Income-Tax Officer, Bangalore V. Shri. Ramakrishna M.J, Bangalore

ITA 1326/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7575 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 15-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S RAMASUBRAMANIAM
• Keywords: Capital asset; Competent authority
• Section: 54F

Judgement Text

ITA.1326/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'B', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A NO.1326/BANG/2016 (ASSESSMENT YEAR : 2010-11) INCOME-TAX OFFICER, WARD-1(3)(5), BENGALURU .. APPELLANT V. SHRI. RAMAKRISHNA M. J, NO.733, 1 BLOCK, 6 TH CROSS, VALEGERAHALLI EXTENSION, JNANABHARATHI LAYOUT, BENGALURU 560 059 .. RESPONDE NT PAN : APSPR7910P ASSESSEE BY : SHRI. S. RAMASUBRAMANIAM, CA REVENUE BY : SHRI. N. SUKUMAR, ADDL. CIT HEARD ON : 12.09.2017 PRONOUNCED ON : 22.09.2017 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THE PRESENT APPEAL IS FILED BY THE REVENUE, AGAINS T THE ORDER OF THE ARISING OUT OF THE ORDER OF THE CIT (A)-I, BENG ALURU, DT.29.04.2016, FOR THE ASSESSMENT YEAR 2010-11, ON THE FOLLOWING G ROUNDS : ITA.1326/BANG/2016 PAGE - 2 ITA.1326/BANG/2016 PAGE - 3 02. BRIEF FACTS ARE, THE ASSESSEE FILED THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF RS.2,0 6,130/-. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND N OTICE WAS ISSUED. THE ASSESSEE HAS SUBMITTED BEFORE THE AO THAT HE SO LD THE SITE LOCATED AT NO.1443, JUDICIAL LAYOUT, YELAHANKA HOBLI, BANGA LORE NORTH TALUK, FOR A CONSIDERATION OF RS.1,00,80,000/-, WHI CH WAS PURCHASED FOR RS.74,470/-. AFTER INDEXATION AT RS.1,81,718/- , LONG CAPITAL GAINS WAS ARRIVED AT RS.98,98,282/-. THE ASSESSEE DEPOSI TED THE ENTIRE PROCEEDS OF RS.1,00,80,000/- IN THE CAPITAL GAINS S AVINGS ACCOUNT ON 09.02.2010 AND SUBSEQUENTLY PAID A SUM OF RS.2 LAKH S AS COMMISSION ON SALE PROCEEDS. THEREAFTER THE ASSESSEE PURCHASE D NEW PROPERTY ITA.1326/BANG/2016 PAGE - 4 CONSISTING OF BOTH LAND AND BUILDING LOCATED AT NO. 733, I BLOCK, 6 TH CROSS, VALAGERHALLI EXTENSION, JNANABHARATHI LAYOUT , BENGALURU 560 059 ON 01.07.2010, FOR A SALE CONSIDERATION OF RS.7 5,75,475/-. THE BREAK-UP OF THE SAID AMOUNT IS AS UNDER : REGISTRATION .. RS.40,00,000 STAMP DUTY .. RS. 3,09,100 PAID TO CONTRACTOR ADDITION/ALTERATION .. RS.32,50, 000 COST OF CONSTRUCTION OF 3 RD FLOOR .. RS.23,00,000 THUS THE ASSESSEE HAS UTILISED THE ENTIRE AMOUNT FO R CONSTRUCTION OF NEW HOUSE WITHIN THE PROVISIONS OF SECTION 54F OF T HE ACT. THE AO WAS NOT CONVINCED WITH THE SUBMISSION MADE BY THE A SSESSEE AND HAD MADE THE ADDITION OF RS.55,89,182/-. FEELING AGGRI EVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). 03. THE CIT (A) HAS GRANTED RELIEF TO THE ASSESSEE. PARAGRAPHS 7 AND 8 OF THE ORDER OF CIT (A), IS REPRODUCED HEREUN DER : 7. THE HONBLE DELHI HIGH COURT DECISION IN THE CAS E OF CIT V. GITA DIGGAL IN ITA 1237/2011 DATED 21/02/2013 HAS B EEN CITED AND THIS REFERENCE HELPS THE APPELLANT CASE. 8. ACCORDINGLY, RS.32.50 LAKH SPENT TOWARDS ALTERAT ION AND RS.23,00,000/- TOWARDS CONSTRUCTION OF 3 RD FLOOR ARE ALLOWED AS DEDUCTION U/S.54F. SIMILARLY CLAIM OF RS.2 LAKH TO WARDS BROKERAGE EXPENSE IS ALLOWABLE. ITA.1326/BANG/2016 PAGE - 5 FEELING AGGRIEVED BY THE ABOVE RELIEF GRANTED BY TH E CIT (A), THE REVENUE IS IN APPEAL BEFORE US, ON THE GROUNDS MENT IONED HEREIN ABOVE. 04. THE LD DR HAS SUBMITTED THAT THE CIT (A) HAS WR ONGLY APPLIED THE JUDGMENT IN THE MATTER OF GITA DUGGAL (SUPRA) O F THE HONBLE DELHI HIGH COURT AND HAS WRONGLY HELD IN FAVOUR OF THE ASSESSEE. 05. ON THE OTHER HAND, THE LD. AR HAS SUBMITTED THA T SECTION 54F IS A BENEFICIAL PROVISION AND IS IN THE STATUTE BOOK F OR PROMOTING THE CONSTRUCTION OF RESIDENTIAL HOUSE AND THEREFORE THI S PROVISION IS TO BE APPLIED LIBERALLY. FOR THAT PURPOSE, THE LD. AR RE LIED UPON THE FOLLOWING JUDGMENTS : CIT V. SAMBANDAM UDAYKUMAR [345 ITR 389-KAR] CIT V. SMT. B. S. SHANTHAKUMARI [ITA.165/2014- KAR] COMMISSIONER OF CUSTOMS V. JAYSHREE INSULATORS [(19 98) 104 E.L.T.748] STATE OF BIHAR V. S K. RAOY [AIR 1966 SC, DT.24.04. 1966] 06. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SECTION 54F READS AS UNDER : 54F. CAPITAL GAIN ON TRANSFER OF CERTAIN. CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. ( 1 ) WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL, THE CAPITAL GAIN A RISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGI NAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THE DATE ON ITA.1326/BANG/2016 PAGE - 6 WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WIT HIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HO USE (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 CA PITAL 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 SECTI ON 45: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY WHERE THE ASSESSEE OWNS ON THE DATE OF THE TRANSFER OF THE OR IGINAL ASSET, OR PURCHASES, WITHIN THE PERIOD OF ONE YEAR AFTER SUCH DATE, OR C ONSTRUCTS, WITHIN THE PERIOD OF THREE YEARS AFTER SUCH DATE, ANY RESIDENTIAL HOU SE, THE INCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPER TY', OTHER THAN THE NEW ASSET. EXPLANATION. FOR THE PURPOSES OF THIS SECTION, ( I ) 'LONG-TERM CAPITAL ASSET' MEANS A CAPITAL ASSET W HICH IS NOT A SHORT- TERM CAPITAL ASSET; ( II ) '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 REDU CED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER. ( 2 ) WHERE THE ASSESSEE PURCHASES, WITHIN THE PERIOD O F ONE YEAR AFTER THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET, OR CONSTRUCT S, WITHIN THE PERIOD OF THREE YEARS AFTER SUCH DATE, ANY RESIDENTIAL HOUSE, THE I NCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPER TY', OTHER THAN THE NEW ASSET, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGINAL ASSET NOT CHANGED UNDER SECTION 45 ON THE BASIS OF THE CO ST 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 H EAD 'CAPITAL GAINS' RELATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOU S YEAR IN WHICH SUCH RESIDENTIAL HOUSE IS PURCHASED OR CONSTRUCTED. ( 3 ) WHERE THE NEW ASSET IS TRANSFERRED WITHIN A PERIO D OF THREE YEARS FROM THE DATE OF ITS PURCHASE OR, AS THE CASE MAY BE, ITS CO NSTRUCTION, THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF THE ORIGI NAL ASSET NOT CHARGED UNDER ITA.1326/BANG/2016 PAGE - 7 SECTION 45 ON THE BASIS OF THE COST OF SUCH NEW ASS ET AS PROVIDED IN CLAUSE, ( A ) OR, AS THE CASE MAY BE, CLAUSE ( B ), OF SUB-SECTION ( I ) SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' RE LATING TO LONG-TERM CAPITAL ASSETS OF THE PREVIOUS YEAR IN WHICH SUCH NEW ASSET IS TRANSFERRED.'. 07. BY RELYING UPON SECTION 54F, THE AO HAS NOTED T HAT THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION U/S.54F FOR THE AL TERATION / RENOVATION CARRIED OUT BY HIM TO THE PURCHASED UNIT, AS ALSO T O THE CONSTRUCTION OF THE THIRD FLOOR. ACCORDING TO THE AO IT WOULD AMOU NT TO CONSTRUCTION OF NEW UNIT IN ADDITION TO THE UNIT THAT THE ASSESS EE HAS PURCHASED. THE AO WAS OF THE OPINION THAT THE EXEMPTION IS ONL Y AVAILABLE FOR PURCHASE OF UNITS WITHIN TWO YEARS OUT OF THE SALE PROCEEDS FROM THE DATE OF TRANSFER OF THE CAPITAL ASSET. IF WE LOOK INTO THE FACTS THEN IT IS UNDISPUTED BY BOTH THE PARTIES BEFORE US THAT THE A SSESSEE HAD SPENT AN AMOUNT OF RS.32,50,000/- TOWARDS ALTERATION MADE TO THE HOUSE AND THAT PAYMENT WAS MADE TO THE CONTRACTOR. ALONGWITH THIS PAYMENT, THE ASSESSEE HAD ALSO SPENT AN AMOUNT OF RS.43,24,6 75/- TOWARDS THE SALE CONSIDERATION, REGISTRATION CHARGES AND STAMP DUTY, TOTALLING TO AN AMOUNT OF RS.75,75,475/-. IN OUR VIEW, THE WORD C ONSTRUCTED IS USED IN THE LATER PART OF SECTION 54F ______ AND THE ASS ESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE ______ IF THE INTERPRETATION AS HAS BEEN GIVEN BY THE AO I S ACCEPTED, THAT THE WORD USED PURCHASED IS REQUIRED TO BE RESTRICTED ONLY TO ACTUAL PURCHASE AND IF ANY ADDITION, ALTERATION OR DEMOLIT ION OF THE PROPERTY IS CARRIED OUT BY THE ASSESSEE FOR THE PURPOSES OF RECONSTRUCTION AFTER THE DEMOLITION AND FOR MAKING IT CONVENIENT FOR HIS USE, THEN THE COST ITA.1326/BANG/2016 PAGE - 8 INCURRED BY THE ASSESSEE FOR THAT PURPOSE WOULD NOT BE ELIGIBLE FOR DEDUCTION U/S.54F, IS AGAINST THE VERY PURPOSE OF P ROVIDING THIS DEDUCTION IN THE STATUTE BOOK. OUR READING OF THE PROVISION MAKES IT ABUNDANTLY CLEAR THAT THE PURCHASE DO NOT INCLUDE A PURCHASE WHICH IS NOT A PURCHASE OF AN ASSET WHICH IS NOT INCAPABLE O F BEING USED BY THE ASSESSEE. THE ASSETS FOR THE PURPOSE OF SECTION OF 54F SHOULD BE AN ASSET PURCHASED BY THE ASSESSE AND IF AN ASSESSEE I NCURS A COST FOR MAKING IT USEFUL AND CONVENIENT AFTER TAKING APPROV AL FROM THE COMPETENT AUTHORITY, AS IN THE PRESENT CASE, THEN T HE ASSESSEE IS ENTITLED TO DEDUCTION U/S.54F OF THE ACT. IN OUR V IEW, THERE IS NO IRREGULARITY OR ILLEGALITY IN THE ORDER PASSED BY T HE CIT (A). WE HOLD ACCORDINGLY. 08. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 22ND DAY OF SEPTEMBER, 2017. SD/- SD/- (A. K. GARODIA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER BENGALURU DATED : 22.09.2017 MCN* ITA.1326/BANG/2016 PAGE - 9 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY