Asst.CIT, Cir-7(1), Hyderabad V. Sri Shaik Ahmed Banafe, Hyderabad

ITA 1748/HYD/2012

• Counselvise Citation: 174822514 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K HARITA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE THE HONBLE VICE PRESIDENT, SHRI D.MANMOHAN AND SHRI B.RAMAKOTAIAH, HONBLE ACCOUNTANT MEMBER ITA NO.1748/HYD/2012 : ASST. YEAR 2008 - 09 ASST. COMMISSIONER OF INCOME - TAX CIRCLE 7(1), HYDERABAD . V/S. SHRI SHAIK AHMED BANAFE HYDERABAD ( PAN - AABCG 3208 J) (APPELLANT) (RESPONDENT) CROSS OBJECTION NO.05/HYD/2013 ( IN ITA NO.1748/HYD/2012) : ASST. YEAR 2008 - 09 SHRI SHAIK AHMED BANAFE HYDERABAD ( PAN - AABCG 3208 J) V/S. ASST. COMMISSIONER OF INCOME - TAX CIRCLE 7(1), HYDERABAD . (CROSS - OBJECTOR) (APPELLANT - IN - APPEAL) ASSESSEE BY : SHRI A.V.RAGHURAM DEPARTMENT BY : SMT. K.HARITA DR DATE OF HEARING 6 . 2 .201 4 DATE OF PRONOUNCEMENT 12.2.2014 O R D E R PER B.RAMAKOTAIAH, ACCOUNTANT MEMBER : MAIN APPEAL IS BY THE REVENUE AGAINST THE ORDERS OF THE CIT(A) DATED 24.9.201 2 RAISIN G THE GROUND THAT THE LEARNED CIT(A) WAS NO T CORR E CT IN HOLDING THAT REFERENCE TO VALUATION CELL UNDER S.50C, S. 55A AND S. 142A CANNOT BE MADE ON THE FACTS OF TH E CASE. THE ASSESSEE IS CONTESTING IN THE CROSS - OBJECTION THE DENIAL OF CERTAIN BENEFITS BY THE LEARNED CIT(A) IN THE ORDER. ITA NO. 1748/HYD/2012 & CO THEREIN SHRI SHAIK AHMED BANAFE, HYDERABAD 2 2. BRIEFLY STATED, FACTS ARE THAT THE ASSESSEE IS AN IN D I VI DUAL AND FILED RETURN OF INCOME ADMITTING TOTAL INCOME OF RS.29,80,4 8 5, CALCULATING CAPITAL GAIN S , AFTER CLAIMING DEDUCTION UNDER S.54 ON THE TRANSFER OF PROPERTY THROUGH A DEVELOPMENT AGREEMENT. THE ASSESSEE WAS EX CLUSIVE OWNER OF HOUSE NO.12 - 2 - 827 HAVING LAND AREA OF 940 SQ. YARDS AND HOUSE NO.12 - 2 - 827/38 HAVING LAND OF 78 SQ. YARDS . HE ALONGWITH HIS WIFE ARE JOINT OWNER S OF H. NO. 12 - 2 - 827/A/2 HAVING UNDIVIDED INTER E ST IN LAND AREA OF 222 SQ. YARDS AND H.NO.12 - 2 - 827/A/2/1 HAVING UNDIVIDED INTER E ST IN LAND AREA OF 222 SQ. YARDS . ASSESSEES WIFE IS THE EXCLUSIVE OWNER OF H.NO.12 - 2 - 827/37 HAVING LAND AREA OF 180 SQUARE YARDS. O UT OF THE TOTAL LAND OF 1642 SQ. YARDS, 1325 SQ. YARDS OF LAND W AS TRANSFERRED UN D ER A D EVELOPMENT AGREEMENT BY BOTH THE OWNERS, AF T ER EXCLU D IN G 44 SQ. YARDS SURRENDERED TO MUNICIPAL CORPORATION OF HYDERABAD , AND 273 SQ. YARDS RETAINED BY THE LAND OWNERS. OUT OF THE 1325 SQ. YARDS, ASSESSEE S SHARE O F LAND WAS 1110 SQ. YARDS, WHILE 215 SQ. YARDS BELONGED TO HIS WIFE. AS PER THE DEVELOPMENT AGREEMENT, TOTALLY 25 FLATS WERE TO B E CON S TRUCTED OUT OF WHICH OWNERS SHARE WA S 50%, WORKING OUT TO 12 - 1/2 FLATS. ASSESSEE OPTED TO SELL THE HALF SHARE AND RECEIVED IN CASH, WHEREAS OUT O F 12 FLA T S RECEIVED , 10 FLATS FELL IN ASSESSEES SHARE AND 2 FLATS FELL IN HIS WIFES SHARE . ASSESSEES WIFE ACCO RD INGLY FIL E D CAPITAL GAINS RETURN IN HER STATUS. 3 . OUT OF THE 10 FLATS WHICH ASSESSEE RECEIVED, TWO FLATS WERE COMBINED INTO ONE, THEREBY FIVE APARTM ENTS BECAME FOUR HOU S IN G UNITS, WHEREAS OTHER FIVE HAVE BEEN SAI D TO HAVE BEEN SOLD BY THE ASSESSEE. SIN C E THE ASSESSEE HAS FOUR HOU S E PROPERTIES, GIVEN FOR DEVELOPMENT, FOUR RESIDENTIAL UNITS RETAINED BY THE ASSESSEE ARE CLAIMED AS DEDUCTION UNDER S.54 OF THE ACT OUT OF THE CAPITAL GAIN S EARNED. WHILE CALCULATING THE CAPITAL GAINS IN THE YEAR UNDER CONSIDERATION, ON THE REASON THAT FLATS WERE HANDED OVER DURING THE YEAR, ASSESSEE OFFERED CAPITAL GAINS ON THE ITA NO. 1748/HYD/2012 & CO THEREIN SHRI SHAIK AHMED BANAFE, HYDERABAD 3 UNDIVIDED SHARE OF LAND HANDED OVER AND TOOK TH E COST OF CON S TRUC T ION O F THE DEVELOPER AS SALE CONSIDERATION. 4 . THE ASSESSING OFFICER IN THE ASSESSMENT ORDER RE - WORKED THE CAPITAL GAINS BY - (A) REFERRING THE PROPERTY TO VALUATION AND ADOPT ING THE VALUE O F R S .1,92,83,500 AS AGAINST RS. 1 , 76 , 41 , 248 SHOW - CAUSED TO THE ASSESSEE; (B) TAKING 50% OF THE SALE PROCEEDS OF HALF - SHARE SOLD EARLIER ON THE SAME BASIS ; (C) VALUING TERRACE RIGHTS ON 6 TH FLOOR, EVEN THOUGH RETAINED BY THE ASSESSEE IN THE ORIGINAL AGREEMENT; (D) ADOPTING THE VALUE OF THREE BED ROOM RENT FREE ACCOMMODATION PROVIDED FOR TWENTY FOUR MONTHS, AND (E) FINALLY T AKING THE PROPORTIONATE VALUE OF ON E FLAT OUT OF THE TOTAL SALE VALUE AND ALLOWING DEDUCTION UNDER S.54 TO ONE RESIDENTIAL FLAT. THIS HAS R E SULTED IN COMPU T ATION OF CAPITAL GAINS AT A HIGHER AMOUNT. WHILE DOING SO, THE ASSESSING OFFICER ALSO MADE CERTAIN UNFOUNDED ALLEGATIONS AND FINDINGS AGAINST THE ASSESSEE. 5 . THE ASSESSEE CONTESTED ALL THE ISSUES BEFORE THE LEARNED CIT(A) URGING THAT (A) THE ASSESSING OFFICER DID NOT HAVE POWER TO REFER THE VALUATION OF SALE CONSIDERATION TO VALUATION CE L L; (B) ASSESSING OFFICER HAS WRONGLY TAKEN THE AMOUNT ALREADY OFFERED IN THE EARLIER YEAR ON HALF SHARE SOLD; (C) THE TERRACE RIGHTS WERE WITH THE AS SESSEE FORM THE BEGINNING AND THER E FORE ADOPTING VALUE THEREOF IS NO T CORR E CT; (D) AS PER THE BOA R DS CIRCULAR, ASSESSEE IS ENTITLED FOR EXEMPTION OF ONE HOUS E E A CH , AGAINST EACH OF THE UNITS SOLD UNDER S.54. IN SUPPORT, ASSESSEE G AVE DETAILED SUBMI S SION S AND ALSO STATED T H A T TWO FL A TS HAVE BEEN COMBINED INTO ONE FLAT AND REQUESTED THE CIT(A) FOR ORDERING VERIFICATION OF THE SAME. THE LEARNED CIT(A) ORDERED THE ASSESSING OFFICER TO ENQUIRY AND OBTAIN ED THE REPORT ON THE SAME. 6. WHILE ACCEPTING THE A SSESSEES CONTENTION S ABOUT POWER OF ASSESSING OFFICER TO REFER TO VALUATION CELL, TERRACE RIGHTS, CLAIM OF EXEMPTION U NDER S.54 ON EACH OF THE RESIDENTIAL UNITS, THE LEARNED CIT(A) ITA NO. 1748/HYD/2012 & CO THEREIN SHRI SHAIK AHMED BANAFE, HYDERABAD 4 UPHELD THE ACTION OF THE ASSESSING OFFICER IN ADOPTING 50% OF SALE PROCEE DS ON THE HALF FLAT SOLD; AND REJECTED THE CON T EN T ION ON THE RENT FREE ACCOMMODATION VALUATION. MANY OF THE ERRORS COMMI TT ED BY THE LEARNED ASSESSING OFFICER IN ADOPTING AREA OF LAND AS WELL AS VALUATION HAVE B E EN CORRECTED BY THE LEARNED CIT(A) IN THE ORDER. 7. REVENUE IS NOT AGGRIEVED BY ANY OF THE IS S UES WHICH ARE CONSIDERED BY THE LEARNED CIT(A), EXCEPT ON TH E POWERS OF THE ASSESSING OFFICER IN REFERRING TO THE VALUATION CELL. THE ASSESSEE , HOW E VER , IS AG G RIEVED IN THE CROSS OBJECTION S ON THE ISSUE OF RESTRICTION OF DEDUCTION UNDER S.54 ON A TOTAL AREA OF RS.8757 SQ. FT. COVERING FIVE F LATS TO 6997 SQ. FT AND VALUATION OF THREE BED ROOM ACCOMMODATION FOR A PERIOD OF 24 MONTHS, WHICH WAS FACTUALLY CONTESTED. 8. AFTER HEARING THE RI V AL CONTENTION S , WE DO NOT SEE ANY MERIT IN TH E RE VENUES GROUND. THE STATU T E PERMITS REFERENCE TO V A LU A TION CELL UNDER S.50C, S.55A AND S.142A. TH E R E IS NO DISPUTE ON THE POWERS OF THE ASSESSING OFFICER IN MAKING A REFERENCE UNDER THESE SECTIONS. HOW E VER, WHAT THE CIT(A) HAS DECIDED WAS THAT THOSE SECTIONS DO NO T APPLY TO THE FACTS OF THE CASE. REVENUE IS CONTESTING THAT FOR ASCERTAINING THE F AIR M ARKET V ALUE OF A CAPITAL ASS E T FOR COMPUTATION OF CAPITAL GAINS, REFERENCE CAN BE MADE TO A VALUATION OFF I C ER UNDER S.55A OF THE AC T. ON THE FACE OF IT, THE STATEMENT MADE ON BEHALF OF THE RE VENUE IS CORRECT. HOW EV ER, ASCERTAINING F AIR M ARKET V ALUE WILL ARISE ONLY IN CERTAIN SITUATIONS. UNDER S.50C IN DETERMINING THE SALE VALUE OF CONSIDERATION ACCORDING T O STAMP VALUE, IF THE ASSESSEE OBJECT S TO THE V ALUATION, THEN REFERENCE UNDER S.50C CAN BE MADE TO V A LU A TION OFFI C ER. THIS SITUATION DOES NOT ARISE IN THIS CA S E. UNDER S.55A, WITH A VIEW TO ASCERTAIN THE FAIR MAR K ET VALUE OF A CAPITAL ASSET, ASSESSING OF FICER CAN REFER THE VALUATION TO VALU A TION OF F I C ER, B UT THE FAIR MARKET VALUE UNDER THIS CHAPTER IS ADOPTED FOR THE PURPOSE OF COST OF ACQUI S I T ION OF AN ASSET, WHILE CO M PU T IN G THE CAPITAL ITA NO. 1748/HYD/2012 & CO THEREIN SHRI SHAIK AHMED BANAFE, HYDERABAD 5 GAIN S AND NO T FOR SALE CON S I D ERATION. IF S.55A COULD B E INVOKED TO ARRIVE AT THE SALE CON S I D ERATION, THEN THERE IS NO NECESSITY TO INTRODUCE PROVIS I ONS OF S .50C , WHICH ENABLES THE ASSESSING OFFICER TO ADOPT THE SRO VALUE, WHERE THE SALE CON S I D ERATION IS NOT IN AC C ORDANCE WITH THE SRO VALUE. WHIL E CO MP U T ING THE CAPITAL GAINS, SUBSTITUTION OF SALE CON S I DE RATION WITH FAIR MARKET VALUE CAN ONLY BE DONE UNDER S.50C. THERE IS NO OTHER PROVISION IN THE AC T TO DO SO. EVEN THE REFERENCE UNDER S.142A O F THE ACT FOR DETERMINING TH E VALUE OF ANY INVESTMENT CAN ONLY BE DON E WITH REFERENCE TO S.69, S.69B, S.69A OR FOR THE PU R PO S E OF FAIR MARKET VALUE OF ANY PROPERTY UN DE R S.56(2). IN TH E GIVEN FACTS OF THE CASE, TH E SE P R OVI SI ON S ARE NOT APPLICABLE , NOR CAN BE INVOKED BY THE ASSESSING OFFICER. WHAT R E VENUE IS CONTES TING CAN BE APPROPRIATE IF THE REFERENCE WAS MADE IN THE HANDS OF THE BUILDER, WHO MAY CLAIM THE COST OF ACQUISITION TO ASCERTAIN THE INVESTMENT IN THE BUILDING, BUT IN THE ASSESSEES CASE, WHO ADOPTED THE ACTUAL COST OF CONSTRUCTION FOR ARRIVING AT THE SA LE CON S I D ERATION, TH E SE PROVISION S DO NO T APPLY. THIS IS WHAT THE LEARNED CIT(A) HAS DECIDED. THER E FORE, WE DO NO T SEE ANY REASON IN THE GROUND RAISED BY THE RE VENUE. ACCOR D INGLY, THE GROUNDS AR E REJECTED, AND THE REVENUES APPEAL STANDS DISMISSED. 9. COMING TO THE CROSS - OBJ E CTION OF THE ASSESSEE , THE ASSESSEE H A S RAI S ED THREE G R OUNDS ON TWO ISSU E S. AS BRIEFLY STATED, THE ASSESSEE HAS CL A IM E D EXEMPTION UNDER S.54 ON FOU R FLATS (FIVE FLATS MADE INTO FOUR FLATS BY COMBINING TWO FLATS INTO ON E ). AS BR I E FLY STATED, THE ASSESSING OFFICER ALLOWED DEDUCTION IN RESPECT OF ONLY ONE FLAT S T ATIN G THAT T HE ASSESSEE IS ENTITLED ONLY FOR ONE RESIDENTIAL HOUSE AS EXEMP T ION UNDER S.54. THE LEARNED CIT(A) VIDE P A RA 11 DISCUSSED THE ISSUE AND HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION IN RESPECT OF FOUR OF THE RESIDENTIAL HOU S ES, RECEIVED AS CON S I D ERATION FROM TH E DEVELOPER. HOWEVER, WHILE DECIDING THE GROUND PERTAINING TO THE ASSESSEES CLAIM THAT TWO FLATS HAD BEEN MERGED INTO ONE, WHIL E FACTUALLY ACCEPTING THAT THE ASSESSEE HAS ITA NO. 1748/HYD/2012 & CO THEREIN SHRI SHAIK AHMED BANAFE, HYDERABAD 6 MERGED TWO FLATS, VIZ. 501 AND 505 INTO ONE, REJECTED THE CONTENTION O F TH E ASSESSEE , STATIN G THAT FROM THE COMPU T AT I ON O F INCOME FILED, ASSESSEE HAD CLAIMED EX E MPTION UNDER S.54 FOR 6997 SQ. FT, I.E. FOR AN AREA C OVERED BY FOUR FLATS ONLY. ACCORDIN G LY, CIT(A) REJ E CTED THIS CONTENTION. 10. LEARNED COUNSEL POIN TE D OUT THAT THE ASSESSEE HAS CLAIMED E X E M PTION UNDER S .54 OF THE AC T IN RESPECT OF 8737 SQ. FT. COVERING FIVE FLATS AND NOT 6997 SQ. FT, AS NOTED BY THE LEARNED CIT(A). THIS BEI N G A FACTUAL ERROR COMMI TT ED BY THE LEARNED CIT(A), WE DIRECT THE ASSESSING OFFICER TO ALLOW THE EXE M PTION IN RESPECT OF 8737 SQ. FT, COVERING FIVE FLATS. HOWEVER, WHILE CALCULATING THE EXEMPTION ON EACH OF THE FLATS ELIGIBLE FOR EACH OF THE HOUSES , THE ASSESSING OFFICER IS DIRECTED TO TAKE INTO CON S ID E RATION, THE CAPITAL GAINS ARISING ON EACH OF THE HOUSE. AS SEEN F R OM THE DEVELOPMENT AGREEMENT, THE ASSESSEE IS H A VIN G A HOU S E HAVING L A ND OF 940 SQ. YARDS; ANOTHER T WO HOUSES IN JOINT OWNERSHIP WITH WIFE (ITEMS NO. (II) AND (III) ON PAGE 2 OF THE DEVELOPMENT AGREEMENT) OF 222 SQ. YARDS EACH; AND A FOURTH HOUSE HAVING LAND OF 78 SQ. YARDS, BEING ITEM NO (IV) IN THE DEVELOPMENT AGREEMENT. SIN C E THE PROPORTION OF CAPITAL GAINS VARY ACCORDING TO THE LAND INCLUDED IN THE TOTAL LAND SURRENDERED TO THE DEVELOPER, THE ASSESSING OFFICER IS DIRECTED TO WORK OUT THE PROPORTIONATE CAPITAL GAINS ON EACH HOUSE, ACCORDING TO THE LAND INVOLVED IN THAT HOUSE AND ALLOW EXEMPTION UNDER EA CH OF THE HOUSES UNDER S.54. THIS ASPEC T OF WORKING OUT OF CAPITAL GAINS IN RESPECT OF EACH OF THE HOUSES HAS TO B E DON E BY TH E ASSESSING OFFICER, EVEN THOUGH T H E ASSESSEE IS ENTITLED FOR EX E MPTION IN RESPECT OF FOUR HOU S ES, AS PART OF THE DE VE LOPM E N T AGREEMENT. THE R E FORE, THE CO M PU TA TION ASPECT OF EXEMPTION UNDER S.54 IS RESTORED TO THE FIL E O F THE ASSESSING OFFICER . THEREFORE, THE G R OUN DS OF THE ASSESSEE ON THIS ISSUE , B E IN G G R OUNDS NO . 1 AND 2 ARE ALLOWED FOR STATI S TICAL PURPOSES. ITA NO. 1748/HYD/2012 & CO THEREIN SHRI SHAIK AHMED BANAFE, HYDERABAD 7 11. GROUN D NO.3 I N THE CROSS OBJ EC TION IS WITH REFERENCE TO SUSTENANCE OF THE ACTION O F THE ASSESSING OFFICER IN INCLUDING THE VALUE OF THREE - BED ROOM ACCOMM OD ATION FOR A PERIOD OF 24 MONTHS, AMOUNTING TO RS .2,40,0000 . IT WAS CONTENDED THAT THE BU I L D ER HAD PAID RENT ONL Y FO R THE PERIOD FROM AUGU S T, 2005 TO MARCH, 2006. THOUGH THE ASSESSEE CONTENDS THAT THE FLATS ARE HANDED OVER IN APRI L , 2007, THE ASSESSING OFFICER TOOK THE PERIOD OF 24 MONTHS AS PER THE AGREEMENT. THE LEARNED CIT(A) ALSO REJECTED THE CON T EN T ION ON THE REASON THAT THE ASSESSEE DID NO T SUBSTANTIATE THAT THE FLATS WERE HANDED O V ER IN APRIL, 2007. 12. BEFORE US, THE LEARNED COUNSEL SU B MI T TED THAT RENT BEING COMPENSATION CANNOT B E BROUGHT TO TAX. THIS CONTENTION , HOWEVER , CANNOT BE ACCEPTED, AS BEAR ING COST OF RENT FOR DISPOSSESSING THE HOUSE USED FOR RESIDENCE IS PART OF THE SAME AGREEMENT, SO IT RE Q UIRES TO BE CONSIDERED WHILE ARRIVING AT THE SALE CON S ID E RATION O F THE LAND GIVEN FOR DEVELOPMENT AGREEMENT. THEREFORE, THE ACTION OF CON S I D ERING/ADOPT ING THE VALUE OF PROVIDING THREE BEDROOM ACCOMMODATION AS PART OF THE AGREEMENT, IN COMPU T IN G THE CAPITAL GAINS IS ACCEPT E D. HOWEVER, THE V ALU ATION OF THE RENT REQUI R ES EXAMINATION. THE ASSESSING OFFICER IS DIRECTED TO OBTAIN THE ACTUAL REN T PAYMENT BY THE BUIL D ER AND ADOPT THE SAME VALUE WHIL E COMPU T IN G THE CAPITAL GAIN S. THE ASSESSEE SHALL PROVIDE THE DETAILS O F ACTUAL RENT BO R NE BY THE BUILDER FOR THIS PU R PO S E. WITH TH E SE DIRECTIONS, THIS G R OUND IS CONSIDERED AS ALLOWED. 13. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND THE CROSS OBJ E CTION OF THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 12.2.2014 SD/ - SD/ - (D.MANMOHAN) (B.RAMAKOTAIAH ) VICE PRESIDENT ACCOUNTANT MEMBER DT/ - 12 TH FEBRUARY 2014 ITA NO. 1748/HYD/2012 & CO THEREIN SHRI SHAIK AHMED BANAFE, HYDERABAD 8 COPY FORWARDED TO: 1. SHRI SHAIK AHMED BANAFE , H.NO.12 - 2 - 827, BANAFE MANSION, MEHDIPATNAM, HYDERABAD 2 . ASST. COMMISSIONER OF INCOME - TAX CIRCLE 7 ( 1 ), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) VI , HYDERABAD COMMISSIONER OF INCOME - TAX V HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S