Vijaya Rao Aedma, Hyderabad, Hyderabad V. ITO, Ward-4(3), Hyderabad, Hyderabad

ITA 1562/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2461 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 22-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset
• Section: 54F; 147; 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A , HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 1562/HYD/2016 ASSESSMENT YEAR: 2010-11 LATE SRI VIJAYA RAO AEDMA, REPRESENTED BY L.R. SMT. A. SHOBA RANI, HYDERABAD PAN AFRPA 7786 B VS INCOME-TAX OFFICER, WARD 4(3), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHURAM FOR REVENUE : SMT. D. KOMALI KRISHNA DATE OF HEARING : 16-05-2017 DATE OF PRONOUNCEMENT : 26-05-2017 O R D E R PER V. DURGA RAO, J.M.: THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, HYDERABAD, DATED 22-09-2016 FOR THE AY. 2010-11, WHEREIN THE ASSESSE E HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BO TH ON FACTS AND IN LAW TO THE EXTENT IT IS PREJUDICIAL TO THE A SSESSEE. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT DEDUCTI ON U/S.54 IS AVAILABLE ONLY FOR ONE FLAT IN SPITE OF BRINGING TO NOTICE THE DECISION IN THE CASE OF ANAND BASAPPA OF KARNATAKA HIGH COURT AND THAT OF THE HYDERABAD IT.A.T., IN THE CASE OF C ONJEEVARAM KRISHNAN AND NOT EVEN STATING SUCH SUBMISSIONS HAVI NG BEEN MADE AND THEREBY ERRED IN NOT ALLOWING DEDUCTION U/ S.54 IN RESPECT OF ALL THE FOUR FLATS. 2. AS PER THE GROUNDS OF APPEAL, THE SUBJECT MATTER IN THIS APPEAL IS WITH REGARD TO ALLOWANCE OF DEDUCTION U/S 54, WHICH WAS REJECTED BY THE REVENUE AUTHORITIES. I.T.A. NO. 1562/HYD/2016 VIJAYA RAO AEDMA BY LR A. SHOBA RANI :- 2 -: 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE APPEL LANT INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-1 1 ON 05.11.2014. DURING THE COURSE OF SURVEY PROCEEDINGS CONDUCTED O N 02.01.2014 IN THE PREMISES OF M/S. LAHARI CONSTRUCTIONS, IT WAS F OUND THAT DEVELOPMENT AGREEMENT HAVE BEEN ENTERED BETWEEN THE ASSESSEE AND HIS BROTHER LATE SRI YADAVA RAO AEDMA ON 19.11.2009 . ON THIS GROUND THE CASE WAS REOPENED. THE CASE WAS REOPENED U/S 14 7 AND NOTICE U/S. 148 WAS ISSUED ON 21.01.2014. ASSESSMENT WAS C OMPLETED ON 31.03.2015 DECLARING THE LONG TERM CAPITAL GAINS AT RS.1,41,16,960/- AND NORMAL INCOME AT RS.1,45,800/-. 3.1 ASSESSEE CLAIMED THAT THE FOUR FLATS WERE ALLOTTED ARE DEEM ED TO HAVE BEEN INVESTED IN THE HOUSE PROPERTY WHICH SATI SFIES THE CONDITIONS U/S 54 OF THE I.T. ACT, 1961. THE ASSESS EE FURTHER STATED THAT SINCE HE HAS INVESTED HIS NET SALE CONSIDERATI ON IN RESIDENTIAL FLATS, THE ENTIRE CONSIDERATION IS EXEMPTED U/S 54 FROM LONG TERM CAPITAL GAINS TAX. 4. THE CIT(A) REFERRING TO THE PROVISIONS OF SECTIO N 54(2) OBSERVED THAT IT IS VERY CLEAR THAT THE ASSESSEE ON THAT DAY HAS INVESTED AND RECEIVED FOR MORE THAN ONE FLAT. HENCE, THE APPLICA BILITY OF DEDUCTION U/S 54 DOES NOT ARISE FOR ALL THE 4 FLATS. THE ASSE SSING OFFICER HAS ALREADY ALLOWED EXEMPTION U/S 54 FOR ONE FLAT, WHIC H IS CORRECT AND FAIR. HE, THEREFORE, CONFIRMED THE ACTION OF THE AO IN MA KING THE ADDITION OF THE BALANCE AMOUNT AS CAPITAL GAINS. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US. 6. BEFORE US, THE LD. AR OF THE ASSESSEE CANVASSED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF T HE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF LATE K. JAIPAL AND OTHERS IN ITA NO. I.T.A. NO. 1562/HYD/2016 VIJAYA RAO AEDMA BY LR A. SHOBA RANI :- 3 -: 1188/HYD/2015 AND OTHERS DATED 20 TH NOVEMBER, 2015. A COPY OF THIS ORDER HAS BEEN PLACED ON RECORD. 7. LD. DR ON THE OTHER HAND NEITHER CONTROVERTED TH E SUBMISSION OF THE LD. AR NOR BROUGHT ANY CONTRARY DECISION IN THI S REGARD. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL FACTS ON RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL (SUPRA), WHEREIN THE BENCH HAS OBSERVED AS UNDER: 7. WE HAVE CONSIDERED THE ISSUE AND PERUSED THE VA RIOUS ORDERS PLACED ON RECORD. THE DISPUTE IS WHETHER A RESIDENTIAL HOUSE STATED IN S.54/S.54F FOR ALLOWING DEDUCTION MEANS A SINGLE RESIDENTIAL HOUSE OR ONE C ONSISTING OF MULTIPLE UNITS. AS FOR THE FACTS INVOLVED HEREIN, THE ASSESSEE HAS REC EIVED FIVE FLATS IN DIFFERENT FLOORS OF THE SAME BUILDING. THE ASSESSING OFFICER RESTRIC TED THE DEDUCTION TO ONE SUCH UNIT/FLAT, WHEREAS THE ASSESSEE CLAIMED DEDUCTION F OR ALL THE FLATS RECEIVED IN TERMS OF DEVELOPMENT AGREEMENT. THEREFORE, THE QUESTION T O BE DECIDED IS WHETHER A RESIDENTIAL HOUSE WOULD INCLUDE MULTIPLE FLATS/RE SIDENTIAL UNITS AS WELL. THIS ISSUE WAS DECIDED BY THE HON'BLE HIGH COURT OF MARAS IN I TS DECISION IN CIT V/S. SMT. V.R.KARPAGAM (SUPRA), WHEREIN THE AMENDMENT BROUGHT TO S.54 AND 54F WAS ALSO CONSIDERED AND HELD AS UNDER- 8. WE HAVE HEARD THE LEARNED STANDING COUNSEL APPE ARING FOR THE REVENUE AT LENGTH AND PERUSED THE MATERIALS PLACED BEFORE THIS COURT AND THE DECISION RELIED ON BY THE TRIBUNAL IN THE CASE OF CIT V. SMT. K.G.R UKMINIAMMA REPORTED IN 331 ITR 211. WE FIND THAT THE RELEVANT PROVISION IS THI S CASE IS SECTION 54F OF THE INCOME TAX ACT, WHICH READS AS FOLLOWS: 54F. CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL AS SETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, TH E CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AN D THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE TWO YEARS AFTER THE DATE ON WHIC H THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOL LOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY,-- I.T.A. NO. 1562/HYD/2016 VIJAYA RAO AEDMA BY LR A. SHOBA RANI :- 4 -: (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN T HE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45: (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEAR S TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BE ARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTIO N SHALL APPLY WHERE- (A) THE ASSESSEE, (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THA N THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET ; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN TH E NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET ; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGI NAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER THAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET , IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY 9. IT IS RELEVANT TO NOTE HEREIN THAT AN AMENDMENT WAS MADE TO THE ABOVE-SAID PROVISION WITH REGARD TO THE WORD 'A' BY THE FINANC E (NO.2) ACT, 2014, WHICH WILL COME INTO EFFECT FROM 01.04.2015. THE SAID AMENDMEN T READS AS FOLLOWS: '32A. WORDS CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA SHALL BE SUBSTITUTED FOR CONSTRUCTED, A RESIDENTIAL HOUSE BY THE FINANCE ( NO.2) ACT, 2014, WITH EFFECT FROM 01.04.2015.' 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 VER Y CLEAR THAT THE BENEFIT OF SECTION 54F OF THE INCOME TAX ACT WILL BE APPLICABL E TO CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA AND THAT CLARIFIES THE S ITUATION 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 MULTIP LE FLATS/RESIDENTIAL UNITS AS IN THE PRESENT CASE WHERE THE ASSESSEE HAS GOT FIVE RE SIDENTIAL FLATS. WE MAY ALSO MENTION HERE THAT ALL THE AUTHORITIES BELOW HAVE CL EARLY UNDERSTOOD THAT THE AGREEMENT SIGNED BY THE ASSESSEE WITH M/S.MOUNT HOU SING 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 ONL Y EQUIVALENT OF 56.25% OF LAND TRANSFERRED, EQUIVALENT TO 43.75% OF BUILT UP AREA RECEIVED BY THE ASSESSEE. THIS I.T.A. NO. 1562/HYD/2016 VIJAYA RAO AEDMA BY LR A. SHOBA RANI :- 5 -: 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 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 CONSIDE RED FOR THE PROPERTY ASSESSED AS ONE UNIT AND ONE DOOR NUMBER IS GIVEN, IT SHOULD BE CON STRUED AS A RESIDENTIAL UNIT, NAMELY, ONE UNIT. IN THAT SENSE, THE SAID PROVISION IS AVAILABLE TO THE ASSESSEE.' 12. IN THE DECISION REPORTED IN (2012) 75 DTR 56 (D R.(SMT.) P.K.VASANTHI RANGARAJAN, THIS COURT, WHILE DEALING WITH THE BENE FIT 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 5 4F OF THE INCOME TAX ACT ON THE INVESTMENT MADE IN THE FOUR FLATS. 13. HENCE, THE ABOVE-SAID DECISIONS OF THIS COURT M AKE IT CLEAR THAT THE PROPERTY SHOULD BE ASSESSED AS ONE UNIT, EVEN THOUGH DIFFERE NT FLATS ARE AVAILABLE 8. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S. VITTAL KRISHNA CONJEEVARAM (SUPRA), FOLLOWING THE DECISION IN THE CASE OF CIT V/S. SYED ALI ADIL (SUPRA) AND THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT V/S. GITA DUGGAL (SUPRA) DISMISSED THE APPEAL OF THE REVENUE, CONFIRMING THE ORDER OF THE ITAT. THE ABOVE JUDGMENTS LAY DOWN A PRINCIPLE THAT MERELY BECAUSE A RESIDENTIAL HOUSE CONSISTS OF SEVERAL INDEPENDENT RESIDENTIAL U NITS, DEDUCTION UNDER S.54/S.54F COULD NOT DISALLOWED. RESPECTFULLY FOLLOWING THE DE CISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S. S YED ALI ADIL (SUPRA) AS APPROVED IN THE CASE OF CIT V/S. VITTAL KRISHNA CONJEEVARAM (SUPRA) AND THE PRINCIPLES LAID DOWN BY THE HON'BLE HIGH COURT OF DELHI AND MADRAS DISCUSSED ABOVE, WE HAVE NO OPTION THAN TO CONFIRM THE ORDER OF THE CIT(A), WHI CH IS IN CONSONANCE WITH THE PRINCIPLES LAID DOWN ON THE ISSUE IN DISPUTE. 9. WE ARE ALSO AWARE THAT THE HON'BLE PUNJAB AND HA RYANA HIGH COURT IN THE CASE OF PAWAN ARYA V/S.CIT (SUPRA) HAS NOT APPROVED THE ABOVE PROPOSITION, BUT THE BINDING DECISIONS OF THE JURISDICTIONAL HIGH COURT IN THE CASES DISCUSSED ABOVE ARE IN FAVOUR OF THE ASSESSEE, AND THEREFORE, THE CONTE NTIONS RAISED BY THE REVENUE IN THIS APPEAL CANNOT BE ACCEPTED. 8.1 AS THE ISSUE UNDER CONSIDERATION IS MATERIALLY IDENTICAL TO THAT OF THE SAID CASE, FOLLOWING THE DECISION OF THE COORDI NATE BENCH, WE DIRECT THE AO TO ALLOW THE ASSESSEES CLAIM OF DEDUCTION U /S 54 OF THE ACT. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALL OWED. I.T.A. NO. 1562/HYD/2016 VIJAYA RAO AEDMA BY LR A. SHOBA RANI :- 6 -: 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017. SD/- SD/- (B. RAMAKOTAIAH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 26 TH MAY , 2017. KV 1 VIJAYA RAO AEDMA, C/O S/SHRI K. VASANTKUMAR, A V RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610, BABHUKHAN ESTATE, BASHEERBAG, HYDERABAD 1. 2 IT), WARD 4(3), IT TOWERS, HYDERABAD. 3 CIT (A)-1, HYDERABAD. 4 PR. CIT 1, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE