R.Balachandar, CHENNAI V. ITO, CHENNAI

ITA 1019/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8486 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 18-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: K G RAGHUNATH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition
• Section: 143(3); 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' # . $ , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.1019/MDS/2016 ( / ASSESSMENT YEAR: 2011-12) MR. R.BALACHANDAR 20, A.S.COLONY MAIN ROAD, ROYAPURAM, CHENNAI-600 013. VS THE INCOME TAX OFFICER, BUSINESS WARD-X(2), CHENNAI-6. PAN: AIRPR8914K ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. K.G.RAGHUNATH, ADVOCATE /RESPONDENT BY : MR. A.V.SREEKANTH,JCIT /DATE OF HEARING : 16 TH SEPTEMBER, 2016 /DATE OF PRONOUNCEMENT : 16 TH SEPTEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 5, CHENNAI DATED 09.03.2016 IN ITA NO.90/CIT(A)-5/1 3-14 PASSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE AC T. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS A PPEAL, HOWEVER, THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN ENHANCING THE ASSESSMENT BY NOT TAKING INTO CONSIDERATION THE LOAN OBTAINED AND DEPLOYED FOR THE PURPOSE OF CONSTRUCTION OF THE PROPERTY AS THE COST OF ACQUISITION AND ALSO DENIED THE BENEFIT OF INDEXATION ON THE SAME. 2 ITA NO.1019/MDS/2016 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN BUSINESS FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 14.11.2011. THE CASE WAS TAKEN UP FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 29.11. 2013. THE ASSESSEE HAD PURCHASED LAND ON 05.02.2007 FOR S ALE CONSIDERATION OF RS.4.00 LAKHS. DURING THE YEAR 200 7, THE ASSESSEE CONSTRUCTED A BUILDING OF 15250 SQ.FT., BY INVESTING RS.40.00 LAKHS WHICH WAS OBTAINED AS LOAN FROM SHRI JOHN PANDIAN. DURING THE RELEVANT ASSESSMENT YEAR THE AS SESSEE SOLD THE LAND AND BUILDING TO MR. JOHN PANDIAN FOR TOTAL SALE CONSIDERATION OF RS.51,75,000 VIDE SALE DEED DATED 18.10.2010 SINCE HE WAS NOT ABLE TO RETURN THE LOAN RECEIVED FROM MR. JOHN PANDIAN. THE PURCHASER MR. JOHN PANDI AN HAD WITHHELD RS.31,71,000/- OUT OF THE SALE CONSIDERATI ON TO RECOVER HIS LOAN AND SETTLED THE BALANCE AMOUNT OF RS.12,04,000/- TO THE ASSESSEE. ON THIS TRANSACTION THE LEARNED ASSESSING OFFICER HAD COMPUTED THE CAPITAL GAIN AS FOLLOWS:- SALE CONSIDERATION RS.12,04,000 3 ITA NO.1019/MDS/2016 (APPORTIONED VALUE FOR LAND) LESS: INDEXED COST OF ACQUISITION: LAND COST : 4,00,000 ADD:REGISTRATION CHARGES: 36,201 INDEXED COST OF ACQUISITION : RS.5,97,570 LONG TERM CAPITAL GAIN : RS.6,06,430/- 4. HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ENHANCED THE CAPITAL GAIN OF THE ASSESSEE BY NOT CONSIDERING THE CONSTRUCTION COST INCURRED BY THE A SSESSEE WHICH WAS SOURCED FROM THE LOAN OBTAINED FROM MR. J OHN PPANDIAN, THE BUYER OF THE IMMOVABLE PROPERTY BY OB SERVING AS UNDER:- 6.4 THE APPELLANT SAID THAT - HE PURCHASED THE LAND IN 2007 FOR RS 4,00,000/- AND SPENT RS 40,00,000/- FOR CONSTRUCTING THE BUILDING BY TAKING LOAN FROM SHRI JOHNPANDIAN. THE APPELLANT ADMITTED THAT - HE SOLD BOTH THE LAND AND BUILDING TOGETHER TO SHRI JOHNPANDIAN FOR A TOT AL CONSIDERATION OF RS. 51,75,000/- BY A SALE DEED DATED 18TH OCT 2010. HE APPORTIONED THE SALE CONSIDERATION BETWEEN LAND AND BUILDING AS - RS. 12,04,000/- FOR LAND AND RS. 39,17,000/- FOR BUILDING AND STATED THAT THE PURCHASER WITHHELD A SUM OF RS. 39,17,000/- OUT OF SALE CONSIDERATION TOWARDS LOAN REPAYABLE BY THE ASSESSEE. BASED ON THE ABOVE FACTS THE APPELLANT CONTESTED 4 ITA NO.1019/MDS/2016 THAT - ON THE ABOVE TRANSACTION, CAPITAL GAIN WILL ARISE ONLY ON THE SALE OF LAND. 6.5 SECTION 48 OF THE INCOME TAX ACT READS AS UNDER: THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' SHALL BE COMPUTED, BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS, NAMELY :- (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT THERETO 6.6 CAPITAL GAIN HAS TO BE COMPUTED TAKING THE FULL VALUE OF CONSIDERATION INTO ACCOUNT. LOAN REPAID OR YET TO BE REPAID CANNOT BE REDUCED FROM THE FULL VALUE OF CONSIDERATION FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN. 6.7 HENCE THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE CAPITAL GAINS ON THE ENTIRE SALE VALUE OF THE BUILDING INCLUDING LAND (RS.51,75,000/- TAKING INTO ACCOUNT THE VALUE AS PER 50C OF THE I.T. ACT I F APPLICABLE. 5. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ENTIRE COST OF BUILDING SHOULD B E TAKEN INTO CONSIDERATION FOR ARRIVING AT THE CAPITAL GAIN WHIC H WAS SOURCED FROM THE LOAN OBTAINED FROM MR. JOHN PANDIA N. FURTHER, HE PLEADED THAT THE ASSESSEE SHOULD BE GIV EN THE BENEFIT OF INDEXATION AS PER THE PROVISIONS OF THE ACT. 5 ITA NO.1019/MDS/2016 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND, RELIED IN THE DECISION OF THE REVENUE AND ARG UED IN SUPPORT OF THE SAME. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE MATERIALS ON RECORD. WE DO NOT FIND ANY MERIT IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. THE COST OF THE ASSET WIL L INCLUDE THE COST OF ACQUISITION OF THE LAND AND COST OF CONSTRU CTION OF THE BUILDING. THERE IS NO REASON AS TO WHY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DENIED IN TREATING THE COST OF CONSTRUCTION OF THE BUILDING A S THE COST OF ACQUISITION. JUST BECAUSE THE ASSESSEE HAS CONSTRUC TED THE BUILDING BY TAKING LOAN DOES NOT MEAN THAT THE ASSE SSEE HAS NOT INCURRED ANY EXPENDITURE ON THE CONSTRUCTION OF THE BUILDING. FURTHER, THE PROVISIONS OF THE ACT DO NOT BAR THE ASSESSEE FROM THE BENEFIT OF INDEXATION JUST BECAUS E HE HAS CONSTRUCTED THE BUILDING BY TAKING LOAN. THEREFORE, WE HEREBY DIRECT THE LEARNED ASSESSING OFFICER TO TREAT THE C OST OF 6 ITA NO.1019/MDS/2016 CONSTRUCTION OF THE BUILDING AND COST OF THE LAND A S THE COST OF ACQUISITION AND ALSO GIVE THE BENEFIT OF INDEXATION IN ACCORDANCE WITH THE ACT AND AS PER THE PROVISIONS 5 0C OF THE ACT WHILE REWORKING THE CAPITAL GAIN.IT IS ORDERED ACCORDINGLY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 16 TH SEPTEMBER, 2016 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 16 TH SEPTEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF