Sh. Narendra Kumar Jain, JODHPUR V. ITO, JODHPUR

ITA 204/JODH/2013

• Counselvise Citation: 20423314 RSA 2013
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Salary income; Cost of acquisition
• Section: 54B; 54F; 234B; 54; 11

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 204/JODH/2013 (A.Y. 2009-10) SHRI NARENDRA KUMAR JAIN VS ITO, NEAR J.K. NURSING HOME WARD-3(2), 1 ST B ROAD, SARDARPURA, JODHPUR. JODHPUR. PAN NO. ACYPJ6717H (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AMIT KOTHARI. DEPARTMENT BY : SH. N.A. JOSHI - DR. DATE OF HEARING : 18/09/2013. DATE OF PRONOUNCEMENT : 23/09/2013. O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE ASSESSEE, FOR A.Y. 2009-10, IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), JODHPUR, DATED 12/03/2013. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE, AS INDIVIDUAL, FILED HIS RETURN OF INCOME (ROI) FOR A. Y. 2009-10 ON 31/07/2009, DECLARING TOTAL INCOME OF RS. 2,89,220/ -. IN THE COMPUTATION OF INCOME THE ASSESSEE HAS SHOWN INCOME FROM SALARY, 2 RENT AND INTEREST. BESIDES, THE ASSESSEE HAS ALSO S HOWN INCOME FROM LONG TERM CAPITAL GAINS (LTCG) AT RS. 1,80,96,502/- AND AGAINST THIS LTCG THE ASSESSEE HAS CLAIMED BENEFIT OF SECTION 54 F OF THE INCOME TAX ACT, 1961, THE ACT FOR SHORT, OF RS. 1,92,27, 780/- AND HENCE ULTIMATELY NIL LTCG HAS BEEN COMPUTED. THE ASSESSEE HAS SOLD THREE PLOTS NUMBERED AS 63,64 AND 65, SITUATED AT THE PAL L ROAD IN THE CITY OF JODHPUR, FOR A CONSIDERATION OF RS. 2,10,00,000/- @ RS. 70,00,000/- PER PLOT, TO SHREE JAIN SHWETAMBER NAKODA PARSHWANATH T EERTH, NAKODA, VIDE THREE SEPARATE SALE DEEDS EVEN DATED 19/02/200 9. THESE PLOTS HAD BEEN PURCHASED BY THE ASSESSEE ON 26/05/2004. T HE TOTAL SALE CONSIDERATION WAS RECEIVED THROUGH CHEQUES DATED 24 /12/2008 AND 20/02/2009. THE ASSESSEE HAS ARRIVED AT AN INDEXED COST OF RS. 29,03,498/- BY TAKING CASH PRICE AT RS. 25,41,906/- . AS AGAINST THE SAME THE ASSESSEE HAS PURCHASED TWO HOUSES, WITH NU MBERS 5 AND 6, AT THE NEW POWER HOUSE ROAD, (HOUSE NO. 5 IN MASURIYA SECTOR 7, VISTAR EXTENSION FOR A CONSIDERATION OF RS. 95,09,010/- AN D HOUSE NO. 6 IN THE SAME LOCALITY FOR A PRICE OF RS. 97,18,770/-). THUS , THE ASSESSEE HAS CLAIMED THAT QUA LTCG OF RS. 1,80,96,502/- INVESTME NT IN TWO NEW HOUSE TOTALING TO RS. 1,92,27,780/- HAS BEEN MADE A ND IN VIEW OF THE PROVISIONS OF SECTION 54F OF THE ACT NO CAPITAL GAI NS TAX IS PAYABLE. IN 3 THE BALANCE SHEET, THE ASSESSEE HAS SHOWN AS ON 31. 03.2009, THE FOLLOWING IMMOVABLE PROPERTIES UNDER THE HEADS FIX ED ASSETS:- HOUSE AT SHASTRI NAGAR RS. 1985000 PLOT AT KALYANPURA RS. 82923 PLOT AT PAL LINK ROAD RS. 157500 PLOT AT SOJAT I GATE RS. 375000 2.1 FROM THE SCHEDULE HP OF THE ITR-2 FILED FOR THI S YEAR IT IS NOTICED THAT THE ASSESSEE HAS SHOWN RENTAL INCOME FROM BARM ER HOUSE TO THE TUNE OF RS. 42,000/- BEFORE CLAIMING STANDARD DEDUC TION U/S 24 OF THE ACT. WHILE VERIFYING THIS INCOME FROM HOUSE PROPERT Y THE AO THROUGH HIS INSPECTOR HAS FOUND THAT THE ASSESSEE POSSESSED AND OWNED TWO HOUSES IN THE RELEVANT YEAR. THE AOS CONCLUSION IS BASED ENTIRELY ON THE REPORT OF HIS INSPECTOR, WHICH IS AS UNDER:- 'AS DIRECTED, I HAVE CONDUCTED THE ENQUIRY IN THE A BOVE MENTIONED CASE. ON SPOT VERIFICATION AND ENQUIRY FR OM LOCAL PERSONS IT IS GATHERED THAT: THE OWNER OF THE PREMISES IS SH. NARENDRA KUMAR S/O SH. DANMAL OF VILLAGE DEWDAWALE, DISTT. BARMER. 2. THE PREMISES IS USED FOR RESIDENTIAL PURPOSES AND IN THE FRONT SIDE OF THE PREMISES THERE ARE TWO SHOPS, WHICH ARE GIVEN ON RENT. THE HOUSE IS SITUATED AT KALYANP URA 4 MARG NO. 1. 3. AS PER MUNICIPAL CORPORATION RECORD THE HOUSE IS REGISTERED IN THE NAME OF SHRI NARENDRA KUMAR S/O S H. DANMAL SINCE 09.4.1993. 4. OWNER OF THE HOUSE AS PER MUNICIPAL CORPORATIO N RECORD IS SH. NARENDRA KUMAR S/O SHRI DANMAL.' 2.2 THUS, THE AO HAS CONCLUDED THAT THE PROPERTY AT KALYANPURA MARG, NO. 1, BARMER, IS A RESIDENTIAL HOUSE PROPERT Y OF THE ASSESSEE. ON FURTHER BEING ASKED BY THE A.O. THE ASSESSEE VID E LETTER DATED 20.12.2011 HAS STATED AS UNDER :- 1. 'THE ASSESSEE HAD SUBMITTED DETAILS OF PROPER TY OWNED BY HIM, AND HAD SUBMITTED THAT THE EXEMPTION CLAI MED U/S 54F WAS IN ACCORDANCE WITH THE PROVISIONS OF LA W, AND THE SAME IS ALLOWABLE IN THE FACTS AND CIRCUMSTANCE S OF THE CASE OF THE ASSESSEE. 2. THE PROPERTY AT PAL LINK ROAD, JODHPUR AND PROPE RTY AT SOJATI GATE ARE NOT RESIDENTIAL PROPERTY. ONLY H OUSE AT A-306 SHASTRI NAGAR, JODHPUR IS RESIDENTIAL HOUSE. THE SAME IS BEING USED FOR THE PURPOSE OF HIS BUSINESS IN WHICH ASSESSEE IS ONE OF THE PARTNER AT PRESENT. SOME OF THE STAFF MEMBERS WHO ARE WORKING AT THE SHOP OF THE ASSESSEE IN WHICH HE IS A PARTNERS ARE BEING PROVIDED PLACE TO STAY AND 5 IS BEING USED FOR OWN BUSINESS PURPOSES. 3. THE PROPERTY AT KALYANPURA, BANNER IS ALSO NOT T HE RESIDENTIAL HOUSE. THE PROPERTY IN THE NAME OF THE ASSESSEE CONSISTS OF ONLY THE SHOPS WHICH HAD BEEN GIVEN ON RENT. THE PROPERTY AT KALYANPURA, BANNER WAS PURCHA SED IN TWO PARTS, ONE BY THE ASSESSEE NAMELY SHRI NARENDRA KUMAR AND OTHER BY SHRI PRAKASH CHAND. THE FRONT PO RTION WAS PURCHASED BY SHRI NARENDRA KUMAR AND THE BACK PORTION WAS PURCHASED BY SHRI PRAKASH CHANDRA. THE COPY OF REGISTERED SALE DEED IN RELATION TO PURCHASE OF THE SAID PROPERTY BY SHRI NARENDRA KUMAR AND SHRI PRAKASH CH ANDRA ARE ENCLOSED HEREWITH. WE HAD ALSO OBTAINED THE PHOTOGRAPH OF THE SHOPS OF THE ASSESSEE AT KALYANPU RA, BANNER, WHICH ARE ENCLOSED HEREWITH WHICH WILL FURT HER CONCLUSIVELY PROVE THAT THE PROPERTY OWNED BY THE A SSESSEE ARE NOT THE RESIDENTIAL HOUSE. 4. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, THE D EDUCTION IN RELATION TO NEW RESIDENTIAL HOUSE CLAIMED BY ASS ESSEE WAS NOT INCORRECT. IT IS THEREFORE SUBMITTED THAT THE OBJECTION RAISED BY YOUR HONOUR IN RELATION TO THE FACT THAT ASSESSEE ALREADY OWNS MORE THAN TWO HOUSES, AND DEDUCTION FOR NEW HOUSE CANNOT BE ALLOWED IS FACTUA LLY NOT CORRECT, AND THE CLAIM MAY THEREFORE KINDLY BE ALLO WED TO THE ASSESSEE. 6 5. THE OTHER OBJECTION RAISED BY YOUR HONOUR THA T THE ASSESSEE HAS PURCHASED NEW BEING HOUSE NO. 5 PURCHA SED ON 29.6.2009 AND HOUSE NO. 6 PURCHASED ON 23.7.2009 . YOUR KIND ATTENTION IS INVITED TOWARDS THE REGISTER ED SALE DEED IN RELATION TO THE PURCHASE OF THE SAID PROPER TY AT PLOT NO. 5 AND 6, SECTION 7, NEW POWER HOUSE ROAD, JODHPUR. THESE ARE IN FACT NOT TWO HOUSES, BUT T HE ONE HOUSE BEING ADJACENT TO EACH OTHER. SINCE THESE W ERE PURCHASED IN THE NAME OF DIFFERENT FAMILY MEMBERS/FRIENDS, AND ASSESSEE HAD PURCHASED THE ENT IRE PROPERTY, TWO REGISTRATION WAS MADE SINCE THERE WER E TWO ORIGINAL OWNERS, BUT THE FACT IS THAT THE ENTIRE HO USE IS ONE HOUSE ONLY. THERE IS ONLY ONE COMMON BOUNDARY WALL AT THE SITE EVEN AT PRESENT AND THE HOUSE IS ONLY ONE HOUSE. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAD PURCHASED TWO HOUSES. EVEN FROM THE DETAILS OF PAYMENT MADE TOWARDS PAYMENT OF ABOVE PROPERTY AT PLOT NO. 5 AND 6 IT WILL BE SEEN THAT IN RELATION TO PLOT NO. 6 TH E PAYMENT HAS BEEN MADE AT RS. 10,00,000/- ON 8.6.2009 AND RS . 80,00,000/- HAS BEEN MADE ON 25.6.2009 AND REGIS TRATION OF THIS PLOT HAS BEEN MADE ON 23. 7.2009. IN RELATI ON TO OTHER PLOT NO. 5 THE PAYMENT HAS BEEN MADE ON 8.6.2 009 FOR RS. 90, 00, 000/- (BY TWO CHEQUES OF RS. 45,00, 000/- EACH) AND THIS SALE HAS BEEN REGISTERED ON 29.6.200 9. THUS PAYMENT FOR BOTH THE PROPERTY HAD BEEN MADE TOGETHE R, AND THE INTENTION OF THE ASSESSEE WAS TO PURCHASE T HE SAID HOUSE, WHICH WAS ONLY ONE HOUSE. THERE WAS A C OMMON BOUNDARY WALL EVEN AT THE TIME OF PURCHASE OF THE S AID 7 PROPERTY WHICH IS EVIDENT FROM THE REGISTERED SALE DEED ALSO. THE SAID PROPERTY THEREFORE FOR ALL PURPOS ES IS ONLY ONE HOUSE ONLY AND CANNOT BE REGARDED AS TWO DIFFER ENT HOUSES. AS SUCH THERE IS NO VIOLATION OF THE PROVIS IONS OF SECTION 54F AS STATED BY YOUR HONOUR IN THE QUERY L ETTER DATED 13.12.2011. 6. IT WILL ALSO BE WORTHWHILE TO DRAW YOUR HONOUR'S KIND ATTENTION TOWARDS THE DECISION OF HON'BLE ITAT JODH PUR BENCH IN THE CASE OF SHRI DALPAT SINGH V. ITO IN IT A NO. 1774 & 1773/JP/94 VIDE ORDER DATED 26.12.2000 IN WH ICH AT PAGE 20 THE ISSUE BEFORE THE HON'BLE IT AT WAS IN R ELATION TO EXEMPTION U/S 5 4F CLAIMED BY THE ASSESSEE IN RE LATION TO 3 PLOTS PURCHASED ADJACENT TO EACH OTHER AND ONE HOUSE WAS CONSTRUCTED THEREON. THE FACTS ARE ALMOST IDENT ICAL TO THE CASE OF THE ASSESSEE. THE HON'BLE IT AT ALSO RE LIED UPON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT V. SMT. M. KALPAGAM REPORTED IN 143 CTR (MAD) 3 36 AND ALLAHABAD BENCH IN THE CASE MASOOD HALIM V. WTO REPORTED IN 28 TTJ 101. AT PAGE 23 AND 24 OF THE SA ID ORDER AFTER APPRECIATING THE FACT AND CIRCUMSTANCES IN TH E CASE OF THE ASSESSEE, THE HON'BLE IT AT ALLOWED THE CLAI M OF THE ASSESSEE IN RELATION TO ALL THE THREE PLOTS PURCHAS ED, AND DEDUCTION CLAIMED U/S 54F WAS ALLOWED TO THE ASSESS EE FOR ENTIRE INVESTMENT. THE SAID ORDER HAD ACHIEVED FINA LITY AND THE DEPARTMENT HAD FILED NO APPEAL IN THE HIGH COUR T. IN VIEW OF THE SAID DECISION, WHICH ALSO HAS A BINDING EFFECT, THE SAME DESERVES TO BE ACCEPTED IN THE CASE OF THE 8 ASSESSEE ALSO. THE COPY OF THE SAID ORDER IS ALSO E NCLOSED HEREWITH FOR YOUR HONOUR'S KIND PERUSAL AND READY REFERENCE. 7. IN YET ANOTHER RECENT DECISION IN THE CASE OF CIT V. D. ANANDA BASAPPA REPORTED IN 309 ITR 329 THE MATTER W AS DEDUCTION U/S 54 BEFORE THE HON'BLE KARNATAKA HIGH COURT. IN THE CASE THE ASSESSEE PURCHASED TWO RESIDENTIAL FLATS WHICH WERE ADJACENT TO EACH OTHER AND CLAIMED THE S AME AS ONE RESIDENTIAL HOUSE AND ACCORDINGLY TREATED CO ST OF BOTH FLATS AS ELIGIBLE FOR DEDUCTION U/S 54. A. O. ALLOWED EXEMPTION FOR CAPITAL GAINS TO THE EXTENT OF COST O F ONE RESIDENTIAL FLAT ON GROUND THAT SECTION 54(1) DOES NOT PERMIT EXEMPTION FOR THE PURCHASERS FOR MORE THAN O NE RESIDENTIAL PREMISES. THE COURT HELD THAT PURCHASE OF TWO FLATS WHICH WERE COMBINED TO MAKE ONE RESIDENTIAL U NIT ARE ONE UNIT OF RESIDENTIAL HOUSE AND THAT THE ASSE SSEE IS ENTITLED FOR DEDUCTION FOR FULL AMOUNT OF COST OF T WO FLATS. THE MERE FACT THAT THE TWO FLATS ARE PURCHASED VIDE TWO DIFFERENT PURCHASE DEEDS WILL ALSO NOT MAKE DIFFERE NCE BECAUSE BOTH THE FLATS ARE USED AS ONE UNIT. 8. IT IS RESPECTFULLY SUBMITTED THAT THE OBJECTIV E OF SECTION 54F OF THE ACT AND THE LIKE PROVISION SUCH AS SECTION 54 OF THE ACT IS TO PROVIDE IMPETUS TO THE HOUSE CONSTRUCTION AND SO LONG AS THE PURPOSE OF HOUSE CONSTRUCTION IS ACHIEVED, SUCH HYPER TECHNICALITY S HOULD NOT IMPEDE THE WAY OF DEDUCTION WHICH THE LEGISLATURE H AS 9 ALLOWED. THE PURPOSE OF THE BENEFIT CAN BE GATHERED FROM THE SPEECH OF THE FINANCE MINISTER AND MEMORANDUM EXPLAINING THE PROPOSAL IN THE FINANCE BILL, 1982. THE HONORABLE FINANCE MINISTER TOLD THE HOUSE (SEE (198 2) 134 ITR (ST.) AT PAGE 28) AS FOLLOWS: 'THERE IS AN ACUTE SHORTAGE OF HOUSING, AND HOUSE B UILDING ACTIVITY HAS TO BE GIVEN IMPETUS. WITH A VIEW TO PR OVIDING AN INCENTIVE TO TAXPAYERS WHO DO NOT OWN A RESIDENT IAL HOUSE, I PROPOSE TO EXEMPT FROM TAX LONG-TERM CAPIT AL GAINS ARISING WHERE THE NET CONSIDERATION IS INVEST ED BY THE TAX PAYER IN A RESIDENTIAL HOUSE. AT PRESENT, CAPITAL GAINS ARISING FROM THE TRANSFER OF A HOUSE USED FOR PERSONAL RESIDENCE BY THE TAX PAYER ARE EXEMPT FROM INCOME-TAX TO THE EXTENT THAT SUCH GAIN S ARE UTILIZED BY THE TAX PAYER FOR CONSTRUCTION OR PURCH ASING A HOUSE FOR PERSONAL RESIDENCE WITHIN A SPECIFIED PER IOD. THESE CONDITIONS OFTEN LEAD TO HARDSHIP. I, THEREFO RE, PROPOSE TO REMOVE THESE RESTRICTIVE CONDITIONS.' 9. THE FIRST PARAGRAPH OF THE ABOVE SPEECH PERTAIN TO SECTION 54F AND THE SECOND PARAGRAPH IS RELEVANT TO SECTION 54 (EXEMPTION OF LONG-TERM CAPITAL GAINS ON SALE OF RESIDENTIAL HOUSE). FROM THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL, 1982 ALSO VIDE PARA GRAPH 42 (134 ITR 138 (ST.) IT IS CLEAR THAT THE PURPOSE OF SECTION 54F IS TO ENCOURAGE HOUSE CONSTRUCTION. ' 10 2.3 EVEN AFTER CONSIDERING THE ABOVE WRITTEN SUBMIS SIONS, THE AO IS NOT SATISFIED AND HAS MADE IMPUGNED ADDITION. 2.4 AGGRIEVED, AN APPEAL WAS FILED AND LD. CIT(A), HAS AGREED WITH THE AO AND NOT WITH THE ASSESSEE. NOW THE ASSESSEE IS IN SECOND APPEAL BEFORE THE APPELLATE TRIBUNAL. ALMOST IDENTICAL ISS UES HAVE BEEN RAKED UP. AS PER AO AND LD. CIT(A) THE ASSESSEE WAS HAVI NG TWO RESIDENTIAL HOUSES SO HE IS NOT ELEGIBLE TO CLAIM BENEFIT OF SE CTION 54F. ON THE OTHER HAND, THE LD. AR HAS STATED THAT THE ASSESSEE HAD ONLY ONE RESIDENTIAL HOUSE AT THE TIME OF PURCHASE OF NEW HO USE. 3 AFTER CONSIDERING RIVAL STANDS AND BEFORE DECIDIN G THE REAL CONTROVERSIES, WE WOULD LIKE TO DISCUSS THE LEGAL P RESCRIPTION OF SECTION 54F ETC. CHAPTER IV OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) WHICH BROADLY DEALS WITH THE COMP UTATION OF THE TOTAL INCOME UNDER FIVE HEADS OF INCOME CLASSIFIED AS UN DER :- A- SALARIES B- OMITTED (EARLIER INTEGRANT ON SECURITIES) C- INCOME FROM HOUSE PROPERTY D- PROFIT AND GAINS OF BUSINESS ON PROFESSION. E- CAPITAL GAINS F- INCOME FROM OTHER SOURCES. 11 THE SECTION E OF THIS CHAPTER DEALS WITH THE HEAD S CAPITAL GAINS WHICH CONTAINS AS MANY AS 28 OPERATIVE SECTIONS (EX CLUDING OMITTED ONES). THESE SECTIONS PROVIDE FOR COMPUTATION OF CA PITAL GAINS IN VIVID SITUATIONS AND SUBJECT TO CERTAIN CIRCUMSTANCES IN WHICH IT IS NOT BE CHARGED. SECTION 45 IS THE BASIC PROVISION WHICH DE FINES CAPITAL GAINS AS ANY PROFITS OR GAINS ARISING FROM THE TRANSFER O F A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL, SAVE AS OTHER WISE PROVIDED IN SECTIONS 54, 54 B, 54D, 54E, 54EA, 54EB BE CHARGEAB LE TO INCOME TAX UNDER THE HEAD CAPITAL GAINS AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLA CE. SECTION 48 PRESCRIBES THE MODE OF COMPUTATION OF CAPITAL GAIN . IT PROVIDES THAT CAPITAL GAINS HAS TO BE COMPUTED BY DEDUCTING FRO M THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ASSURING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSETS, THE FOLLOWING AMOUNTS :- (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST O F ANY IMPROVEMENT THERETO. THE ABOVE PRESCRIPTION IS FURTHER SUBJECT TO 5 PROV ISIONS. SECTION 49, DEALS WITH THE MODES OF DETERMINATION COST OF THE A CQUISITION OF THE ASSET. SECTION 50, 50A, 50B, 50C, 50D PRESCRIBED SP ECIAL PROVISIONS FOR 12 THE COMPUTATION OF CAPITAL GAINS OF DEPRECIABLE ASS ETS, COST OF ACQUISITION OF DEPRECIABLE ASSETS, COMPUTATION OF C APITAL GAINS IN CASE OF SLUMP SALE, PROVISION FOR FULL VALUE OF CONSIDER ATION IN CERTAIN CASES AND DEEMING PROVISION OF DETERMINING CONSIDERATION IN CERTAIN CASES, RESPECTIVELY. THEREAFTER, COMES THE PROVISIONS OF S ECTIONS WHICH DEAL WITH NET SALE CONSIDERATION IN SPECIFIC INSTANCES U NDER WHICH THE ASSESSEE CAN CLAIM EXEMPTION TO SOME EXTENT. SECTION 54. DEALS WITH THE PROFIT ON THE SALE OF A PROPERTY USED FOR RESIDENCE. IF THE ASSESSEE SELLS HIS ORIGINAL ASSET AND HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DA TE ON WHICH THE TRANSFER TOOK PLACE, PURCHASED OR HAS, WITHIN A PER IOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE, TH EN 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:- (1) THE COST OF NEW ASSET (RESIDENTIAL HOUSE) WILL BE ADJUSTED AGAINST THE CAPITAL GAINS. IF THERE IS SOM E BALANCE (CAPITAL GAINS) THAT SHALL BE CHARGED U/S 45 AS THE INCOME OF THE PREVIOUS YEAR. HOWEVER, IF THE NEW ASSET IS SOL D WITHIN 3 YEARS OF ITS PURCHASE / CONSTRUCTION, THE COST OF THAT NEW ASSET SHALL BE TAKEN AT NIL. MEANING THEREBY IF TH E ASSESSEE 13 SELLS THE NEW ASSET WITHIN THE 3 YEARS OF ITS PURCH ASE OR CONSTRUCTION THEN THE ENTIRE NET CONSIDERATION WILL BE CHARGED TO INCOME TAX OF THAT PARTICULAR YEAR. (2) IN CASE THE CAPITAL GAIN IS EQUAL OR LESS THAN THE COST OF NEW ASSET, NO CAPITAL GAINS SHALL BE CHARGED U/S 45. HOWEVER, IF THE NEW ASSET IS SOLD WITH 3 YEARS THEN THE CAPITAL GAINS SHALL BE REDUCED TO DETERMINE ITS COS T. IN CASE THE CAPITAL GAIN IS NOT APPROPRIATED BY THE ASSESSE E TOWARDS THE PURCHASE OF THE NEW ASSET WITH THE TIME STIPULA TED AS ABOVE, THEN TO AVAIL BENEFIT THE ASSESSEE AHS TO DE POSIT THE CAPITAL GAINS AS DIRECTED IN SUB SECTION (2) OF SEC TION 54. LIKEWISE, MUTATIS MUTANDIS, SECTION 54B DEALS WITH THE CAPITAL GAINS ON THE TRANSFER OF LAND USED FOR AGRI CULTURAL PURPOSES AND THE CIRCUMSTANCES ARE ALMOST SIMILAR W HEN THE ASSESSEE PURCHASES ANOTHER AGRICULTURAL LAND WI THIN THE TIME STIPULATED, THEN CAPITAL GAINS IS NOT CHARGED. SECTION 54D DEALS WITH CAPITAL GAINS ARISING ON COMPULSORY ACQUISITION OF LANDS AND BUILDINGS AND THE SITUATIO NS IN WHICH IT WILL NOT BE CHARGED TO INCOME TAX. SECTION 54E DEALS WITH MODE AND MODALITIES WHEN CAPITAL GAIN AR ISING ON TRANSFER OF CAPITAL ASSETS WHEN IT WILL NOT BE C HARGED TO INCOME TAX. SECTION 54EA DEALS WITH CIRCUMSTANCES W HEN THE CAPITAL GAINS ARISING ON TRANSFER OF LONG TERM CAPITAL ASSETS SHALL NOT BE CHARGED WHEN IT IS INVESTED IN SPECIFIED SECURITIES. SIMILARLY SECTION 54EB DEALS WITH CAPIT AL GAINS ARISING ON TRANSFER OF LONG TERM CAPITAL ASSETS. SE CTION 54EC TALKS ABOUT INVESTMENT OF CAPITAL GAINS IN CERTAIN BONDS TO 14 ESCAPE TAX. SECTION 54ED DEALS SUCH A SITUATION IN CASES OF TRANSFER OF CERTAIN LISTED SECURITIES OR UNITS. NOW , WE COME TO SECTION 54F WHICH DEALS WITH THE CASES WHERE CAP ITAL GAIN ARISING ON THE TRANSFER OF CERTAIN CAPITAL ASS ETS IS NOT CHARGED TO TAX IF THE NET CONSIDERATION THEREFROM I S INVESTED IN THE RESIDENTIAL HOUSE. UNDER THIS SECTI ON FOLLOWING CONDITIONS MUST EXIST TO CLAIM BENEFIT:- (I) THERE SHOULD BE TRANSFER OF A LONG TERM CAPITAL ASS ET WHICH SHOULD NOT BE A RESIDENTIAL HOUSE (ORIGINAL ASSET). (II) THE ASSESSEE MUST HAVE PURCHASED A RESIDENTIAL HOUS E (NEW ASSET) ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE ORIGINAL ASSET WAS TRANSFERRED. O R WITHIN 3 YEARS OF SUCH TRANSFER A NEW ASSET HAS BEE N CONSTRUCTED. (III) IN SUCH CASES THE ASSESSEE SHALL BE BENEFITED. IF T HE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UND ER SECTION 45. IF THE COST OF THE NEW ASSET IS LESS T HAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL AS SET, SO MUCH OF THE CAPITAL GAINS AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45. TO AVAIL THE ABOVE 15 BENEFIT THE ASSESSEE MUST NOT OWN MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET. OR HE PURCHASES ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET. OR HE CONSTRUCTS AN Y RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF 3 YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET. HOWEVER, THE ABOVE POSITIONS ARE SUBJECT TO A CONDITIONS THAT THE INCOME FROM THE RESIDENTIAL HOUSE OTHER THAN THE ONE RESIDENTIAL HO USE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET , IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THIS SECTION FURTHER PROVIDES MODALITIES AS TO HOW AND WHEN THE CAPITAL GAIN CAN BE DEEMED TO BE ASSESSEES INCOME CHARGEABLE TO TAX. SECTIONS 54G, 54GA, 54GB, 54H, 55 AND 55A DEAL WITH ALLIED CIRCUMSTANCES. FOR THE NOW, WE ARE MORE CONCERNED WITH THE PROVISIONS OF SECTION 54F. THE REQUIREMENTS OF THIS SECTION FOR TAX BENEFIT, IT SE EKS TO PROVIDE TO A ASSESSEE CAN BE PICTOGRAPHED AS UNDER: (O)= ORIGINAL ASSETS (LONG TERM CAPITAL ASSET NOT B EING A RESIDENTIAL HOME) PURCHASE NEW ASSET APART CONSTRUCTION NEW ASSET (AS FROM ONE RESIDENTIAL HOME RESIDENCE) APART FROM ON E WITHIN ONE YEAR BEFORE THE RESIDENTIAL HOME WITHI N 3 YEARS 16 TWO YEARS AFTER THE TRANSFER OF THE TRANSFER OF TH E A.O. OF A.O. (I) NOTHING LEFT OUT - CAPITAL GAINS IS CHARGEABL E (II) SOMETHING IS LEFT AND NOT DEPOSITED AS - CHARGEABLE TO TAX. STIPULATED) (III) IF DEPOSITED AS - NO TAX. STIPULATED (IV) HOWEVER, IF WITHIN A YEAR - CANNOT AVAIL BENEFIT ASSESSEE PURCHASES A OF SECTION 54F(1) OF SECTION 54F(1)HOUSE WITHIN ONE YEAR OR CONSTRUCTIONS WITHIN 3 YEARS, A NEW RESIDENTIAL HOUSE AFTER THE TRANSFER OF THE ORIGINAL ASSET; AND THE INCOME FROM SUCH RESIDENTIAL HOUSE (OTHER THAN THE ONE RESIDENT IAL HOUSE OWNED ON THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET) IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN NUTSHELL, TO AVAIL BENEFIT OF SECTION 54F, WITHOUT VIOLATING ITS CONDITIONS, THE FOLLOWING CONDITIONS MUST CO-EXISTS. (I) THE ASSESSEE MUST OWN A (LONG TERM) CAPITAL ASSET, I.E., THE ORIGINAL ASSET. (II) THIS ORIGINAL ASSET SHOULD NOT BE A RESIDENTIAL HOU SE. (III) THIS ORIGINAL ASSET SHOULD BE TRANSFERRED. 17 (IV) THE NET CONSIDERATION SHOULD BE ARRIVED AT IN VIEW OF EXPLANATION APPENDED TO SECTION 54(1). (V) AT THE TIME OF TRANSFER OF THE ORIGINAL ASSET, THE ASSESSEE SHOULD NOT OWN / PROCESS MORE THAN ONE RESIDENTIAL HOUSE. (VI) IN CASE THE ASSESSEE ACQUIRES BY (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET ACQUIRES ON THE DATE OF THE TRANSFER OF ASSETS, OR (II) PURCHASES ANY RESIDENTIAL HOUSE WITH ONE YEAR AFTER OR (III) CONSTRUCTS STAY RESIDENTIAL HOUSE WITH 3 YEAR S AFTER, THE DATE OF TRANSFER OF THE ORIGINAL ASSET A ND THAT OTHER (RESIDENTIAL HOUSE) IS CHARGEABLE UNDER THE HEARD INCOME FROM OTHER SOURCES THEN THE ASSESSEE CANNOT AVAIL ANY BEFIT OF SECTION 54F(1). TO SIMPLIFY : THE ASSESSEE (BEING AN INDIVIDUAL OR A HUF) CAN AVAIL TAX-BENEFIT) QUA CAPITAL GAINS ARISI NG ON THE SALE OF ORIGINAL ASSET (L.T. CAPITAL ASSET O THER THAN A RESIDENTIAL HOUSE) PROVIDED THE ASSESSEE DOE S NOT OWN MORE THAN ONE RESIDENTIAL HOUSE (OTHER THAN THE NEW ASSET I.E., NEW RESIDENTIAL HOUSE). BUT THE ABOVE IS SUBJECT TO THE MODE OF DEALING WITH THAT CAPITAL GAINS. HOWEVER, IN OTHER TWO SITUATIONS 18 (I) WHEN THE ASSESSEE PURCHASES ONE MORE RESIDENTIAL HOUSE WITHIN ONE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET OR (II) CONSTRUCTS ANY RESIDENTIAL HOUSE (OTHER THAN THE NEW ASSET RESIDENTIAL HOUSE) WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET (L.T. CAPITAL AND) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER THAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET, IS CHARGEABLE UNDER THE HEAD INCOME FROM HO USE PROPERTY. 3.1 ADVERTING TO THE FACTS OF THIS CASE, WE HAVE NO TICED AND FOUND THAT THE ASSESSEE, IN FACT, DID NOT OWN MORE THAN O NE RESIDENTIAL HOUSE AT THE TIME OF SALE OF THE ORIGINAL ASSET. THE LD. DR COULD NOT SAY WITH IMPUNITY THAT THE ASSESSEE ACTUALLY OWNED TWO HOUSE S I.E. ONE MORE THAN THE ORIGINAL ASSET. THE HOUSE AT BARMER IS IN FACT IS A CLUSTER OF SHOPS APPURTENANT THERETO THERE IS A SMALL LIVING A REA IN THE HIND PORTION. AS PER THE LD. AR THIS RESIDENTIAL PORTION IN FACT, BELONGS TO ONE SHRI PARKASH CHAND. A CERTIFICATE OBTAINED FROM THE MUNICIPAL COMMISSIONER IS ENCLOSED AT PAGES 9B OF THE PAPER B OOK, IN WHICH IT IS CERTIFIED THAT THE ASSESSEE IS HAVING THREE SHOPS A T PLOT AT KALYANPURA MARG NO. 1, BARMER. THE ABOVE FACTS ARE ALSO FORTIF IED FORM THE 19 PHOTOGRAPHS OF THE PROPERTY IN QUESTION WHICH ARE O N THE RECORD. THEREFORE, IN VIEW OF THE ABOVE STATED LEGAL POSITI ON, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE DID NOT OWN MO RE THAN ONE RESIDENTIAL PROPERTY AT THE TIME OF SALE OF THE ORI GINAL ASSETS, AND THEREFORE, THE ASSESSEE IS ENTITLED TO THE BENEFIT OF SECTION 54F OF THE ACT. SINCE, THE ASSESSEE HAS INVESTED MORE THAT THE LTCG IN THE NEW HOUSE (ASSET) NO CAPITAL GAINS IS CHARGEABLE. AS A RESULT, WE ALLOW THIS APPEAL OF THE ASSESSEE ON MERITS OF THE CASE. 4. HOWEVER, THE GROUND NO. 7 TAKEN REGARDING CHARGI NG OF INTEREST U/S 234B OF THE ACT, CANNOT BE ALLOWED IN VIEW OF T HE SETTLED POSITION THAT CHARGING OF INTEREST IS MANDATORY. ACCORDINGLY , WE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY DELETING THE ENTIRE C APITAL GAINS SO ADDED BY AO AND CONFIRMED BY LD. CIT(A). 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2013. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23 RD SEPTEMBER, 2013. 20 VL/ COPY TO : 1. THE APPELLANT BY ORDER 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR