under section 54F. 16. Referring to the decision of the Pune Bench of the Tribunal in the case of Ramdas Sitaram Patil vs. ACIT (2024) 166 taxmann.com 222 (Pune-Trib.), he submitted that the Tribunal in the said decision has held that where recital of sale deed clearly pointed out that possession of property was taken on 31.03.2015 which was within period of one year before date of sale of original asset and covenants in sale deed executed and registered were conclusive in absence of any evidence to contrary, assessee was entitled for deduction u/s 54/54F. 17. So far as the allegation of the Assessing Officer that the assessee has entered into MoU with a company in which she is a shareholder is concerned, the Ld. Counsel for the assessee referring to the decision of the Co-ordinate Bench of the Tribunal in the case of Lalitkumar Kesarimal Jain vs. DCIT (2020) 113 taxmann.com 387 (Pune-Trib.) submitted that the Tribunal in the said decision has held that in view of the fact that there was no dispute about genuineness of transactions entered into between assessee and builder, mere fact that assessee was one of associated parties in said concern whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e be dismissed. 23. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both the sides. We find the Assessing Officer in the instant case rejected the claim of exemption u/s 54F of the Act on the ground that (i) the assessee has not submitted a registered document to establish that she has purchased the residential house, (ii) MoU dated 21.08.2015 is un-registered, (iii) as per clauses of MoU, 1/4th right in the house property is disputed and a civil suit in this regard is still pending, (iv) which shows that Kumar Housing Corporation was not the owner of the property at the time of making MoU, (v) MoU is nothing but a colourable devise with the sole purpose of evading taxes, (vi) MoU dated 21.08.2015 is nothing but a document made with family members and related concern with the purpose to suit the assessee. We find the Ld. CIT(A) / NFAC on the basis of submissions made by the assessee, remand report of the Assessing Officer and rejoinder of the assessee to such remand report, allowed the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 well as its context are different, the ratio of that decision will have no application to the instant case. 8. Under the circumstances, no question of law arises out of the order of the Tribunal and the Tribunal was justified in not making a reference. 26. We find the Hon ble Karnataka High Court in the case of CIT vs. Mrs. Shakuntala Devi (supra) has held that the utilization of capital gains in construction of residential house within a period of two years would suffice to claim exemption und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003 for a total consideration of Rs. 1,70,00,000/-. Subsequent to such sale she entered into an agreement for purchasing another property for a total consideration of Rs. 3,25,00,000/- by agreement dated 08.09.2003. Said agreement came to be entered into within six months from the date of sale i.e., 04.02.2003 and assessee had paid a total consideration of Rs. 2,40,00,000/- between April' 2003 to September' 2003. After making the payment, a registered sale deed had not been executed in favour of the assessee before completion of two years period pursuant to Memorandum of Understanding dated 08.09.2003. The consideration received by her under sale dated 04.02.2003 has been paid by the assessee for purchasing another property and reinvestment has been made within two years as contemplated under Section 54 of the Act. These facts are not in dispute. Thus, long- term capital gains computed by virtue of sale deed stood adjusted by virtue of payment made by assessee for purchasing another property under Memorandum of Understanding dated 08.09.2003. As such, Tribunal has rightly held that date of purchase was to be taken as the basis for reckoning the period of two years prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d invested the entire net consideration within the stipulated period, it would meet the requirement of Section 54F and as such, assessee would be entitled to get the benefit of Section 54F of the Act. Though such construction of building may not be complete in all respect that by itself would not disentitle the assessee to the benefit flowing from Section 54F . In fact, appellate Commissioner has not only taken note of the judgment of the co-ordinate bench of this Court in Sambandam's Udaykumar case (supra), but had also taken note of the judgment of High Court of Madras in the case of CIT v. Sardarmal Kothari[2008] 302 ITR 286, which was on similar facts as obtained in Sambandam Udaykumar's case (supra) and as such in the instant case, Appellate Commissioner allowed assessee's appeal noting that the appeal filed by the revenue against the order of High Court of Madras before Apex Court in CC Nos.3953-3954/2009 had been dismissed on 06.04.2009. 9. That apart, co-ordinate bench of this Court in Sambandam Udaykumar's case (supra) referred to supra has examined similar issue and has held that the words used in Section 54F are 'purchased' or 'constructed' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val submissions and perused the material on record. The solitary issue in the present appeal revolves round the entitlement of assessee for deduction u/s. 54/54F of the Income-tax Act, 1961. From the perusal of the assessment order, it would reveal that the AO had denied the claim for deduction u/s. 54/54F, firstly on the ground that no deduction u/s. 54F/54F can be claimed simultaneously in respect of the new residential house and secondly, the new residential property was purchased before one year prior to the sale of original asset. Admittedly, the sale consideration was paid prior to the one year before the sale of original asset. There is no bar under law to claim deduction simultaneously u/s,.54 and u/s. 54F in respect of the same asset. The crucial fact which needs to be determined in the present case is the date of purchase of the new residential property. It is settled position of law that the crucial date for the purpose of determination is when the property is purchased for the purpose of section 54 and the date when the possession and control of the property is given to the purchaser s hands. Reliance can be made to the decision of Hon ble Andhra Pradesh High Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Co-ordinate Bench in the case of Lalitkumar Kesarimal Jain vs. DCIT (supra) has held that mere fact that assessee was one of associated parties in said concern which was developing housing project, could not be a ground to deny benefit of deduction u/s 54F. 30. We find the Hon'ble Supreme Court in the case of Fibre Boards (P) Ltd. vs. CIT (supra) 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. The relevant observations of the Hon'ble Supreme Court read as under: 36. A reading of Section 54G makes it clear that the assessee is given a window of three years after the date on which transfer has taken place to purchase new machinery or plant or acquire building or land. We find that the High Court has completely missed the window of three years given to the assessee to purchase or acquire machinery and building or land. This is why the expression used in 54G(2) is which is not utilized by him for all or any of the purposes aforesaid . . It is clear that for the assessment year in question all that is required for the assessee to avail of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot claim exemption from payment of tax on capital gains. This cannot be the intention of the Legislature and an interpretation, which would defeat the very purpose, and the object of the Act requires to be avoided. (at para 31 of the impugned judgment). 38. We are of the view that the aforesaid construction of Section 54G would render nugatory a vital part of the said Section so far as the assessee is concerned. Under sub-section (1), the assessee is given a period of three years after the date on which the transfer takes place to purchase new machinery or plant and acquire building or land or construct building for the purpose of his business in the said area. If the High Court is right, the assessee has to purchase and/or acquire machinery, plant, land and building within the same assessment year in which the transfer takes place. Further, the High Court has missed the key words not utilized in sub-section (2) which would show that it is enough that the capital gain made by the assessee should only be utilized by him in the assessment year in question for all or any of the purposes aforesaid, that is towards purchase and acquisition of plant and machinery, and land and buildin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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