ITO, Ward-9(3), Hyderabad, Hyderabad V. Kondal Reddy Mandal Reddy, Hyd, Hyderabad

CO 1/HYD/2016

• Counselvise Citation: [2016] 119 COUNSELVISE.COM (IT) 3236 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 25-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 143(3); 50C; 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.848/HYD/2015 ASSESSMENT YEAR 2010-2011 THE INCOME TAX OFFICER, WARD-9(3), HYDERABAD. VS. MR. KONDAL REDDY MANDAL REDDY, HYDERABAD-500035 PANADQPM5900L (APPELLANT) (RESPONDENT) CROSS OBJECTION NO.01/HYD/2016 ARISING OUT OF ITA.NO.848/HYD/2015 - ASSESSMENT YEAR 2010-2011 MR. KONDAL REDDY MANDAL REDDY, HYDERABAD-500035 PANADQPM5900L VS. THE INCOME TAX OFFICER, WARD-9(3), HYDERABAD. (CROSS - OBJECTOR) (RESPONDENT) FOR REVENUE : MR. B.R. RAMESH FOR ASSESSEE : MR. K.C. DEVDAS DATE OF HEARING : 13.04.2016 DATE OF PRONOUNCEMENT : 13 .05.2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS AN APPEAL FILED BY THE REVENUE FOR THE A.Y. 2010-2011 WHILE THE CROSS-OBJECTION IS FILED B Y THE ASSESSEE. AT THE TIME OF HEARING, THE LD. COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE CROSS OBJECTION IS TIME BARRED BY 170 DAYS AND THEREFORE, THE ASSESSEE IS NOT PRES SING 2 ITA.NO.848/H/2015 & CO.NO.1/H/2016 MR. KONDAL REDDY MANDAL REDDY, HYDERABAD. THE SAME. THE CROSS OBJECTION IS ACCORDINGLY DISMIS SED AS NOT PRESSED. 2. AS REGARDS THE REVENUES APPEAL, WE FIND THAT THE ONLY ISSUE IS AS TO WHETHER FOR ALLOWING THE EX EMPTION UNDER SECTION 54F OF THE ACT, THE DEEMED CONSIDERAT ION UNDER SECTION 50C OF THE I.T. ACT IS TO BE TAKEN IN TO CONSIDERATION OR THE CONSIDERATION MENTIONED IN THE SALE DEED ONLY IS TO BE TAKEN INTO CONSIDERATION. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, DERIVING INCOME FROM HOUSE PROPERTY, CA PITAL GAINS AND INTEREST INCOME, FILED HIS RETURN OF INCO ME FOR THE A.Y. 2010-2011 ON 13.04.2011 DECLARING INCOME O F RS.5,19,930. DURING THE ASSESSMENT PROCEEDINGS UNDE R SECTION 143(3) OF THE ACT, THE A.O. OBSERVED THAT T HE ASSESSEE HAS SOLD HIS PLOT AT BANJARAHILLS FOR A CONSIDERATION OF RS.20 LAKHS AS IS MENTIONED IN THE SALE DEED. HE OBSERVED THAT VENDEES HAVE PAID THE STAMP DUTY, REGISTRATION CHARGES ETC., FOR THE VALUE OF RS.89,6 0,000. THEREFORE, HE INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT AND BROUGHT THE DIFFERENCE OF RS.69,60,000 TO T AX AS THE CAPITAL GAIN. AGAINST THE SAME, THE ASSESSEE CL AIMED DEDUCTION UNDER SECTION 54F OF THE I.T. ACT FOR INV ESTMENT OF RS.1,37,15,550 MADE BY HIM FOR CONSTRUCTION OF A RESIDENTIAL HOUSE AT RAMAKRISHNAPURAM, SAROORNAGAR, RANGA REDDY DISTRICT. THE A.O. HOWEVER, HELD THAT T HE SALE CONSIDERATION OF RS.20 LAKHS MENTIONED IN THE SALE DEED ALONE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54F AND 3 ITA.NO.848/H/2015 & CO.NO.1/H/2016 MR. KONDAL REDDY MANDAL REDDY, HYDERABAD. NOT DEEMED CONSIDERATION ARRIVED AT BY INVOKING THE PROVISIONS OF SECTION 50C OF THE I.T. ACT. HE THERE FORE, BROUGHT THE SUM OF RS.69,60,000 TO TAX AS CAPITAL G AIN. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE SAME AND THE REVENUE IS IN APPEAL B EFORE US. 4. THE LD. D.R., WHILE RELYING UPON THE ORDER OF THE A.O, HAS PLACED RELIANCE UPON THE FOLLOWING TWO DECISIONS IN SUPPORT OF HIS CONTENTION THAT THE FU LL VALUE OF THE SALE CONSIDERATION AS MENTIONED IN SECTION 54F IS ONLY THE CONSIDERATION ACTUALLY RECEIVED BY THE A SSESSEE AND NOT THE DEEMED CONSIDERATION RECEIVED UNDER SEC TION 50C OF THE I.T. ACT. (1) CIT, WEST BENGAL AND ANOTHER VS. GEORGE HENDERSON & CO. LTD., (1967) 66 ITR 622 (2) CIT VS. SMT. NILOFER L SINGH (2009) 309 ITR 233 (DEL.) (HC). 5. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE CIT(A) AND ALSO P LACED RELIANCE UPON THE FOLLOWING DECISIONS. (1) RAJ BABBAR VS. ITO (2013) 56 SOT 1 (ITAT) (MUM.) (2) GOULI MAHADEVAPPA VS. ITO (2013) 356 ITR 90 (KAR.) 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THERE IS NO DISPUT E THAT THE ASSESSEE HAS INVESTED A SUM OF RS.1,37,00,000 I N THE 4 ITA.NO.848/H/2015 & CO.NO.1/H/2016 MR. KONDAL REDDY MANDAL REDDY, HYDERABAD. CONSTRUCTION OF A NEW RESIDENTIAL HOUSE AT SAROORNA GAR. IT IS ALSO NOT DISPUTED THAT THE SALE CONSIDERATION UN DER SECTION 50C IS TO BE ADOPTED AS THE SALE CONSIDERAT ION FOR COMPUTATION OF THE CAPITAL GAIN. THE DISPUTE ONLY I S WHETHER THE ACTUAL SALE CONSIDERATION MENTIONED IN THE SALE DEED OR THE DEEMED SALE CONSIDERATION UNDER SE CTION 50C IS TO BE ADOPTED FOR ALLOWING THE DEDUCTION UND ER SECTION 54F OF THE I.T. ACT. WE FIND THAT IN THE CA SE OF RAJ BABBAR VS. ITO (CITED SUPRA), THE TRIBUNAL AT MUMBA I HAS CONSIDERED THIS ISSUE AT LENGTH AND AT PARA 11 TO 1 3 HELD AS UNDER : 11. FROM THE PROVISIONS OF SECTION 54F (1), IT I S EVIDENT THAT THE PROVISIONS OF SECTION (A) AND (B) READ WITH THE EXPLANATION ON 'NET CONSIDERATION' DECIDES IF ANY CHARGEABLE CAPITAL GAINS U/S 45 EXISTS OR NOT SUBJECT TO THE CONDITIONS SPECIFIED THEREIN. AS PER THE PROVISIONS OF SECTION 54F(1)(A) OF THE ACT, NO CAPI TAL GAINS ARE CHARGEABLE U/S 45 OF THE ACT, 'IF THE COS T OF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET'. TH E PRINCIPLE OF PROPORTIONATE EXEMPTION VIDE CLAUSE (B ) ABOVE IS PUT INTO SERVICE. NOW, THE QUESTION IS WHA T IS THE MEANING OF THE EXPRESSION 'NET CONSIDERATION'? THE SAME IS DEFINED IN THE EXPLANATION BELOW THE SECTION 54F(1) AND THE SAME READS THAT 'FOR THE PURPOSE OF THIS SECTION (54F), NET CONSIDERATION', IN RELATION TO THE TRANSFER OF A CAPITAL ASSET, MEANS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUIN G AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS RE DUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER.' IT IS A SETTLED ISSUE THAT THE PROVISIONS OF SECTION 54F OF THE ACT ARE C ODE BY ITSELF. THUS, THE PLAIN READING OF THE PROVISION S OF SECTIONS 45, 48, 50C AND 54F OF THE ACT SUGGEST THA T THERE IS NOTHING TO BAR BENEFITS OF EXEMPTION U/S 5 4F IN RESPECT OF THE CAPITAL GAINS RELATABLE TO THE FV C AS 5 ITA.NO.848/H/2015 & CO.NO.1/H/2016 MR. KONDAL REDDY MANDAL REDDY, HYDERABAD. PER THE DEEMED FICTION U/S 50C OF THE ACT. CLAUSE ( A) OF SECTION 54F(I) SPECIFIES THAT IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RES PECT OF THE ORIGINAL ASSET, THERE IS NO CHARGEABLE CAPIT AL GAINS U/S 45 OF THE ACT. IN THE INSTANT CASE, THE C OST OF THE NEW ASSET IS RS. 17,65,752/AND 'NET CONSIDERATION' AS DEFINED IS ' .. THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER OF THE CAPITAL ASSET AS REDUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER' I.E. RS. 16,87,000 A S PER SEC 50C AND RS. 8 LAKHS AS PER THE SALE DEED. THE SAID CLAUSE (A) REFERS TO THE PROVISIONS OF SEC TION 45 OF THE ACT. IN THE GIVEN FACTS OF THE INSTANT CA SE, NO CHARGEABLE CAPITAL GAINS ARISES U/S 45 OF THE ACT. THUS, IN THIS CASE, WITH INVESTMENT OF RS. 17,65,752/IN NEW ASSET, THE COST OF THE NEW ASSET I S NOT LESS THAN THE NET CONSIDERATION (NC) IN RESPECT OF THE ORIGINAL ASSET. OF COURSE, THE 'NET CONSIDERATI ON' HAS TWO VARIANTS DEPENDING ON FVC ADOPTED AND IN THIS CASE, THE NCS ARE QUANTITATIVELY LESSER THAN T HE COST OF THE NEW ASSET LEAVING NO CHARGEABLE CAPITAL GAINS U/S 45 OF THE ACT. THEREFORE, IN OUR OPINION, THE ASSESSEE IS NOT CHARGEABLE TO ANY CAPITAL GAINS CONSIDERING THE GIVEN FACTS OF THE CASE AND ALSO TH E SAID CLAUSE (A) OF SECTION 54F(1). 12. WE SHALL NOW TAKE UP THE ORDERS OF THE TRIBUNA L CITED BY THE PARTIES. FIRST, WE SHALL TAKE UP THE DECISION IN THE CASE OF GOULI MAHADEVAPPA (SUPRA) D T 16.07.2010. FACTS ARE THAT THE ASSESSEE SOLD PLOT F OR RS. 20 LAKHS. THE CONSIDERATION AS PER THE SRO IS R S. 36 LAKHS. ASSESSEE PURCHASED NEW ASSET FOR RS. 24 LAKHS AND INVESTED ENTIRE SALE PROCEEDS. AO CALCULATED CAPITAL GAINS AT RS.14,06,494 AND ALLOWE D EXEMPTION TO THE EXTENT OF FVC OF RS. 20 LAKHS AND NOT ON FVC OF RS. 36 LAKHS. ON THESE FACTS, THE TRIBUNAL HELD THAT THE DEEMING FICTION ON FVC GIVEN IN SECTION SOC CANNOT BE EXTENDED TO SECTION 54F (PARA 8.19) AS THE SAME IS AN EXEMPTION PROVISIONS AND IS A COMPLETE CODE IN ITSELF AND IT DOES NOT OVERRIDE OT HERS CIT V. ACE BUILDERS (P.) LTD. [2006] 281 ITR 210/[2005] 144 TAXMAN 855 (BOM.). 