Pr. Commissioner Of Income Tax-I, Jodhpur v. Shri Prakash Chand Modi, D

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 52 / 2018 Pr. Commissioner of Income Tax-I, Jodhpur. ----Appellant Versus Shri Prakash Chand Modi, D-128, Shastri Nagar, Jodhpur. ----Respondent _____________________________________________________For Appellant(s) :Mr. K.K. Bissa. For Respondent(s) :Mr. Anjay Kothari. _____________________________________________________ HON'BLE MR. JUSTICE GOPAL KRISHAN VYAS HON'BLE MR. JUSTICE RAMCHANDRA SINGH JHALAOrder 11/05/2018 After hearing learned counsel for the parties, we haveperused the finding given by the learned ITAT, Jodhpur in theimpugned judgment dated 12.07.2017, in which following findingis given by the ITAT, which reads as under:- 5.On consideration of the entire factual position weare of the view that the CIT (A) was justified ingranting the benefit claimed u/s 54 by the assessee asthe property sold was a residential house and there isno dispute that the assessee had made investment inthe new residential house for which the deduction isbeing claimed. The section no where defines thequantum of construction on the land so as to be eligibleto be defined as a residential unit. The only conditionis that there should be a residential house capable ofbeing used as a residence by any person. There is noeven no condition that the same should be in occupation of the assessee himself and it can be usedas residence even by any other person also. Theregistered sale deed also speaks about the residentialhouse and there is reference of the constructedbuilding thereon. There had been room, bathroom,kitchen area in the said property which are theimportant ingredient of the residential house. Thephotograph of the property attached with theregistered sale deed, also indicate that there isconstructed residential house over the said property.The plot in question was being acquired in financialyear 1982-83 and the construction and otherdevelopment work was being carried out in 2006-07and 2008-09, and the approval of the concernedauthorities and charges being paid had also beensubmitted and there is electricity connection for whichregular chharges are being paid. There were fouradjacent plot and a common residential houseconsisting of six rooms was made thereon. The otherthree plots belonged to the assessee’s father and twobrothers. There was a complete residential house. Theassessee had invested the entire capital gains in theconstruction of new residential house. We therefore,uphold the finding of the CIT(A) in deleting the saidaddition so made and dismiss the appeal filed by thedepartment.” The aforesaid finding of learned ITAT is in consonance withthe adjudication by the Hon’ble Supreme Court in case of SanjeevLal Etc. Vs. Commissioner of Income Tax & Anr., reported in 365ITR 389 (SC), which reads as under:- “22. In addition to the fact that the term “transfer” hasbeen defined under Section 2(47) of the Act, even iflooked at the provisions of Section 54 of the Act which The aforesaid finding of learned ITAT is in consonance withthe adjudication by the Hon’ble Supreme Court in case of SanjeevLal Etc. Vs. Commissioner of Income Tax & Anr., reported in 365ITR 389 (SC), which reads as under:- “22. In addition to the fact that the term “transfer” hasbeen defined under Section 2(47) of the Act, even iflooked at the provisions of Section 54 of the Act which gives relief to a person who has transferred his oneresidential house and is purchasing another residentialhouse either before one year of the transfer or eventwo years after the transfer, the intention of theLegislature is to give him relief in the matter ofpayment of tax on the long term capital gain. If aperson, who gets some excess amount upon transfer ofhis old residential premises and thereafter purchases orconstructs a new premises within the time stipulatedunder Section 54 of the Act, the Legislature does notwant him to be burdened with tax on the long termcapital gain and therefore, relief has been given to himin respect of paying income tax on the long termcapital gain. The intention of the Legislature or thepurpose with which the said provision has beenincorporated in the Act, is also very clear that theassessee should be given some relief. Though it hasbeen very often said that common sense is a strangerand an incompatible partner to the Income Tax Act andit is also said that equity and tax are strangers to eachother, still this Court has often observed that purposiveinterpretation should be given to the provisions of theAct. In the case of Oxford University Press v.Commissioner of Income Tax [(2001) 3 SCC 359] thisCourt has observed that a purposive interpretation ofthe provisions of the Act should be given whileconsidering a claim for exemption from tax. It has alsobeen said that harmonious construction of theprovisions which subserve the object and purposeshould also be made while construing any of theprovisions of the Act and more particularly when one isconcerned with exemption from payment of tax.Considering the aforestated observations and theprinciples with regard to the interpretation of Statutepertaining to the tax laws, one can very well interpretthe provisions of Section 54 read with Section 2(47) of the Act, i.e. definition of “transfer”, which would enablethe appellants to get the benefit under Section 54 ofthe Act. 23.Consequences of execution of the agreement tosell are also very clear and they are to the effect thatthe appellants could not have sold the property tosomeone else. In practical life, there are events when aperson, even after executing an agreement to sell animmoveable property in favour of one person, tries tosell the property to another. In our opinion, such an actwould not be in accordance with law because once anagreement to sell is executed in favour of one person,the said person gets a right to get the propertytransferred in his favour by filing a suit for specificperformance and therefore, without hesitation we cansay that some right, in respect of the said property,belonging to the appellants had been extinguished andsome right had been created in favour of thevendee/transferee, when the agreement to sell hadbeen executed. 24.Thus, a right in respect of the capital asset, viz.the property in question had been transferred by theappellants in favour of the vendee/transferee on 27thDecember, 2002. The sale deed could not be executedfor the reason that the appellants had been preventedfrom dealing with the residential house by an order of acompetent court, which they could not have violated. 25.In view of the aforestated peculiar facts of thecase and looking at the definition of the term ‘transfer”as defined under Section 2(47) of the Act, we are ofthe view that the appellants were entitled to reliefunder Section 54 of the Act in respect of the long term 24.Thus, a right in respect of the capital asset, viz.the property in question had been transferred by theappellants in favour of the vendee/transferee on 27thDecember, 2002. The sale deed could not be executedfor the reason that the appellants had been preventedfrom dealing with the residential house by an order of acompetent court, which they could not have violated. 25.In view of the aforestated peculiar facts of thecase and looking at the definition of the term ‘transfer”as defined under Section 2(47) of the Act, we are ofthe view that the appellants were entitled to reliefunder Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance oftransfer of their residential property being House No.267, Sector 9-C, situated in Chandigarh and used forpurchase of a new asset/residential house. 26.The appeals are, therefore, allowed with no orderas to costs. The impugned judgments are quashed andset aside and the Authorities are directed to re-assessthe income of the appellants for the Assessment Year2005-2006, after taking into account the fact that theappellants were entitled to the relief, subject tofulfilment of other conditions.” In view of above facts no substantial question of lawemerges for consideration. Consequently the instant income taxappeal is hereby dismissed while following the aforesaid judgment. (RAMCHANDRA SINGH JHALA)J. (GOPAL KRISHAN VYAS) J. Ishan