Sumathi Gedupudi , Hyderabad vs Assessee

ITA No.1403/Hyd/2014 : Assessment year 2009-10

Smt Sumathi Gedupudi V/s. Dy. Commissioner of Income-tax Hyderabad Circle 10(1), Hyderabad

(PAN - AGMPG 6429 K )

(Appellant) (Respondent)

Appellant by : Shri A.Chandramouleswara Rao

Respondent by : Shri D.Sudhakar Rao CIT-DR

Date of Hearing 28.4.2015 Date of Pronouncement 01.05.2015

ORDER

Per G.C.Gupta, Vice President:

This appeal by the assessee for the assessment year 2009-10 is directed against the order of the Commissioner of Income-tax I, Hyderabad.

2. Grounds of appeal of the assessee are as under-

"1. The Revisionary Order u/s. 263 is erroneous and bad both on facts and in law.

2. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-tax has Erred in assuming the jurisdiction u/s. 263 of the IT Act 1961 in as much as the assessment order dated 16.12.2011 is neither erroneous nor it is prejudicial interest of the revenue.

2 ITA No.1403/Hyd/2014 Smt. Sumathi Gedupudi , Hyderabad

3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-tax has erred in restricting the exception granted u/s. 54F to the extent of Rs.1,04,51,312/- which is the amount out the sale consideration utilized in the acquisition of a residential house ignoring the fact that the appellant has also utilised an amount of Rs.45,45,885/- in the acquisition of same residential house even though this amount was borrowed from a bank. He is not justified in ignoring the fact that the amount the cost of the Residential house is to be deducted U/s. 54F.

4. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-tax has erred in directing the Assessing Officer to recomputed the deduction and to restrict the deduction u/s. 54F to Rs.1,04,51,312/-. The Ld. Commissioner of Income-tax is not justified in directing the Assessing Officer to complete the Re-assessment contrary to the provisions of 54F as the conditions is that the cost of new house acquired should not be less than the amount of net sale consideration received on the transfer of the long term capital asset and should have been incurred within the stipulated time.

5. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-tax has erred in not appreciating the fact that the Addl. CIT , Range 13, Hyderabad being the Assessing Officer has correctly consider the provisions of section 54F and therefore the Assessment Order cannot be termed as erroneous."

3. The Learned counsel for the assessee submitted that the assessee is an individual and has filed return declaring income of Rs.13,81,375, after claiming deduction under S.54F of the Act. The assessment was framed under S.143(3) accepting the returned income of the assessee. The Commissioner of Income-tax in revisional proceedings under S.263 of the Act has directed the Assessing Officer to recompute the deduction under S.54F by restricting the deduction claimed to Rs.1,04,51,312 and as an amount of Rs.45,45,855 has to be disallowed representing bank loan used in the purchase of house by the assessee. The learned 3 ITA No.1403/Hyd/2014 Smt. Sumathi Gedupudi , Hyderabad

counsel for the assessee submitted that the assessee has invested a sum of Rs.1,49,97,000 in the purchase of house. Out of the total investment made in the acquisition of house property, the assessee has utilised an amount of Rs.45,45,855 by availing housing loan from Kotak Mahindra Bank and the balance amount of investment was from the direct receipts from the sale of shares. The Commissioner in the order under S.263 has treated the assessment as erroneous and prejudicial to the interests of Revenue to the extent of deduction under S.54F of Rs.45,45,855 being the bank loan utilised in the acquisition of the house. The learned counsel for the assessee submitted that the issue is covered in favour of the assessee with series of decisions including those of the Hyderabad bench of the Tribunal in J.V.Krishna Rao V/s. Dy. Commissioner of Income-tax (24.taxmann.com.104); Munnir Khan V/s. ITO(41 SOT

504)(Hyd); Puspa Devi Tibrewala V/s. ITO (dated 22.3.2013 in ITA No1733/Hyd/2011 for assessment year 2007-08); and the decision of Delhi Bench of Tribunal in Kapil Kumar Agarwal V/s. ACIT( dated 16.7.2013 in ITA No.2975/Delhi/2013 for assessment year 2009-

10), besides the decision of Kerala High Court in ITO V/s. K.C.Gopalan (107 Taxman 591). He also relied on the decision of the Apex Court in the case of Malabar Industrial Co. Ltd. V.s,. CIT (243 ITR 83), wherein it was held that the Commissioner cannot exercise jurisdiction under S.263 merely because his view is different from that of the Assessing Officer. He submitted that there is no error in the order of the Assessing Officer in accepting the claim of the assessee under S.54F and the order was not prejudicial to the interests of the Revenue.

4. The Learned Departmental Representative has opposed the submissions of the learned counsel for the assessee. He referred to the relevant provisions of S.54F of the Act in support of the case of the Revenue that the sale proceeds of an asset have to 4 ITA No.1403/Hyd/2014 Smt. Sumathi Gedupudi , Hyderabad

be invested in the specified asset within the stipulated time in order to claim deduction under S.54F of the Act. He submitted that the assessee has invested a sum of Rs.1,04,51,312 out of the sale proceeds from shares of Rs.1,63,45,644 and therefore, the Commissioner was justified in directing the Assessing Officer to redo the assessment by not allowing deduction under S.54F on the amount of Rs.45,45,855 invested by the assessee by availing the housing loan from the bank. He submitted that the Hyderabad Bench Tribunal in Smt.V.Kumuda V/s. DCIT (135 ITD 116) has decided similar issue on similar facts in favour of the Revenue. He relied on the order of the Commissioner passed under S.263 of the Act.

5. We have considered the rival submissions carefully and also perused the orders of the Assessing Officer and the Commissioner. We find that the basic facts of the case are not in dispute. The assessee has invested a sum of Rs.1,04,51,312 out of the sale proceeds of the shares within the stipulated period. The balance amount of Rs.45,45,855 was invested in the purchase of house by the assessee by availing housing loan from Kotak Mahindra Bank Ltd. We find that the issue before us with regard to grant of deduction/exemption under S.54F of the Act with regard to the amount invested in the purchase of specified assets within the stipulated time by availing loan from the bank, is covered in favour of the assessee with series of decisions cited on behalf of the assessee before us. In J.V.Krishna Rao (supra), it was held by the Hyderabad bench of the Tribunal that the capital gains earned by the assessee can be utilised for other purposes, and as long as the assessee fulfils the condition of investment of the equivalent amount in the asset qualifying for relief under S.54F, by securing the money spent out of the capital gains from other sources available to it, either by borrowing or otherwise, it is eligible for 5 ITA No.1403/Hyd/2014 Smt. Sumathi Gedupudi , Hyderabad

relief under S.54F in respect of the entire amount of capital gains realised. It was held that in the circumstances, there is merit in the contention of the assessee that in as much as they have made deposits of the amounts equivalent to the capital gains realized in the Capital Gains Investments Scheme, even though part of those capital gains have been utilised for other purposes, borrowing amount equivalent to such utilised funds, they are entitled to relief under S.54F as ultimately the assessee deposited the requisite amounts in the Capital Gains Investments Scheme for exemption under S.54F within the time stipulated by the statute. In Munnir Khan V/s. ITO (supra), Hyderabad Bench of the Tribunal held that it was not necessary that the same fund must be used for the purchase of new residential house and that neither law nor any circular requires establishing direct nexus between the amount received on sale and utilization in the purchase of residential house for the purpose of S.54F and other relevant provisions. The Tribunal held that since money has no colour, all that is required is compliance with the conditions of investment within stipulated time. In Puspa Devi Tibrewala (supra), Hyderabad Tribunal has decided the issue in favour of the assessee and has cited CBDT Circular No.667 dated 18.10.1993 in support of its decision. Other decisions cited by the learned counsel for the assessee also support the case of the assessee.

6. We find in the facts of the present case that it is not disputed that the assessee has in fact deposited the total amount of Rs.1,49,97,000 in the purchase of the residential house during the stipulated period. Merely because the assessee has availed a bank loan of Rs.45,45,855 and has invested in the purchase of the residential house, it cannot be denied exemption underS.54F of the Act. The fact that money to that extent has not come directly from the sale proceeds of the original asset received by the assessee, is 6 ITA No.1403/Hyd/2014 Smt. Sumathi Gedupudi , Hyderabad

not decisive of the issue. The fact remains that the amount received by the assessee on the sale of the original asset owned by it was invested in the purchase of the residential asset within the stipulated time, partly from the sale proceeds of the original asset directly and partly from the borrowed amount. The assessee has fulfilled all the conditions of investment of the equivalent amount of the sale proceeds in the purchase of residential house qualifying for relief under S.54F, by investing the money out of the sale proceeds of the original asset available with it or by borrowing from the bank. We find that the decision of the Hyderabad Tribunal in Smt.V.Kumuda V/s. DCIT (supra) relied upon by the Learned Departmental Representative relates to a decision in the Miscellaneous Application preferred by the assessee. At any rate, it is clear that two views are possible on this issue before us, and the view taken by the Assessing Officer was a possible view and could not be said to be a perverse view. The issue of granting deduction/exemption under S.54F on the borrowed money can at best be called a debatable issue. In our considered view, the Assessing Officer has taken a possible view permitted under law, and is as per the series of decisions of different benches of the Tribunal. It could not be said that the order of the Assessing Officer was erroneous or prejudicial to the interests of the Revenue. In this view of the matter, we hold that the Commissioner was not justified in setting aside the assessment framed under S.143(3), as the order of the Assessing Officer could not be said to be erroneous and prejudicial to the interests of the Revenue. Accordingly, the issue is decided in favour of the assessee and the order of the Commissioner passed under S.263 of the Act is cancelled, allowing the grounds of the assessee in this appeal.

7. In the result, appeal of the assessee is allowed.

7 ITA No.1403/Hyd/2014 Smt. Sumathi Gedupudi , Hyderabad

Order pronounced in the court on 1st May, 2015

Sd/- Sd/-

(P.M.Jagtap) (G.C.Gupta) Accountant Member Vice President

Dt/- 1st May, 2015

Copy forwarded to:

1. Smt Sumathi Gedupudi, C/o. Shri M. Chandra Mouleswara Rao, Chartered Accountant C-3 Sky Lark Apartment, Opp to Skyline Theatre, Basheerbagh, Hyderabad 500 029.

2. Addl. Commissioner of Income-tax Range 13, Hyderabad

3. Commissioner of Income-tax(Appeals) I Hyderabad

4. Departmental Representative, ITAT, Hyderabad.

B.V.S