INCOME TAX OFFICER, WARD 3(3) , VISAKHAPATNAM V. MEENA TANGUDU, VISAKHAPATNAM

ITA 304/VIZ/2024

AI Insights

The case involves an appeal by the revenue against the order of the Learned Commissioner of Income Tax (Appeals), which had allowed the assessee's claim for deduction under section 54 of the Income Tax Act, 1961. The assessee, Meena Tangudu, had sold a portion of land under a Joint Development Agreement and claimed deduction for the flats received in return. The Assessing Officer had disallowed this claim, leading to the appeal before the CIT(A), who reversed the AO's decision. The revenue challenged this decision, arguing that the CIT(A) erred in applying the law as amended post-2015, which restricts the exemption to one residential unit under section 54F. The Tribunal, after considering the arguments and the relevant legal provisions, partly allowed the revenue's appeal, directing the computation of capital gains and allowing the deduction for one residential unit only.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46597 (ITAT-VISAKHAPATNAM)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Capital Gains
• Section: 143(3); 142(1); 143(2); 201; 54; 54F

Judgement Text

"आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM (HYBRID HEARING) श्री धिजय पाल राि, उपाध्यक्ष, एिं श्री एस बालाक ृष्णन, लेखा सदस्य क े समक्ष BEFORE SHRI VIJAY PAL RAO, HON’BLE VICE PRESIDENT & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपीलसं./I.T.A.No.304/VIZ/2024 (निर्धारण वर्ा/ Assessment Year: 2017-18) Income Tax Officer – Ward – 3(3) Infinity Towers Sankaramatam Road Visakhapatnam – 530016 Andhra Pradesh v. Meena Tangudu Flat No. 201 Hemas Sri Sourya Nirman Apartments New Resapuvanipalem – 530013 Andhra Pradesh [PAN: AILPT4300K] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : None राजस्व का प्रतततितित्व/ Department Represented by : Dr. Aparna Villuri, Sr.AR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 07.01.2025 घोर्णध की तधरीख/Date of Pronouncement : 20.01.2025 आदेश /O R D E R PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. This appeal is filed by the revenue against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1065401916(1) dated 05.06.2024 for the I.T.A.No.304/VIZ/2024 Meena Tangudu Page No. 2 A.Y.2017-18 arising out of order passed under section 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 30.12.2019. 2. Brief facts of the case are, assessee being an individual filed return of income for the A.Y. 2017-18 on 28.07.2017 admitting a total income of Rs.1,88,800/- after claiming of deduction of Rs. 1,20,000/- under Chapter VIA of the Act. The case has been selected for limited scrutiny under CASS for examining the Deduction / exemption claimed from capital gains. Accordingly, statutory notices under section 143(2) and 142(1) of the Act were issued on various dates as detailed in the assessment order. Assessee has not responded to any of the notices. Subsequently, show-cause notice dated 26.12.2019 issued on assessee requesting the assessee to show cause why the exemption claimed under section 54 of the Act cannot be denied. In response, assessee submitted reply. After examining the submissions, the Ld. AO disallowed the claim of the assessee and determined the total income of the assessee at Rs. 2,27,27,940/-. 3. Aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld.CIT(A). Before Ld. CIT(A), assessee submitted that portion of the land was sold to M/s. Spectrum Properties in pursuance of a Joint Development Agreement, in consideration assessee received 4.5 flats representing 45% of the consideration for selling the 55% of the land.. Assessee claimed deduction under section 54 of the Act with respect to the 4.5 flats she acquired in I.T.A.No.304/VIZ/2024 Meena Tangudu Page No. 3 pursuance to the Joint DevelopmentAgreement. Ld. CIT(A) by relying on various judicial pronouncements allowed the appeal of the assessee. 4. Aggrieved by the order of the Ld. CIT(A), revenue is in appeal before us by raising following grounds of appeal: -. “1. The Order of the Ld. CIT(A), NationalFaceless Appeal Centre (NFAC), Delhi is erroneous in law and to the facts of the case. 2. The Ld. CIT(A) erred in not appreciating the fact that AO elaborately discussed the grounds raised by the assessee during assessment proceedings, and concluded that the exemption claimed u/s 54 of the Act was not allowable as per the provisions of the Act. As per the provisions of section 54 of the Act, the original asset, being a vacant land, does not fall under \"being buildings or lands appurtenant thereto, and being a residential house\" 3: The Ld. CIT(A) erred in not observing the fact that the decision of Hon'ble ITAT that was relied upon is not applicable to the facts of the present case as the assessment year in the said ruling is 2008-09, which is prior to the amendment to section 54F i.e. 01-04-2015. 4. The Ld. CIT (A) erred in notappreciating the fact that the AO rightly disallowed the claim of exemption made by the assessee to the tune of Rs.2,25,39, 140/- u/s 54 of the Act. 5. The appellant craves leave to add or delete or amend or substitute any ground of appeal before and/or at the time of hearing of appeal. 6. For these and other grounds that may be urged at the time of appeal hearing, it is prayed that the above addition be restored.” 5. At the outset, Ld. Departmental Representative [hereinafter in short “Ld.DR”] submitted that the assessee has claimed deduction under section 54 of the Act whereas assessee is entitled for exemption under section 54F of the Act for a single residential unit. She argued that Ld. CIT(A) has erred in considering the provisions of the amendment w.e.f. 01.04.2015. She therefore I.T.A.No.304/VIZ/2024 Meena Tangudu Page No. 4 pleaded that the assessee is entitled only for one house to be claimed as exemption under section 54F of the Act. 6. None appeared on behalf of the assessee, inspite of the notice delivered on 13.12.2024. 7. We therefore after hearing the Ld. DR proceeded to adjudicate the issue based on the material available on record. The provisions of section 54F of the Act are extracted below for reference: - “Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. 54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India (hereafter in this section referred to as the new 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 new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect 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 the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and I.T.A.No.304/VIZ/2024 Meena Tangudu Page No. 5 (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head \"Income from house property\". Explanation.—For the purposes of this section,— \"net consideration\", in relation to the transfer of a capital asset, means the full value 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. (2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head \"Income from house property\", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head \"Capital gains\" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head \"Capital gains\" relating to long-term capital assets of the previous year in which such new asset is transferred. (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,— (i) the amount by which— I.T.A.No.304/VIZ/2024 Meena Tangudu Page No. 6 (a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds (b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid. Explanation.—[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]” 8. From the plain reading of the section which was amended by the Finance Act, 2014 w.e.f. 01.04.2015, the assessee is entitled for deduction under this section for one residential house in India. Accordingly, we find merit in the arguments of the Ld. DR and direct the Ld. AO to compute the Capital gains and allow the deduction under section 54F of the Act for one residential unit in accordance with the provisions of section 54F of the Act. Accordingly, the grounds raised by the revenue are partly allowed. 9. In the result, appeal of the revenue is partly allowed. Order pronounced in the open court on 20th January, 2025. Sd/- (धिजय पाल राि) (VIJAY PAL RAO) उपाध्यक्ष/VICE PRESIDENT Sd/- (एस बालाक ृष्णन) (S. BALAKRISHNAN) लेखा सदस्य/ACCOUNTANT MEMBER Dated: 20.01.2025 Giridhar, Sr.PS I.T.A.No.304/VIZ/2024 Meena Tangudu Page No. 7 आदेशकीप्रनतनलनपअग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee : Meena Tangudu Flat No. 201 Hemas Sri Sourya Nirman Apartments New Resapuvanipalem – 530013 Andhra Pradesh 2. रधजस्व/ The Revenue : Income Tax Officer – Ward – 3(3) Infinity Towers Sankaramatam Road Visakhapatnam – 530016 Andhra Pradesh 3. The Principal Commissioner of Income Tax 4. नवभधगीयप्रनतनिनर्, आयकरअपीलीयअनर्करण, नवशधखधपटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax 6. गधर्ाफ़धईल / Guard file //True Copy// आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam "