Dy. Commissioner of Income Tax , Circle-11(1), Hyderabad V. Late Shri Ieneni Sripathirao L/r Ieneni Shashikant, Hyderabad

ITA 1380/Hyd/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7419 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A FIGURE OF RS. PER SQ.FT
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Valuation report; Set aside; Capital Gains
• Section: 148; 54; 143(3); 50C; 54F; 55A

Judgement Text

ITA No.1380/Hyd/2019 1 IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad (Through Video Conferencing) Before Shri A. Mohan Alankamony, Accountant Member AND Shri S.S. Godara, Judicial Member ITA No.1380/Hyd/2019 Assessment Year: 2011-12 The Asst. Commissioner of Income Tax, Circle – 11(1), Hyderabad. Vs. Late Shri Ieneni Sripathirao L/R Ieneni Shashikant, H.No.5-2-41/20, Seshadri Nagar, Kukatpally, Hyderabad. PAN : BEEPS2654P. (Appellant) (Respondent) Assessee by: Shri K.C. Devdas. Revenue by : Shri T. Sunil Goutam. Date of hearing: 23/11/2021 Date of pronouncement: 29/11/2021 O R D E R Per S. S. Godara, J.M. This assessee’s appeal for A.Y 2011-12 arises from the Commissioner of Income Tax (Appeals)-5, Hyderabad’s order dated 16.07.2019, in case No.0060/2018-19/CIT(A)-5 involving proceedings under section 143(3) r.w.s. 147 of Income Tax Act, 1961 (in short, “the Act”). Heard both the parties. Case file perused. ITA No.1380/Hyd/2019 2 2. The Revenue has raised the following substantive grounds in the instant appeal. “1. Whether in the facts and circumstances, the order of the ld.CIT(A) in directing the Assessing Officer to allow the claim of the assessee u/s 54F of the Income Tax Act, is not perverse, illegal and likely to be set aside. 2. Whether in the facts and circumstances, the ld.CIT(A) is justified in directing the Assessing Officer to consider all the residential flats received as consideration as part of reinvestment for the purpose of Section 54F, when the assessee received multiple flats located on different floors separated by different blocks of a gated community / apartment complex. 3. Whether in the facts and circumstances, the ld.CIT(A) is justified in directing the Assessing Officer to consider all the residential flats received as consideration relying on the decision of the Hon'ble AP High Court in the case of Sri Syed Ali Adil by not considering that the facts of the case are distinguishable and not applicable to the facts of the present case. 4. Whether in the facts and circumstances, the ld.CIT(A) is justified in not considering the intention of the legislature while amending Section 54F of the Income Tax Act vide Finance ka 2C:1.4 which clarifies that 'a residential house I means 'one residential house' means ‘one residential house’ even before the amendment to Section 54F.” 3. Both the learned representatives invite our attention to the CIT(A)’s detailed discussion accepting the assessee’s impugned section 54F deduction of the claim as under : “6. Decision: The appellant has transferred a property along with other family members, the appeals in the case of the other family members have already been decided and the appellant is also the part of the same agreement, which resulted in the accrual of capital gain. The appellant has also claimed exemption u/s. 54F with regard to the application of the capital gain. It will be of relevance to bring out the adjudication in the cases of other parties whose status was equivalent to the appellant in the transaction. The adjudication in the case of Muralidher Rao Vaddepalli, one of the transferors alongwith the appellant vide order dated 13-03-2019 in appeal no CIT(A), Hyderabad5/10242/2018-19 is brought out as under for reference and appreciation of the facts of the case. "The appellant along with 12 other family members (herein after mentioned as Owners) entered into a joint development agreement on 14.02.2011 (relevant to this AY) with M/ s. Sumashaila Developers (herein after mentioned as SD) for transferring their 58% land of total area of 10 Acres at ITA No.1380/Hyd/2019 3 survey No. 498, Kukatpally Village, Balanagar, Mandal. For the purposes of stamp value of the development agreement, the SRO determined the total value at Rs. 88,11,43,000/- . The same included the total built up area of apartment, fiats, independent houses and parking comprising of the Owner's share and developer's share. The AO for determining the individual sale consideration of appellant got the value from the SRO during the course of assessment proceedings and the SRO stated that the constructed area cost for the purposes of stamp duty was Rs. 1300/- per sq.ft. The AO therefore determined the consideration by multiplying the constructed area in sq.ft which was to be received by the appellant by a figure of Rs. 1300/- per sq.ft. It was agreed between the parties, that Owners will receive constructed area out of the apartments and flats to the extent of 55% approximately and SD will retain 45% approximately of this relevant constructed area. The supplementary agreement, went on to identify the respective units, working out the Owner's share at (300199 sq.ft) and SD's share at 246921 sq.ft in the agreed proportion of 55 : 45. The agreement was entered on 14.02.2011 between appellant and 12 other persons (being called the first party in the agreement). The agreement further goes on to identify the share of respective owners on the basis of their lineage and understanding which has been mentioned by the appellant in the submissions and the shares as identified in the agreement of these respective persons are not in dispute by the AO. Therefore the share is considered as determined by the AO and as submitted by the appellant in the working of capital gains. The agreement states that the Owners including the appellant, approached SD for development of the said land and the entire cost of development including approvals and subsequent costs etc. was to be borne by SD along with. all other responsibilities, henceforth of the execution of the said agreement. The Owners declared that they are the sole owners of the property and there is no encumbrance on the said property and they were in possession of the property. On the agreed consideration which was accepted at 55% of the total constructed area (having an identified market value of Rs. 1300/- per sq.ft) along with the cumulative sum of Rs. 60,00,000/ - taken by Owners in various quantum’s (termed as refundable deposit, to be adjusted later), the Owners handed over the peaceful possession of the property to SD. From the above the following undisputed facts emerge: 1. The Owners were absolute owners of the property and there was no encumbrance of the property. 2. The Owners were having the possession of the property. 3. The value of the consideration received by _ the Owners including the appellant, as per the agreement and determined as per SRO value of the relevant constructed area was Rs. 39,02,58,700/- (300199 sq.ft X 1300/ - per sq.ft). The same therefore has to be considered as cumulative sale ITA No.1380/Hyd/2019 4 consideration of the Owners for determining their respective capital gains as per section 50C of the Income Tax Act, 1961 as per their respective shares. 4. The Owners agreed to take the consideration not of the market value in money terms, but in lieu of the same, agreed to take 55% of the constructed area pertaining to flats/ apartments and each of them, also took certain amounts of money from SD at the time of execution of the agreement. 5. The Owners handed over the possession of the property. 6. All the liability henceforth of the development in pecuniary terms were of SD and also other responsibility of development and the Owners had no further role in the matter. 7. The Owners thus exchanged the consideration which was to be in monetary terms in the form of constructed area to be received at a future date, the same therefore is nothing but an application of consideration of monetary terms. Thus it cannot be claimed that the consideration has not been received by the Owners, further needless to state that each of the Owners received certain amount of the cheque in the execution of the agreement. 8. The cheque were called refundable deposit for the convenience of the Owners, the agreement explicitly states that the same would be adjusted against the constructed area if not given, this implies that the amount of money has been received by the Owners and they have allotted constructed area over and above the amounts given at the time of the executing of the agreement. Thus the Owners receive certain amounts of cheque along with the application of the balance consideration in the form of constructed area. 9. The buyer which is SD has thus taken possession of the property; paid consideration of some quantum to each of the Owner and also agreed to give constructed area pertaining to their share. The buyer which is SD has thus taken possession and paid part consideration in monetary terms also, so that, the Owners cannot challenge this sale of land and can only now challenge regarding the delivery of the constructed area, which being the application of the identified consideration of Rs. 39,02,58,700/-. 10. To sum up, the Owners have transferred the land and given peaceful possession to the SD and received consideration in the form of constructed area valuing Rs. 39,02,58,700/ - (constructed area being the application of consideration) and also some quantums of cheque, which for convenience is called refundable deposit. The refundable deposit is eventually to subsume in the sale consideration and is not to be taxed separately. The above transaction of sale of land by Owners to SD is thus a "transfer" within the meaning of Sec. 2(47) of the IT Act for the year under consideration and is chargeable to Income Tax under the Capital Gains for the year under consideration. The land in question being more than 3 years old, which is not in dispute, will attract the Long Term Capital Gains Tax accordingly. The case of the appellant was reopened u/ s 148 of the IT Act, as the appellant had entered in to the agreement cited above and not disclosed the Capital Gains on the above transaction for the year under consideration. ITA No.1380/Hyd/2019 5 The AO recorded all the facts and drew satisfaction for reopening the case and issued notice u/ s 148 after drawing necessary satisfaction and taking statutory approval. The appellant filed the return in response to the notice u/ s 148 as per the facts stated in the assessment order. The AO determined the Capital Gains on the basis of share of the appellant by giving the due indexed cost of acquisition as per SRO value (The AO also referred the matter to the valuation officer u/s 55A of the IT Act as the appellant had claimed a higher value of the cost of acquisition at Rs. 300/ -, whereas the SRO value was Rs. 8/- as on 01.04.81). The AO adopted the SRO value for the sale consideration and calculated the proportionate share of the appellant and gave the indexed the cost of acquisition to the appellant and restricted the claim of the appellant for the exemption u/s 54F to only one flat. The appellant has raised various grounds in the appeal. The first ground pertains to the claim that there is no escapement of income for the under consideration and the appellant has filed the Capital Gains declaring the transaction in AY 2013-14. As per the appellant the taxability arises in A. Y. 2013-14 and as per the analysis of the documents and the agreement already made in the above paragraphs, it is very clear that there was a transfer of land within the meaning of - Sec. 2(47) of the IT Act 1961 in the present year under consideration, the relevant Capital Gains, which arose on account of such transfer, was not disclosed by the appellant in the return for the present year under consideration and therefore the AO was correct in reopening the case u/ s 147 and proceeding to assess the said income accordingly. The appellant might have disclosed the same in AY 2013-14, the same cannot change the chargeability of tax as per law and as per the year under consideration. Therefore, the first ground of appeal is dismissed accordingly. The second ground of appeal states that the document was already on record and therefore as the relevant gain was disclosed in AY 2013-14, therefore the case need not be reopened. The chargeability of tax has to be in the year of transfer and not as per the desire of the appellant in the year which it will like to disclose, therefore the ground of the appellant is dismissed accordingly as per the conclusion drawn in the above paragraphs. The third ground of the appeal is dismissed as it has been already held that the transfer has taken place in the present year under consideration itself and therefore the taxability will arise in the present year itself. The fifth ground of appeal pertains to the cost of construction taken by the AO at Rs. 1300/- per sq.ft. The AO has taken the value as per the SRO value of the sale document and also during the course of assessment proceedings, the AO has taken this value on making the proper communication with the SRO for the value of constructed area for determining the respective sale consideration of the appellant and other owners. The appellant has not given any cogent evidence or reason for the same not to be considered for determining the quantum of sale consideration. Therefore, the fifth ground of appeal is dismissed accordingly. ITA No.1380/Hyd/2019 6 The sixth ground of appeal pertains to the allowance of exemption u/ s. 54F as the appellant has effectively invested in constructed residential units at the time of execution of the agreement itself. The appellant has claimed the exemption u/s 54F, on account of investment made in the constructed area comprising of multiple residential flats (more than one in number), which was received by the appellant, as an application of the consideration with regard to the transfer of his share of land. The AO, however has restricted the exemption u/ s. 54F claimed by the appellant only to the extent of investment in one residential flat and denied on the other residential flats. The Appellant in his submission has cited several decisions including that of the jurisdictional High Court, that exemption u/ s 54F has to be allowed in respect of a residential house which consist of multiple units and of jurisdictional !TAT, wherein it has been held that Sec. 54F exemption has to be allowed even if such independent units or on different floors. The relevant part of decisions with citation are reproduced as under: "viii. Vittal Krishna Conjeevaramvs ITO (l44 ITD 325) (Hyd): In this case the Hon'ble ITAT, Hyderabad Held as under:- "Exemption u/ s. 54F only requires that the property should be of residential nature and the fact that the residential house consists of several independent units cannot be an impediment to grant relief u/ s. 54F even if such independent units are on different floors. " ix. CIT vs Syed Ali Adil ( Decision of AP High Court dated 20.12.2012): In this case though the decision was rendered in the context of Sec 54 of the IT Act the hon'ble high court held that the assessee was eligible for exemption in respect of a residential hose which consists of multiple units. " In view of the above decisions, it is clear that even if the investment is made in multiple residential houses/units, the appellant will be entitled for exemption u/ s. 54F. It is also important to note that an amendment u/ s. 54F took place vide Finance Act, 2014, wherein, "a residential house" was substituted with "one residential house in India" w.e.f 01.04.2015. The said amendment very clearly states that prior to 01.04.2015, the section did not restrict the investment to only one residential house. Therefore from the above decisions and subsequent amendment, the reinvestment quantum for eligibility u/ s. 54F cannot be limited to one residential house. Therefore, the AO is directed to consider all the residential flats received as consideration as part of re-investment for the purpose of section 54 F. As regards the reference to the valuation officer for the valuation of the property as on 01.04.81 is of no consequence as regards the determination of income from Capital Gains because the whole consideration has been effectively reinvested in the residential flats which are eligible for exemption u/ s 54F. ITA No.1380/Hyd/2019 7 Thus as the total sale consideration has been invested in the flats, therefore as per clause (a) to sub sec. (1) to sec 54F, as the cost of new asset is not less than the net consideration, therefore the capital gain will not be charged u/ s 45. Needless to state, that the cheque amount received will be adjusted against the cost of the flat received by the appellant and therefore, it subsumes in the consideration itself. However, the report from the DVO, would be relevant in computing the capital gains, if the new asset has been sold by the appellant, then the liability of capital gains will arise as per sec. 54(3) of the IT Act and the same has to be charged in the year of the transfer of new asset. Therefore, the report of the DVO and the valuation thereof can be used for the computation of capital gains as and when the trigger of Sec. 54(3) happens in the case of the appellant. In view of the above, the ground no. 6 is allowed accordingly. The fourth ground of appeal pertains to the fact that the AO has taken the value of land as on 01.04.1981 as Rs. 8 per sq.yd. The AO has adopted the SRO value as on 01.04.1981 which is correct and the same is Rs. 8 per sq.yd. The appellant's claim of the rate being Rs. 300 per sq.yd has been referred for valuation by the AO. As already stated, while adjudicating the sixth ground that the capital gains will arise only on account of the sale of constructed areas as per section 54(3) on a subsequent date, therefore the AO is directed to consider the valuation report as received from D VO for the value as on 01.04.81 to determine the capital gains in the subsequent year, if any. Therefore, the present ground is of no relevance to the year under consideration, as the exemption u/ s. 54F is allowed to the appellant. To sum up the appeal is partly allowed. " From the above adjudication, it is clear that the capital gain accrued to the appellant and the appellant is eligible for exemption u/s 54F as already adjudicated in the ground no. 6 of the order of the said transferor reproduced above and the appellant's case being identical to it, the appellant has also raised the ground no. 6 of this appeal, which is more or less identical to the ground no. 6 of the above reproduced order, in view of the identical issue, the ground no. 6 is allowed accordingly. The ground nos. 2 to 5 have been withdrawn by the appellant and therefore are dismissed accordingly. The ground no. 5a raised during the course of appellate proceedings, as additional ground is also dismissed as the same is withdrawn by the appellant. The ground no. 7 has not been substantiated and loses relevance in view of relief granted in ground no. 6, however the same is dismissed for want of substantiation. The ground no. 1 and 8 are general in nature and needs no separate adjudication.” ITA No.1380/Hyd/2019 8 4. We next find that this tribunal’s recent common order dated 23.11.2021 in Revenue’s appeals ITA Nos.732, 889 and 890/Hyd/2019 and corresponding assessee’s Misc. Applications MA Nos.48-50/Hyd/2021; quotes case law CIT Vs. Vittal Krishna, Conjeevaram Vs. ITO 144 ITD 325 (Hyd), CIT Vs. Syed Ali Adil 352 ITR 418 (AP), CIT Vs. Anand Basappa 309 ITR 329, CIT Vs. Gita Duggal 357 ITR 153, Arun K. Thiagarajn Vs. CIT 193 DTR 153, CIT Vs. Gumanmal Jain 394 ITR 666, Tilokchand and Sons Vs. ITO 413 ITR 666 etc to uphold the latter’s claim of section 54F deduction involving other family members. We thus adopt judicial consistency to affirm the CIT(A)’s lower appellate findings under challenge. 5. This Revenue’s appeal is dismissed in above terms. Order pronounced in the Open Court on 29 th November, 2021. Sd/- Sd/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER Hyderabad, dated 29 th November, 2021. TYNM/sps Copy to: S.No Addresses 1 Late Shri Ieneni Sripathirao, L/R Ieneni Shashikant, H.No.5-2-41/20, Seshadri Nagar, Kukatpally, Hyderabad. 2 The Asst. Commissioner of Income Tax, Circle – 11(1), Hyderabad. 3 CIT (A) – 5, Hyderabad. 4 Pr. CIT – 5, Hyderabad. 5 DR, ITAT Hyderabad Benches 6 Guard File By Order