Ita/238/2015 Of Mr.m.george Joseph v. Cit’, (1992) 196 Itr 188 (Sc), 'Cit Vs, Gwalior Rayon Silk Manufacturing Co. Ltd., (1994) 196 Itr 149

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 12 DAY OF JULY 20271 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’/BLE MR. JUSTICE HEMANT CHANDANGOUDAR BETWEEN: ILT.A. NO.238 OF Z2O1 MR. M. GEORGE JOSEPH,NO.534/30, 5TH CROSS|MAHALAKSHMI LAYOUTBANGALORE-560086. (BY SRI. SHANKAR A. SR. COUNSEL FOR|SRI. BHAIRAV KUTTAIAH, ADV.,) ... APPELLAN| AND" DY. COMMISSIONER OF INCOME TAX| OFFICER, CIRCLE 12(2)4TH FLOOR, R.P. BHAVAN14/3A, NRUPATHUNGA ROAD.BANGALORE-560001. (BY SRI. E.I. SANMATHI, ADV.,)- .., RESPONDENT THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 13.02.2015 PASSEDIN ITA NO.13/BANG/2014 FOR THE ASSESSMENT YEAR 2009-10,PRAYING TQ: | (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE.APPELLAN!. | (ii) ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO.THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY.THELITAT,BANGALORE.BENCH.IN|LIANO.13/BANG/2014RELATING TO ASSESSMENT YEAR 2009-10 VIDE ITS ORDER.DATED 13.02.2015. THIS I.T.A. COMING ON FOR FINAL HEARING, THIS DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short)has been preferred by the assessee. The subject matter|of the appeal pertains to the Assessment year 2009-10.The appeal was admitted by a bench of this Court on thefollowing substantial question of law: “Whether the Income Tax AppellateTribunal ts Justified in law in confirming theorderpassedDy thefirst.AppellateAuthority and Assessing Officer that theappellant is not entitled to exemption of|Rs.88,98,9/70/- under Section 54F of theActeVeClthough|allthemandatoryrequirements and conditions were fulfilledon the facts and circumstances of thecase?” 2 |Facts leading to filing of this appeal brieflystated are that the assessee Is an Individual. The|assessee was a Shareholder in two companies viz., PearlInsulation Pvt. Ltd. And M/s Pearl Metal Products Pvt.Ltd. The assessee had transferred the shares held byhim in the aforesaid companies on 21.08.2008 resulting|in Long Term Capital Gains. The assessee filed return of |income on 31.07.7009 for the Assessment Year 2009-10.and declared total income of Rs.28,39,63,455/- and.claimed exemption under Section 54F of the Act to theextent of Rs.88,98,9/70/- on account of acquisition of anew residential house property vide registered sale deeddated 28.03.2011. The return was selected for scrutiny.The Assessing Officer by an order dated 16.12.2011.inter alia neld that assessee nad computed Long Term.Capital Gain of Rs.26,88,34,949/- under Section 54 of.the Act in respect of an investment made in acquiring a.new residential Nouse property to the extent ofRs.88,98,970/-.Tne.ASS@SSINQ|Officer.neildtnat| investment made by the assessee does not fall within.purview of Section 54F of the Act and disallowed theclaim and added the amount to the returned income. 3The assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeals),which was dismissed by an order dated 16.09.2013. The.assessee challenged the aforesaid order before the|Income Tax Appellate Tribunal (hereinafter referred to.as the tribunal for short). The tribunal by an orderdated 13.02.2015 dismissed the appeal preferred by theassessee. In the aforesaid factual background, this|appeal nas been filed. 4Learneq Senior counsel for tne assesseesubmitted that daughter of the assessee nad enteredinto an agreement with M/s Brigade Enterprises on|30.12.2006 for construction of a new flat and made=payments to the builder. The aforesaid allotment of theflat was transferred in favour of tne assessee on§ 3The assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeals),which was dismissed by an order dated 16.09.2013. The.assessee challenged the aforesaid order before the|Income Tax Appellate Tribunal (hereinafter referred to.as the tribunal for short). The tribunal by an orderdated 13.02.2015 dismissed the appeal preferred by theassessee. In the aforesaid factual background, this|appeal nas been filed. 4Learneq Senior counsel for tne assesseesubmitted that daughter of the assessee nad enteredinto an agreement with M/s Brigade Enterprises on|30.12.2006 for construction of a new flat and made=payments to the builder. The aforesaid allotment of theflat was transferred in favour of tne assessee on§ 18.03.2009 and the flat was registered in the name of|the assessee on 28.03.2011 i.e., prior to three years.from the date of transfer of shares i.e., 21.08.2008. It isalso submitted that in order to claim exemption under.Section 54F of the Act, the assessee had to construct aresidential house within three years from the date of.transfer of original asset. It is also urged that case of the assessee was a case of construction of the propertyand not mere purchase. In support of aforesaidsubmission, reliance has been placed on Circulars dated15.10.1986 and 16.12.1993 issued by Central Board of Directors. It is also urged that since, the impugned order|has been passed on misinterpretation of Section 54F oftne Act, therefore, a substantial question of law arises.for consideration in this appeal. In support of aforesaidSubmissions, reliance has been placed on decisions in"BAJAJ TEMPO LTD. VS. CIT’, (1992) 196 ITR 188(SC),'CIT|VS,GWALIORRAYONSILKMANUFACTURING CO. LTD., (1994) 196 ITR 149 (SC)and decisions in|'CIT VS. SMT. BRINDA|KUMARI’, (2002) 253 ITR 343 (DEL.), ‘CIT VS.MRS. HILLA J.B.WADIA'’, (1995) 216 ITR 376(BOM.), ‘CIT VS. SAMBANDAM UDAYKUMR,, (2012)345 ITR 389 and ‘CIT VS. SADARMAL KOTHART.,(2008) 302 ITR 286 (MAD.). 5.|On the other hand, learned counsel for therevenue submitted that all the authorities under the Act.have held that assessee has not satisfied the conditions.prescribed in Section 54F of the Act and is therefore, notentitled to benefit of the aforesaid provision. Theaforesaid findings are based on appreciation of evidence.on record. It is also pointed out that no plea has been.taken by the assessee in the appeal that the findings.recorded by the authorities are perverse or authorities|have|invoked|any|materialavailableON)record.Therefore, no substantial question of law arises for.consideration in this appeal. It is also submitted tnatAssessing Officer as well as Commissioner of Income Tax (Appeals) in para 3.2 to 3.4 and tribunal in para5.5.1 to 5.5.4 have assigned detailed reasons fordenying the claim of the assessee under Section 54F of the Act. It is also urged that exemption clause should be interpreted strictly. In support of aforesaid submissions, reference has been made to.‘COMMISSIONER OFCUTOMS (IMPORT), MUMBAI VS. DILIP KUMAR &CO’, (2018) 68 GST 39, ‘JAI NARAYAN VS. INCOME.TAX OFFICER, 306 ITR 335 (P & H), PRAKASH VS.INCOME TAX OFFICER & ORS, 312 ITR 40(MUMBAI)and'VIPINMALTK|(HUF)VS,COMMISSIONER OF INCOME TAX, (2009) 330 ITR0309 (DEL). 6.|We nave considered tne rival SUDMISSIONS.andhave|carefullyperused|therecord. Beforeproceeding further, it is apposite to take note of relevant|extract of Section 54F of the Act, which reads as under: Capital gain on transfer of certain|capital assets not to be charged in case of investment [n residential house, 6.|We nave considered tne rival SUDMISSIONS.andhave|carefullyperused|therecord. Beforeproceeding further, it is apposite to take note of relevant|extract of Section 54F of the Act, which reads as under: Capital gain on transfer of certain|capital assets not to be charged in case of investment [n residential house, 54F(1) Subject to the provisions of sub-Section (4), where, in the case of an assessee being an individual or a Hindu undividedfamily, the capital gain arises from the|transfer of any long term capital asset, not.being a residential house (nereafter in this|section referred to as the original asset), and|the assessee has within a period of one yearbefore or two years after the date on which)the transfer took place purchased, or haswithin a period of three years after that date|constructed, one residential house in India].(hereafter in this Section referred to as thenew asset), the capital gain snall be dealt|WIth|In|accordancewiththefollowing.provisions of this section, that is to say - (a) if the cost of the new asset is not less|than the net consideration in respect of the.original asset, the whole of such capital gain|Shall not be charged under Section 45| (b) if the cost of the new asset Is less|than the net consideration in respect of the.original asset, so much of the capital gain as|bears to the whole of the capital gain the. same proportion as the cost of the new asset|bears to the net consideration, shall not be|charged under Section 45. 7Thus, it is evident that assessee within aperiod of one year before or two years after the date on.which transfer took place, purchases or has within aperiod of three years after that date, constructs aresidential house, he is entitled to the benefit UnderSection 54F of the Act. 8 _In the instant case, the daughter of theassessee had entered into an agreement for purchaseof |a flat on 30.12.2006 with M/s Brigade Enterprises. On|21.08.2008, the assessee transferred his shares in the.company on which Long Term Capital Gain was offered.Thereafter, under an agreement, on 18.03.2009, the flat|was transferred in the name of the assessee andthereafter a registered sale deed was executed in favour|of the assessee on 28.03.7011. The assessee had|acquired the residential property viz., the flat under an. agreement to sell in respect of undivided land and an|agreement to build, thus, the instant case was a case of.construction of a residential house. The sale deed was/executed in favour of the assessee within a period of.three yeas from the date of transfer of shares i.e., on.28.03.2011, prior to three years from the date oftransfer of shares i.e., 21.08.2008. Therefore, theauthorities under the Act ought to have examined the|claim of the assessee whnetner or not tne assessee Nadconstructed a residential house within a period of three.years from the date of transfer of original property. It is also pertinent to note that exemption under Section 54.of the Act is dependant on the date of acquisition of theproperty and not on the date of payment made inrespect of sucn property. It is also noteworthy to.mention that to claim an exemption under Section 54Fof the Act, it is not necessary that the same saleconsideration should be used for construction of a new|nouse property. It is also notewortny that Section 54F of the Act is a beneficial provision, which has been enactedwith an object to promote investment in housing andenable the assessee to save tax on capital gains. It is a|well settled rule of interpretation that benevolentprovision should be interpreted liberally bearing in mind|the object for which the provision is enacted. Thus, fromnarration of aforementioned facts, it is evident that the|assessee had complied with the conditions stipulatedUnder Section 5S4F of the Act and was entitied forexemption. Therefore, the finding recorded by the|tribunal that since, payments were made prior to oneyear before the date of transfer of shares and therefore,the assessee is not entitled to claim exemption underSection 5S4F of tne Act cannot put be termed asperverse. For the aforementioned reasons, the substantialquestion of law is answered in the negative and infavour of tne assessee. In the result, order of thetribunal dated 13.02.2015 insofar as it pertains the ������!���������������������"���������������������������������������������������������2�������� ��������������������������������� ����������� ��� �����������