S.P.N.Rajan, CHENNAI V. ITO, CHENNAI

ITA 1570/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7867 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 30-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: N VIJAYAKUMAR
• Keywords: Cost of acquisition
• Section: 54F

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO. 1570/MDS/2016 / ASSESSMENT YEAR : 2011-12 SHRI S.P.N. RAJAN, C1, NO.14, D BLOCK, 7 TH STREET, ANNA NAGAR (EAST), CHENNAI 600 102. PAN : AFEPR9843R V. THE INCOME TAX OFFICER, BUSINESS WARD XIV (1), CHENNAI. ( /APPELLANT) ( !' /RESPONDENT) # /APPELLANT BY : SHRI N. VIJAYAKUMAR, CA !' # /RESPONDENT BY : SHRI V. NANDAKUMAR, JCIT # /DATE OF HEARING : 23.12.2016 # /DATE OF PRONOUNCEMENT : 31.01.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-7, CHENNAI DATED 24.03.2016 AND PERTAIN TO THE ASSESSMENT YEAR 2011- 12. THE ONLY ISSUE ARISES FOR CONSIDERATION IS CLAIM OF EXEMPTIO N UNDER SECTION 54F OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ). 2 I.T.A. NO. 1570/MDS/2016 2. SHRI N. VIJAYAKUMAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54F OF THE ACT FOR 36,05,277/-. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE PURCHASED A LAND AND BUILDING FOR 11,60,000/- AND ALSO INCURRED THE EXPENDITURE OF 24,30,000/- FOR RENOVATION. THE ASSESSEE HAS FILED A COPY OF THE AGREEMENT SAID TO BE ENTERED INTO WITH CONTRACTOR FOR RENOVATION, IN SUPPORT OF THE C LAIM OF RENOVATION. HOWEVER, THE ASSESSING OFFICER REJECTED THE CLAIM O F THE ASSESSEE ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE T HE BILLS AND VOUCHERS. REFERRING TO THE COPY OF THE AGREEMENT F OR RENOVATION WHICH IS AVAILABLE AT PAGE 19 OF THE PAPER BOOK, TH E LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH ONE SHRI K.P. RAMACHANDRAN FOR RENOV ATION. THE COST OF RENOVATION WAS AGREED BETWEEN THE ASSESSEE AND THE CONTRACTOR AT 24,30,000/-. WHEN THE ASSESSEE ENTERED INTO AN AGREEMENT WITH CONTRACTOR FOR RENOVATION OF THE WOR K AGREEING FOR A PRICE, THE ASSESSEE COULD NOT PRODUCE THE BILLS AND VOUCHERS FOR THE WORK. AT THE BEST, THE BILLS AND VOUCHERS WOULD BE PRODUCED BY THE CONTRACTOR AND CERTAINLY NOT BY THE ASSESSEE. THE LD. REPRESENTATIVE CLAIMED THAT THE CONTRACTOR SHRI K.P . RAMACHANDRAN DIED IN A ROAD ACCIDENT. THEREFORE, HE COULD NOT G ET THE DETAILS OF 3 I.T.A. NO. 1570/MDS/2016 BILLS AND VOUCHERS FROM HIM. DUE TO UNWARRANTED I NCIDENT, THE ASSESSEE WAS HANDICAPPED IN COLLECTING THE BILLS AN D VOUCHERS FROM THE CONTRACTOR, FOR THE PURPOSE OF COMPLYING WITH T HE REQUIREMENT OF THE ASSESSING OFFICER. THE LD. REPRESENTATIVE PL ACED HIS RELIANCE ON THE KARNATAKA HIGH COURT IN THE CASE OF RAHANA S IRAJ V CIT, [2015] 128 DTR 302 (KAR) (HC). 3. ON THE CONTRARY, SHRI V. NANDAKUMAR, THE LD. DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT SECTION 54F OF THE AC T, CLEARLY SAYS THAT, WHAT WAS EXEMPTED IS THE COST OF ACQUISITION OF THE LAND AND BUILDING AND NOT THE COST OF RENOVATION. THE COST OF RENOVATION CANNOT BE CONSTRUED AS COST FOR PURCHASE OR CONSTRU CTION OF PROPERTY. HENCE, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASS ESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE STATING THAT T HE ASSESSEE CANNOT PRODUCE THE BILLS AND VOUCHERS FOR THE RENOV ATION WORK. IT IS NOT IN DISPUTE THAT THE RENOVATION WAS DONE BY THE ASSESSEE THROUGH CONTRACTOR. IN FACT, THE RENOVATION WAS MA DE THROUGH A CIVIL 4 I.T.A. NO. 1570/MDS/2016 CONTRACTOR BY NAME SHRI K.P. RAMACHANDRAN. WHEN TH E ASSESSEE ENTERED INTO AN AGREEMENT FOR CARRYING OUT THE RENO VATION OF THE BUILDING WITH A CONTRACTOR, THE BILLS AND VOUCHERS COULD NOT BE AVAILABLE WITH THE ASSESSEE. THEREFORE ASKING THE ASSESSEE TO PRODUCE BILLS AND VOUCHERS FOR RENOVATION IS SOMETH ING IMPOSSIBLE FOR THE ASSESSEE TO PRODUCE. THEREFORE, THE ASSESS ING OFFICER IS NOT JUSTIFIED IN CALLING FOR THE BILLS AND VOUCHERS, WH EN THE ASSESSEE CLAIMS THAT THE WORK WAS ENTRUSTED TO THE CONTRACTO R. THE FACT THAT THE RENOVATION WAS ENTRUSTED TO A CONTRACTOR SHRI K .P. RAMACHANDRAN IS NOT IN DISPUTE. THEREFORE, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT CALLING FOR BILLS AND VOUCH ERS FROM THE ASSESSEE IS NOT JUSTIFIED. 5. NOW COMING TO THE CONTENTION OF THE LD. D.R., TH AT SECTION 54F OF THE ACT ALLOWS ONLY THE COST OF PURCHASE AND THE COST OF CONSTRUCTION OF THE BUILDING AND NOT THE COST OF RE NOVATION, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE BUILDING WAS UNFIT FOR HUMAN HABITATION, THE COST OF RENOVATION TO MAKE THE BUILDING READY FOR HUMAN HABITATION WOULD ALSO FORM PART OF THE COST OF PURCHASE OR COST OF CONSTRUCTION. IN FACT, THE KARNATAKA HIGH COURT IN RAHANA SIRAJ V CIT, [2015] 128 DTR 302, EX AMINED THIS 5 I.T.A. NO. 1570/MDS/2016 ISSUE ELABORATELY AND FOUND THAT A RESIDENTIAL HOUS E MEANS A PROPER HABITUAL HOUSE AND NOT MERELY A STRUCTURE. THE KAR NATAKA HIGH COURT FURTHER FOUND THAT IT IS THE RIGHT OF THE ASS ESSEE TO DECIDE AS TO HOW A RESIDENTIAL HOUSE CAN BE ACQUIRED AT A REASON ABLE COST. IF THE ASSESSEE DECIDES THAT INSTEAD OF GOING TO PURCH ASE A READY TO SHIFT RESIDENTIAL HOUSE, PURCHASE AN OLD HOUSE AND GET THE SAME RENOVATED FOR MAKING IT HABITUAL AS IT IS ECONOMICA L, THE TAX AUTHORITIES CANNOT QUESTION SUCH A DECISION TAKEN B Y THE ASSESSEE. 6. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54F OF THE ACT. ACCORDINGLY, THE ORDERS OF THE LOW ER AUTHORITIES ARE SET ASIDE AND THE DISALLOWANCE OF 23,40,566/- IS DELETED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 31 ST JANUARY, 2017 AT CHENNAI. SD/- SD/- ( . . ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, /DATED, THE 31 ST JANUARY, 2017. 6 I.T.A. NO. 1570/MDS/2016 JR. # ! $ % $ /COPY TO: 1. /APPELLANT 2. !' /RESPONDENT 3. &' ( )/CIT(A)-7, CHENNAI 4. &' /CIT 5. ! $ /DR 6. () /GF.