ACIT, Dehradun V. Narendra Mohan Uniyal, Dehradun

ITA 1624/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9924 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 11-08-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 20-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Keywords: Capital asset; Benefit of exemption; Capital Gains
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI RAJPAL YADAV, JM AND SHRI R.C.SHARMA, A M ITA NO.1624/DEL/2009 ASSESSMENT YEAR : 2006-07 ADDL.COMMISSIONER OF INCOME TAX, RANGE-1, DEHRADUN. VS. SHRI NARENDRA MOHAN UNIYAL, 132, JHANDA MOHALLA, DEHRADUN. PAN NO.AAFPU5301F. (APPELLANT) (RESPONDENT) CROSS-OBJECTION NO.157/DEL/2009 ASSESSMENT YEAR : 2006-07 SHRI NARENDRA MOHAN UNIYAL, 132, JHANDA MOHALLA, DEHRADUN. PAN NO.AAFPU5301F. VS. ADDL.COMMISSIONER OF INCOME TAX, RANGE-1, DEHRADUN. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI MANISH GUPTA, SR.DR. ASSESSEE BY : SHRI SANJAY MALIK, ADVOCATE. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AND THE CRO SS-OBJECTION BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 20.1.200 9 FOR THE AY 2006-07. 2. THE REVENUE IS BASICALLY AGGRIEVED FOR DELETING THE ADDITION OF RS.15 LAKHS AND IN ALLOWING BENEFIT OF EXEMPTION U/S 54F OF THE IT ACT IN RESPECT OF SECOND PROPERTY PURCHASED BY THE ASSESSEE. IN THE CROSS-O BJECTION, THE ASSESSEE HAS JUST SUPPORTED THE ORDER OF THE CIT(A). 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND FROM THE RECORD THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE S OLD A PIECE OF LAND FOR RS.1.20 CRORES WHICH WAS PURCHASED BY HIM IN THE FY 1989-90 , WHICH RESULTED INTO CAPITAL ITA-1624/D/2009 & CO-157/D/2009 2 GAINS OF RS.31.04 LAKHS. A CLAIM OF DEDUCTION U/S 54F WAS FILED ON THE PLEA THAT SUBSEQUENT TO THE SALE OF PLOT, THE ASSESSEE PURCHA SED A PIECE OF LAND FOR RS.30 LAKHS AND WITHIN SIX MONTHS THEREAFTER AGAIN PURCHA SED ANOTHER CONTINUOUS PLOT OF LAND FOR WHICH HE GAVE AN ADVANCE OF RS.5 LAKHS ON 25.10.2006, RS.10 LAKHS ON 28.10.2006 AND BALANCE PAYMENT OF RS.15 LAKHS ON 13 .11.2006, 6.12.2006 AND 31.1.2007. THE ASSESSEE CLAIMED EXEMPTION OF NET C ONSIDERATION WHICH HE INVESTED IN THE PURCHASE OF FIRST PLOT ON WHICH RES IDENTIAL HOUSE WAS UNDER CONSIDERATION AND IN RESPECT OF HIS CONTINUOUS PLOT WHICH ACCORDING TO THE ASSESSEE WAS NOTHING BUT A LAND APPURTENANT TO THE BUILDING CONSTRUCTED ON THE FIRST PLOT. THE AO HELD THAT CONSIDERATION INVESTED IN THE PURC HASE OF THE SECOND PLOT IS NOT ENTITLED TO EXEMPTION U/S 54F, HE RESTRICTED THE EX EMPTION TO THE EXTENT OF AMOUNT INVESTED IN PURCHASE OF FIRST PLOT. THE AO OBSERVE D THAT DEDUCTION U/S 54F IS PROVIDED ONLY IF INVESTMENT IS IN RESPECT OF A RESI DENTIAL HOUSE AND NOT FOR AN EMPTY PLOT. THE AO FURTHER STATED THAT THE ASSESSE E HAS SUBMITTED THE DESIGN OF THE HOUSE INTENDED TO BE BUILT ON THE FIRST PLOT, A LONGWITH THE RETURN. THE AO INSPECTED THE HOUSE ON 30.1.2008 AND FOUND THAT ASS ESSEE WAS CONSTRUCTING HIS HOUSE ON FIRST PLOT AND SECOND PLOT WAS STILL VACAN T. THE AO FINALLY HELD THAT THE SECOND PLOT CANNOT