Shri.G R Pradeep , Bangalore V. The Assistant Commissioner of Income Tax Circle-3(2)(1), Bangalore

ITA 191/BANG/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4707 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 19-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH JT BENGALURU
• Assessee Lawyers: KRISHNA UPADHYA S
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 191/BANG/2018 ASSESSMENT YEAR : 2014 - 15 SHRI G.R. PRADEEP, NO.39, GOPADY ENTERPRISES, JAIMUNI RAO CIRCLE, MAGADI MAIN ROAD, AGRAHARA DASARAHALLI, BANGALORE 560 023. PAN: AFJPP 1456P VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(2)(1), BANGALORE. APP ELLANT RESPONDENT A PPELLANT BY : SHRI KRISHNA UPADHYA S., CA RE SPONDENT BY : SHRI B.R. RAMESH, JT.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 16 . 0 5 .201 8 DATE OF PRONOUNCEMENT : 01 . 0 6 .201 8 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 20.11.2017 OF THE CIT(APPEALS)-III, BENGALURU RELATING TO ASSE SSMENT YEAR 2014-15. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN D ISALLOWING THE CLAIM OF ASSESSEE FOR DEDUCTION OF RS.8,45,900 U/S. 54 OF TH E ACT. ITA NO.191/BANG/2018 PAGE 2 OF 7 3. THE FACTUAL DETAILS ARE AS FOLLOWS. THE ASSESSE E IS AN INDIVIDUAL. HE SOLD A RESIDENTIAL PROPERTY AT NO.59/4, 7 TH MAIN, THYAGARAJANAGARA, BASAVANAGUDI ON 29.06.2013 FOR A SALE CONSIDERATION OF RS.99 LAKHS. THE ASSESSEE COMPUTED LONG TERM CAPITAL GAINS OF RS.92, 73,933 ON THE SALE OF THE PROPERTY. THE ASSESSEE CLAIMED DEDUCTION OF RS .10 LAKHS ON THE GROUND THAT HE CONSTRUCTED A HOUSE AT NO.6, 5 TH MAIN, GOVINDARAJANAGAR, BANGALORE. THE REMAINING LONG TERM CAPITAL GAIN OF RS.82,73,933 WAS OFFERED TO TAX BY THE ASSESSEE. THE CONSTRUCTION O F THE NEW HOUSE WAS CARRIED OUT BY THE ASSESSEE BETWEEN THE PERIOD 13. 04.2013 TO 05.01.2014 AS PER THE FOLLOWING DETAILS:- ITA NO.191/BANG/2018 PAGE 3 OF 7 4. THE AO WAS OF THE VIEW THAT THE ASSESSEE CLAIMED DEDUCTION U/S. 54 OF THE ACT FOR INVESTMENT BY WAY OF CONSTRUCTION OF ANOTHER RESIDENTIAL HOUSE ONLY IN RESPECT OF INVESTMENTS AFTER THE DATE OF SALE OF THE OLD ASSET, I.E., 29.06.2013. ACCORDINGLY, THE AO ALLOWED EXPE NSES LISTED AT SL.NOS. 23 TO 25 REFERRED TO IN THE CHART ABOVE, WHICH EXPENSE S WERE INCURRED AFTER 29.06.2013. 5. THE CIT(APPEALS) CONFIRMED THE ORDER OF THE AO. BEFORE THE CIT(APPEALS), THE ASSESSEE RELIED ON THE DECISION O F THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. J.R. SUBRAMANYA BHAT, 165 ITR 571 (KAR) . THE HONBLE HIGH COURT IN THE AFORESAID JUDGMENT AFTER REFERRING TO THE CONDITIONS FOR GRANT OF DEDUCTION U/S. 54 OF THE ACT, ALLOWED THE CLAIM OF ASSESSEE FOR DEDUCTION BY OBSERVING AS FOLLOWS:- ITA NO.191/BANG/2018 PAGE 4 OF 7 4. THE TRIBUNAL HAS HELD THAT THE GROUND OR LAND APPURTENANT TO THE BUILDING WAS IN THE OCCUPATION OF THE ASSESS EE. IT HAS FURTHER HELD THAT THOUGH THE COMMENCEMENT OF THE NE W BUILDING WAS EARLIER TO THE SALE OF THE OLD BUILDING, THE NE W BUILDING WAS COMPLETED IN MARCH, 1977, WHICH WAS WITHIN THE TWO- YEAR PERIOD CONTEMPLATED BY SECTION 54. SO STATING, THE TRIBUNA L ALLOWED THE RELIEF CLAIMED BY THE ASSESSEE. 5. THERE IS NO DISPUTE THAT THE BUILDING HAS BEEN CONSTRUCTED WITHIN TWO YEARS FROM THE DATE OF SALE OF THE OLD B UILDING. THE OLD BUILDING WAS SOLD IN FEBRUARY, 1977. THE NEW BUILDI NG WAS COMPLETED IN MARCH, 1977, THE CONSTRUCTION OF WHICH HAD COMMENCED IN 1976. SECTION 54 OF THE INCOME-TAX ACT SO FAR AS IT IS RELEVANT PROVIDES : 'WHERE A CAPITAL GAIN ARISES FROM THE TRANSFER OF A CAPITAL ASSET TO WHICH THE PROVISIONS OF SECTION 53 ARE NOT APPLICABLE, BEING BUILDINGS OR LANDS APPURTENANT TH ERETO THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'I NCOME FROM HOUSE PROPERTY', WHICH IN THE TWO YEARS IMMEDI ATELY PRECEDING THE DATE ON WHICH THE TRANSFER TOOK PLACE , WAS BEING USED BY THE ASSESSEE OR A PARENT OF HIS MAINL Y FOR THE PURPOSES OF HIS OWN OR THE PARENT'S OWN RESIDENCE, AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THAT DATE PURCHASED, OR HAS WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE CONSTRUCTED, A HOUSE PROPERTY FOR T HE PURPOSES OF HIS OWN RESIDENCE, 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 PROVISI ONS OF THIS SECTION, THAT IS TO SAY,.......' UNDER THIS SECTION, IF THE ASSESSEE HAS WITHIN A PE RIOD OF ONE YEAR AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PUR CHASED OR HAS WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE CONSTR UCTED A RESIDENTIAL HOUSE, THEN, INSTEAD OF THE CAPITAL GAI N BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHI CH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCO RDANCE WITH THE OTHER PROVISIONS SET OUT IN THE SAID SECTION. THE T RIBUNAL ON AN APPRECIATION OF THE EVIDENCE HAS FIRSTLY FOUND THAT THE BUILDING WAS USED BY THE ASSESSEE MAINLY FOR HIS RESIDENTIAL PURPOSE. TAKING INTO CONSIDERATION THE AREA OF THE BUILDING UNDER THE OCCUPATION OF THE ASSESSEE, IT HAS STATED THAT THE GROUND FLOOR ITA NO.191/BANG/2018 PAGE 5 OF 7 OCCUPIED BY THE ASSESSEE INCLUDING THE GARAGE WAS 1 , 330 SQ. FT. THE LAND APPURTENANT TO THE GROUND FLOOR EXCLUDING THE LAND OCCUPIED BY THE HOUSE WAS 4,795 SQ. FT. THAT WAS AL SO HELD TO BE UNDER THE OCCUPATION OF THE ASSESSEE. THIS BUILDING WITH THE LAND HAS BEEN SOLD. IT WAS ONLY THE FIRST FLOOR THAT WAS LET OUT. THE TRIBUNAL TOOK INTO CONSIDERATION THE EXTENT OF THE BUILDING USED MAINLY FOR THE RESIDENTIAL PURPOSE OF THE ASSESSEE AND FOUND THAT THE MAJOR PORTION OF THE BUILDING WAS UNDER THE OCC UPATION OF THE ASSESSEE. THE TRIBUNAL, THEREFORE, CONCLUDED THAT T HE FIRST CONDITION PRESCRIBED UNDER SECTION 54 WAS SATISFIED . THIS FINDING, IT MAY BE SEEN, HAS BEEN ARRIVED AT BY THE TRIBUNAL UPON APPRECIATION OF THE EVIDENCE AND THE FACTUAL ASPECT S OF THE CASE. 6. SO TOO WAS THE NEXT CONCLUSION REACHED BY THE T RIBUNAL. THE DATE OF THE SALE OF THE OLD BUILDING WAS FEBRUA RY 9, 1977. THE COMPLETION OF THE CONSTRUCTION OF THE NEW BUILD ING WAS IN MARCH, 1977, ALTHOUGH THE COMMENCEMENT OF THE CONST RUCTION STARTED IN 1976. IT IS IMMATERIAL, AS THE TRIBUNAL, IN OUR OPINION, HAS RIGHTLY OBSERVED, ABOUT THE DATE OF COMMENCEMENT OF THE CONSTRUCTION OF THE NEW BUILDIN G. SINCE THE ASSESSEE HAS CONSTRUCTED THE BUILDING WITHIN TW O YEARS FROM THE DATE OF SALE OF THE OLD BUILDING, HE WAS E NTITLED TO RELIEF UNDER SECTION 54 OF THE ACT. 7. BOTH THE CONCLUSIONS REACHED BY THE TRIBUNAL AR E ON AN APPRAISAL OF THE EVIDENCE ON RECORD AND THEY ARE NO T SHOWN TO BE UNREASONABLE OR PERVERSE. 8. WE, THEREFORE, ANSWER THE QUESTION IN THE AFFIR MATIVE AND AGAINST THE REVENUE. IN THE CIRCUMSTANCES OF THE CA SE, WE MAKE NO ORDER TO COSTS. 6. THE CIT(APPEALS) DID NOT DEAL WITH THIS PLEA OF THE ASSESSEE SPECIFICALLY, BUT UPHELD THE ORDER OF THE AO. THE CIT(A) PLACED RELIANCE ON THE DECISION OF THE ITAT HYDERABAD BENCH IN THE CAS E OF SMT. NIMMAGADA SRIDEVI V. DCIT [2013] 33 TAXMANN.COM 306 (HYD. TRI B.) . IN THAT CASE, DEDUCTION U/S. 54F OF THE ACT WAS ALLOWED ONLY IN R ESPECT OF INVESTMENT IN CONSTRUCTION OF A NEW HOUSE AFTER THE DATE OF TRANS FER OF THE OLD ASSET. ITA NO.191/BANG/2018 PAGE 6 OF 7 7. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASS ESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. AS WE HAVE ALREADY SEEN, DEDUCTION U/S. 54 OF THE ACT IS ALLOWED IF A PROPER TY BEING RESIDENTIAL HOUSE IS TRANSFERRED AND LONG TERM CAPITAL GAIN IS DERIVE D BY THE ASSESSEE. IF THE ASSESSEE, ONE YEAR BEFORE THE TRANSFER OF OLD ASSET OR ONE YEAR THEREAFTER PURCHASED A NEW ASSET, HE IS ENTITLED TO DEDUCTION U/S.54 OF THE ACT. IF THE ASSESSEE CONSTRUCTS A NEW HOUSE, THEN THE CONSTRUCT ION SHOULD BE COMPLETED WITHIN A PERIOD OF TWO YEARS AFTER THE TR ANSFER OF OLD ASSET. IN THE PRESENT CASE, THE EXPENSES FOR CONSTRUCTING THE NEW RESIDENTIAL HOUSE, IS PARTLY INCURRED ONE YEAR BEFORE THE TRANSFER AND WI THIN TWO YEARS AFTER THE TRANSFER OF THE OLD ASSET. IT IS NOT DISPUTED THAT THE CONSTRUCTION HAS BEEN COMPLETED WITHIN A PERIOD OF TWO YEARS AFTER THE DA TE OF TRANSFER. IN SUCH CIRCUMSTANCES, THE ASSESSEE IS ENTITLED TO DEDUCTIO N U/S. 54F OF THE ACT FOR THE ENTIRE SUM OF RS.10 LAKHS. THE FACTS ARE IDENT ICAL TO THE FACTS OF THE CASE OF THE DECISION OF THE HONBLE HIGH COURT OF K ARNATAKA IN THE CASE OF J.R. SUBRAMANYA BHAT (SUPRA) . 9. IN THE DECISION OF ITAT HYDERABAD BENCH IN THE C ASE OF SMT. NIMMAGADDA SRIDEVI (SUPRA) THERE IS A REFERENCE TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF J.R.SUB RAMANYA BHAT (SUPRA) BUT THERE IS NO REASON GIVEN IN THE AFORESAID DECIS ION AS TO WHY THE RATIO LAID DOWN IN THE AFORESAID JUDGMENT IS NOT FOLLOWED . THE DECISION RENDERED ITA NO.191/BANG/2018 PAGE 7 OF 7 BY THE HONBLE KARNATAKA HIGH COURT BEING THE DECIS ION OF JURISDICTIONAL HIGH COURT, RENDERED ON IDENTICAL FACTS OF THE CASE AS THAT OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE SAME SHOULD BE FOLLOWED . WE ARE THEREFORE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION OF RS.10 LAKHS U/S. 54F OF THE ACT. WE DIRECT THE AO TO ALLOW THE DEDUCTIO N AS CLAIMED BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF JUNE, 2018. SD/- SD/- ( INTURI RAMA RAO ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 1 ST JUNE, 2018. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.