I-T - Claim of exemption u/s 54F can't be denied for merely not getting possession of flat within stipulated period of time due to delay in construction work outside control of assessee: ITAT
By TIOL News Service
MUMBAI, DECEMBER 06, 2018: THE ISSUE IS - Whether claim of exemption u/s 54F can be denied for merely not getting possession of the flat within stipulated period of time due to delay in construction work outside the control of assessee when all other condition for claim are fulfilled. NO IS THE VERDICT.
Facts of the case
The assessee an individual, engaged in garments business under proprietorship concern namely M/s Pramukh Creation, had filed return for relevant AY. During assessment proceedings, it was noted that the assessee sold 8000 Shares of an entity namely M/s Offshore Finvest Limited on various dates [between 01.07.2004 to 08.12.2004] for net sale consideration of Rs.12.40 Lacs. All the shares under question were stated to be purchased by the assessee on 21.04.2003 for Rs.42,560/- i.e. @Rs.5.32 per share from a broker namely Rajendra Prasad Shah, registered with Calcutta Stock Exchange. The difference of sale price and purchase price was claimed as Long Term Capital Gains, against which deduction u/s 54F was claimed in view of the fact that the assessee purchased a new flat for Rs. 12.41 Lacs. The steep difference in the sale price and purchase price created doubt in the mind of AO as to genuineness of the transactions and accordingly, the assessee was directed to substantiate the same. On the failure of assessee to submit requisite documents, the AO treated the state transactions as sham transactions and added the resultant gains of Rs.11.98 Lacs in the hands of the assessee as cash credit u/s 68. Consequently, deduction u/s 54F was disallowed. On appeal, CIT(A) confirmed the stand of AO.
Tribunal held that,
++ it is noted that the impugned shares of M/s Offshore Finvest Limited were purchased by the assessee for purchase consideration of Rs.42,560/- from a broker Rajendra Prasad Shah. In support of purchase transactions, the ledger extract of the assessee in the books of share broker Rajendra Prasad Shah was perused which revealed that the stated investment has been sourced by the assessee out of sale proceeds of earlier investment. The gain on sale of earlier investment has been reflected by the assessee in his return of income for AY 2004-05 and the same has been accepted by the revenue. In support of genuineness of purchase of impugned shares, the assessee has placed on record contract note, relevant share certificate, statement of demat holding on various dates. The perusal of the share certificate reveal that the shares were transferred in assessee's name on 06.02.2004 vide transfer number 561, registered folio no. V-41 and the said shares were subsequently converted into demat form which is evidenced by the statement of demat holding as on 31.05.2004. The cost of these shares has been reflected in assessee's Balance Sheet for the financial year 2003-04. All the facts lead us to conclude that the assessee, acquired the share at some point of time and the said transactions were not mere paper transactions. Nothing on record suggest that any cash transactions got exchanged between the assessee and the share broker. This is further supported by the fact that the assessee invested the entire gains in purchase of new house property. After weighing all these evidences on record as against the findings of revenue, it was found that the transactions were genuine in nature. So far as the huge rise in the sale price of the shares is concerned, it is trite law that the additions could not be made merely on the basis of suspicion, conjectures or surmises. Nothing on record suggest that the assessee, in any manner, collided with his share broker to manipulate the price of the shares. Therefore, the addition of Rs.11.98 Lacs as made by AO u/s 68 stands deleted;
++ so far assessee's claim u/s 54F is concerned, it was found that the assessee has invested the gains in new house property viz. Flat at Ashiana [Kandivali] on various dates. The assessee's claim has been denied only on the premise that the possession of the flat could not be obtained by the assessee within stipulated period of time. However, the same per se, could not be a ground to deny the deduction particularly when the assessee has acquired certain rights in the property and has appropriated the capital gains towards the same and fulfilled all the other conditions as envisaged by Section 54F. The assessee could not be penalized for delays in the construction which is a common feature of the industry. Therefore, it was hold that the assessee was entitled for deduction u/s 54F. The appeal stand partly allowed.
(See 2018-TIOL-2332-ITAT-MUM)