BE CONSIDERED AS A PART OF THE R ESIDENTIAL HOUSE AS CONTEMPLATED U/S 54F OF THE ACT. 4. BY THE IMPUGNED ORDER, CIT(A) ALLOWED THE CLAIM OF DEDUCTION IN RESPECT OF SECOND PLOT, U/S 54F BY RELYING ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SUNITA AGGARWAL 284 ITR 20. HE FURTHER RECORDED A FINDING TO THE EFFECT THAT AO HAS NOT ADDUCED ANY EVIDENCE THAT THE SECOND PLOT IS NOT A CONTINUOUS ONE AND IT DOES NOT CONSTITUTE A LAND AP PURTENANT TO THE BUILDING CONSTRUCTED WITHIN THE STATUTORY TIME LIMIT U/S 54F OF THE ACT. AGGRIEVED BY THIS ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL B EFORE US. 5. IT WAS VEHEMENTLY ARGUED BY THE LEARNED SR.DR SH RI MANISH GUPTA THAT PROVISIONS OF SECTION 54F ARE QUITE DIFFERENT FROM THE PROVISIONS OF SECTION 54. ITA-1624/D/2009 & CO-157/D/2009 3 AS PER LEARNED DR, UNDER SECTION 54, THE ASSESSEE I S ENTITLED FOR EXEMPTION OF CAPITAL GAINS BY INVESTING THE SAME IN THE BUILDING AND LAND APPURTENANT THERETO WHEREAS U/S 54F, THE ASSESSEE IS ENTITLED FOR EXEMP TION ONLY IN RESPECT OF CAPITAL GAINS INVESTED IN THE HOUSE PROPERTY AND NOT THE LA ND APPURTENANT THERETO. BOTH THE PROVISIONS WERE READ BY HIM AND A CLEAR DISTINC TION WAS DRAWN WITH RESPECT TO THE WORDS BUILDING OR LAND APPURTENANT THERETO AS USED IN SECTION 54, AND A RESIDENTIAL HOUSE AS USED IN SECTION 54F. HE HEAV ILY RELIED ON THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF ZAIBUNN ISA BEGAM 151 ITR 320 WHEREIN WORDS LAND APPURTENANT THERETO U/S 54 HAV E BEEN DEALT WITH AND IT WAS HELD THAT THE EXTENT OF LAND APPURTENANT SHOULD B E DETERMINED TO THE ENJOYMENT OF THE BUILDING BY THE OCCUPIERS AND TO THE EXTENT OF LAND USED FOR OTHER PURPOSES SHOULD NOT BE TAKEN INTO ACCOUNT FOR DETERMINATION OF EXEMPTION FOR CAPITAL GAINS U/S 54. IT WAS FURTHER HELD THAT THE MEANING OF TH E EXPRESSION LAND APPURTENANT IN SECTION 54 OF THE ACT, SHOULD BE CONSTRUED IN A BROAD AND NON-TECHNICAL SENSE AND THE MEANING GIVEN TO THAT EXPRESSION IN OTHER A CTS SHOULD BE IRRELEVANT. IN TERMS OF THIS DECISION, LEARNED DR ARGUED THAT THE MATTER MAY BE RESTORED TO THE TAX AUTHORITIES TO ENQUIRE INTO THE ENJOYMENT OF TH E BUILDING AND LAND BY OCCUPIERS AND THE SCOPE FOR ANY OTHER USE OF THE PROPERTY. 6. ON THE OTHER HAND, LEARNED AR RELIED ON THE FIND INGS OF THE CIT(A) AND ALSO DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF SUNITA AGGARWAL (SUPRA). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAR EFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE HAS INVESTED HIS CAPITAL GAIN ON ACQUIRING THE NEW ASSE T. THERE IS NO DISPUTE WITH REGARD TO INVESTMENT OF ENTIRE CAPITAL GAINS HAVING BEEN MADE DURING THE PERMISSIBLE TIME LIMIT PROVIDED U/S 54F. THE ONLY GRIEVANCE OF THE AO RELATES TO CLAIM OF DEDUCTION U/S 54F IN RESPECT OF THE SECOND PLOT PURCHASED ON A DIFFERENT DATE WHICH WAS ADJACENT TO THE FIRST PLOT. ITA-1624/D/2009 & CO-157/D/2009 4 8. LEARNED DR HAD FURTHER FORTIFIED THE ACTION OF A O BY DRAWING DISTINCTION BETWEEN THE PROVISIONS OF SECTION 54 AND 54F OF THE I.T.ACT, 1961. FOR BETTER UNDERSTANDING, THE DEDUCTIONS ENUMERATED U/S 54 AND 54F, IT WOULD BE RELEVANT TO REPRODUCE THESE PROVISIONS, WHICH READ AS UNDER:- 54. [(1)] [SUBJECT TO THE PROVISIONS OF SUB-SECTION (2 ), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIV IDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TER M CAPITAL ASSET [***], BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND B EING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD I NCOME FROM HOUSE PROPERTY (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF [ONE YEAR BEFOR E OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED], O R HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE, THEN ], INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY,. 9. PROVISIONS OF SECTION 54F WHICH DEAL WITH PR OVISIONS OF CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGE D IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE, READ AS UNDER:- 54F. (1) [SUBJECT TO THE PROVISIONS OF SUB-SECTION (4) , WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIV IDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-T ERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTIO N REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PER IOD OF ONE YEAR BEFORE OR [TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TO OK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE (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, 10. IT IS CRYSTAL CLEAR FROM THE PLAIN READING OF S ECTION 54 & 54F THAT EXEMPTION IS ALLOWABLE IN RESPECT OF AMOUNT INVESTED IN THE C ONSTRUCTION OF A RESIDENTIAL HOUSE. THERE IS NO ANY RIDER U/S 54F THAT NO DEDUC TION WOULD BE ALLOWED IN RESPECT OF INVESTMENT OF CAPITAL GAINS MADE ON ACQU ISITION OF LAND APPURTENANT TO ITA-1624/D/2009 & CO-157/D/2009 5 THE BUILDING OR ON THE INVESTMENT ON LAND ON WHICH BUILDING IS BEING CONSTRUCTED. WHEN THE LAND IS PURCHASED AND BUILDING IS CONSTRUC TED THEREON, IT IS NOT NECESSARY THAT SUCH CONSTRUCTION SHOULD BE ON THE ENTIRE PLOT OF LAND, MEANING THEREBY A PART OF THE LAND WHICH IS APPURTENANT TO THE BUILDING AN D ON WHICH NO CONSTRUCTION IS MADE, THERE IS NO DENIAL OF EXEMPTION ON SUCH INVES TMENT. THEREFORE, THE CONTENTION OF THE LEARNED DR THAT THERE IS A DISTIN CTION WITH RESPECT TO INVESTMENT IN APPURTENANT LAND AS PER SECTION 54 AND 54F IS NO T TENABLE AT ALL. IN THE INSTANT CASE, THERE IS NO DISPUTE TO THE FACT THAT INVESTME NT OF CAPITAL GAINS WAS MADE WITHIN THE STATUTORY PERIOD AND MOREOVER WITHIN THE SAME FINANCIAL YEAR. ANOTHER PLOT OF LAND WHICH WAS PURCHASED BY THE ASSESSEE WA S ADJACENT TO THE PLOT ALREADY PURCHASED DURING THE RELEVANT YEAR ITSELF OUT OF CA PITAL GAINS. ONLY BECAUSE CONSTRUCTION WAS MADE ON THE FIRST PLOT OF LAND, TH E EXEMPTION CLAIMED IN RESPECT OF INVESTMENT MADE IN ADJACENT PLOT OF LAND CANNOT BE DECLINED WHEN ALL THE OTHER CONDITIONS AS STIPULATED U/S 54F ARE BEING SATISFIE D. WHILE DEALING WITH THE OBJECTION OF THE AO, THE CIT(A) HAS CATEGORICALLY G IVEN A FINDING THAT THE LAND SO PURCHASED WAS ONE PIECE OF PLOT HAVING AREA OF 2000 SQ.MTR. BOTH THESE PLOTS WERE HAVING 1000 SQ.MTR. OF LAND. BOTH THE PLOTS FORMED PART OF ONE RESIDENTIAL UNIT AND ARE CONTIGUOUS AND ADJOINING TO EACH OTHER. THE CO MMENTS OF THE AO TO THE EFFECT THAT EXEMPTION U/S 54F IS ELIGIBLE ONLY FOR CONSTRU CTION OF HOUSE IS NOT TENABLE INSOFAR AS EVEN COST OF LAND FORMING PART OF THE RE SIDENTIAL UNIT ON WHICH NO CONSTRUCTION IS DONE IS ALSO ELIGIBLE FOR EXEMPTION U/S 54F. THUS, THE COST OF VACANT LAND APPURTENANT TO AND FORMING PART OF THE RESIDENTIAL UNIT IS TO BE CONSIDERED FOR CLAIM OF EXEMPTION U/S 54F EVEN IF N O CONSTRUCTION HAS BEEN DONE ON THE APPURTENANT LAND. THE PROVISIONS OF SECTION 54 CLEARLY PROVIDE FOR EXEMPTION IF THE NET CONSIDERATION RECEIVED AS A RE SULT OF TRANSFER OF ANY CAPITAL ASSET, OTHER THAN A RESIDENTIAL HOUSE, IS INVESTED IN THE PURCHASE OR CONSTRUCTION OF A RESIDENTIAL HOUSE. THE NEW RESIDENTIAL HOUSE IS NOT DEBARRED FROM HAVING A LAND APPURTENANT TO ANY SIZE AND IT IS ALSO NOT THE CASE OF THE AO THAT THE LAND APPURTENANT TO THE BUILDING IS NOT ENTITLED TO EXEM PTION U/S 54F. HAD IT BEEN A CASE OF LAND NOT APPURTENANT TO THE BUILDING SO CON STRUCTED, THEN THE CONTENTION OF ITA-1624/D/2009 & CO-157/D/2009 6 THE AO TO THE EFFECT THAT INVESTMENT OF CAPITAL GAI NS MADE IN THE SECOND PLOT WHICH IS NOT APPURTENANT TO THE BUILDING SO CONSTRUCTED I S NOT ELIGIBLE FOR EXEMPTION, CAN BE FAVOURABLY ACCEPTED. THE CASE LAW CITED BY THE LEARNED DR IN THE CASE OF ZAIBUNNISA BEGAM (SUPRA) IS ENTIRELY ON DIFFERENT F ACTS INSOFAR AS THE APPURTENANT LAND WAS NOT USED BY THE ASSESSEE FOR ANY OTHER PUR POSES. ON THE CONTRARY, THE EXPRESSION LAND APPURTENANT IN SECTION 54 OF THE ACT WAS HELD TO BE CONSTRUED IN A BROAD AND NON-TECHNICAL SENSE AND IT WAS HELD THA T THE MEANING GIVEN TO THAT EXPRESSION IN OTHER ACTS SHOULD BE IRRELEVANT. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SUNITA AGGARWAL (SUPRA) HAS OB SERVED THAT WHILE CLAIMING EXEMPTION U/S 54, THE PROPERTY THOUGH PURCHASED FRO M TWO DIFFERENT PERSONS BY VIRTUE OF FOUR DIFFERENT SALE INSTANCES IN THE SHAP E OF FOUR DIFFERENT PARCELS, CONSTITUTES ONE SINGLE RESIDENTIAL UNIT OF THE ASSE SSEE. 11. IN VIEW OF THE ABOVE DISCUSSION AND KEEPING IN VIEW THE DETAILED OBSERVATION MADE BY THE CIT(A) AT PARAGRAPHS 4, 5 & 6, WE CAN SAFELY CONCLUDE ON PROPER APPRECIATION OF MATERIAL AVAILABLE ON REC ORD THAT THE PROPERTY PURCHASED BY THE ASSESSEE WAS A SINGLE UNIT AND WAS BEING USE D FOR RESIDENTIAL PURPOSES, THEREFORE INVESTMENT MADE IN RESPECT OF BOTH THE PL OTS WAS ELIGIBLE FOR CLAIM OF EXEMPTION U/S 54F. WE, THEREFORE, UPHOLD THE ORDER OF CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. AS THE CROSS-OBJECTIO N ARE BASICALLY IN SUPPORT OF THE CIT(A)S ACTION, WE ALLOW THE CROSS-OBJECTION IN TE RMS INDICATED HEREINABOVE. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED WHEREAS CROSS- OBJECTION FILED BY THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2009. SD/- SD/- (RAJPAL YADAV) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31.08.2009. VK. ITA-1624/D/2009 & CO-157/D/2009 7 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR