Sh. Manish Sethi, New Delhi v. ITO, New Delhi

ITA 2039/DEL/2010 | 1997-1998
Pronouncement Date: 09-09-2011 | Result: Allowed

Appeal Details

RSA Number 203920114 RSA 2010
Assessee PAN APAPS6049G
Bench Delhi
Appeal Number ITA 2039/DEL/2010
Duration Of Justice 1 year(s) 4 month(s) 5 day(s)
Appellant Sh. Manish Sethi, New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 09-09-2011
Date Of Final Hearing 30-08-2011
Next Hearing Date 30-08-2011
Assessment Year 1997-1998
Appeal Filed On 04-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE HONBLE VICE PRESIDENT SHRI G.E. VEERABHADRA PPA AND HONBLE JUDICIAL MEMBER SHRI RAJPAL YADAV I.T.A. NO.2039/DEL/2010 ASSESSMENT YEAR: 1997-98 SHRI MANISH SETHI VS. INCOME TAX OFFICER 5285 SARDAR THANA ROAD WARD 39(3) SADAR BAZAR DELHI-06 NEW DELHI PAN NO.AAPAPS 6049 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINAY BAHL ADVOCATE RESPONDENT BY : SHRI R.S. NEGI SR. DR ORDER PER RAJPAL YADAV JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER OF C IT(A)- XXVIII NEW DELHI DATED 11.02.2010 PASSED FOR ASSESSMENT YEAR 1997- 98. 2. THE ASSESSEE HAS TAKEN NINE GROUNDS OF APPEAL WHICH A RE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF H IS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE WHETHER HE IS ENTITLED FO R DEDUCTION OF `1 69 334/- U/S 54F OF THE INCOME-TAX ACT ON ACCOUNT OF INVESTMENT OF CAPITAL GAIN IN A RESIDENTIAL PROPERTY? 2.1 THE BRIEF FACTS OF THE CASE ARE THAT ORIGINALLY A SSESSMENT WAS COMPLETED U/S 144 ON 15 TH MARCH 2000 AT AN INCOME OF `4 59 860/- AGAINST RETURNED INCOME OF `35 020/-. THE ASSESSMENT WAS SET ASIDE BY THE TRIBUNAL IN I.T.A. NO.2997/D/2001 VIDE ORDER DATED 13 TH JANUARY 2009. THE ASSESSING OFFICER HAS PASSED THE FRESH ASSESSMENT O RDER ON 09.12.2009. THE ASSESSEE HAS SOLD A PLOT AT MUNDKA FOR A CONSIDERATION OF `2 10 000/-. HE HAS SHOWN CAPITAL GA IN OF `1 69 334/-. 2 DEDUCTION OF THIS GAIN WAS CLAIMED U/S 54F ON THE GROU ND THAT HE HAS INVESTED A SUM OF `1 80 000/- FOR THE PURCHASE OF A FL AT. THE ASSESSEE HAS PLACED ON RECORD THE DETAILS OF SALE AND PURCHASE I N TABULAR FORM WHICH READ AS UNDER:- 4. THE DETAILS OF SALE AND PURCHASE ARE AS UNDER:- SALES CONSIDERATION RECD 19.06.1996 `2 10 000/- INVESTMENTS IN RESIDENTIAL HOUSE PROPERTY. DATE AMOUNTS 22.09.1996 50 000/- 06.12.1996 50 000/- 06.12.1996 30 000/- 10.12.1996 50 000/- `1 80 000/- 5.THE CAPITAL GAINS WORKS OUT AS UNDER:- SALES CONSIDERATION `2 10 000/- LESS: INDEXED COST ` 46 666/- LONG TERM CAPITAL GAINS `1 69 334/- LESS: INVESTMENT IN RESIDENTIAL HOUSE INVESTED `1 80 000/- BUT RESTRICTED TO `1 69 334/- `1 69 334/- TAXABLE LONG TERM GAINS ------NIL------ 2.2 THE LEARNED ASSESSING OFFICER REJECTED THE CLAIM OF ASSESSEE ON THE GROUND THAT CONSTRUCTION OF THE FLAT WAS NOT COMP LETED WITHIN THE STIPULATED PERIOD THEREFORE HE IS NOT ENTITLED FOR THE DEDUCTION U/S 54F OF THE INCOME-TAX ACT. 2.3 APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF T O THE ASSESSEE. 2.4 LEARNED COUNSEL FOR THE ASSESSEE WHILE IMPUGNING THE ORDERS OF AUTHORITIES SUBMITTED THAT HIS CASE DULY FALLS WITHIN TH E AMBIT OF 3 CIRCULAR NO.471 AND 472 ISSUED BY THE CBDT ON 15.10.1 986 AND 16.12.1993. HE TOOK US THROUGH THESE CIRCULARS AND PO INTED OUT THAT BOARD HAS RECOGNIZED THE BOOKING OF A FLAT IN A DDA SCHEME OR IN HOUSING SCHEME FLOATED BY ANY CO-OPERATIVE HOUSING SOCI ETY AT THE PAYMENT OF FIRST INSTALLMENT AS CONSTRUCTION OF THE RESI DENTIAL HOUSE. ACCORDING TO THESE CIRCULARS IF AN ASSESSEE BOOKED THE F LAT IN A SELF- FINANCING SCHEME AND PAID THE FIRST INSTALLMENTS OF THE COST OF CONSTRUCTION THE ALLOTMENT IS FINAL UNLESS IT IS CANCEL LED THEN THE COST OF THE NEW ASSET IS THE TENTATIVE COST OF CONSTRUCTION A ND THE ASSESSEE WOULD BE ALLOWED THE BENEFIT OF SECTION 54F. THE ASSE SSEE PLACED ON RECORD COPY OF THE CERTIFICATE ISSUED BY MANCHAHAT CO -OPERATIVE GROUP HOUSING SOCIETY LTD. SITUATED AT PLOT NO.42 SECTOR-1 0 DWARKA PHASE-I NEW DELHI CERTIFYING THAT ASSESSEE WAS ALLOTTED MEMBERSH IP NO.148. A FLAT BEARING NO.212 HAS BEEN ALLOTTED TO HIM. HE HAS PAID THE MONEY TOWARDS LAND MONEY FOR THE YEAR 1996-97. THE ASSESSEE F URTHER SUBMITTED THAT HE IS STILL POSSESSING THIS FLAT WHICH HAS B EEN RENTED OUT. 2.5 ON THE OTHER HAND LEARNED DR RELIED UPON THE O RDER OF CIT(A). HE POINTED OUT THAT LEARNED FIRST APPELLATE AUTHORIT Y HAS CONSIDERED CIRCULAR NO.667 DATED 18.10.1993 WHICH ALSO DEALS W ITH GRANT OF DEDUCTION U/S 54 & 54F. ACCORDING TO THE CIT(A) CO NSTRUCTION OF THE FLAT OUGHT TO BE COMPLETED WITHIN A PERIOD OF THREE YEARS BUT ASSESSEE FAILED TO PRODUCE ANY EVIDENCE DEMONSTRATING THIS ASPE CT. 2.6 WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THE CIRCULARS RELIED UPON BY THE ASSESSEE HAS A DIRECT BEARING THEREFORE IT IS IMPERATIVE UPON US T O TAKE COGNIZANCE OF THESE CIRCULARS. THEY READ AS UNDER:- 4 471. CAPITAL GAINS FROM LONG 471. CAPITAL GAINS FROM LONG 471. CAPITAL GAINS FROM LONG 471. CAPITAL GAINS FROM LONG- -- -TERM CAPITAL ASSET TERM CAPITAL ASSET TERM CAPITAL ASSET TERM CAPITAL ASSET - -- - INVESTMENT IN A FLAT UNDER THE SELF INVESTMENT IN A FLAT UNDER THE SELF INVESTMENT IN A FLAT UNDER THE SELF INVESTMENT IN A FLAT UNDER THE SELF- -- -FINANCING SCHEME OF THE FINANCING SCHEME OF THE FINANCING SCHEME OF THE FINANCING SCHEME OF THE DELHI DEVELOPMENT AUTHORITY DELHI DEVELOPMENT AUTHORITY DELHI DEVELOPMENT AUTHORITY DELHI DEVELOPMENT AUTHORITY - -- - WHETHER TO B WHETHER TO B WHETHER TO B WHETHER TO BE TREATED AS E TREATED AS E TREATED AS E TREATED AS CONSTRUCTION FOR THE PURPOSES OF CAPITAL GAINS CONSTRUCTION FOR THE PURPOSES OF CAPITAL GAINS CONSTRUCTION FOR THE PURPOSES OF CAPITAL GAINS CONSTRUCTION FOR THE PURPOSES OF CAPITAL GAINS 1. 1.1. 1. SECTIONS 54 AND 54F PROVIDE THAT CAPITAL GAINS ARISIN G ON TRANSFER OF A LONG-TERM CAPITAL ASSET SHALL NOT BE CHAR GED TO TAX TO THE EXTENT SPECIFIED THEREIN WHERE THE AMOUN T OF CAPITAL GAIN IS INVESTED IN A RESIDENTIAL HOUSE. IN THE CASE OF PURCHASE OF A HOUSE THE BENEFIT IS AVAILABLE IF TH E INVESTMENT IS MADE WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE AND IN CASE OF CONSTRUCTION OF A HOUSE THE BENEFIT IS AVAILABLE I F THE INVESTMENT IS MADE WITHIN THREE YEARS FROM THE DATE OF THE TRANSFER. 2. 2.2. 2. THE BOARD HAD OCCASION TO EXAMINE AS TO WHETHER THE ACQUISITION OF A FLAT BY AN ALLOTTEE UNDER THE SELF- FINANCING SCHEME (SFS) OF THE D.D.A. AMOUNTS TO PURCHASE OR IS CONSTRUCTION BY THE D.D.A. ON BEHALF OF THE ALLOTTEE . UNDER THE SFS OF THE D.D.A. THE ALLOTMENT LETTER IS ISSUED ON PAYMENT OF THE FIRST INSTALLMENT OF THE COST OF CONSTRU CTION. THE ALLOTMENT IS FINAL UNLESS IT IS CANCELLED OR THE AL LOTTEE WITHDRAWS FROM THE SCHEME. THE ALLOTMENT IS CANCELLED ONLY UNDER EXCEPTIONAL CIRCUMSTANCES. THE ALLOTTEE GE TS TITLE TO THE PROPERTY ON THE ISSUANCE OF THE ALLOTMEN T LETTER AND THE PAYMENT OF INSTALLMENTS IS ONLY A FOLLOW-UP AC TION AND TAKING THE DELIVERY OF POSSESSION IS ONLY A FORMALIT Y. IF THERE IS A FAILURE ON THE PART OF THE D.D.A. TO DELI VER THE POSSESSION OF THE FLAT AFTER COMPLETING THE CONSTRUCTION THE REMEDY FOR THE ALLOTTEE IS TO FILE A SUIT FOR REC OVERY OF POSSESSION. 3. THE BOARD HAVE BEEN ADVISED THAT UNDER THE ABOVE CIRCUMSTANCES THE INFERENCE THAT CAN BE DRAWN IS THAT THE D.D.A. TAKES UP THE CONSTRUCTION WORK ON BEHALF OF TH E ALLOTTEE AND THAT THE TRANSACTION INVOLVED IS NOT A SA LE. UNDER THE SCHEME THE TENTATIVE COST OF CONSTRUCTION IS ALREADY DETERMINED AND THE D.D.A. FACILITATES THE PA YMENT OF THE COST OF CONSTRUCTION IN INSTALLMENTS SUBJECT TO T HE CONDITION THAT THE ALLOTTEE HAS TO BEAR THE INCREASE IF ANY IN THE COST OF CONSTRUCTION. THEREFORE FOR THE PURPO SE OF CAPITAL GAINS TAX THE COST OF THE NEW ASSET IS THE TENTA TIVE COST OF CONSTRUCTION AND THE FACT THAT THE AMOUNT WAS ALLOWED TO BE PAID IN INSTALLMENTS DOES NOT AFFECT THE LEGAL POSITION STATED ABOVE. IN VIEW OF THESE FACTS IT HAS BE EN DECIDED THAT CASES OF ALLOTMENT OF FLATS UNDER THE SEL F- 5 FINANCING SCHEME OF THE D.D.A. SHALL BE TREATED AS CA SES OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS. 472: WHETHER ALLOTMENT OF FLATS/HOUSES BY CO WHETHER ALLOTMENT OF FLATS/HOUSES BY CO WHETHER ALLOTMENT OF FLATS/HOUSES BY CO WHETHER ALLOTMENT OF FLATS/HOUSES BY CO- -- -OPERATIVE SOCIETIES OPERATIVE SOCIETIES OPERATIVE SOCIETIES OPERATIVE SOCIETIES AND OTHER INSTITUTIONS WHOSE SCHEMES OF ALLOTMENT AND AND OTHER INSTITUTIONS WHOSE SCHEMES OF ALLOTMENT AND AND OTHER INSTITUTIONS WHOSE SCHEMES OF ALLOTMENT AND AND OTHER INSTITUTIONS WHOSE SCHEMES OF ALLOTMENT AND CONSTRUCTION ARE SIMILAR TO TH CONSTRUCTION ARE SIMILAR TO TH CONSTRUCTION ARE SIMILAR TO TH CONSTRUCTION ARE SIMILAR TO THOSE OF DDA SHOULD BE TREATED OSE OF DDA SHOULD BE TREATED OSE OF DDA SHOULD BE TREATED OSE OF DDA SHOULD BE TREATED AS CASES OF CONSTRUCTION FOR PURPOSES OF SECTIONS 5 4 AND 4F: AS CASES OF CONSTRUCTION FOR PURPOSES OF SECTIONS 5 4 AND 4F: AS CASES OF CONSTRUCTION FOR PURPOSES OF SECTIONS 5 4 AND 4F: AS CASES OF CONSTRUCTION FOR PURPOSES OF SECTIONS 5 4 AND 4F: 1.ATTENTION IS INVITED TO BOARDS CIRCULAR NO.471 DAT ED 15.10.1986. IT WAS CLARIFIED THEREIN THAT CASES OF AL LOTMENT OF FLATS UNDER THE SELF-FINANCING SCHEME OF THE DELH I DEVELOPMENT AUTHORITY (DDA) SHOULD BE TREATED AS CASES OF CONSTRUCTION FOR THE PURPOSES OF SECTIONS 54 AND 54F OF THE INCOME-TAX ACT. THE BOARD HAS SINCE RECEIVED REPRESENTATIONS THAT EVEN IN RESPECT OF ALLOTMENT OF FLATS/HOUSES BY CO-OPERATIVE SOCIETIES AND OTHER INSTITUTIONS WHOSE SCHEMES OF ALLOTMENT AND CONSTRUCTION ARE SIMILAR TO THOSE OF DELHI DEVELOPMENT AUTHORITY A SIMILAR VIEW SHOULD BE TAKEN. 2.THE BOARD HAS CONSIDERED THE MATTER AND HAS DECIDED THAT IF THE TERMS OF THE SCHEMES OF ALLOTMENT AND CONSTRUCTION OF FLATS/HOUSES BY THE CO-OPERATIVE SOCIETI ES OR OTHER INSTITUTIONS ARE SIMILAR TO THOSE MENTIONED IN PA RA 2 OF BOARDS CIRCULAR NO.471 DATED 15.10.1986 (SL. NO. 428) SUCH CASES MAY ALSO BE TREATED AS CASES OF CONSTRUCTION FOR THE PURPOSES OF SECTIONS 54 AND 54F OF THE INCOME-TAX ACT. 2.7 THESE CIRCULARS HAVE COME UP FOR CONSIDERATION IN THE CASE OF CIT VS. MS. HILA J.B. WADIA 69 TAXMAN 114 (BOM.) AND IN THE CASE OF SMT. SEETHA SUBRAMANIAM VS. ACIT 59 ITD 94 (ITAT MADRAS). IN BOTH THESE ORDERS IT HAS BEEN EXPLAINED THAT WHEN AN ALLOTMENT LETTER IS ISSUED TO AN ALLOTTEE THEREUPON GETS TITLE TO THE PROPERTY ON THE ISSUANCE OF THE ALLOTMENT LETTER AND THE PAYMENT OF INSTALLMENT IS ON LY A FOLLOW UP ACTION AND TAKING DELIVERY OF POSSESSION IS ONLY A FORMA LITY. IN THE PRESENT CASE ASSESSEE BECAME THE MEMBER OF THE CO-OPERAT IVE SOCIETY VIDE MEMBERSHIP NO.148. THE SOCIETY HAS FLOATE D A SCHEME FOR CONSTRUCTION OF THE FLATS. THE LAND WAS ALLOTTED TO T HE SOCIETY AND 6 ASSESSEE HAS PAID HIS PART OF COST OF LAND AS WELL AS CONSTRU CTION TO THE SOCIETY. ULTIMATELY THE FLAT WAS CONSTRUCTED ON THAT PIECE OF LAND AND IT WAS HANDED OVER TO THE ASSESSEE AS PER HIS SHARE. TO OUR M IND THE CASE OF THE ASSESSEE COMES WITHIN THE AMBIT OF CIRCULAR N O.471 & 472. THE LEARNED REVENUE AUTHORITIES HAVE ERRED IN REFUSIN G THE DEDUCTION TO THE ASSESSEE. 2.8 IN VIEW OF THE ABOVE DISCUSSION WE ALLOW THE APPE AL OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GRANT DEDUCTIO N U/S 54F OF THE INCOME-TAX ACT TO THE ASSESSEE. 3. IN RESULT APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 09.0 9.2011. SD/- SD/- ( G.E. VEERABHADRAPPA ) ( RAJPAL Y ADAV ) VICE PRESIDENT JUDICIAL MEMBER DT. 09.09.2011. NS COPY FORWARDED TO:- 1. SHRI MANISH SETHI 5285 SADAR THANA ROAD SADAR BAZAR DELHI- 06. 2. INCOME TAX OFFICER WARD 39(3) NEW DELHI. 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. TRUE COPY. BY ORDER (ITAT NEW DELHI). DATE OF HEARING 30.08.2011 DATE OF DICTATION 07.09.2011 DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. 09.09.2011 DATE OF ORDER SENT TO THE CONCERNED BENCH 09.09.2011