C. Bhaskara Jyothi, Hyderabad V. The DCIT Circle 3(1), Hyderabad

ITA 1259/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59213 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-08-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 01-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: S RAMA RAO
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND CHANDRAPOOJARI, ACCOUNTANT MEMBER ITA NO.1259/HYD/2010 ASSESSMENT YEAR: 2008-09 M/S C. BHASKARA JYOTHI, HYDERABAD. (PAN: ABXPC 6536 B) (APPELLANT) VS THE DCIT, CIR-16(1), HYDERABAD. (RESPONDENT) APPELLANT BY : SRI S. RAMA RAO RESPONDENT BY : SHRI V. SRINIVAS DATE OF HEARING: 01-12-2011. DATE OF PRONOUNCE MENT: 25 -01-2012. O R D E R PER BENCH: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27-8-2010 OF THE CIT (APPEALS)-I, HYDERABAD A ND IT PERTAINS TO THE ASSESSMENT YEAR 2008-09. 2. FIRST GROUND OF APPEAL IS WITH REGARD TO THE REJ ECTION OF CLAIM OF THE ASSESSEE UNDER SECTION 54F OF THE INCO ME-TAX ACT. ITA NO.1259/HYD/2010 C. BHASKARA JYOTHI, HYD. L.L ========================== 2 3. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE CLAIMED RS.46,47,357/- AS DEDUCTION UNDER SECTION 54F OF TH E ACT. THE SAME WAS DENIED BY THE ASSESSING OFFICER ON THE REA SON THAT NO POSSESSION OF THE RESIDENTIAL PREMISES HAS BEEN TAK EN BY THE ASSESSEE AND NO SALE DEED WAS EXECUTED TILL THE DUE DATE OF FILING THE RETURN OF INCOME. FOR THE PURPOSE OF REJ ECTION OF THE CLAIM OF THE ASSESSEE, THE ASSESSING OFFICER RELIED ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT V S. JAYALAKSHMI RAJENDRAN (152 ITR 742) AND THE JUDGMEN T OF KERALA HIGH COURT IN THE CASE OF P.K. KESAVA NAIR V S. CIT (174 ITR 253). ON FURTHER APPEAL, THE CIT (A) CONFIRMED THE ABOVE ACTION OF THE ASSESSING OFFICER. AGAINST THE ORDER OF THE CIT (A) ON THIS ISSUE, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. T HE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE J UDGMENT OF DELHI HIGH COURT IN THE CASE OF D.P. MEHTA VS. CO MMISSIONER OF INCOME-TAX (251 ITR 529) WHEREIN HELD THAT SINCE IT WAS FOUND THAT THE CONSTRUCTION WAS OF THE GARAGE AND S ERVANT QUARTERS AND THERE WAS NO OCCUPATION BY ANY SERVANT OR TENANT IN THE PROPERTY AND ALSO IN VIEW OF THE ACCEPTED S TATEMENT OF THE ASSESSEE THAT THE BUILDING WAS NOT WORTH OCCUPY ING AND WAS NOT INHABITABLE, THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION UNDER SECTION 54 OF THE ACT. ON THE OTH ER HAND, THE CONTENTION OF THE ASSESSEES COUNSEL IS THAT TH E CONSIDERATION RECEIVED ON SALE OF THE PROPERTY WHIC H RESULTED IN CAPITAL GAINS HAS BEEN INVESTED IN THE CONSTRUCTION OF HOUSE PROPERTY. ACCORDING TO THE ASSESSEE, SHE HAS ACQUI RED THE ITA NO.1259/HYD/2010 C. BHASKARA JYOTHI, HYD. L.L ========================== 3 PROPERTY VIDE DOCUMENT DATED 24-7-2009. AS PER SAI D DOCUMENT, THE ASSESSEE GOT THE LAND REGISTERED IN H ER NAME AND ALSO ENTERED INTO CONSTRUCTION AGREEMENT VIDE A GREEMENT DATED 24-7-2009 WITH EMMAR HILLS TOWNSHIP PVT. LTD. , AND EMMAR MGF LAND LTD. AS PER ARTICLE-4 OF THE AGREEM ENT, THE DEVELOPER SHALL COMPLETE THE CONSTRUCTION OF THE AP ARTMENT WITHIN A PERIOD OF 36 MONTHS FROM THE DATE OF COMME NCEMENT WITH A FURTHER GRACE PERIOD OF 36 MONTHS. THE COMM ENCEMENT DATE AS PER THE AGREEMENT IS DEFINED IN THE AGREEME NT AS 2 ND DAY OF MAY, 2008 OR THE DATE ON WHICH THE PURCHASER MADE FIRST INSTALLMENT OF CONSTRUCTION PAYMENT AND IT WA S REALIZED BY THE DEVELOPER WHICHEVER IS LATER. AS PER THE CONT ENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE PAYMENT F OR CONSTRUCTION WAS MADE ON 31-3-2008, 12-4-2008 AND 3 0-4- 2008 AND THUS THE AGREEMENT DEEMED TO BE COMMENCED FROM THE 2 ND MAY, 2008 AND THEREAFTER IT IS TO BE CONSTRUED THA T THERE IS A TIME LIMIT TO COMPLETE THE CONSTRUCTION WITHIN THREE YEARS TIME WITH A GRACE PERIOD OF SIX MONTHS. ACC ORDING TO THE DEPARTMENT, THE EARLIEST POSSIBLE DATE FOR CONSTR UCTION OF THE APARTMENT WILL BE 3 RD MAY, 2011 AND IF ONE CONSIDER THIS DATE AS DATE OF COMPLETION, THE ASSESSEE WOULD NOT BE EN TITLED FOR DEDUCTION UNDER SECTION 54F AS THE ASSESSEE IS LIA BLE TO CONSTRUCTION THE NEW APARTMENT FOR RESIDENCE BEFORE AUGUST, 2010 AS THE ASSESSEE TRANSFERRED THE LAND IN AUGUST , 2007. WE FIND NO MERIT IN THE ARGUMENT OF THE LEARNED DEP ARTMENTAL REPRESENTATIVE BECAUSE IN THIS CASE, THE ASSESSEE M ADE ALL EFFORTS TO ACQUIRE NEW ASSET AS STIPULATED UNDER S ECTION 54F AND MADE THE PAYMENTS TOWARDS PURCHASE OF THE PROPE RTY BY ITA NO.1259/HYD/2010 C. BHASKARA JYOTHI, HYD. L.L ========================== 4 ENTERING INTO AN AGREEMENT WITH THE DEVELOPER VIZ., EMMAR HILLS TOWNSHIP PVT. LTD., AND EMMAR MGF LAND LTD. IF THE ASSESSING OFFICER HAD ANY DOUBT REGARDING THE COMPL ETION OF THE CONSTRUCTION WITHIN THE TIME STIPULATED, HE COULD H AVE VERY WELL INSPECTED THE PREMISES AND COULD HAVE CALLED FOR T HE INFORMATION LIKE SANCTION PLAN OF THE BUILDING, CON STRUCTION DETAILS, POWER CONNECTION DETAILS, WATER CONNECTION /BOREWELL DETAILS ETC. THE ASSESSING OFFICERS WITHOUT CARRYI NG OUT ALL THESE ENQUIRIES, STRAIGHTAWAY REJECTED THE CLAIM OF THE ASSESSEE. IN OUR OPINION, THE COMPLETION OF THE CO NSTRUCTION HAS TO BE VERIFIED AS MENTIONED ABOVE. ACCORDINGLY , WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFIC ER FOR FRESH CONSIDERATION IN ACCORDANCE WITH LAW. 5. THE SECOND GROUND OF APPEAL IS THAT THE CIT (A) ERRED IN HOLDING THAT THERE IS RIGHT TO RECEIVE INTEREST ON THE AMOUNT OF RS.2 CRORES PAID TO M/S. AMOGH REALTORS AND FURTHER ERRED IN DIRECTING THE ASSESSING OFFICER TO TAX THE INTEREST CALCULATED AT 2% OF THE SAID AMOUNT OF RS. 2 CRORES PER MONTH. 6. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE HAS PAID RS. 2 CRORES TO M/S. AMOGH REALTORS AND IN RETURN WAS A LLOTTED 52 ACRES 34 GUNTAS OF LAND AT THE RATE OF RS. 4 LAKH P ER ACRE. AS PER THE MOU ENTERED INTO WITH AMOGH REALTORS, THE L ATTER HAS TO BUY BACK THE LAND WITHIN 4 MONTHS AT THE RATE OF RS.5.25 LAKHS PER ACRE. THERE WAS ANOTHER CLAUSE STATING T HAT IF THE BUY BACK IS NOT MADE WITHIN 4 MONTHS BUT WITHIN SIX MONTHS, THE BUYBACK WILL BE MADE @ RS.5.50 LAKHS PER ACRE. THERE ITA NO.1259/HYD/2010 C. BHASKARA JYOTHI, HYD. L.L ========================== 5 WAS ALSO A CONDITION THAT IF THE BUYBACK IS DELAYED , INTEREST @2% PER MONTH WILL ACCRUE ON THE AMOUNT PAID. APAR T FROM THIS TRANSACTION, THE ASSESSEE HAD ALSO PAID ANOTHE R RS. 2 CRORES AS ADVANCE FOR PURCHASE OF LAND WITH SIMILAR CONDITION. APPARENTLY, THE BUY BACK OF THE LAND HAS NOT TAKEN PLACE AS YET. THE ASSESSING OFFICER HAS CALCULATED THE PROF IT ARISING OUT OF THE AMOUNT INVESTED BY THE ASSESSEE AT RS.1,25,0 0,000/- AND ADDED THE SAME TO THE INCOME. APPARENTLY, THE ASSESSING OFFICER HAS CALCULATED THE PROFIT OF 1.25 FOR EVERY 4 LAKHS INVESTED (RS. 5.25 LAKHS BUY BACK PRICE- RS. 4 LAKH PER ACRE PURCHASE PRICE). THUS, FOR RS. 4 CRORES INVESTED BY THE ASSESSEE THE AMOUNT HAS BEEN CALCULATED AT RS.1.25 CRORES AS INCOME OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPEAL, THE CIT (A) DIRECTED THE ASSESSING OFFICER TO TAX THE INTEREST AT 2% PER MON TH ON THE AMOUNT OF ADVANCED BY THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS PAID RS. 2 CRORES TO M/S AMOGH REALTORS. AS PER MO U DATED 21-9-2007 WITH AMOGH REALTORS PVT. LTD., THE ASSESS EE PURCHASED 52 ACRES AND 34 GUNTAS PROPERTY SITUATED AT ANANTHARAM, MELA SANGAM AND KAMMIPALLY VILLAGES, MU NIPALLY MANDAL, MEDAK DISTRICT AT RS. 4 LAKH PER ACRE. THER E WAS A CLAUSE IN MOU THAT THE SELLER AGREED TO BUY BACK TH E SAID AGRICULTURAL LAND WITHIN FOUR MONTHS FROM THE DATE OF REGISTRATION WITH THE FURTHER GRACE PERIOD OF TWO M ONTHS. IN ITA NO.1259/HYD/2010 C. BHASKARA JYOTHI, HYD. L.L ========================== 6 THE EVENT OF BUY BACK, THE VENDOR COMPANY AGREED TO MAKE PAYMENT AT RS.5.25 LAKHS PER ACRE IF SUCH BUYBACK W ITHIN THE PERIOD OF 4 MONTHS AND SHALL PAY AN AMOUNT OF RS. 25,000 IF THE BUY BACK IS WITHIN THE GRACE PERIOD OF FURTHER TWO MONTHS (AFTER 6 MONTHS RS.5,50,000/-). IF THERE IS DELAY BEYOND THE PERIOD OF SIX MONTHS IN BUYING BACK THE PROPERTY, T HE INTEREST AT 2% WOULD BE PAID. BEING SO, THE ASSESSING OFFIC ER WAS OF THE OPINION THAT THE ASSESSEE HAS RIGHT TO RECEIVE THE ABOVE AMOUNT AND HE CALCULATED ACCORDINGLY AT RS.1.25 CRO RES. BUT, AS PER MOU, M/S. AMOGH REALTORS PVT. LTD., HAS TWO OPTIONS I.E., TO PURCHASE THE PROPERTY AT RS.5.25 LAKHS PER ACRE WITHIN FOUR MONTHS AND THEREAFTER TO PURCHASE THE PROPERTY AT RS.5.50 LAKHS PER ACRE WITHIN THE PERIOD OF SIX MON THS. IF FAILED TO DO SO, THEREAFTER, THE AMOGH REALTORS COU LD PURCHASE THE SAID PROPERTY BY PAYING RS.5.50 LAKHS PER ACRE AND INTEREST AT 2% PER MONTH ON RS. 2 CRORES. 8. IN CASE M/S. AMOGH REALTORS PVT. LTD., DOES NOT WANT TO PURCHASE THE PROPERTY, THE ASSESSEE CAN SELL THE PR OPERTY ACCORDING TO THEIR WISH. DURING THE PERIOD OF SIX MONTHS ONLY, THE ASSESSEE CANNOT SELL OR MORTGAGE TO A THIRD PAR TY. IN OTHER WORDS, THEREAFTER, THE ASSESSEE IS AT LIBERTY TO DI SPOSE OF THIS PROPERTY AS IT THINKS FIT. BEING SO, IN THE PRESEN T CASE, IT CANNOT BE SAID THAT THE INCOME FROM THIS TRANSACTI ON HAS BEEN ACCRUED TO THE ASSESSEE. M/S AMOGH REALTORS PVT. LI MITED NOT EXERCISED THEIR OPTION TO PURCHASE THE PROPERTY AND IN VIEW OF THIS, THE ASSESSEE IS AT LIBERTY TO SELL THE PROPER TY TO WHOMSOEVER IT WANTS. IN THE CIRCUMSTANCES, WE CANN OT HOLD ITA NO.1259/HYD/2010 C. BHASKARA JYOTHI, HYD. L.L ========================== 7 THAT THE INCOME ACCRUED TO THE ASSESSEE AND IT IS L IABLE FOR TAXATION. ACCORDINGLY, THERE IS NO SCOPE FOR ADDIT ION ON NOTIONAL BASIS WITHOUT REALLY ACCRUING THE INCOME T O THE ASSESSEE. IN VIEW OF THE ABOVE, THIS GROUND OF THE ASSEDSSEE IS ALLOWED. 9. THIRD GROUND OF APPEAL IS WITH REGARD TO SUSTAI NING OF AN AMOUNT RS.21 LAKHS ON ACCOUNT OF THE INTEREST RECE IVABLE FROM GOLDEN GATE PROPERTIES PVT. LIMITED. THE ASSESSEE HAD ADVANCED RS. 3 CRORES TO M/S GOLDEN GATE PROPERTIES PVT. LIMITED AT THE RATE OF 2% PER MONTH. IN THE ASSESS MENT YEAR UNDER CONSIDERATION, THE TOTAL AMOUNT DUE TO THE AS SESSEE WAS RS.36 LAKHS AND THE ASSESSEE OFFERED RS.15 LAKHS FO R THE ASSESSMENT YEAR UNDER CONSIDERATION AND RS.21 LAKHS FOR THE SUBSEQUENT YEAR. THE ASSESSMENT OFFICER BROUGHT TO TAX THIS AMOUNT OF RS.21 LAKHS ALSO. AGAINST, THE ASSESSEE IS IN APPEAL BEFORE US. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT RS.21 LAKHS HAS BEEN OFFERED TO TAX IN THE SUBSEQUE NT YEAR AND THE ASSESSEE HAS BEEN FOLLOWING CASH SYSTEM OF ACC OUNTING FOR THIS INCOME. IF THE CONTENTION OF THE ASSESSEE IS CORRECT AND OFFERED THIS INCOME TO THE NEXT ASSESSMENT YEAR ON RECEIPT BASIS, THIS AMOUNT OF RS.21 LAKHS CANNOT BE TAXED F OR THE YEAR UNDER CONSIDERATION OTHERWISE, IT AMOUNT TO DOUBLE TAXATION. IN VIEW OF THE ABOVE, WE SET ASIDE THIS ISSUE TO TH E FILE OF THE ITA NO.1259/HYD/2010 C. BHASKARA JYOTHI, HYD. L.L ========================== 8 ASSESSING OFFICER TO SEE WHETHER THE ASSESSEE IS FO LLOWING CASH SYSTEM OF ACCOUNTING TO THIS HEAD OF INCOME AND WHE THER THIS IMPUGNED INCOME WAS OFFERED TO TAX IN THE NEXT ASSE SSMENT YEAR. IF THE SAME IS OFFERED TO THE SUBSEQUENT ASSE SSMENT YEAR ON RECEIPT BASIS, THERE CANNOT BE ANY ADDITION OF T HE AMOUNT OF RS.21 LAKHS FOR THE ASSESSMENT YEAR UNDER CONSIDERA TION. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 25-01-2012. . SD/- SD/- (CHANDRA POOJARI) (H.S. SIDHU) ACCOUNTANT MEMBER. JUDI CIAL MEMBER. DT/- 25 -01-2012. COPY FORWARDED TO: 1. C. BHASKARA JYOTHI, 8 - 2 - 293/82/A, PLOT NO.1158, ROAD NO.57, JUBILEE HILLS, HYDERABAD. 2. 3. 4. 5. JMR * DCIT, CIRCLE - 3(1), HYDERABAD. CIT (A)-I, HYDERABAD. CIT , AP, HYDERABAD. THE DR., ITAT, HYDERABAD.