Dr. Devika Gunasheela, Bangalore V. JCIT, Bangalore

ITA 1047/BANG/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8006 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 20-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S SUNDAR RAJAN
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value; Valuation report; Capital Gains
• Section: 54B; 54F; 133(6); 48; 13; 22; 147; 148; 54

Judgement Text

ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.1047/BANG/2016 ASSESSMENT YEAR: 2012-13 DR. DEVIKA GUNASHEELA NO.1, DEWAN N MADHAVA RAO ROAD BASAVANAGUDI BANGALORE-560 004 PAN NO : AASPG4385Q VS. JOINT COMMISSIONER OF INCOME-TAX RANGE-2(3) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI NARENDRA SHARMA, A.R. RESPONDENT BY : SHRI S. SUNDAR RAJAN, D.R. DATE OF HEARING : 25.08.2020 DATE OF PRONOUNCEMENT : 26.08.2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 11.03.2016 OF CIT(A)-2, BENGALURU RELATING TO ASSESSMENT YEAR 2012-13. THE DISPUTE IN THIS APPEA L IS WITH REGARD TO COMPUTATION OF LONG TERM CAPITAL GAI N AND ALLOWING EXEMPTION U/S 54F OF THE INCOME TAX ACT, 1 961 (HEREINAFTER CALLED AS THE ACT) TO THE ASSESSEE. 2. THE ASSESSEE IS AN INDIVIDUAL. SHE IS A DOCTOR BY PROFESSION. THE PROPERTY MEASURING 3600 SQ.FT. IN WARD ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 2 OF 19 NO.49 GANDHI BAZAR, BENGALURU-4 (HEREINAFTER REFERR ED TO AS THE PROPERTY) BELONGED TO ONE SHRI M. GUNASHEE LA, HE HAVING OBTAINED THE SAME UNDER PARTITION DEED DATED 10.09.1970 BETWEEN HIS BROTHERS AND HIS FATHER. S HRI M. GUNASHEELA DIED INTESTATE ON 30.11.2004 LEAVING BEH IND HIS WIFE DR. SULOCHANA GUNASHEELA AND TWO DAUGHTERS DR. N. MADHAVI GUNASHEELA & DR. DEVIKA GUNASHEELA (THE ASSESSEE IN THIS APPEAL) AS LEGAL HEIRS ENTITLED TO SUCCEED TO 1/3 RD SHARE EACH OF THE PROPERTY. ON 30.09.2009, DR. SULOCHANA GUNASHEELA, THE MOTHER OF THE ASSESSEE, THROUGH A REGISTERED RELEASE DEED, RELEASED HER /3 RD SHARE OF RIGHT AND TITLE IN THE PROPERTY IN FAVOUR OF HER TWO DAUGHTERS DR. MADHAVI N. GUNASHEELA AND DR. DEVIKA GUNASHEELA (THE ASSESSEE IN THIS APPEAL). THUS, TH E ASSESSEE AND DR. MADHAVI N. GUNASHEELA BECAME OWNER S OF 1/2 SHARE EACH OF THE PROPERTY. ON 29.09.2011 THE ASSESSEE AND HER SISTER DR. MADHAVI N. GUNASHEELA S OLD THE PROPERTY FOR A SALE CONSIDERATION OF RS.3,02,40 ,000/-. THE ASSESSEE RECEIVED A SUM OF RS.1,51,20,000/- AS HER SHARE IN THE SALE CONSIDERATION FOR SALE OF SHARE OF RIGHT TITLE AND INTEREST OVER THE PROPERTY. 3. FOR ASSESSMENT YEAR 2012-13, THE ASSESSEE FILED A RETURN OF INCOME, DECLARING LONG TERM CAPITAL GAIN ON ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 3 OF 19 SALE OF HER SHARE OF THE PROPERTY. THE COMPUTATION OF LONG TERM CAPITAL GAIN GIVEN BY THE ASSESSEE WAS AS FOLL OWS: COMPUTATION OF CAPITAL GAINS ON TRANSFER OF COMMERCI AL PROPERTY AT BASAVANAGUDI JOINTLY HELD BY DR. MADHAVI & DR. DEVIKA SALE CONSIDERATION - DEVIKA SHARE 1,5120000 LESS: EXPENSES ON TRANSFER @ 2% 302400 NET SALE CONSIDERATION 14817600 LESS: COST OF ACQUISITION PROPERTY INHERITED BY THE PREDECESSOR BEFORE 1 ST APRIL 1981 FAIR MARKET VALUE OF THE PROPERTY AS ON 1 ST APRIL 19 AS PER VALUATION REPORT RS.50 PER SQ.FT TOTAL AREA - 1800 SQ.FT 270000 INDEX VALUE 1981 100 2011-12 7.85 2119500 INDEX COST OF ACQUISITION 2119500 LONG TERM CAPITAL GAINS 1,2698100 LESS: EXEMPTION U/S 54 FOR REINVESTMENT IN CAPITAL GAINS ACCOUNT SCHEME 1,4900 000 NET CAPITAL GAINS NIL 4. IT CAN BE SEEN FROM THE AFORESAID COMPUTATION TH AT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 54 OF THE AC T. THE SCHEME OF TAXATION OF CAPITAL GAIN UNDER THE AC T NEEDS TO BE SEEN TO DECIDE THE ISSUES IN THIS APPEA L. UNDER SECTION 45 OF THE ACT, A NY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN TH E PREVIOUS YEAR SHALL, SAVE AS OTHERWISE PROVIDED IN SECTIONS 54 , 54B , 54D , 54E , 54EA , 54EB , 54F , 54G AND 5 ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 4 OF 19 4H , BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'CAPIT AL GAINS', AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. UNDER SECTION 48 OF THE ACT, INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' SHALL BE COMPUTED, BY DEDUCTIN G FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED O R ACCRUING 66 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 67 ; ( II ) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT 67 THERETO: SECOND PROVISO TO SECTION 48 PROVIDES THAT WHERE LONG- TERM CAPITAL GAIN ARISES FROM THE TRANSFER OF A LON G-TERM CAPITAL ASSET, OTHER THAN CAPITAL GAIN ARISING TO A NON- RESIDENT FROM THE TRANSFER OF SHARES IN, OR DEBENTU RES OF, AN INDIAN COMPANY REFERRED TO IN THE FIRST PROVISO, THE PROVISIONS OF CLAUSE ( II ) SHALL HAVE EFFECT AS IF FOR THE WORDS 'COST OF ACQUISITION' AND 'COST OF ANY IMPROVEMENT' , THE WORDS 'INDEXED COST OF ACQUISITION' AND 'INDEXED CO ST OF ANY IMPROVEMENT' HAD RESPECTIVELY BEEN SUBSTITUTED. EXPLANATION ( III ) TO SECTION 48 DEFINES 'INDEXED COST OF ACQUISITION' TO MEAN AN AMOUNT WHICH BEARS TO THE C OST OF ACQUISITION THE SAME PROPORTION AS COST INFLATION I NDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST INFLATION INDEX FOR THE FIRST YEAR IN WHICH TH E ASSET WAS HELD BY THE ASSESSEE OR FOR THE YEAR BEGINNING ON THE ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 5 OF 19 1ST DAY OF APRIL, 1981, WHICHEVER IS LATER; LONG TERM CAPITAL ARE RECORDED AT COST PRICE IN BOOKS. DESPIT E INCREASING INFLATION, THEY EXIST AT THE COST PRICE AND CANNOT BE REVALUED. WHEN THESE ASSETS ARE SOLD, THE PROFIT AMOUNT REMAINS HIGH DUE TO THE HIGHER SALE PRICE AS COMPARED TO PURCHASE PRICE. THIS ALSO LEADS TO A HI GHER INCOME TAX. THE COST INFLATION INDEX IS APPLIED TO THE LONG- TERM CAPITAL ASSETS, DUE TO WHICH PURCHASE COST INC REASES, RESULTING IN LESSER PROFITS AND LESSER TAXES TO BEN EFIT TAXPAYERS. THE INTENTION OF THE LEGISLATURE IS TO TAX THE REAL GAIN ON TRANSFER OF THE CAPITAL ASSET NOT THE PROFIT DUE TO INFLATION. IN ORDER TO ACHIEVE THIS OBJECTIVE, T HE INDEXATION IS INTRODUCED IN CAPITAL GAIN TAXATION . THE INDEXATION BENEFIT IS MEANT TO TAKE INTO ACCOUNT TH E INFLATIONARY TRENDS BETWEEN THE YEAR OF PURCHASE AN D THE YEAR OF SALE. 5. UNDER SECTION 54 OF THE ACT, IF CAPITAL GAIN AR ISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET, BEING BUILDINGS OR LAND APPURTENANT THERETO, AND BEING A RESIDENTIA L HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS (I) WITHIN A PERIOD OF ONE YEAR BEFORE OR ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 6 OF 19 (II) TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE (A) PURCHASED, OR (B) HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENT IAL HOUSE, THEN, CAPITAL GAIN WILL BE EXEMPT TO THE EXTENT OF LONG-TERM CAPITAL GAINS OR TO THE EXTENT OF A MOUNT INVESTED IN THE PURCHASE OR CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE. WHICHEVER IS LESS. LONG TERM CAPITAL GAIN MEANS GAIN ON TRANSFER OF A LONG TERM CAPITAL ASSET. IN CASE OF CAPITAL ASSET BEING IMMOVABLE PROPERTY CONSISTING OF LAND O R BUILDING OR BOTH, THE PERIOD OF HOLDING IS 24 MONTH S TO QUALIFY AS A LONG-TERM CAPITAL ASSET. 6. UNDER SECTION 54F OF THE ACT, IF CAPITAL GAIN A RISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, (I) WITHIN A PERIOD OF ONE YEAR BEFORE OR (II) TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE (A) PURCHASED, (B) OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENT IAL HOUSE (HEREAFTER REFERRED TO AS THE NEW ASSET), THE ASSESSEE WILL GET EXEMPTION PROPORTIONATELY I. E., EXEMPTION = (CAPITAL GAIN X AMOUNT INVESTED) NET SALE CONSIDERATION 7. EXEMPTION U/S/54F OF THE ACT IS NOT AVAILABLE W HERE: ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 7 OF 19 (A) THE ASSESSEE, (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER T HAN 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 O F TRANSFER OF THE ORIGINAL ASSET; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DAT E OF TRANSFER OF THE ORIGINAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER THAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRAN SFER OF THE ORIGINAL ASSET, IS CHARGEABLE UNDER THE HEAD I NCOME FROM HOUSE PROPERTY. 8. FOR EXEMPTION U/S.54 & 54F, THE ASSESSEE IS GIV EN 2 YEARS TO PURCHASE THE HOUSE PROPERTY OR 3 YEARS FOR CONSTRUCTION OF THE HOUSE PROPERTY, BUT THE CAPITAL GAIN ON THE TRANSFER OF ORIGINAL HOUSE PROPERTY IS TAXAB LE IN THE PREVIOUS YEAR IN WHICH TRANSFER TOOK PLACE. HENCE, THE ASSESSEE WILL HAVE TO TAKE A DECISION FOR THE PURCHASE/CONSTRUCTION OF THE HOUSE PROPERTY TILL TH E DATE OF FURNISHING OF THE RETURN OTHERWISE THE CAPITAL GAIN WOULD BECOME TAXABLE. THE AMOUNT OF CAPITAL GA IN, WHICH IS NOT UTILIZED BY THE ASSESSEE FOR THE PURCH ASE OR CONSTRUCTION OF THE NEW HOUSE BEFORE THE DATE OF FURNISHING OF THE RETURN OF INCOME, SHALL BE DEPOSI TED BY HIM UNDER THE CAPITAL GAINS ACCOUNT SCHEME, BEFORE THE DUE DATE OF FURNISHING THE RETURN. IN THE PRESENT C ASE THE ASSESSEE DEPOSITED THE UNUTILIZED CAPITAL GAIN IN C APITAL ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 8 OF 19 GAINS ACCOUNT SCHEME BEFORE THE DUE DATE FOR FUNISH ING THE RETURN OF INCOME. 9. THE A.O. POINTED OUT TO THE ASSESSEE THAT EXEMPT ION U/S 54 OF THE ACT WOULD BE AVAILABLE ONLY IF THE PR OPERTY THAT WAS TRANSFERRED WAS A RESIDENTIAL HOUSE AND SI NCE AS PER THE SCHEDULE OF PROPERTY AS FOUND IN THE SALE D EED, THE PROPERTY WAS A VACANT LAND. THE A.O. EXPRESSED HIS VIEW THAT THE ASSESSEE WOULD NOT BE ENTITLED TO THE BENE FIT U/S 54 OF THE ACT. IN THIS REGARD, THE A.O. ISSUED NOT ICE U/S 133(6) OF THE ACT TO BRUHAT BENGALURU MAHANAGAR PAL IKE (BBMP) AND OBTAINED THE INFORMATION THAT THE PROPER TY THAT WAS SOLD WAS A VACANT LAND AND NOT A RESIDENTI AL HOUSE. 10. BEFORE THE A.O., THE ASSESSEE CLAIMED EXEMPTIO N U/S 54F INSTEAD OF SECTION 54 OF THE ACT. DEDUCTION U/ S 54F OF THE ACT IS AVAILABLE ON SALE OF ANY CAPITAL ASSE T OTHER THAN RESIDENTIAL HOUSE. THE ASSESSEES REQUEST FOR ALLOWING CLAIM OF EXEMPTION U/S 54F OF THE ACT WAS DENIED BY THE A.O. FOR THE REASON THAT THE ASSESSEE OWNED MORE THAN ONE RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET ON THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET. WE HAVE ALREADY SEEN THAT U/S 54F OF THE ACT, EXEMPTION WIL L NOT BE AVAILABLE, IF THE ASSESSEE OWNS MORE THAN ONE RESIDENTIAL HOUSE. ACCORDING TO THE A.O., THE ASSE SSEE ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 9 OF 19 OWNED THREE PROPERTIES AND THEREFORE, THE DEDUCTION U/S 54F OF THE ACT WAS ALSO DENIED BY THE A.O. ANOTHER DISPUTE BETWEEN THE ASSESSEE AND THE A.O. WAS WITH REGARD TO THE COMPUTATION OF COST OF ACQUISITION OF THE CAPITAL ASSET FOR THE PURPOSE OF COMPUTING CAPITAL GAIN. THE ASSESSEE CLAIMED COST OF ACQUISITION AT RS.150/ - PER SQ.FT. AS ON 01.04.1981 AND COMPUTED THE INDEXED CO ST OF ACQUISITION AS FOLLOWS: (A) COST OF ACQUISITION: YEAR OF ACQUISITION: BEFORE 01.04.1981 ESTIMATION VALUE/SQ.FT.:RS.150/- AS ON 01.04.1981 AREA (3600/2) = 1800 SQ.FT. COST OF ACQUISITION IS - RS.2,70,000/- (B) COMMISSION PAID: TRANSFER EXPENSES - RS.3,02,400/- (C) INDEXED COST OF ACQUISITION: 270000 X 785/100 - RS.21,19,500/- 11. THE ASSESSEE FILED REPORT OF A REGISTERED VALUER IN SUPPORT OF THE CLAIM FOR THE COST OF ACQUISITION. THE A.O., HOWEVER, WAS OF THE VIEW THAT THE ENGINEER HAD NOT GIVEN THE BASIS FOR HIS ESTIMATION. THE A.O., THEREFORE, COMPUTED THE INDEXED COST OF ACQUISITION AS FOLLOWS : INDEXED COST OF ACQUISITION: FOR 2/3 RD OF PROPERTY FROM F.Y. 2004-05 1,20,000X785/480 = 1,96,250 FOR 1/3 RD OF PROPERTY FROM F.Y. 2009-10 60,000 X 785/632 = 74,525 TOTAL INDEXED COST OF ACQUISITION = 2, 70,775 ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 10 OF 19 12. THE A.O. ALSO DID NOT ALLOW THE CLAIM OF THE AS SESSEE FOR COMMISSION AS A DEDUCTION IN COMPUTING CAPITAL GAIN FOR WANT OF PROOF. FINALLY, THE A.O. COMPUTED THE LONG TERM CAPITAL GAIN AS FOLLOWS: THE ABOVE ANALYSIS OF FACTS AND LAW NECESSITATES T HE RE- COMPUTATION OF TAXABLE LTCG AS UNDER: 1. SALE CONSIDERATION: RS.1,51,20,000/- 2. COST OF ACQUISITION: RS. 1,80,000/- 3. INDEXED COST OF ACQUISITION: RS. 2,70,775/- 4. COMMISSION PAID: RS.0/- 5. LONG TERM CAPITAL GAIN: RS.1,48,49,225/- 13. AGGRIEVED BY THE ORDER OF THE A.O., ASSESSEE P REFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) FORMULATED TH E FOLLOWING ISSUES AS ARISING FOR CONSIDERATION BEFOR E HER: 2.4 THE ISSUES WHICH ARISE FROM THE GROUNDS RAISED BY THE APPELLANT THEREFORE ARE:- (A) WHETHER THE APPELLANT IS ENTITLED FOR DEDUCTION U/S 54? (B) WHETHER THE APPELLANT IS ENTITLED TO THE ALTERN ATIVE CLAIM FOR DEDUCTION U/S 54F? (C) WHETHER COST OF ACQUISITION AS ON 01.04.1981 IS TO BE TAKEN AT RS.150/- PER SQ.FT. AS WORKED OUT BY THE APPELLANT OR RS.100/- PER SQ.FT. AS WORKED BY THE ASSESSING OFFICER. (D) WHETHER THE APPELLANT IS ELIGIBLE TO INDEXATION W.E.F. 01.04.1981 BEING THE COST OF ACQUISITION IN THE HAN DS OF THE PREVIOUS OWNER. ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 11 OF 19 14. IN THIS APPEAL, WE ARE CONCERNED ONLY WITH THE ISSUES (B), (C) & (D). AS FAR AS ISSUE (B) IS CONCERNED, THE CIT(A) HELD AS FOLLOWS: 2.6.3 AFTER CONSIDERING THE FACTS OF THE CASE AND THE ARGUMENTS FORWARDED BY THE APPELLANT, IT IS SEEN THAT THE APP ELLANT HAS 3 PROPERTIES AS PER RETURN OF INCOME FOR A.Y. 2011-12 ON WHICH INCOME FROM HOUSE PROPERTY IS DECLARES. THESE ARE:- (I) FLAT NO.001,KUMAR PARADISE RENTAL INCOME NIL DECLARED BEING SELF-OCCUPIED PROPERTY (II) IMMOVABLE PROPERTY AT - RENTAL INCOME DECLAR ED U/S 22 DOBHI GHAT, THALGATPURA AS HOUSE PROPERTY INCOM E (III) IMMOVABLE PROPERTY AT - RENTAL INCOME DECLAR ED U/S 22 NAGADEVANAHALLI AS HOUSE PROPERTY INCOME. IN RESPECT OF (I) ABOVE, THERE IS NO DISPUTE. HOWE VER, IN RESPECT OF (II) & (III), THESE ARE CLAIMED TO BE VACANT LAND O NLY. CONSIDERING THAT FOR A.Y. 2011-12, THESE HAVE BEEN DECLARED AS INCOM E FROM HOUSE PROPERTY AND NOT GROUND RENT, AND ALSO BENEFIT U/S 24 HAVE BEEN CLAIMED, WHICH HAVE NOT BEEN WITHDRAWN TILL NOW, TH E APPELLANTS CLAIM THAT THESE ARE MERE VACANT LANDS CANNOT BE EN TERTAINED. IT IS NOT OPEN TO THE APPELLANT TO MAKE CONTRADICTORY CLA IMS IN THE TWO SUCCESSIVE YEARS TO SUIT HER REQUIREMENT. BEFORE R EITERATING THIS CLAIM IN APPEAL, THE MINIMUM THE APPELLANT SHOULD HAVE DO NE WAS TO WITHDRAW THE BENEFITS CLAIMED ON HOUSE PROPERTY IN RESPECT OF THESE TWO PROPERTIES TO PURSUE ITS CLAIM THAT THESE ARE V ACANT LANDS FOR THE PURPOSE OF DEDUCTION U/S 54F. THIS HAS NOT BEEN DO NE TILL NOW. I HOLD THAT UNDER SUCH FACTS, THE APPELLANTS CLAIM U/S 54 F CANNOT BE ENTERTAINED AND I AM UNABLE TO INTERFERE WITH THE F INDINGS OF THE ASSESSING OFFICER. ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 12 OF 19 15. AS FAR AS ISSUES C & D ARE CONCERNED, THE CIT(A ) HELD AS FOLLOWS: 2.7.3 HOWEVER, IN THIS CASE, SINCE LAND IN THE SAI D LOCALITY IS VALUED AT RS.100/- AS DETAILED IN THE ASSESSMENT OR DER BASED UPON THE GUIDANCE VALUE INTIMATED BY THE SUB-REGISTRAR, AND UNDER FINDINGS OF THE ASSESSING OFFICER THAT THE VALUATION CERTIFI CATE HAD CERTAIN FLAWS AS BROUGHT IN THE ASSESSMENT ORDER ITSELF, THE APPE LLANT IS UNABLE TO JUSTIFY THE COST AT RS.150/- PER SQ.FT. AS ON 1.4.1 981. MOREOVER, THIS IS A CASE OF ESTIMATION, AND NOT A CASE OF AN ACTUAL T RANSFER OF PROPERTY ON 1.4.1981, AT A RATE HIGHER THAN THAT INTIMATED B Y THE SUB-REGISTRAR THAT A RATE HIGHER THAN THE GUIDANCE VALUE SHOULD B E ACCEPTED WITHOUT ANY EVIDENCE THEREOF. UNDER SUCH FACTS, I HOLD THA T THE ASSESSING OFFICER HAS BEEN REASONABLE AND FAIR IN ADOPTING TH E VALUE AT RS.100/- PER SQ.FT. THE SAME IS UPHELD. 3. HOWEVER, AS REGARDS INDEXATION, I AGREE WITH THE APPELLANT THAT IN THE LIGHT OF JUDICIAL DECISIONS CITED BY THE APPELL ANT, PARTICULARLY IN THE CASE OF KARNATAKA HIGH COURT IN THE CASE OF SMT. KA VERI THIMMAIAH AND OTHERS REPORTED IN 369 ITR 81, THE APPELLANT IS ELIGIBLE TO INDEXED COST OF ACQUISITION FROM DATE OF HOLDING BY PREVIOU S OWNER. THEREFORE, INDEXATION IS ALLOWED W.E.F. 1.4.1981 ITSELF IN RES PECT OF 2/3 RD SHARE OF THE PROPERTY INHERITED FROM FATHER IN 2004-05. HOW EVER, IN RESPECT OF 1/3 RD SHARE INHERITED/GIFTED FROM MOTHER IN 2009-10, IND EXATION IS TO BE WORKED OUT FROM THE TIME THE SAME WAS HELD BY TH E MOTHER, I.E. ON THE DEATH OF FATHER OF THE APPELLANT IN 2004-05 WHE N THE PREVIOUS OWNER ACQUIRED IT. THE ASSESSING OFFICER IS DIRECT ED TO RE-COMPUTE LONG TERM CAPITAL GAINS ACCORDINGLY. 16. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 13 OF 19 17. WE HAVE HEARD THE RIVAL SUBMISSIONS. AS FAR AS THE ISSUE WITH REGARD TO THE EXEMPTION U/S 54F OF THE A CT IS CONCERNED, IN RESPECT OF CLAIM OF EXEMPTION U/S.54F OF THE ACT, THE CIT(A) DENIED THE CLAIM FOR DEDUCTION FOR THE REASON THAT THE ASSESSEE OWNED MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, I.E., THE ASSESSEE OWNED THREE RESIDENTIAL HOUSE AND THAT AS PER THE REQUIRE MENTS OF SEC.54F OF THE ACT, IF THE ASSESSEE OWNS OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSE T, THEN EXEMPTION WILL NOT BE ALLOWED. BEFORE CIT(A) ASSESSEE POINTED OUT THAT OUT OF THE THREE PROPERTI ES LISTED BY THE CIT(A) IN THE IMPUGNED ORDER, TWO PROPERTIES WERE ONLY VACANT LAND NOT RESIDENTIAL HOUSE AND THAT THA T RECEIVED IN RESPECT OF THE TWO PROPERTIES LISTED AS (II) & (III) IN PARAGRAPH 2.6.3 OF THE IMPUGNED ORDER, THESE WER E CLAIMED TO BE VACANT LAND ONLY AND THE RENT RECEIVE D FROM LETTING OUT THESE TWO PROPERTIES WERE ONLY RENT FOR LEASE OF LAND AND NOT LAND TOGETHER WITH BUILDING. THE CIT( A) DID NOT ACCEPT THE CLAIM OF THE ASSESSEE FOR THE REASON THAT IN A.Y. 2011-12, THESE HAVE BEEN DECLARED AS INCOME FR OM HOUSE PROPERTY AND NOT GROUND RENT, AND ALSO BENEFI T U/S 24(A) HAVE BEEN CLAIMED, WHICH HAVE NOT BEEN WITHDR AWN. THE CIT(A) THEREFORE REFUSED TO ACCEPT THE CLAIM OF THE ASSESSEE THAT RENT RECEIVED FOR THE TWO PROPERTIES WERE FOR MERE LETTING OUT OF LAND. ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 14 OF 19 18. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO AN ORDER OF ASSESSMENT DATED 12.10.201 5 PASSED BY THE A.O. IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2011-12. IT IS SEEN FROM THE AFORE SAID ORDER THAT THE ASSESSMENT FOR ASSESSMENT YEAR 2011- 12 WAS RE-OPENED BY ISSUE OF A NOTICE U/S 148 OF THE A CT FOR THE REASON THAT IN THE ORIGINAL RETURN OF INCOME, T HE ASSESSEE HAD DECLARED INCOME FROM THREE HOUSE PROPE RTIES AND THAT TWO OUT OF THE THREE HOUSE PROPERTIES WERE NOT BUILDINGS THAT WERE SOLD OUT BY THE ASSESSEE BUT WE RE ONLY A LEASE OF LAND OVER WHICH, THE TENANTS HAD PUT UP CONSTRUCTION. THE FOLLOWING TABLE AND THE REASONS RECORDED FOR REOPENING AS SET OUT IN THE AFORESAID ORDER OF ASSESSMENT WERE BROUGHT TO OUR NOTICE: 2. IN THE ORIGINAL RETURN OF INCOME THE ASSESSEE H AS DECLARED INCOME FROM HOUSE PROPERTY AS UNDER: 3. THE CASE WAS REOPENED FOR THE FOLLOWING REASON: PARTICULARS HOUSE PROPERTY 1 HOUSE PROPERTY 2 HOUSE PROPERTY 3 TOTAL RENT RECEIVED 2,69,345 1,00,000 3,79,125 7,48,470 LESS: RENT NOT REALIZED 11,215 -- -- 11,215 ANNUAL VALUE 2,58,130 1,00,000 3,79,125 7,37,255 LESS: DEDUCTION U/S 24(A) 77,439 30,000 1,13,738 2,11,177 INCOME FROM HOUSE PROPERTY 1,80,691 70,000 1,13,738 5,16,078 ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 15 OF 19 DURING THE ASSESSMENT PROCEEDINGS OF A.Y. 2012-13 THE A.R. HAS ADMITTED THAT THE RENT RECEIVED FROM PROPERTIES OF DOBHI & NAGADEVANAHALLI IS NOTHING BUT LEASE RENT AND NOT T HE RENT RECEIVED AGAINST THE HOUSE PROPERTIES UNDER CHAPTER VI-C OF THE INCOME-TAX ACT, 1961. BASED ON THE ARS ADMISSION, IT IS INFERRED T HAT THE ASSESSEE DURING THE AY 2011-12 HAS WRONGLY DECLARED THE LAND RENT OF RS.7,37,255/- WHICH IS RECEIVED FROM DOBHI & NAGADE VANAHALLI AS INCOME FROM HOUSE PROPERTY. BY DOING SO, THE ASSES SEE HAS CLAIMED 30% DEDUCTION U/S 24(A) AMOUNTING TO RS.2,11,177/-. 19. ULTIMATELY, IN THE ORDER OF ASSESSMENT, THE AS SESSEE ACCEPTED THAT THE PROPERTY AT DHOBI GHAT OF THALGAT PURA AND NAGADEVANAHALLI PROPERTY WERE NOT BUILDINGS THA T WERE LET OUT AND THE RENT RECEIVED WAS ONLY IN RESP ECT OF LAND AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED T O DEDUCTION OF 30% OF THE RENT RECEIVED U/S 24(A) OF THE ACT. THE ASSESSMENT WAS ACCORDINGLY COMPLETED ASSESSING THE RENT RECEIVED BY THE ASSESSEE FROM THE AFORESAID TW O PROPERTIES AS INCOME UNDER THE HEAD INCOME FROM OT HER SOURCES. LD. COUNSEL, THEREFORE, SUBMITTED THAT T HE VERY BASIS ON WHICH THE CIT(A) DENIED THE BENEFIT OF DED UCTION U/S 54F OF THE ACT TO THE ASSESSEE, NO LONGER SURVI VES AND THE ASSESSEE SHOULD BE ALLOWED THE BENEFIT OF DEDUC TION U/S 54F OF THE ACT. LD. D.R. RELIED ON THE ORDER O F THE CIT(A). ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 16 OF 19 20. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ONLY BASIS ON WHICH THE ASSESSEE WAS DENIED THE BENEFIT OF DEDUCTION U/S 54F OF THE ACT WAS THA T THE ASSESSEE OWNED MORE THAN TWO RESIDENTIAL HOUSES, OT HER THAN THE NEW ASSET ON THE DATE OF TRANSFER OF THE O RIGINAL ASSET. FROM THE ORDER OF ASSESSMENT PASSED U/S 147 OF THE ACT FOR ASSESSMENT YEAR 2011-12 DATED 12.10.201 5, IT IS CLEAR THAT THE DHOBI GHAT, THALGATPURA AND NAGADEVANAHALLI PROPERTIES WERE IN FACT NOT RESIDEN TIAL HOUSES OWNED BY THE ASSESSEE AND THAT THE ASSESSEE HAD ONLY GIVEN THE LEASE OF VACANT LAND AND OBTAINED RE NT FOR LAND AND NOT FOR ANY BUILDING. THEREFORE, IT IS CL EAR THAT THE ASSESSEE DID NOT OWN MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET ON THE DATE OF TRAN SFER OF THE ORIGINAL ASSET. THEREFORE, DEDUCTION U/S 54F O F THE ACT SHOULD BE ALLOWED TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 21. AS FAR AS THE FMV AS ON 01.04.1981 IS CONCERNE D, THE ASSESSEE HAD ADOPTED THE VALUE AS ON 01.04.1981 AT RS.150/- PER SQ.FT. ON THE BASIS OF A REPORT OF A R EGISTERED VALUER. IT IS NOT DISPUTED BY THE A.O. AND THE RIG HT THAT THE GUIDELINE VALUE OF THE PROPERTY AS ON 01.04.198 1 WAS RS.100/- PER SQ.FT. IT IS THE PLEA OF THE ASSESSEE THAT FAIR MARKET VALUE AND GUIDELINE VALUE ARE TWO DIFFERENT VALUES ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 17 OF 19 AND GENERALLY, THE FAIR MARKET VALUE IS HIGHER THAN THE GUIDELINE VALUE. IN THIS REGARD, OUR ATTENTION WAS DRAWN TO A DECISION OF THE HONBLE KARNATAKA HIGH COURT I N THE CASE OF LATE SMT. KRISHNA BAJAJ VS ACIT 267 CTR 172 (KARN.), WHEREIN IT WAS LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT THAT IN THE CONTEXT OF FAIR MA RKET VALUE FOR THE PURPOSE OF COMPUTING CAPITAL GAIN, TH AT MARKET VALUE OF PROPERTY IS GENERALLY FAR MORE THAN HIGHER THAN THE GUIDELINE VALUE. KEEPING IN VIEW THE LAW LAID DOWN AS ABOVE AND ALSO HAVING NOTE OF THE FACT THAT THE CLAIM OF THE ASSESSEE FOR FMV AS ON 01.04.1981 IS SUPPORTED BY A REPORT OF THE REGISTERED VALUER AND FACTSW OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE CL AIM OF THE ASSESSEE FOR ADOPTING FMV AS ON 01.04.1981 AT RS.150/- PER SQ.FT. IS REASONABLE AND THE SAME IS D IRECTED TO BE ACCEPTED. 22. THE THIRD ISSUE THAT NEEDS TO BE ADJUDICATED I S WITH REGARD TO ALLOWING BENEFIT OF INDEXATION TO THE ASS ESSEE. WE HAVE ALREADY SEEN THAT THE PROPERTY WAS ACQUIRED BY M. GUNASHEELA ON 10.09.1979 AND THAT ON HIS DEATH O N 30.11.2004, WIFE OF GUNASHEELA RELEASED HER 1/3 RD SHARE IN FAVOUR OF HER TWO DAUGHTERS AND THEREBY, THE ASS ESSEE AND HIS SISTER GOT HALF SHARE EACH OF THE PROPERTY. THIS DEED OF RELEASE WAS DATED 30.09.2009. THE ASSESSEE CLAIMED INDEXATION BENEFIT FROM 01.04.1981 ITSELF. THE ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 18 OF 19 CIT(A) ALLOWED THE BENEFIT OF INDEXATION FROM 2004- 05 FOR 1/3 RD SHARE, WHICH THE ASSESSEE INHERITED FROM GUNASHEELA ON HIS DEATH ON 30.11.2004. AS FAR AS INDEXATION FOR HALF SHARE IN THE 1/3 RD SHARE WHICH THE ASSESSEE GOT BY WAY OF RELEASE FROM HER MOTHER IS CONCERNED, THE AO ALLOWED INDEXATION ONLY FROM 2009 -10 BECAUSE THE RELEASE DEED WAS DATED 30.09.2009. IN O UR VIEW, THE ASSESSEE SHOULD BE ALLOWED THE BENEFIT OF INDEXATION RIGHT FROM 01.04.1981. IN THIS REGARD, THE PROVISIONS OF SECTION 55(2)(B)(II) OF THE ACT ARE R ELEVANT AND THE SAME PROVIDES THAT IF THE CAPITAL ASSET BECOMES PROPERTY OF THE ASSESSEE BY WAY OF SUCCESSION, THE COST OF ACQUISITION OF THE CAPITAL ASSET WOULD BE THE COST OF THE CAPITAL ASSET TO THE PREVIOUS OWNER OR THE FMV AS ON 01.04.1981 AT THE OPTION OF THE ASSESSEE, IF THE CA PITAL ASSET WAS ACQUIRED BY THE PREVIOUS OWNER PRIOR TO 01.04.1981. IN THE PRESENT CASE, NEITHER THE ASSES SEE NOR HER MOTHER ACQUIRED THE PROPERTY. THEY ACQUIRED TH E PROPERTY ONLY BY WAY OF INHERITANCE. THE SHARE REL EASED BY MOTHER OF THE ASSESSEE IN HER FAVOUR ALSO HAD NO T COST TO HER AND THEREFORE THE COST TO THE PREVIOUS OWNER HAS TO BE ADOPTED. THE PROPERTY WAS ACQUIRED BY GUNASHEEL A PRIOR TO 01.04.1981 AND THE ASSESSEE IN THE COMPUTA TION OF CAPITAL GAIN HAS OPTED TO ADOPT THE FMV AS ON 01.04.1981 FOR COMPUTING CAPITAL GAIN. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE WOULD ITA NO.1047/BANG/2016 DR. DEVIKA GUNASHEELA, BENGALURU PAGE 19 OF 19 BE ENTITLED TO THE BENEFIT OF INDEXATION FROM 01.04 .1981 IN RESPECT OF HER HALF SHARE IN THE PROPERTY ON SALE O F WHICH, THE ASSESSEE DERIVED CAPITAL GAIN. WE HOLD AND DIR ECT ACCORDINGLY. THE OTHER GROUNDS OF APPEAL BEING ACA DEMIC ARE NOT ADJUDICATED. 23. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUG20. SD/- (A.K. GARODIA) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) VICE PRESIDENT BANGALORE, DATED 26 TH AUG, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.