Pydimukkala Sundara Nalini, Visakhapatnam V. The income Tax Officer, Ward-2(4), , Visakhapatnam

ITA 113/VIZ/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2914 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 04-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Keywords: Capital asset; Salary income; Set aside; Capital Gains
• Section: 54F; 143(1); 113; 22; 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM (T HROUGH WEB - BASED VIDEO CONFERENCING PLATFORM) BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER I . T . A . NO. 113 / VIZ /2020 (ASST. YEAR: 20 1 1 - 1 2 ) SMT. PYDIMUKKALA SUNDARA NALINI , D.NO. 4 - 49 - 21, LAWSONS BAY COLONY, VISAKHAPATNAM. VS. IT O , WARD - 2(4) , VISAKHAPATNAM . PAN NO. AEMPP 5663 C (APP ELLANT ) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI , ADVOCATE . DEPARTMENT BY : SMT. U.MINI CHANDRAN , SR. DR DATE OF HEARING : 25 / 0 9 /2020 . DATE OF PRONOUNCEMENT : 23 /11 /20 20 . O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1 , VISAKHAPATNAM , IN ITA NO.73/2016 - 17/CIT(A) - 1/VSP/2019 - 20 FOR THE ASSESSMENT YEAR 20 1 1 - 1 2 . 2. ALL THE GROUNDS OF APPEAL ARE RELAT ED TO THE DENYING DEDUCTION U/SEC. 54 F (3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'ACT') . 2 ITA NO. 113/VIZ/2020 ( SMT. PYDIMUKKALA SUNDARA NALINI ) 3 . FACTS OF THE CASE IN BRIEF ARE THAT ASSESSEE IS AN INDIVIDUAL AND DRAWING SALARY INCOME FROM LIC OF INDIA , SHE FILED HER RETURN OF INCOME FOR THE A.Y. 2011 - 12 DECLARIN G TOTAL INCOME OF RS. 5,03,550/ - WHICH WAS PROCESSED U/SEC. 143(1) DATED 14/03/2012 . SUBSEQUENTLY, THE AO ISSUED NOTICE U/SEC. 148 OBSERVING THAT THE ASSESSEE HA S SOLD THE IMMOVABLE PROPERTY COMPRISING OF THREE P IECES OF LAND FOR A TOTAL CONSIDERATION OF RS.1,16,95,080/ - AND DEPOSITED THE SAME IN CAPITAL GAINS DEPOSIT SCHEME WITH CORPORATION BANK ON 03/02/2009. LATER SHE PURCHASED THE LAND ADMEASURING 313 SQ.YDS . WITH AC SHEETS SHED AND CLAIMED EXEMPTION U/SEC. 54F OF THE ACT. SUBSEQUENTLY, SHE HAS GIVEN THE SAID 313 SQ.YD S . OF LAND FOR DEVELOPMENT TO M/S. SURYA REAL ESTATE S AND CONSTRUCTIONS. AS PER THE DEVELOPMENT AGREEMENT , THE ASSESSEE RETAINED 2/3 RD OF LAND AND THE CONSTRUCTED AREA CONSISTING OF 2 FLOORS WITH A BUILT UP AREA OF 3296 SQ.FT. THE ASSESSEE ALSO PAID A DDITIONAL AMOUNT OF RS. 40.00 LAKHS TOWARDS BALANCE CONSTRUCTION COST TO THE BUILDER TOWARDS HER SHARE OF CONSTRUCTED AREA . THE AO VIEWED THAT TRANSFER OF LAND TO M/S. SURYA REAL ESTATES AND CONSTRUCTIONS AMOUNTS TO TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT. SINCE THE ASSESSEE HAD PURCHASED THE LAND ALONG WITH SHED ON 07/02/2009 AND TRANSFERRED THE SAID LAND ON 29/07/2010 , THE AO VIEWED THAT 3 ITA NO. 113/VIZ/2020 ( SMT. PYDIMUKKALA SUNDARA NALINI ) THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 54F OF THE ACT AND ACCORDINGLY WITHDRAWN THE DEDU CTION ALLOWED EARLIER AND TAXED A SUM OF RS. 75,00,015/ - UNDER THE HEAD LONG TERM CAPITAL GAIN S . 4. AGAINST THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE LD. CIT(A) AND THE LD.CIT(A) DI S MISSED THE APPEAL OF THE ASSESSEE HOLDING THAT AS PER THE JOINT DEVELOPMENT AGREEMENT DATED 29/07/2010 , THE TRANSFER OF LAND GIVEN FOR DEVELOPMENT PURPOSE AMOUNTS TO TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT AND THUS, H E LD THAT DEVELOPMENT AGREEMENT DATED 29/07/2010 IS ANTIVIRUS TO THE PROVISIONS OF SECTION 54 F (3) OF THE ACT AND ACCORDINGLY CONFIRMED THE ADDITION AND DISMISSED THE APPEAL OF THE ASSESSEE. 5 . AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBU NAL. 6 . DURING THE APPEAL HEARING, LD.AR SUBMITTED THAT ASSESSEE HAS SOLD THREE PIECES OF LAND FOR A CONSIDERATION OF RS. 1,16,95,080/ - AND DEPOSITED THE SAME IN CAPITAL GAIN S DEPOSIT SCHEME WITH CORPORATION BANK ON 03/02/2009 . SUBSEQUENTLY , SHE PURCHASED A SITE ADMEASURING 313 SQ.YDS. ALONG WITH AC SHEET SHED ON 07/02/2009 FOR A CONSIDERATION OF RS. 65,88,000/ - WHICH WAS CLAIMED AS EXEMPTION U/SEC. 54F OF THE ACT. THE LAND ALONG WITH AC SHED PURCHASED BY THE ASSESSEE CANNOT BE HELD AS 4 ITA NO. 113/VIZ/2020 ( SMT. PYDIMUKKALA SUNDARA NALINI ) DWELL ING UNIT SINCE THE AC SHED WAS ONLY 50 SQ.FT. WHICH DOES NOT HAVE ANY AMENITIES FOR LIVING , THEREFORE THE ASSESSEE INTENDED TO CONSTRUCT A DECENT RESIDENTIAL UNIT HENCE SHE HAS GIVEN THE SAME LAND FOR DEVELOPMENT AND RETAINED 2/3 RD OF LAND AND 2 FLOORS OUT OF 3 FLOORS CONSTRUCTED IN THE AREA. THUS, THE ASSESSEE HAS CONSTRUCTED A RESIDENTIAL UNIT OF 3296 SQ.FT. IN TWO FLOORS . THE ASSESSEE HAS ALSO PAID A SUM OF RS. 40.00 LAKHS TO THE BUILDER FOR CONSTRUCTION OF THE RESIDENTIAL HOUSE TO MEET THE DEFICIT IN COST OF CONSTRUCTION . SINCE ASSESSEE HAS SOLD LANDS AND CONSTRUCTED THE RESIDENTIAL HOUSE, SHE IS ENTITLED FOR EXEMPTION U/SEC. 54F OF THE ACT . T HE QUESTION OF SECTION 54 F (3) DOES NOT COME INTO PL A Y SINCE THE ENTIRE PROCESS WAS COMPLETED WITHIN THREE YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AS PROVIDED IN THE INCOME TAX ACT. THEREFORE, ARGUED THAT BOTH THE LOWER AUTHORITIES MISGUIDED IN PRESUMING THAT THE ASSESSEE HAD PURCHASED RESIDENTIA L HOUSE AND TRANSFERRED THE SAME TO THE BUILDER FOR DEVELOPMENT. IN THIS CASE, THE ASSESSEE STRESSED THAT SHE HAS PURCHASED ONLY LAND TO CONSTRUCT A RESIDENTIAL HOUSE AND TRANSFERRED THE SAID LAND TO THE DEVELOPER, THEREFORE LD.AR ARGUED THAT THE ASSESSEE HAS NOT VIOLATED ANY OF THE PROVISIONS OF SECTION 54 F (3) OF THE ACT HENCE, REQUESTED TO SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE APPEAL OF THE ASSESSEE. 5 ITA NO. 113/VIZ/2020 ( SMT. PYDIMUKKALA SUNDARA NALINI ) 7 . PER CONTRA, LD.DR SUBMITTED THAT THE ASSESSEE HAD PURCHASED A HOUSE BEARING NO. 4 - 62 - 15 AT CHINA WALTAIR VILLAGE, LAWSONS BAY COLONY , VISAKHAPATNAM COMPRISING OF 313 SQ.YDS. WITH A SHED OF 50 SQ.FT. AND CLAIMED EXEMPTION U/SEC.54F OF THE ACT. SUBSEQUENTLY , THE ASSESSEE HAD TRANSFERRED THE PROPERTY TO THE DEVELOPE R, HENCE VIOLATED THE PROVISIONS OF SECTION 54F WHICH STIPULAT ES THAT RESIDENTIAL HOUSE PURCHASED BY THE ASSESSEE ON WHICH DEDUCTION U/SEC. 54F IS CLAIMED SHOULD NOT BE TRANSFER RED WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF PURCHASE OR CONSTRUCTION. SINCE THE ASSESSEE HAS TRANSFERRED THE PROPERTY WITHIN THREE YEARS, THE L D.DR ARGUED THAT CIT(A) RIGHTLY UPHELD THE ORDER OF THE AO AND NO INTERF E RE N CE IS CALLED FOR. 8 . WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD. 9 . IN THIS CASE, THE ASSESSEE HAD DISPOSED OF 03 PIECES OF LAND FOR A CONSIDERATION OF RS. 1,16,95,080/ - AND DEPOSITED THE SAME IN THE CAPITAL GAIN S DEPOSIT SCHEME WITH CORPORATION BANK ON 03/02/2009. SUBSEQUENTLY, SHE HAD PURCHASED THE LAND WITH AC SHED ADMEASURING 313 SQ.YDS. FOR A CONSIDERATION OF RS. 65,88,000/ - ON 07/02/2009 AND CLAIMED DEDUCTION U/SEC. 54 F OF THE ACT WHICH WAS ALLOWED BY THE AO IN THE ASSESSMENT . LATER ON, THE ASSESSEE HAS GIVEN THE SAID LAND OF 313 SQ.YDS FOR 6 ITA NO. 113/VIZ/2020 ( SMT. PYDIMUKKALA SUNDARA NALINI ) DEVELOPMENT TO M/S. SURYA REAL ESTATES AND CONSTRUCTIONS . THE ASSESSEE HAS ENCLOSED THE DEVELOPMENT AGREEMENT IN PAPER BOOK AT PAGE NOS. 22 TO 28 . THE ASSESSEE ALSO ENCLOSED M EMORANDUM OF U NDERSTANDING (MOU) ENTERED INTO BY THE ASSESSEE WITH M/S.SURYA REAL ESTATES AND CONSTRUCTIONS AT PAGE NOS. 29 TO 31. AS PER THE DEVELOPMENT AGREEMENT, THE BUILDER HAS TO CONSTRUCT A BUILDING COMPRISING STILT FLOOR FOR PARKING , GROUND + TWO UPPER FLOORS WITH EACH FLOOR MEASURING 1648 SQ.FT. AND THE ASSESSEE IS ENTITLED TO TWO FLOORS I.E. FIRST AND 2 ND FLOORS COMPRISING 3296 SQ.FT. AS A SINGLE UNIT IN DUPLEX MODEL WITH INTERNAL STAIRCASE AND THE DEVELOPER SHALL BE ENTITLED TO HAVE EXCLUSIVE RIGHTS OVER THE GROUND FLOOR . THE OWNER I.E. ASSESSEE WOULD RETAIN 2 0 6.66 SQ.YDS OF LAND AS UNDIVIDED SHARE OF LAND OUT OF 313 SQ.YDS . AND THE REMAINING UNDIVIDED SHARE OF 106.34 SQ.YDS . WOULD BE TRANSFERRED IN FAVOUR OF THE DEVELOPER OR ITS NOMINEE. FROM THE DEVELOPMENT AGREEMENT, IT IS SEEN THAT ASSESSEES INTENTION IS VERY CLEAR TO CONSTRUCT A RESIDENTIAL HOU S E ON 313 SQ.YDS OF SITE, ACCORDINGLY THE SAME WAS GIVEN FOR DEVELOPMENT AND RETAINED 2/3 RD OF LAND AND 2 /3 RD CONSTRUCTED AREA AS A SINGLE RESIDENTIAL UNIT AS AGREED BETWEEN THE DEVELOPER AND THE ASSESSEE. THE ASSESSEE ALSO ENTERED INTO MOU WHICH IS ENCLOSED IN PAGE NO.29 TO 32 AGREEING TO PAY RS. 40.00 LAKHS AS A CONSIDERATION OVER AND ABOVE VALUE OF 7 ITA NO. 113/VIZ/2020 ( SMT. PYDIMUKKALA SUNDARA NALINI ) RELINQUISHING THE RIGHT OF 106.34 SQ. YDS. O F LAND AS PER DEVELOPMENT AGREEMENT DATED 29/07/2010 . FROM COMBINED READING OF THE DEVELOPMENT AGREEMENT , MOU AND FACTS PLACED BEFORE US IT IS UNDERSTOOD THAT THE ASSESSEE HAS SOLD THE 03 PIECES OF LAND AND CONSTRUCTED A RESIDENTIAL UNIT WI THIN THE TIME SPECIFIED IN SECTION 54F OF THE ACT. AS PER THE STATEMENT OF FACTS PLACED BEFORE THE LD. CIT(A) THE ENTIRE TRANSACTION WAS COMPLETED WITHIN THE TIME ALLOWED U/SEC. 54F OF THE ACT WHICH CLEARLY REVEALS THAT THERE WERE NO SEPARATE TRANSACTION S . BY ANY STRETCH OF IMAGINATION AC SHED OF 50 SQ.FT. CANNOT BE STATED TO BE A RESIDENTIAL HOU S E AND AT BEST IT CAN BE CALLED AS A SECURITY GUARDS ROOM FOR GUARDING PREMISES. IT IS ACCEPTED FACT THAT RESIDENTIAL UNIT COMPRISES OF KITCHEN, BED ROOMS , HALL, TOILETS ETC. T HEREFORE WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS SOLD THE 03 PIECES OF LAND AND CONSTRUCTED A SINGLE RESIDENTIAL UNIT COMPRISING OF 3296 SQ.FT. AS A DUPLEX UNIT AS MENTIONED IN DEVELOPMENT AGREEMENT AND MOU FOR WHICH THE ASSESSEE HAD SPENT A SUM OF RS. 65,88,000/ - + REGISTRATION CHARGES AND ADDITIONAL SUM OF RS. 40.00 LAKHS AS PER MOU DATED 29/07/2010 AGGREGATING TO RS. 1,11,47,230/ - AND THE ASSESSEE IS ENTITLED FOR DEDUCTION U/SEC. 54F OF THE ACT AND WITHDRAWAL OF DEDUCTION ALLOWED U/SEC. 54F BY THE AO IS BAD IN LAW. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES 8 ITA NO. 113/VIZ/2020 ( SMT. PYDIMUKKALA SUNDARA NALINI ) AND DELETE THE ADDITION MADE BY THE AO AND ALLOW THE APPEAL OF THE ASSESSEE. 10 . IN THE RESULT, AP PEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 23 /11 / 2020 . SD/ - SD/ - (V. DURGA RAO) (D.S. SUNDER SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23 /11 / 20 20 . VR/ - COPY TO: 1. THE ASSESSEE - SMT. PYDIMUKKALA SUNDARA NALINI, D.NO. 4 - 49 - 21, LAWSONS BAY COLONY, VISAKHAPATNAM. 2. THE REVENUE ITO, WARD - 2(4), VISAKHAPATNAM. 3. THE PR. CIT - 1 , VISAKHAPATNAM. 4. THE CIT(A) - 1 , VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.