Short Overview  Section 54 requires an assessee to purchase residential house property either one year before or within two years after date of transfer of long-term capital asset, or if an assessee within a period of three years after said date has constructed a residential house. In the instant case, assessee had booked a semi furnished flat. In terms of related agreement assessee was to make payments in installments and builder was to construct unfinished bare shell of a flat. Under these circumstances, agreement was for construction of new residential house and no purchase of a flat and since construction had been completed within three years of sale of original asset, assessee was entitled to relief under section 54 disallowance made by AO could not be sustained in view of CBDT Circular No. 672, dated 16-12-1993.

Assessee sold certain property on 21-12-2011 and claimed deduction under section 54 investment in a new house property as per sale agreement dated 10-2-2006. AO disallowed deduction under section 54 on the ground that assessee entered into agreement dated 10-2-2006 and said date of agreement had to be treated as date of acquisition, which fells beyond one year period provided under section 54.

It is held that Section 54 requires an assessee to purchase residential house property either one year before or within two years after date of transfer of long-term capital asset, or if an assessee within a period of three years after said date has constructed a residential house. In the instant case, assessee had booked a semi furnished flat. In terms of related agreement assessee was to make payments in installments and builder was to construct unfinished bare shell of a flat. Under these circumstances, agreement was for construction of new residential house and no purchase of a flat and since construction had been completed within three years of sale of original asset, assessee was entitled to relief under section 54 disallowance made by AO could not be sustained in view of CBDT Circular No. 672, dated 16-12-1993.

Decision: In assessee’s favour.

 

IN THE DELHI HIGH COURT

VIPIN SANGHI & SANJEEV NARULA, JJ.

Pr. CIT v. Akshay Sobti

ITA No. 991/2019

19 December, 2019

Appellant by: Ajit Sharma, Senior Standing Counsel with Adeeba Mujahid, Advocate.

Respondent by: Salil Kapoor, Shivansh Pandya, Sumit Lalchandani and Ananya Kapoor, Advocates.

Sanjeev Narula, J. (Oral)

Caveat No. 1219/2019 in ITA 992/2019

1. Learned counsel for the Respondent/caveator has appeared.

2. Accordingly, the caveat stands discharged.

Caveat No. 1227/2019 in ITA 996/2019

3. Learned counsel for the Respondent/caveator has appeared.

4. Accordingly, the caveat stands discharged.

C.M. No. 53570/2019 (delay) in ITA 991/2019

5. By this application the applicant seeks condonation of delay of 39 days in re-filing the application. For the reasons stated in the application, the delay is condoned.

6. The application stands disposed of in the aforesaid terms.

C.M. No. 53572/2019 (delay) in ITA 992/2019

7. By this application the applicant seeks condonation of delay of 34 days in re-filing the application. For the reasons stated in the application, the delay is condoned.

8. The application stands disposed of in the aforesaid terms.

C.M. No. 53742/2019 (delay) in ITA 996/2019

9. By this application the applicant seeks condonation of delay of 39 days in re-filing the application. For the reasons stated in the application, the delay is condoned.

10. The application stands disposed of in the aforesaid terms.

ITA 991/2019, ITA 992/2019 & ITA 996/2019

11. The present appeals under section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) emanate from the orders of ITAT in ITA No. 5900/Del/2015 and ITA No. 5901/Del/2015, both dated 10-5-2019 and ITA No. 5899/Del/2015 dated 15-5-2019 dismissing the appeals of the Revenue, and upholding the orders of the Commissioner (Appeals) allowing deductions under section 54 and 54EC of the Act, consequently deleting the additions made by the assessing officer (assessing officer).

12. Though separate assessment orders were framed under section 143 (3) of the Act in respect of each assessee, however since the issues involved were common and overlapping, the same came to be disposed of by way of a consolidated order passed by Commissioner (Appeals). The appeal filed by the Revenue against the said order resulted in one common order disposing of the ITA No. 5900/Del/2015 and ITA No. 5901/Del/2015 dated 10-5-2019 in respect of assesses – Akshay Sobti and Pradeep Sobti in ITA 991/2019 and ITA 992/2019 respectively. As regards to assessee – Seema Sobti (Respondent in ITA 992/2019), the appeal of the Revenue was decided by way of a separate Order dated 15-5-2019 in ITA No. 5899/Del/2015.

13. Since the issues involved in all the appeals are in respect of the same assessment year (AY) i.e. 2012-13 are common and interconnected, the grounds of appeal are also nearly identical, except for difference in figures, the same were heard together and are being disposed of by this common order. For the sake of convenience, the facts in the case of ITA 992/2019 are being noted and discussed extensively, and the decision would apply mutatis mutandis in all the appeals.

Brief Facts [ITA 992/2019]

14. The facts in brief giving rise to the present appeal are that the assessee is an individual, earning income from house property, business and profession, capital gains and other sources. He filed his return of income for assessment year 2012-13 on 31-10-2012, declaring total income of Rs. 8,05,34,659, including long term capital gains from sale of property at Jor Bagh, New Delhi on 21-12-2011 for a sale consideration of Rs. 13 crores. The said property was purchased in Financial Year (FY) 2001-02, as per sale deed dated 19-10-2001, for Rs. 36,16,000. After indexation, the cost of acquisition was claimed to be Rs. 66,63,286, resulting in capital gain of Rs. 12,33,36,714 against which, the assessee claimed deduction under section 54 of the Act for investment in a new house property ‘Magnolias DLF Golf Links’ as per sale agreement dated 10-2-2006. Deductions were also claimed under section 54EC of the Act. During the course of assessment proceedings, the assessee submitted a detailed computation of capital gains, showing payment of Rs. 2,88,80,619 to DLF Magnolias up to 31-3-2012, towards cost of the property and further payment of Rs. 1,02,16,598 towards bank interest and loans and cost of improvement on the above said property.

15. The case of the assessee was selected for scrutiny under CASS. Notice under section 143 (2) of the Act was served upon the assessee followed by a notice under section 142(1) of the Act, along with a questionnaire issued on 28-8-2014.

16. The assessee complied with the said notice and furnished the requisite details. The assessing officer examined the records and books of account and relying upon the judgment of this Court in the case of Gulshan Malik v. CIT in ITA No. 55/2014 and CIT v. R.L. Sood (2008) 245 ITR 727 (Delhi) : 2000 TaxPub(DT) 0875 (Del-HC) framed the assessment under section 143(3) of the Act. He made disallowance of deduction under section 54 of the Act on the ground that the assessee entered into an agreement dated 10-2-2006 and the said date of the agreement is to be treated as date of acquisition, which falls beyond the one year period provided under section 54 of the Act and is also prior to the date of transfer. As regards the deduction claimed by the assessee under section 54EC of the Act amounting to Rs. 1,00,00,000, the assessing officer made disallowance of Rs. 50,00,000. Further, assessing officer made addition of Rs. 14,07,474 on account of suppression of maintenance charges under the head “income from house property” received from rented property.

17. The assessee filed an appeal against the assessment orders before Commissioner (Appeals), and the same was allowed vide Order dated 21-8-2015 and the additions made by the assessing officer were deleted. The Commissioner (Appeals) observed that the benefit under section 54 of the Act required an assessee to purchase a residential house property either one year before or within two years after the date of transfer of long term capital asset; or if an assessee within a period of three years after the said date has constructed a residential house. Relying upon the CBDT Circular No. 672 dated 16-12-1993, it was held that the assessee had booked a semi furnished flat at Magnolias DLF Golf Links. In terms of Clause 1.1 of the said agreement, the assessee was to make payments in installments and the builder was to construct the unfinished bare shell of a flat. Under these circumstances, the Commissioner (Appeals) considered the agreement to be a case of construction of new residential house and not purchase of a flat. It was further observed that since the construction has been completed within three years of the sale of original asset, a fact accepted by the assessing officer, the assessee was entitled to relief under section 54 of the Act and resultantly, the disallowance of Rs. 4,01,93,262 was deleted.

18. The relevant portion of the order of the Commissioner (Appeals) reads as under :–

“6. Ground no.-4 relates to ‘“disallowance of deduction under section 54 to the extent of Rs. 4,00,97,217 (A.No.496/14-15), 4,10,45,578 (A.No.494/14-15) and Rs. 4,01,93,262 (A.No.495/14-15) to the returned income of Rs. 8,05,34,650 (A.No.496/14-15), Rs. 2,75,04,910 (A.No.495/14-15) and Rs. 72,38,440 (A.No.494/14-15). The fact of the case is that the appellant declared long term capital gain of Rs. 52087347 (A.Nos.494/14-15) Rs. 12,33,36,714 (A.No.496/14-15) and Rs. 71665302 (A.No.495/14-15) from the sale of property at 146, Jorbagh, New Delhi on 21-12-2011 on which he claimed deduction under section 54 amounting to Rs. 4,00,97,217 A.No.496/1415), 4,10,45,578 (A.Nb.494/14-15) and Rs. 4,01,93,262 A.No.495/14-15). However, the assessing officer disallowed the claim on the grounds that the appellant had entered into an agreement dated 10-2-2006 and therefore the date of agreement be treated as the date of acquisition, which falls beyond the period of one year prior to the date of transfer prescribed under section 54 of the Income-tax Act, following the judgment of Honorable Delhi High Court in the case of Gulshan Malik v. CIT in ITA no. 55 of 2014 : 2014 TaxPub(DT) 1751 (Del-HC) and CIT v. R.L. Sood (2008) 109 taxman 227 (Delhi) : (2008) 245 ITR 727 (Delhi) : 2000 TaxPub(DT) 0875 (Del-HC), he disallowed the claim of the appellant. According to Assessing officer, the appellant could have purchased a house property between 28-12-2010 to 28-10-2011 in order to claim deduction under section 54. Since the appellant invested in the residential House property namely Dlf Magnolia way back in F.Y. 2005-06 which is clearly outside the time period mentioned in section 54 of the Income-tax Act, it does not fit in case of exemption under section 54. The Assessing officer placed reliance on the judgement of Honorable High Court at Delhi in the case of Gulshan Malik v. CIT in ITA No. 55 of 2014 and CIT v. R.L. Sood (2008) 109 taxman 227 (Delhi) : (2008) 245 ITR 727 (Delhi) : 2000 TaxPub(DT) 0875 (Del-HC). However, the appellant submitted that in order to avail the benefit under section 54 of Income-tax Act he is required to purchase a residential house property either one year before or within two year after the date of transfer of original asset; or within a period of three years after that date” he is required to construct a residential house. Therefore, for proper application ‘of this section it has to be seen whether in the instant case is it a purchase or a construction?

It has been clarified by the CBDT in Circular No.672 dated 16-12-1993 in which it has been made clear that the earlier Circular No. 471 dated 15-10-1986 in which it was stated that acquisition of flat through allotment by DDA has to be treated as a construction of flat would apply to co-operative societies- and other institutions. The builder would fall in the category of other institutions as held by Mumbai Bench of Tribunal in the case Sunder Kaur Sujan Singh Gadh (supra) and therefore booking of the flat with the builder has to be treated as construction of flat by the appellant.

Thus, in the present case, the period of three years would apply for construction of new house from the date of transfer of the original asset. The above circulars are binding on the revenue authorities under s. 119 of the Act. He referred the decision rendered by the Honorable High Court of Bombay In the case of Hilla J.B. Wadia (1995) 216 ITR 376 (Bom) : 1995 TaxPub(DT) 0162 (Bom-HC), wherein the Honorable High Court has held that n is a case of “Construction”. Reliance was placed on the judgment of Honorable Karnataka High Court in the case of CIT v. J.R. Sobramanya Bhatt (1887) 165 ITR 571 (Karn), wherein it has been held that it is immaterial whether the construction of the new house was started before the date of transfer, it should be completed after the date of transfer of the original house.

In the present case, he had booked a semi finished flat with the builder, namely DLF Universal Limited in the residential group housing complex named as Magnolias DLF Golf Links) and as per agreement, he was to make payment in installments and the builder was to construct the unfinished bare shell of flat for finishing by the buyers on their own to make it liveable (having specifications set out in Annexure-V) as per clause 10.1 of the said agreement. It .is ·also pertinent to mention that Builder Company offered vide letter dated 30-12-2011 (copy enclosed) that the Occupation certificate has been received from the Competent Authorities and the six months period for completing the interiors, in terms of agreement shall commence from 01-1-2012 and is to be completed before 30-6-2012. Builder Company’s letter dated 20-3-2012 and 20-1-2012 (Copies enclosed) offered to finalise the details of interiors and extended the time for completion of interior to 30-9-2012 and finally possession was granted on 30-10-2013. It has therefore to be considered as a case of construction of new residential house and not purchase of a flat. Since the flat has been allotted to the appellant by the builder ‘who would fall in the category of other institutions mentioned in· the circulars, it has to be taken as a case of construction of the residential flat and not as a purchase of a residential flat. Therefore, he had time window of three years period available to him commencing from 21-12-2011 till 21-12-2014 to construct a house property. Having come to this conclusion that it is case of construction it is now to be seen if the appellant fulfils the conditions laid down under section 54(1) of the Act. In the instant case; the appellant has occupied the house property during 2013 vide letter dated 30-10-2013 offering occupation of House property. Further, the appellant has claimed the deduction on amount invested till the due date of filing of return under section 139 (1) of the Income-tax Act. Further, the reliance placed by the assessing officer on the judgment of Honorable Delhi High Court in the case of Gulshan Malik v. CIT in ITA no. 55 of 2014 is not relevant to the facts of the case under appeal, since the issue involved in the case of Gulshan Malik was pertaining to the period of holding of an asset for the purpose of establishing whether the resultant gain is long term capital gain or is short term capital gain. It was held that a right or interest in an immovable property can accrue only by way of an agreement embodying consensus ad idem as against the confirmation letter that does not confer any right to claim title. Similarly in the case of CIT v. R.L. Sood [(2008) 109 taxman 227 (Delhi) : (2008) 245 ITR 727 (Delhi) : 2000 TaxPub(DT) 0875 (Del-HC), the honorable High Court has declined request of the Revenue to call for reference on the proposed question. It has further been clarified that realising the practical difficulties faced by the appellant in such situations, the CBDT issued a Circular No. 471, dt. 15-10-1986. The relief extending instructions of the CBDT, in wake of realization of practical difficulties faced by the appellants, by way of circular extending relief to even marginally non compliant appellants in its literal sense of hyper technicalities/cannot be used as a tool to interpreted instructions of the board or decision of the law Courts, to deny the very relief to the otherwise compliant appellants. In a recent reference to Honorable. Delhi High Court, in the case of CIT v. Kuldeep Singh, the Honorable Court has observed and discussed various decision of the other Honorable High Courts and Honorable Supreme Court; as follows :–

A. CIT Andhra Pradesh v. T. N. Aravinda Reddy (1979) 4 SCC 721;

B. Civil Appeal Nos. 5899-5900/2014 titled Sanjeev La I etc v. CIT Chandigarh & Anr decided on 01-7-2014, 2014 (8) SCALE 432

C. Reference was made to the decision of Supreme court in CIT v. J.H. Gotla [1985] 156 ITR 323 (SC) : 1985 TaxPub(DT) 1344 (SC).

D. Moreover in CIT v. Bharati C Kothari (2000) 244 ITR 352 (Cal) : 2000 TaxPub(DT) 1283 (Cal-HC)

In the instant case, since the appellant entered· into an agreement for construction of a bare shell of a house by periodic payment of installments and he had to carry the internal fit-outs to make it live-able as per Annexure-V of the agreement with the Builder Company, within Six months from the date of certificate of occupation from the competent Authorities, this is to be treated as the case of construction. Further, the construction has been completed within three years of the sale of original asset, which is accepted by the assessing officer, the relief under section 54 is genuinely claimed by. him and therefore, disallowance made under section 54 amounting to Rs. 4,00,97,217 (A.No.496/14-15.), 4,10,45,578 (A.No.494/14-15) and Rs. 4,01,93,262 (A.No.495/14-15) may be deleted.

After going through the facts and circumstances of the case, submissions of the appellant which include Board’s circular and various case laws, I find merit in his argument. From the above discussion, it is clear that the facts of the present case indicates that it was a case of construction of flat and not purchase of flat as held by the assessing officer. Since, the case pertains to construction, benefit of section 54 are available to the appellant. Therefore, after careful consideration to the relevant facts and law, I am of the view that booking of bare shell of a flat is a construction of house property and not purchase, therefore, the date of completion of construction is to be looked into which is as per provision of section 54 of the LT. Act., therefore, the assessing officer is directed to allow benefit to the appellant as claimed under section 54 of the I.T. Act.

Accordingly, the appeal on this ground is allowed.”

19. With respect to the challenge relating to disallowance of deduction under section 54EC of the Act, Commissioner (Appeals) relying upon the judgment of High Court of Madras dated 16-12-2014 in the case of CIT v. Coromandal Industries Ltd. (2015) 370 ITR 586 (Madras), held that the restriction on the investment in bonds of Rs. 50,00,000 incorporated in Section 54EC(1) of the Act is effective from 01-4-2015 in relation to assessment year  2015-16 and the subsequent years. Thus, following the aforenoted decision, the appeal of the assessee on this ground was allowed. As regards the addition made on account of rental income received from DT Cinemas amounting to Rs. 14,07,474, Commissioner (Appeals) gave a finding of fact that no maintenance charges were received by the Appellant, as confirmed by the tenant, verifiable from the statement of account, TDS certificates and details reflected in Form 26AS. For these reasons, the additions made by the assessing officer, pertaining to maintenance charges, were also directed to be deleted.

20. In the appeal filed by the Revenue, the Tribunal upheld the order of Commissioner (Appeals) and confirmed the deletions.

21. Mr. Ajit Sharma, learned senior standing counsel for the Appellant argues that the impugned order is perverse and the Tribunal has erred in deleting the additions/disallowances made by the assessing officer without considering the detailed findings given in the assessment order. He argued that the assessing officer had rightly taken the effective date of purchase as 10-2-2006 which is beyond the period of limitation prescribed under section 54 of the Act. He further argued that since the property at Magnolias DLF was purchased prior to the sale of the long term asset, the assessee cannot take benefit of the amounts expended in the construction thereof as the sale proceeds of the long term assets have not been utilized in the construction of the said property. He argued that the property at Jor Bagh was sold on 21-12-2011 and as per the calculation submitted by the assessee, an amount of Rs. 3,00,86,525 had been paid to Magnolias DLF up to 31-3-2012 and Rs. 1,01,06,737 towards bank, interest on loans and on cost of improvement of the property. Such payments have not been made from the sale proceeds of the Jor Bagh property and therefore the benefit of Section 54 of the Act should not be allowed to the assessee. He further argued that ITAT is not justified in deleting the addition under section 54EC of the Act for excess investments in specified bonds without considering that the purpose of inserting proviso to Sub Section 1 to Section 54EC of the Act was to clarify and remove any ambiguity that existed and not allow any additional benefit by removing the restriction over and above the limit of Rs. 50,00,000 prescribed under section 54EC Act. Lastly, he argued that the deletion of addition of Rs. 14,07,474 was erroneous and without appreciation of the fact that as per Clause 8 (V) of the lease deed executed with DT Cinemas, the assessee had received maintenance charges as income in disguise.

22. Mr. Salil Kapoor, learned counsel for the Respondents/Caveator urges that the present appeals do not raise any question of law, much less substantial question of law which requires consideration by this Court. He urges that the precise question urged by Revenue in relation to Section 54 of the Act has already been decided by this Court in the cases of CIT v. Bharti Mishra (2014) 265 CTR 374 (Delhi) : 2014 TaxPub(DT) 1636 (Del-HC) and CIT v. Kuldeep Singh (2014) 270 CTR 561(Delhi) : 2014 TaxPub(DT) 3685 (Del-HC). Regarding the benefit availed by the assessee under section 54EC pertaining to limit of investments in bonds, he relied upon the judgment of High Court of Madras in CIT v. C. Jaichander (2015) 370 ITR 579 (Madras) : 2014 TaxPub(DT) 4189 (Mad-HC).

23. We have given due consideration to the submissions made by learned counsels for the parties.

24. It is an accepted position and is not disputed by the Revenue that the assessee had sold the property at Jor Bagh on 21-12-2011. On the said sale, the assessee has claimed deduction of capital gains under section 54 of the Act. The assessee was required to purchase a residential house property either one year before, or within two years after the date of transfer of original asset; or within a period of three years after the date he was required to construct a residential house. CBDT in its Circulars No. 672 dated 16-12-1993 has made it clear that the earlier Circular No. 471 dated 15-10-1986 in which it was stated that acquisition of flat through allotment by DDA has to be treated as a construction of flat, would apply to cooperative societies and other institutions. The tax authorities have relied upon the said circular and held that the builder would fall in the category of other institutions and, therefore, booking of the flat with the builder has to be treated as construction of flat by the assessee. In accordance with the said agreement, the assessee was to make payment in installments and the builder was to construct an unfinished bare shell flat for finishing by the buyers. The possession was granted on 30-3-2013. The lower tax authorities after examining the terms of the agreement, the occupation certificate, and the other letters-offer to finalize the details of interiors, have come to a conclusion that the assessee had booked a semi furnished flat with the builder, namely, DLF Universal Ltd. in the residential group housing complex named as Magnolias DLF Golf Links. Accordingly, the assessee had a window of three years period from 21-12-2011 till 21-12-2014 to construct a house property, calculated from the date of transfer of original asset. The appellant has claimed deduction on amount invested till the due date of filing of return under section 139 (1) of the Income Tax Act. In this factual background, we do not find any cogent ground to hold that the Respondents do not fulfill the conditions laid down under section 54 (1) of the Act so as to deny the benefit of the said provision. The apprehension expressed by the learned senior standing counsel for the Revenue is not borne from the facts on record. The provision in question is a beneficial provision for assessees, who replace the original long-term capital asset by a new one. In relation to Section 54F, this Court in CIT v. Bharti Mishra (2014) 265 CTR 374 (Delhi) : 2014 TaxPub(DT) 1636 (Del-HC) has rejected the contention raised by the Revenue, which is similar to one urged by Mr. Sharma, in the following words :–

“13. For the satisfaction of the third condition, it is not stipulated or indicated in the Section that the construction must begin after the date of sale of the original/old asset. There is no condition or reason for ambiguity and confusion which requires moderation or reading the words of the said sub-section in a different manner. The apprehension of the Revenue that the entire money collected or received on transfer of the original/capital asset would not be utilised in the construction of the new capital asset, i.e., residential house, is ill-founded and misconceived. The requirement of sub-section (4) is that if consideration was not appropriated towards the purchase of the new asset one year before date of transfer of the original asset or it was not utilised for purchase or construction of the new asset before the date of filing of return under section 139 of the Act, the balance amount shall be deposited in an authorized bank account under a scheme notified by the Central Government. Further, only the amount which was utilised in construction or purchase of the new asset within the specified time frame stand exempt and not the entire consideration received.

14. Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. The Supreme Court in CCE v. Favourite Industries, (2012) 7 SCC 153 (SC) : 2012 TaxPub(EX) 401 (SC) has succinctly observed :–

‘21. Furthermore, this Court in Associated Cement Companies Ltd. v. State of Bihar [(2004) 7 SCC 642], while explaining the nature of the exemption notification and also the manner in which it should be interpreted has held :– (SCC p. 648, para 12)

“12. Literally ‘exemption’ is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially, in a growing economy. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden of progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking, liberal and strict construction of an exemption provision is to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in the nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. (See Union of India v. Wood Papers Ltd. [(1990) 4 SCC 256 : 1990 SCC (Tax) 422] and Mangalore Chemicals and Fertilisers Ltd. v. Dy. CCT [1992 Supp (1) SCC 21] to which reference has been made earlier.)”

22. In G.P. Ceramics (P.) Ltd. v. Dy. Commissioner, Trade Tax (2009) 2 SCC 90], this Court has held :–

(SCC pp. 101-02, para 29)

29. It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. [See CTT v. DSM Group of Industries [(2005) 1 SCC 657] (SCC para 26); TISCO Ltd. v. State of Jharkhand [(2005) 4 SCC 272] (SCC paras 42- 45); State Level Committee v. Morgardshammar India Ltd. [(1996) 1 SCC 108] ; Novopan India Ltd. v. CCE & Customs [1994 Supp (3) SCC 606] ; A.P. Steel ReRolling Mill Ltd. v. State of Kerala [(2007) 2 SCC 725] and Reiz Electrocontrols (P.) Ltd. v. CCE. [(2006) 6 SCC 213]’

15. In view of the aforesaid position, we do not find any merit in the present appeal and the same is dismissed.”

25. The aforenoted findings of the tax authorities are factual and cannot be categorized as perverse. It cannot be said in the facts of the present case that the deduction claimed for the construction were not relatable to the transaction of sale of the Jor Bagh property which resulted in income by way of capital gains. There is no ground urged by Revenue before Commissioner (Appeals), or before the ITAT, that the expenditure was not connected with the sale transactions. Moreover, we cannot go into the factual question as to whether the deduction claim made by the assessee with regard to the payments were not genuine, or were not made. The assessing officer had treated the date of acquisition of the residential property as 10-2-2006 and denied the exemption under section 54 of the Act, which was not the correct approach. We, therefore, do not find any question of law that arises for our consideration on this ground. With respect to the deduction under section 54EC of the Act being restricted to Rs. 50,00,000 as against Rs. 1,00,00,000, we may note that the said question has already been answered in the judgment relied upon by the Tribunal to uphold the deletion by Commissioner (Appeals). The High Court of Madras in CIT v. Coromandal Industries Ltd. (supra) has held as under :–

“4. The issue involved in this appeal is no longer res integra in view of the decision of this Court in CIT v. C. Jaichander [Order dated 15-9-2014 made in T.C.(A) Nos. 419 and 533 of 2014] : (2015) 370 ITR 579 (Madras) : 2014 TaxPub(DT) 4189 (Mad-HC), to which one of us – R. Sudhakar, J. is a party). In the said decision, this Court held as under :–

“5. The key issue that arises for consideration is whether the first proviso to Section 54EC(1) of the Act would restrict the benefit of investment of capital gains in bonds to that financial year during which the property was sold or it applies to any financial year during the six months period.

6. For better understanding of the issue, it would be apposite to refer to Section 54EC(1) of the Act, which reads as under :–

‘Section 54EC- Capital gain not to be charged on investment in certain bonds :–

(1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say :–

(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45 ;

(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer 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 acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45.

Provided that the investment made on or after the 1-4-2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees.’

7. On a plain reading of the above said provision, we are of the view that Section 54EC(1) of the Act restricts the time limit for the period of investment after the property has been sold to six months. There is no cap on the investment to be made in bonds. The first proviso to Section 54EC(1) of the Act specifies the quantum of investment and it states that the investment so made on or after 1-4-2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees. In other words, as per the mandate of Section 54EC(1) of the Act, the time limit for investment is six months and the benefit that flows from the first proviso is that if the assessee makes the investment of Rs. 50,00,000 in any financial year, it would have the benefit of Section 54EC(1) of the Act.

8. The legislature noticing the ambiguity in the above said provision, by Finance (No.2) Act, 2014, with effect from 1-4-2015, inserted after the existing proviso to subsection (1) of Section 54EC of the Act, a second proviso, which reads as under :–

“Provided further that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.”

9. At this juncture, for better clarity, it would be appropriate to refer to the Notes on Clauses – Finance Bill 2014 and the Memorandum explaining the provisions in the Finance (No.2) Bill, 2014, which read as under :–

“Notes on Clauses – Finance Bill 2014:

Clause 23 of the Bill seeks to amend section 54EC of the Income-tax Act relating to capital gain not to be charged on investment in certain bonds. The existing provisions contained in sub-section (1) of section 54EC provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has within a period of six months invested the whole or part of capital gains in the long-term specified asset, the proportionate capital gains so invested in the long-term specified asset out of total capital gain shall not be charged to tax. The proviso to the said sub-section provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakh rupees.

It is proposed to insert a proviso below first proviso in said sub-section (1) so as to provide that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.

This amendment will take effect from 1-4-2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent years.

Memorandum: Explaining the provisions in the Finance (No.2) Bill, 2014-

Capital gains exemption on investment in Specified Bonds.

The existing provisions contained in sub-section (1) of section 54EC of the Act provide that where capital gain arises from the transfer of a long-term capital asset and the assessee has, at any time within a period of six months, invested the whole or any part of capital gains in the long-term specified asset, out of the whole of the capital gain, shall not be charged to tax. The proviso to the said sub-section provides that the investment made in the long-term specified asset during any financial year shall not exceed fifty lakh rupees. However, the wordings of the proviso have created an ambiguity. As a result the capital gains arising during the year after the month of September were invested in the specified asset in such a manner so as to split the investment in two years i.e., one within the year and second in the next year but before the expiry of six months. This resulted in the claim for relief of one crore rupees as against the intended limit for relief of fifty lakhs rupees. Accordingly, it is proposed to insert a proviso in subsection (1) so as to provide that the investment made by an assessee in the long-term specified asset, out of capital gains arising from transfer of one or more original asset, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.

This amendment will take effect from 1-4-2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years.”

10. The legislature has chosen to remove the ambiguity in the proviso to Section 54EC(1) of the Act by inserting a second proviso with effect from 1-4-2015.The memorandum explaining the provisions in the Finance (No.2) Bill, 2014 also states that the same will be applicable from 1-4-2015 in relation to assessment year 2015-16 and the subsequent years. The intention of the legislature probably appears to be that this amendment should be for the assessment year 2015-2016 to avoid unwanted litigations of the previous years. Even otherwise, we do not wish to read anything more into the first proviso to Section 54EC(1) of the Act, as it stood in relation to the assessees.

11. In any event, from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. It would have made a difference, if the restriction on the investment in bonds to Rs. 50,00,000 is incorporated in Section 54EC(1) of the Act itself. However, the ambiguity has been removed by the legislature with effect from 1-4-2015 in relation to the assessment year 2015-16 and the subsequent years.

For the foregoing reasons, we find no infirmity in the orders passed by the Tribunal warranting interference by this Court. The substantial questions of law are answered against the Revenue and these appeals are dismissed.’

(Emphasis Supplied)”

5. The decision of this Court in Areva T and D India Ltd (supra) relied upon by the learned Senior Standing Counsel for the appellant is not applicable to the facts of the present case, as in the said decision the writ petitions filed “for issuance of writ of declaration declaring that the conditions occurring in Notification No. 380 of 2006 F. No. 142/09/ 2006-TPL, dated 22-12-2006, along with the words ‘subject to the following conditions, namely,’ issued by the Central Board of Direct Taxes are ultra vires Section 54EC of the Income-tax Act, 1961, and arbitrary and violative of Articles 14 and 265 of the Constitution of India and consequently unenforceable”, were dismissed as infructuous taking note of the subsequent amendment to Section 54EC of the Act, incorporating the limit on amount of investment in bonds in the section itself.

6. For the reasons aforesaid, we do not find any question of law, much less substantial question of law that arises for our consideration in this appeal. Accordingly, this appeal is dismissed. No costs.”

26. In view of the aforesaid decision, we are of the opinion that the question urged by the Revenue does not require our consideration.

27. As regards the third question of law- relating to deletion of addition of Rs. 14,07,474, it is to be noted that the ITAT has held that the presumption drawn by the assessing officer for making the addition was patently false, based on conjectures and surmises, without appreciating the records and making an inquiry to discredit the evidences and confirmation placed on record by the assessee. DLF Universal Ltd. has confirmed that the payment of rent under the lease agreement to the assessee, and has also stated that no other amount is due on any account whatsoever. Maintenance of the property was being done by the tenant itself. In absence of any evidence of receipt of any amount on account of maintenance, that would contradict the books of account, the deletion made by Commissioner (Appeals) has been upheld. This consistent factual finding arrived at by the Commissioner (Appeals) and ITAT does not give rise to any question of law.

28. In view of the above, the appeals do not merit any consideration by this Court and are accordingly dismissed.