6 ITA.NO.848/H/2015 & CO.NO.1/H/2016 MR. KONDAL REDDY MANDAL REDDY, HYDERABAD. 13. THUS, THE COST OF THE NEW ASSET IS RS. 24 LAKH S AND 'NET CONSIDERATION' AS DEFINED IS THE FULL VALU E OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS REDUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER' I.E. RS. 36 LAKHS AS PER SEC 50C AND RS. 20 LAKHS AS PER THE SALE DEED. THEREFORE, IT IS CASE WHERE THE COST OF THE NEW ASS ET IS NOT LESS THAN NET CONSIDERATION U/S. 50C AND MOR E THAN THE NET CONSIDERATION AS PER THE SALE DEED. THEREFORE, THE DECISION OF THE TRIBUNAL IN THIS CAS E IS DISTINGUISHABLE ON FACTS. THEREFORE, CLAUSE (A) OF SECTION 54F(1) OF THE ACT DOES NOT APPLY. 6.1. FURTHER, THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF GOULI MAHADEVAPPA VS. ITO (CITED SUPRA) , AT PARAS 6 TO 8 HAS HELD THAT THE ULTIMATE OBJECT AND PURPOSE OF SECTION 50C OF THE I.T. ACT IS TO SEE TH AT THE UNDISCLOSED INCOME OF CAPITAL GAINS RECEIVED BY THE ASSESSEE SHOULD BE TAXED AND THAT THE LAW SHOULD NO T ENCOURAGE AND PERMIT THE ASSESSEE TO PEG DOWN THE MARKET VALUE AT THEIR WHIMS AND FANCY TO AVOID TAX, BUT WHEN THE CAPITAL GAIN IS ASSESSED ON NOTIONAL BASIS , WHATEVER AMOUNT IS INVESTED IN THE NEW RESIDENTIAL HOUSE WITHIN THE PRESCRIBED PERIOD UNDER SECTION 54 OF TH E I.T. ACT, THE ENTIRE AMOUNT INVESTED, SHOULD GET BENEFIT OF DEDUCTION IRRESPECTIVE OF THE FACT THAT THE FUNDS F ROM OTHER SOURCES ARE UTILISED FOR NEW RESIDENTIAL HOUS E. THE DECISION RELIED UPON BY THE LD. D.R. IN THE CASE OF CIT, WEST BENGAL AND ANOTHER VS. GEORGE HENDERSON & CO., LTD., (CITED SUPRA) AND CIT VS. SMT. NILOFER L SING H ARE DISTINGUISHABLE ON FACTS. SINCE THE FACTS IN THE CA SE OF THE ASSESSEE HEREIN ARE SIMILAR TO THE FACTS IN THE CAS E OF RAJ 7 ITA.NO.848/H/2015 & CO.NO.1/H/2016 MR. KONDAL REDDY MANDAL REDDY, HYDERABAD. BABBAR (CITED SUPRA), RESPECTFULLY FOLLOWING THE DE CISION OF THE COORDINATE BENCH, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.05.2016. SD/- SD/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 13 TH MAY, 2016 VBP/- COPY TO : 1. THE INCOME TAX OFFICER, WARD - 9(3), 2 ND FLOOR, D BLOCK, I.T. TOWERS, A.C. GUARDS, MASAB TANK, HYDERABAD. 2. MR. KONDAL REDDY MANDAL REDDY, SRI ARCADE, 11 - 12 - 349, ROAD NO.9, R.K. PURAM, SAROORNAGAR, HYDERABAD 500 035. 3. CIT(A) - VII , HYDERABAD. 4. CIT - VII , HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD. 6. GUARD FILE