ITO 22(3)(2) NAVI MUMBAI vs MAHENDRA H KACHHARA NAVI MUMBAI

1 आयकर आयकर आयकर आयकर अपीलीय अपीलीय अपीलीय अपीलीय अिधकरण अिधकरण अिधकरण अिधकरण, बी बी बी बी खंडपीठ खंडपीठ खंडपीठ खंडपीठ मुंबई मुंबई मुंबई मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI-“B”,BENCH सवी राजे ,लेखा सद य एवं एवं एवं एवं शिजीत डे, याियक सद य Before S/Sh.

Rajendra,Accountant Member & Shaktijit Dey,Judicial Member आयकर आयकर आयकर आयकर अपील अपील अपील अपील संसंसंसं/.ITA No.2454/Mum/2014,िनधारण िनधारण िनधारण िनधारण वष वष वष वष/Assessment Year-2011-12 ITO22(3) Navi Mumbai Vs Mahendra H Kachhara 339,Big Splash,Sector 17,Vashi New Bombay- 400075 PAN:AACPK9251B (अपीलाथ /Appellant) (यथ / Respondent) िनधा रती िनधा रती ओर ओर ओर ओर सेसेसेसे/Assessee by :Shri V D Parmar राज व क ओर से/ Revenue by :Shri Maurya Pratat सुनवाई सुनवाई सुनवाई सुनवाई क क क क तारीख तारीख तारीख तारीख / Date of Hearing : 06- 10 -2015 घोषणा क तारीख / Date of Pronouncement : 06-10-2015 आयकर आयकर आयकर आयकर अिधिनयम अिधिनयम अिधिनयम अिधिनयम,1961 1961 1961 1961 क धारा क धारा क धारा क धारा 254 254 254 254(1)के अतगत आदेश के अतगत आदेश Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सदय राजे के अनुसार PER RAJENDRA, AM- Challenging the order dated 27.01.2014 of CIT(A)-33,Mumbai,the Assessing Officer(AO) has filed the present appeal.

Assessee,an individual,company,engaged in the profession of a chartered accountant,filed his return of income on 11.09.2011,declaring total income of Rs.

5.59 lakhs.The AO completed the assessment u/s.143(3) of the Act on 18.10.2013,determining the income of the assessee at Rs.

74,82,450/-.

2.Effective ground of appeal is about allowing exemption u/s.54 of the Act.During the assessment proceedings,the AO found that the assessee had sold his flat for a total consideration of Rs.1.15 Crores on 16.11.2010,that in the computation of income he had computed long term capital gains(LTCG)at Rs.69. )at Rs.69.23 lakhs,that LTCG was claimed exempt u/s.54 of the Act on the ground that the entire amount stood invested in purchase of a new flat,that the new asset was purchased on 16.09.2010.However the AO rejected the claim made by the assessee,as he was of the opinion that the assessee should have purchased the residential house by 15.11.2012 i.e.within two years from the date of transfer of original asset,that payment were made to the developers after expiry of two years from the date of sale of old flat,that the construction of the new flat was completed by the developer after two years from the date of sale of old flat by the assessee,that the building was not complete until 15.11.2012,that the occupation certificate was received in the year 2013.He asked the assessee as to why the exemption claimed u/s.54 of the Act should not be denied.After considering the submission of the assessee,the AO held that the assessee had received the possession of the new flat on 19.07.2013,that he had not purchased the new asset within two years from the sale of old flat,that the benefit of three years of construction of a residential house was not available to him.

3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA).Before him it was contented that investment in the new asset was made by 24.

06.2013,that the possession was taken well within three years.He produced the copies of the agreement of purchase and sale of his old flat,agreement of purchase of new flat,statement of 2 payment made.He relied upon the cases of Bharati C Kothari(244ITR352)and R L Sood(245 ITR 727).After considering the submissions of the assessee and the assessment order,the FAA held that the assessee had booked a new flat with the builder and as per the agreement he had to make payment in installments,that the builder was to handover the possession of the flat after construction,that the assessee had made entire payment towards the new residential esidential flat by 24.06.2013,that he had taken possession within three years from the date of transfer of his old flat,tha the amount equivalent to the capital gains arising out of the transfer of old asset stood invested on or before the due date of filing of return of income u/s.

139(1)of the Act.He referred to the dates of payment made by the assessee for purchasing the new asset.He referred to the circular no.672 of the CBDT dated 16.12.1993 r.w. circular no.471 dated 15.10.1986.He relied upon the cases of Sunder kaur Sajjansingh Gadh (3 SOT 206)and Mrs.

Hilla J B Wadia(216ITR376),Bharati Mishra(41Taxmann.com.50)and allowed the appeal filed by the assessee.

4.Before us,Departmental Representative (DR) relied upon the order of the AO and the Authorised Representative (AR) supported the order of the FAA.We have heard the rival submissions and perused the material before us.We find that the AO had denied the exemption u/s.

54 because he was of the opinion that the assessee had not constructed the flat within 2 yrs from the date of transfer of his old house, that the FAA has given a categorical finding of the fact that the possession of the new asset was taken well within the period of three years from the date of sale of the old flat.Here we would like to refer to the case of Hilla J.B.

Wadia (supra).

The Hon’ble Jurisdictional high Court has decided the issue of exemption u/s.

54 as under : Section 54 of the Income-tax Act, 1961, has to be construed in the context of the manner in which residential properties are now being constructed in a city like Bombay where, looking to the cost of the land, co-operative housing societies are being formed for constructing a building in which flats are allotted to members.

This must also be viewed as a method of constructing residential tenements. tenements.

What we have to see is whether the assessee has acquired a right to a specific flat in such a building which is being constructed by the society and whether he has made a substantial investment within the prescribed period which will entitle him to obtain possession of the flat so constructed and in which he intends to reside.

The material test in this connection is domain over the flat and investment in it.

Central Board of Direct Taxes Circular No.

471, * dated October 15, 1986, deals with investment in flats under the self-financing scheme of the Delhi Development Authority.

The Board has stated in the circular 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 a flat under this scheme should be treated as a case of construction for the purpose of capital gains…… that the assessee had acquired domain over the flat and had invested almost the entire requisite amount in it within a period of two years as prescribed under section 54.

She was, therefore, entitled to the exemption under section 54.

Respectfully following the above and confirming the order of FAA,we decide the effective ground of appeal against the AO.

As a result,appeal filed by the AO stands dismissed फलतः िनधा रती ारा दािखल क गई अपील मंजूर क जाती है Order pronounced in the open court on 6th,October,2015. आदेश क घोषणा खुले यायालय म दनांक 6. अटूबर,2015 को क गई । 3 Sd/- Sd/- (शि जीत डे शि जीत डे / Shaktijit Dey) (राजे / RAJENDRA) याियक सद य / JUDICIAL MEMBER लेखा लेखा लेखा लेखा सदय सदय सदय सदय / ACCOUNTANT MEMBER मुंबई/Mumbai,दनांक/Date:06.10.2015 व.िन.स.Jv.Sr.PS. .Jv.Sr.PS. आदेश आदेश आदेश आदेश क क क क ितिलिप ितिलिप ितिलिप ितिलिप अ ेिषत अ ेिषत अ ेिषत अ ेिषत/Copy of the Order forwarded to : 1.Appellant /अपीलाथ" 2.

Respondent /#$यथ" 3.The concerned CIT(A)/संब& अपीलीय आयकर आयु', 4.The concerned CIT /संब& आयकर आयु' 5.DR “ B” Bench, ITAT, Mumbai /िवभागीय #ितिनिध, बी बी बी बी खंडपीठ,आ.अ.याया.मुंबई 6.Guard File/गाड, फाईल स$यािपत #ित //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst.

Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai.