ITO, CHENNAI V. S. Lakshmanan, CHENNAI

ITA 2103/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96033 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: J RADHAKRISHNAN
• Keywords: Deduction for capital gain; Capital asset; Additional evidence
• Section: 54F; 142(1); 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , ! ', $ %& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ ITA NO.2103/MDS/2013 ( )( / ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER, BUSINESS WARD IV(1), CHENNAI - 600 034. V. SHRI S. LAKSHMANAN, 99-46, C-3, ASHOK AMOGA APARTMENTS, 1 ST MAIN ROAD, GANDHI NAGAR, ADYAR, CHENNAI - 600 020. PAN : AAUPL 4308 C (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SH. P. RADHAKRISHNAN, JCIT -.+, / 0 / RESPONDENT BY : SH. J. RADHAKRISHNAN, ADVOCATE 1 / 2$ / DATE OF HEARING : 01.09.2015 34) / 2$ / DATE OF PRONOUNCEMENT : 11.09.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDE RS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, CHENNAI, DA TED 14.08.2013, OF ASSESSMENT YEAR 2010-11. 2 I.T.A. NO.2103/MDS/13 2. THE EFFECTIVE REVISED GROUNDS RAISED BY THE DEPA RTMENT ARE AS FOLLOWS:- 2.1. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE EXEMPTION CLAIMED U/S 54 OR ALTERNATIVE CLAIM U/S 54F OF THE I.T. ACT. 2.2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ORIGINAL PROPERTY (OKKAIAM THORAIPAKKAM PROPERTY) SOLD BY THE ASSESSEE, ON 3.7.2009, WAS ONLY A VACANT LAND, THE SALE OF WHICH WILL NOT QUAL IFY FOR DEDUCTION U/S 54 OF THE I.T. ACT. 3.1. WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL, THE LEARNED CIT(A) ERRED IN GIVING DIRECTIO N TO GRANT DEDUCTION U/S 54F ON THE LAND COST AND COST OF CONSTRUCTION OF THE BUILDING CONSTRUCTED IN MAL LI ENCLAVE, WHEN THE PURCHASE OF LAND AS WELL AS CONSTRUCTION AGREEMENT WERE ENTERED INTO MUCH AFTER THE DUE DATE OF FILING THE RETURN OF INCOME F OR A.Y. 2010-11. 3.2. THE LEARNED CIT(A) FAILED TO APPRECIATE THE DECISION OF THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. SMT. ZAIBUNISSA BEGUM (151 ITR 320). 3. THE BRIEF FACTS OF THE CASE ARE THE ASSESSEE IS AN INDIVIDUAL AND WAS IN SHARE TRADING BUSINESS AND FILED HIS RET URN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ADMITTING NIL INCOME. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TA X ACT, 1961 (IN SHORT 'THE ACT'). FURTHER, THE CASE WAS SELECTED F OR SCRUTINY AND NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED . DURING THE FINANCIAL YEAR 2009-10, THE ASSESSEE SOLD A RESIDEN TIAL HOUSE 3 I.T.A. NO.2103/MDS/13 PROPERTY FOR ` 1,12,00,001/- AND CLAIMED EXEMPTION UNDER SECTION 5 4 OF THE ACT. AS THE DUE DATE FOR FILING OF RETURN W AS NEARING, THE ASSESSEE DEPOSITED LONG TERM CAPITAL GAIN IN CAPITA L GAINS ACCOUNT SCHEME ON 26.07.2010 AND CLAIMED THE BENEFIT OF LON G TERM CAPITAL GAIN EXEMPTION. WHEREAS, THE ASSESSING OFFICER CALL ED FOR THE INFORMATION DURING THE HEARING PROCEEDINGS AND DENI ED THE EXEMPTION ON THE GROUND THAT THE PROPERTY SOLD WAS ONLY VACANT LAND AS SECTION 54 OF THE ACT DOES NOT APPLY TO VAC ANT LANDS. HENCE, HE BROUGHT TO TAX THE LONG TERM CAPITAL GAIN S OF ` 90,10,274/- AND DETERMINED A DEMAND OF ` 24,56,150/-. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(APPEALS) RA ISING THE GROUNDS IN RESPECT OF DENIAL OF EXEMPTION UNDER SEC TION 54 / 54F OF THE ACT. IN THE COURSE OF HEARING PROCEEDINGS BEFO RE THE CIT(APPEALS), THE ASSESSEE SUBMITTED A COPY OF COMP UTATION OF INCOME RELATING TO ASSESSMENT YEAR 2009-10, WHERE T HE RENTAL INCOME FROM HOUSE PROPERTY WAS ASSESSED TO TAX UNDE R THE HEAD INCOME FROM PROPERTY. FURTHER, THE ASSESSEE DEMO NSTRATED THAT AN AMOUNT OF ` 93 LAKHS WAS INVESTED UNDER CAPITAL GAINS SCHEME WITH A NATIONALIZED BANK. BEFORE THE CIT(APPEALS) , THE ASSESSEE HAS ALSO MADE AN ALTERNATIVE CLAIM WITHOUT PREJUDIC E TO THE RIGHTS, IF 4 I.T.A. NO.2103/MDS/13 THE ASSESSING OFFICER CONSIDERED THE SALE PROCEEDS RELATING TO VACANT LAND, THEN EXEMPTION MAY BE GRANTED UNDER SE CTION 54F OF THE ACT. THE ASSESSING OFFICER WITHOUT ALLOWING EX EMPTION UNDER SECTION 54 / 54F OF THE ACT, BROUGHT THE LONG TERM CAPITAL GAINS TO TAX. THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS AND PROVISIONS OF CAPITAL GAINS SCHEME BY INVESTING THE LONG TERM CAPITAL GAIN IN PURCHASE OF LAND AND CONSTRUCTION OF RESIDENTIAL HO USE, AGGREGATING TO ` 1,08,19,213/- AND THE BUILDER HAS HANDED OVER THE P OSSESSION OF THE RESIDENTIAL PROPERTY ON 30.05.2012 ALONG WITH C OMPLETION CERTIFICATE. THE PURCHASE OF LAND AND CONSTRUCTION OF PROPERTY WAS COMPLETED WITHIN A PERIOD OF THREE YEARS FROM THE D ATE OF TRANSFER OF THE PROPERTY SOLD, THE CIT(APPEALS) HAS OBSERVED IN PARA 7 OF HIS ORDER AS FOLLOWS:- 7. THE AR OF THE APPELLANT HAS FILED COPY OF THE RET URN OF INCOME FILED FOR THE AY 2009-10 FOR SHOWING INCOME FROM HOUSE PROPERTY WHICH IS GIVEN ON RENT SITUATED AT PLOT NO.39, RAJU NAGAR, THORAIPAKKAM, CHENNAI 96 AND ALSO SHOWN AN AMOUNT OF RENT RECEIPT AT ` 7,800/- ALONG WITH THE PROPERTY TAX PAID. THE AR OF THE APPELLANT HAS ALSO MADE AN ALTERNATIVE CLAIM THAT IF THE ASSESSING OFFICER VERSION THAT THE PROPERTY SOLD WAS NOT RESIDENTIAL PROPERTY AND IT IS ONLY LANDS THE SALE PROCEEDS HAVE BEEN REINVESTE D IN PURCHASING ANOTHER RESIDENTIAL HOUSE AT COIMBATORE AND THE AMOUNT INVESTED IN THE NEW PROPERTY IS AT ` 1,08,90,213/- WHICH INCLUDES THE COST OF LAND ALONG WITH REGISTRATION AND OTHER EXPENSES AT ` 46,32,535/- AND SUPERSTRUCTURE AS PER CONSTRUCTION AGREEMENT DATED 2709.2011 AT ` 61,86,678/-. THIS ALTERNATIVE CLAIM HAS 5 I.T.A. NO.2103/MDS/13 BEEN MADE BEFORE THE ASSESSING OFFICER ALSO THAT IF EXEMPTION OF U/S 54 IS NOT CONSIDERED THE SAME MAY BE CONSIDERED U/S 54F OF THE I.T. ACT IN CASE THE PROPER TY SOLD IS TREATED AS LANDS OTHER THAN RESIDENTIAL HOU SE PROPERTY, WHICH QUALIFIES FOR THE EXEMPTION U/S 54F OF THE I.T. ACT. HOWEVER, THE ASSESSING OFFICER HAS NOT CONSIDERED THE ALTERNATE CLAIM OF THE APPELLANT DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. CONSIDERING THE FACTS ON RECORD AND ON VERIFICATION OF THE EVIDENCE FILED, THE CIT(APPEALS) HAS DIRECTED THE A.O. TO AL LOW THE CLAIM THE EXEMPTION UNDER SECTION 54 OR ALTERNATIVE CLAIM UND ER SECTION 54F OF THE ACT. 5. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT AS PER THE FINDINGS OF THE ASSESSING OFFICER, ONLY VACANT LAND WAS SOLD AND THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER SE CTION 54 OF THE ACT AND ALSO CONCLUDED THAT THE ORDER OF THE CIT(AP PEALS) IS ERRED IN BOTH LAW AND FACTS. THE CIT(APPEALS) HAS RELIED ON ADDITIONAL EVIDENCE. HENCE, THE ORDER OF THE CIT(APPEALS) BE SET ASIDE TO THE FILE OF THE A.O. 6. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE PROPERTY PURCHASED BY THE ASSESS EE WAS A LONG TERM ASSET. THE CONSTRUCTION WAS MADE AND THE RENT AL INCOME WAS RECEIVED AND ALSO OFFERED TO TAX FOR ASSESSMENT YEA R 2009-10 UNDER THE HEAD INCOME FROM HOUSE PROPERTY FOLLOWED BY P ROOF OF RENT 6 I.T.A. NO.2103/MDS/13 RECEIPT AND PROPERTY TAXES PAID. THERE IS NO DOUBT THE PROPERTY IS A BUILDING WHICH IS SUBJECT TO RENTAL INCOME AND ASSE SSED UNDER THE HEAD HOUSE PROPERTY. THE PROVISIONS OF SECTION 5 4 OF THE ACT IS CLEAR THAT WHEN THE LONG TERM CAPITAL GAIN ARISES F ROM THE TRANSFER OF A LONG TERM CAPITAL ASSET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY, WHICH THE ASSESSEE HAS COMPLIED AND AS A PRE-CONDITION OF THE BUYER OF THE PROPERTY, THE HOUSE WAS DEMOLISHED AND SALE DEED WA S EXECUTED FOR ` 1.12 CRORES. THE LONG TERM CAPITAL GAINS COULD NO T BE APPROPRIATED FOR PURCHASE OR CONSTRUCTION OF NEW RE SIDENTIAL PROPERTY BEFORE DUE DATE OF RETURN OF INCOME. UNDE R SECTION 139(1) OF THE ACT, THE AMOUNT WAS DEPOSITED ON 26.07.2010 IN A NATIONALIZED BANK UNDER CAPITAL GAINS ACCOUNT SCHEM E. IN CONTINUATION OF COMPLIANCE OF CAPITAL GAIN EXEMPTIO N SCHEME, THE ASSESSEE HAS PURCHASED AND CONSTRUCTED RESIDENTIAL PROPERTY WITHIN THREE YEARS AFTER THE DATE OF TRANSFER OF THE PROPE RTY SOLD ON 3 RD JULY, 2009. 7. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AS WELL AS THE ORD ERS OF REVENUE AUTHORITIES. WE ARE OF THE OPINION THAT THE PROVIS IONS OF SECTION 54 7 I.T.A. NO.2103/MDS/13 AND SECTION 54F OF THE ACT ARE BENEFICIAL PROVISION S WHICH ARE TO BE CONSIDERED LIBERALLY AS BOTH ARE FOR CONSTRUCTION O F RESIDENTIAL HOUSE PROPERTIES WITHIN SPECIFIED TIME. THE ASSESSEE CLA IMED EXEMPTION UNDER SECTION 54 OF THE ACT BY PURCHASING LAND AND CONSTRUCTION OF RESIDENTIAL HOUSE WHICH IS NOT DISPUTED BY THE ASSE SSING OFFICER. 8. THE ONLY POINT OF DISPUTE ARISES IS WHETHER THE PROPERTY SOLD IS A VACANT LAND OR RESIDENTIAL HOUSE PROPERTY. IT WAS SUBMITTED BEFORE THE CIT(APPEALS) THAT THE PROPERTY, WHICH WA S SOLD, WAS LET OUT ON RENT IN THE EARLIER YEARS AND THIS WAS DULY SUPPORTED BY THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2009-10 ALONG WITH DETAILS OF RENT RECEIPT AND TAXES PAID. HENCE, THE CHARACTER OF THE PROPERTY HAS TO BE TREATED AS RESIDENTIAL PROPERTY AS THERE WAS A PRE-CONDITION TO DEMOLISH THE HOUSE PROPERTY AND EX ECUTE A SALE DEED, WHICH IS DISPUTED BY THE A.O. BUT NOT THE IN VESTMENT MADE BY THE ASSESSEE IN NEW RESIDENTIAL HOUSE AT COIMBATORE , COSTING ` 1,08,90,213/- AND THE POSSESSION ALONG WITH COMPLE TION CERTIFICATE ISSUED BY THE BUILDER ON 30.05.2012. HENCE, THE IN VESTMENT COMPLIED THE PROVISIONS OF LAW AND ATTAINED THE FIN ALITY. THE ISSUE IS NARROW DOWN TO WHETHER THE PROPERTY TAKES THE CHARA CTER OF LAND OR HOUSE PROPERTY. THE REVENUE HAS RAISED THE GROUNDS BEFORE US THAT THE CIT(APPEALS) HAS ERRED IN DIRECTING THE AS SESSING OFFICER TO 8 I.T.A. NO.2103/MDS/13 ALLOW EXEMPTION TO THE ASSESSEE UNDER SECTION 54 OR ALTERNATIVE CLAIM UNDER SECTION 54F OF THE ACT. THE PROPERTY W AS SOLD ON 03.07.2009. EVEN THOUGH IT IS VACANT LAND, WITHOUT PREJUDICE TO THE RIGHTS OF THE ASSESSEE, ASSESSEE IS ELIGIBLE FOR EX EMPTION UNDER SECTION 54F OF THE ACT. THE LD. D.R. SUBMITTED THA T THE PURCHASE OF LAND AND THE CONSTRUCTION AGREEMENT WERE MADE AFTER DUE DATE OF FILING OF THE RETURN FOR THE ASSESSMENT YEAR 2010-1 1, IT STILL SATISFIES THE CONDITIONS UNDER SECTION 54 OF THE ACT. BEFORE THE DUE DATE UNDER SECTION 139(1) OF THE ACT, THE ASSESSEE HAS D EPOSITED LONG TERM CAPITAL GAINS IN CAPITAL GAINS ACCOUNT SCHEME AND COMPLIED WITH THE PRE-CONDITIONS AND ALSO TOOK THE POSSESSIO N OF THE PROPERTY ON 30.05.2012 AND THERE IS NO DISPUTE OF POSSESSION BY THE A.O. IN THE ASSESSMENT ORDER. FURTHER, THE LD. D.R. RELIED ON THE JUDGMENT OF ANDHRA PRADESH HIGH COURT IN CIT V. SMT. ZAIBUNI SA BEGUM (1985) 151 ITR 320, WHERE LORDSHIPS HAVE CONSIDERED THE ISSUE IN RESPECT OF TRANSFER OF BUILDING AND LAND APPURTENAN T, AND THE ISSUE IS ON DIFFERENT FACTS WHERE THE CONSTRUCTION WAS IN A SMALLER AREA COMPARED TO THE OPEN LAND LEFT ON WHICH THE BUILDIN G IS CONSTRUCTED. THE SAME CANNOT BE APPLIED TO THE PRESENT CASE, AS THE ASSESSEE IN TOTO HAS SOLD THE LAND ALONG WITH BUILDING. 9 I.T.A. NO.2103/MDS/13 9. IN THE AFORESAID FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(APPEALS), WE ARE INCLINED TO UPHOLD THE SAME BY DISMISSING THE G ROUNDS RAISED BY THE DEPARTMENT. 10. IN THE RESULT, DEPARTMENT APPEAL IS DISMISSED. ORDER PRONOUNCED ON 11 TH SEPTEMBER, 2015 AT CHENNAI. SD/- SD/- ( ! ' ) ( ... ) (CHANDRA POOJARI) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 6 /DATED, THE 11 TH SEPTEMBER, 2015. 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