BALASUNDARAM MAHALAKSHMI, COIMBATORE V. DCIT, NON CORPORATE CIRCLE-4, COIMBATORE

ITA 1411/CHNY/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6119 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-06-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 29-11-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILAY BARAN SOM LD
• Keywords: Principle of natural justice; Benefit of exemption
• Section: 143(3); 54F

Judgement Text

आयकर अपीलीय अिधकरण ‘ए’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय +ी मनोज कु मार अ/वाल ,लेखा सद4 एवं माननीय +ी मनु कु मार िग7र, ाियक सद4 के सम8। BEFORE HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM AND HON’BLE SHRI MANU KUMAR GIRI, JM आयकरअपील सं./ ITA No.1411/Chn y/2023 (िनधा9रणवष9 / As sessment Year: 2013-14) Ms. Balasundaram Mahalakshmi 216, ATD Road, Race Course, Coimbatore-641 018. बनाम / V s. DCIT Non-Corporate Circle-4 Coimbatore. थायीलेखासं./जीआइआरसं./PAN/GIR No. AIOPM-6371-Q (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : Shri T. Banusekar (Advocate)- Ld.AR थ कीओरसे/Respondent by : Shri Nilay Baran Som (CIT)-Ld. DR सुनवाई की तारीख/Date of Hearing : 20-06-2024 घोषणा की तारीख /Date of Pronouncement : 03-07-2024 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2013-14 arises out of the order of learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 16-10- 2023 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 31-03-2016. The grounds taken by the assessee are as under: 1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the Interests of the appellant and is opposed to the principles of natural justice, equity and fair play. 2 2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction. Exemption u/s.54F 3. For that the Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in restricting the claim of exemption u/s. 54F to the tune of Rs.55,68,576/-. 4. For that the Commissioner of Income Tax (Appeals) erred in stating that the appellant owned more than one residential house other than the new asset on the date of transfer of original asset Which is contrary to the facts and which was never the issue before the Assessing Officer nor was there any such factual finding by the Assessing Officer. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant only partially owned one residential house other than the new asset, on the date of transfer of the original asset and was eligible for claim of exemption u/s.54F 6. For that the appellant is eligible to claim exemption u/s.54F in respect of multiple flats comprised in a single residential project in the same location and constructed under a common approved plan. 7. For that the flats allotted to the appellant by the developer were under a single residential project constructed as a single residential building by the developer. 8. For that even if the flats were allotted in different blocks, as long as the flats are in the same address/location, the appellant is eligible to claim exemption u/s.54F in respect of such flats. As is evident, the assessee is aggrieved by denial of full deduction u/s 54F. 2. The Ld. AR advanced arguments supporting the case of the assessee. Reliance has been placed on various judicial decisions, the copies of which have been placed on record. The Ld. CIT-DR also advanced arguments supporting the case of the revenue. The written submissions have also been filed on behalf of revenue which has duly been considered while adjudicating the appeal. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Proceedings before lower authorities 3.1 During assessment proceedings, it transpired that the assessee earned certain Long-Term Capital Gains (LTCG) against which the assessee claimed deduction u/s 54F for Rs.569.91 Lacs. Upon 3 examination, it was noted that the assessee and three of her family members entered into a joint development agreement (JDA) with M/s Srivari Infrastructure Pvt. Ltd. (SIPL) and impugned deduction was claimed on the share of developed property received by the assessee. 3.2 As per terms of JDA, the total area of land to be developed was Rs.84506 Sq. Ft. and the assessee and co-owners agreed to transfer 51841 sq. ft. of land against constructed area of 86649 sq. ft. which include 72408 sq. ft. of residential space and 14241 sq. ft. of commercial space. This constructed area was contained in 36 residential flats. Out of these flats, impugned deduction u/s 54F was claimed in respect of 24 flats. The same was claimed as per the ratio of decision of Hon’ble High Court of Madras in the case of V.R.Karpagam (373 ITR 127). The details of these flats have been tabulated on Page No.6 of the assessment order. These flats were of different types and located on different floors. 3.3 The Ld. AO did not accept the claim of the assessee on the ground that the flats were spread over in different 15 types of blocks and each type of block was individual and isolated one. Since the assessee was already having one residential house, the assessee would be eligible to claim deduction for one more residential unit only. As per the decision in V.R.Karpagam (373 ITR 127), the assessee could claim deduction for a unit which was connected and consecutively numbered on a single floor. Finally, the assessee’s claim was restricted to one block of unit i.e., Floor Nos.8 & 9 of Type-1 valued at Rs.55.68 Lacs and balance deduction of Rs.514.23 Lacs was brought to tax as LTCG. 3.4 The Ld. CIT(A) confirmed the action of Ld. AO on the ground that since the assessee owned more than one residential house other than 4 the new asset on the date of transfer of original asset, the benefit of deduction u/s 54F could not be granted to the assessee. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 4. The factual matrix is not in dispute before us. The Ld. AR has placed on record diagrammatical location of the flats which have been acquired by the assessee as per terms of JDA. It is very clear that the flats are located on different floors and they are not connected with each other. However, from the facts, it would emerge that these flats have accrued to the assessee as per the terms of JDA. The assessee has entered into a JDA with the developer and agreed to transfer certain undivided share of land (UDS) against constructed area. The constructed area is a composite one which happens to be contained in 36 flats. Nevertheless, these acquisitions arise out of single act of entering into a JDA by the assessee with the developer. The various decisions of Hon’ble High Court of Madras address such a situation. 5. We find that Hon’ble High Court of Madras in the case of V.R. Karpagam (373 ITR 127), considering the effect of amendment to Sec.54F, held as under: - 10. The above-said amendment to Section 54F of the Income Tax Act, which will come into effect only from 01.04.2015, makes it very clear that the benefit of Section 54F of the Income Tax Act will be applicable to constructed, one residential house in India and that clarifies the situation in the present case, i.e, post amendment, viz., from 01.04.2015, the benefit of Section 54F will be applicable to one residential house in India. Prior to the said amendment, it is clear that a residential house would include multiple flats/residential units as in the present case where the assessee has got five residential flats. We may also mention here that all the Authorities below have clearly understood that the agreement signed by the assessee with M/s.cMount Housing Infrastructure Ltd., is that the assessee will receive 43.75% of the built- up area after development, which is construed as one block, which may be one or more flats. In that view of the matter what was before the Assessing Officer is only equivalent of 56.25% of land transferred, equivalent to 43.75% of built up area received by the assessee. This built up area got translated into five flats. Hence, we are of the opinion that the transaction in this case was not with regard to the 5 number of flats but with regard to the percentage of the built up area, vis-a-vis, the Undivided Share of Land. 11. In similar circumstances, this Court, by order dated 04.01.2012 in T.C.(A)No.656 of 2005 held as follows: "The above provision refers to a residential house meaning thereby that even if there are four different flats and if it is considered for the property assessed as one unit and one door number is given, it should be construed as a residential unit, namely, one unit. In that sense, the said provision is available to the assessee." 12. In the decision reported in Dr. Smt. P.K. Vasanthi Rangarajan v. CIT [2012] 23 taxmann.com 299/209 Taxman 628 this Court, while dealing with the benefit of exemption under Section 54F, followed the above-said decision of this Court in T.C.(A)No.656 of 2005 and granted the benefit to the assessee under Section 54F of the Income Tax Act on the investment made in the four flats. 13. Hence, the above-said decisions of this Court make it clear that the property should be assessed as one unit, even though different flats are available. Here also, as per the assessment order, all the flats have one door number, namely, Door No.29F, Race Course, Coimbatore. The Hon’ble Court thus held that the amendment to Sec.54F of the Act would operate only from 01-04-2015. Prior to this amendment, a residential house could include multiple flats / residential units. Another pertinent observation was that the assessee received certain percentage of built- up area after development, which was construed as one block, which may be one or more flats. Against transfer of UDS, the assessee received equivalent built-up area. This built up area got translated into five flats. Therefore, such transaction was not with regard to the number of flats but with regard to the percentage of the built up area, vis-a-vis, the Undivided Share of Land. We find that similar facts exist in the present appeal before us and the aforesaid ratio is applicable to the facts of the present case. 6. Similarly, in the subsequent case of G. Chinnadurai (74 Taxmann.com 227), under identical situation, it was held by Hon’ble Court as under: - 13. In terms of the said agreement, the developer has offered 9500 sq.ft., of built up area along with proportionate undivided share of land in the proposed building complex. Therefore, the agreement is a composite agreement and it mentions that the petitioner is 6 entitled to a total built up area of 9500 sq.ft. Therefore, it would be immaterial, if whether 9500 sq.ft., of built up area given to the petitioner is separate over in the same floor or in a different floor or in different blocks in the apartment complex, since the consideration which has passed on, was for agreeing to offer 9500 sq.ft., of built up area along with proportionate undivided share. This agreement was followed by a supplementary agreement, dated 5th September 2013, where except for a small reduction in the super built up area by reducing it to 8050 sq.ft., and giving the details of the flat numbers, there are no other changes to the principal agreement dated 29.10.2010. 14. Thus, by applying the legal principles enunciated in the case of Smt. V.R. Karpagam (supra), Dr. Smt. P.K. Vasanthi Rangarajan (supra), and G. Saroja (supra), it is to be pointed out that the expression "a residential house" used in Section 54, should not be taken to convey the meaning that it refers to a 'single residential' house and if that was the intention of the legislature, the framers of the statute would have used the word "one" instead of "a". In fact, the facts of the case in Smt. V.R. Karpagam (supra), is more or less identical to that of the case on hand, which also pertained to a development of a property, originally owned by the assessee and the consideration was that the owner/assessee was to receive 43.75% of built up area after development, which translated into five flats. In this decision also, it was held by jurisdictional High Court that since the agreement was a composite agreement which mention that the assessee would be entitled for certain built-up area. It would, therefore, be immaterial whether the built-up area was spread over in the same floor or in a different floor or in different blocks in the apartment complex since the consideration which has passed on was for agreeing to offer built-up area along with proportionate undivided share. The ratio of this decision, in our opinion, is also applicable to the facts of present appeal before us and supports the case of the assessee. 7. The subsequent decision of Gumanmal Jain (80 Taxmann.com 21) is also on identical facts. In that case, the assessee received 15 flats which were located at different locations. On identical facts, the final conclusion of Hon’ble Court was as under: - 7. CONCLUSION: (i) We therefore have no hesitation in holding that in the instant case the assessee having got 15 flats along with his two sons will not disentitle him from getting the benefit under Section 54-F of the IT Act only on the ground that all the 15 flats are not in the same Block, particularly in the light of the admitted factual position that all the 15 flats are located at the same address namely, 'Rain Forest' No. 57, New No. 36, 7 Taylor's Road, Rem Street, Kilpauk, Chennai 600 010. (ii) As a sequitur, we are unable to persuade ourselves that the 15 flats, even if they are located in different blocks would not disentitle the assessee from getting the benefit of Section 54-F of IT Act. (iii) We have no hesitation in holding that the order of ITAT which has been called in question before us is correct, there is no infirmity in the said order, does not call for any interference and we are of the view that the said order deserves to be confirmed. (iv) We also noticed that in all the judgements, irrespective of whether it is under Section 54 or 54-F of IT Act, which we have discussed supra, the judgements have proceeded only on the basis that the flats [being more than one flat] are in the same location/address. Therefore, once it is in the same location/address, the question of whether it is in the same block or in different blocks does not arise for consideration. To our mind, as long as all the flats are in the same address/location even if they are located in separate blocks or towers it does not alter the position. In the instant case, after all, all the flats are a product of one development agreement of the same piece of land being said land. Therefore, we make it abundantly clear that even if flats/apartments are in different blocks and different towers as long as they are in same address/location it does not disentitle the assessee from getting the benefit of Section 54-F of IT Act. (v) Therefore, the sole and sheet anchor submission of counsel for Revenue that the 15 flats in the instant case are located in the different blocks does not impress us. We are unable to persuade ourselves that this will disentitle the assessee from getting the benefit of Section 54-F as all the flats are in the same location/address and all flats are by products of one development agreement with the same builder. (vi) The logic behind our view is that the assessee, irrespective of whether it is one flat or many flats, gets proportionate undivided share in land only for the same piece of land. Therefore, assessee does not buy more than one property in that sense of the matter. Flats, apartments are completely based on co-ownership. (vii) Owing to all that have been stated supra, we conclude that the assessee is entitled to the benefit of Section 54-F of IT Act. We find that this decision is on identical facts and the same addresses the facts of present appeal before us and supports the case of the assessee. In this decision, the logic applied by Hon’ble Court was that the assessee, irrespective of whether it is one flat or many flats, gets proportionate undivided share in land only for the same piece of land. Therefore, the assessee does not buy more than one property in that sense of the matter. Flats, apartments are completely based on co- ownership. 8 8. Considering the ratio of all these binding judicial precedents, we would hold that the assessee was eligible to claim impugned deduction u/s 54F in full. It could also be noted that Ld. CIT(A) has gone on erroneous assumption of facts. The claim has been denied on the ground that the assessee owned more than one residential house on the date of transfer which was never the case of Ld. AO. In fact, the assessee has placed on record an affidavit affirming that she does not own more than one residential house on the date of transfer. 9. The Ld. CIT-DR, in the written submissions, has averred that the provisions of Tamil Nadu Apartment Act, 1994 were not brought to the notice of Hon’ble High Court of Madras. However, these arguments, in our opinion, are not relevant at this stage before us and we are bound by the decision of jurisdictional High Court. Therefore, these arguments could not be accepted. The Ld. CIT-DR has also referred to the subsequent amendments made by Finance Act, 2014 and Finance Act, 2019 to support the case of the revenue. However, subsequent amendments, in our opinion, could not jeopardize the claim of the assessee prior to amendments. Therefore, we are unable to concur with these arguments. 10. Finally, Ld. AO is directed to grant impugned deduction u/s 54F in full to the assessee and re-compute the income of the assessee. 11. The appeal stand allowed in terms of our above order. Order pronounced on 3 rd July, 2024 Sd/- (MANU KUMAR GIRI) ाियक सद4 / JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद4 / ACCOUNTANT MEMBER 9 चे4ई Chennai; िदनांक Dated : 03-07-2024 DS आदेशकीNितिलिपअ/ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकरआयु=/CIT Coimbatore. 4. िवभागीय ितिनिध/DR 5. गाडBफाईल/GF