Shri.Bijukumar Sadasivan, Bangalore V. Income Tax Officer, Bangalore

ITA 2188/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8565 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 13-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIJUKUMAR SADASIVAN
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH - SMC A BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 2188/ BANG/201 6 (ASSESSMENT YEAR : 2011 - 12 ) SHRI BIJUKUMAR SADASIVAN, FLAT NO.A - 201, NO.184 CHITRAKUT ENVIRONS, VIBHUTHIPURA MAIN ROAD , VEERABHADRA 2 ND STAGE, BANGALORE - 560 037 PAN AGEOJ 6467F VS. INCOME TAX OFFICER, WARD 14( 5 ) , BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI BIJUKUMAR SADASIVAN, ASSESSEE. RESPONDENT BY : SHRI AR.V.SREENIVASAN, JCIT (D.R) DATE OF H EARING : 23.02.2017. DATE OF P RONOUNCEMENT : 28 .02. 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DT.12.8.2016 OF COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 2 ITA NO. 2188 /BANG/ 2016 3. I HAVE HEARD THE ASSESSEE IN PERSON AS WELL AS LEARNED DEPARTMENTA L REPRESENTATIVE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ISSUE IN THIS APPEAL IS REGARDING RESTRICTING THE CLAIM OF THE ASSESSEE UNDER SECTION 54 TO RS.13,22,700 AS AGAINST THE CLAIM OF RS.34,10,574. DURING THE YEAR UNDER CONSIDERATION THE AS SESSEE HAD S OLD THE RESIDENTIAL PROPERTY AT S.NO.2 88 /78 SITUATED IN VAZHOOR VILLAGE, CHANGANACHERRY TALUK, KOTTAYAR DIST., KERALA FOR A CONSIDERATION OF RS.34,50,000. THE ASSESSEE PURCHASED NEW RESIDENTIAL PROPERTY BEING A FLAT BEARING NO. A 210, 2 ND FLO OR, BLOCK A IN CHITRAKUT ENVIRONS, VIBHUTHIPURA VILLAGE, K.R. PURAM HOBLI, BANGALORE. THE ASSESSEE CLAIMED THAT THE COST OF NEW PROPERTY WAS RS.35,50,000 HOWEVER THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE AND FOUND THAT AS PER THE VAL UE FIXED BY 3 ITA NO. 2188 /BANG/ 2016 THE STAMP DUTY AUTHORITY, THE NEW PROPERTY WAS PURCHASED FOR A CONSIDERATION OF RS.13,22,700. HENCE THE ASSESSING OFFICER HAS RESTRICTED THE CLAIM OF DEDUCTION UNDER SECTION 54F TO RS.13,17,358 AND DISALLOWED THE BALANCE AMOUNT OF RS.20,93,216 WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE CIT (APPEALS) BUT COULD NOT SUCCEED. 4. BEFORE THE TRIBUNAL, THE ASSESSEE HAS POINTED OUT THAT THE ASSESSEE HAS PURCHASED THI S NEW FLAT VIDE AGREEMENT DT.19.7.2010 FROM ONE MR. SURESH RAO WHO WAS THE ORIGINAL ALLOTTEE OF FLAT FROM THE DEVELOPERS I.E. M/S. CHITRAKOOT DEVELOPERS. THEREFORE THE ORIGINAL ALLOTTEE OF THE FLAT BECOME THE CONFIRMING PARTY IN THE TRANSACTION OF PURCHA SE AND SALE OF THE SAID FLAT. THE ASSESSEE PAID A SUM OF RS.30,50,000 TO THE CONFIRMING PARTY AND BALANCE AMOUNT OF RS.13,22,700 TO THE DEVELOPER. HE HAS FURTHER POINTED OUT THAT THE ENTIRE PAYMENT OF RS.35,50,000 WAS PAID THROUGH CHEQUES. THUS THE AS SESSEE HAS CONTENDED THAT WHEN THE ASSESSEE HAS INVESTED TOTAL AMOUNT OF RS.35,50,000 IN THE NEW RESIDENTIAL HOUSE THEN THE CLAIM OF THE ASSESSEE CANNOT BE RESTRICTED TO RS.13,17,358. HE HAS RELIED UPON THE DECISION OF THE CO - ORDINATE BENCH DT.26.8.2015 IN THE CASE OF SRI S. TEJRAJ RANKA VS. ITO IN ITA NO.82/BANG/2014. 4 ITA NO. 2188 /BANG/ 2016 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDER OF AUTHORITIES BELOW AND SUBMITTED THAT AS PER THE SALE DEED THE SALE CONSIDERATION HAS BEEN SHOWN AT RS.13,22,700. IT IS ALSO THE VALUE FIXED BY THE STAMP REGISTERING AUTHORITY THEREFORE THE ASSESSING OFFICER HAS CORRECTLY ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT. 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, IT IS NOTED THAT IN THE SALE DOCUMENT WITH THE DEVELOPER/BUILDER, THE CONSIDERATION IS SHOWN ONLY RS.13,22,700 . S INCE THIS FLAT IN QUESTION WAS EARLIER ALLOTTED TO ONE MR. SURESH RAO WHO IS A CONFIRMING PARTY IN THE TRAN SACTION OF SALE AND PURCHASE OF THE PROPERTY BY THE ASSESSEE FROM M/S. CHITRAK U T DEVELOPER AND A SUM OF RS.30,50,000 WAS PAID TO THE CONFIRMATION PARTY THE REFORE THE AMOUNT OF INVESTMENT HAS TO BE CONSIDERED NOT ONLY THE PAYMENT MADE TO THE BUILDER BUT ALSO THE PAYMENT MADE TO THE CONFIRMING PARTY. THE ASSESSEE HA D ALSO EXPLAINED BEFORE THE CIT (APPEALS) THAT THE ASSESSEE HAS PAID THIS AMOUNT TO THE CONFIRMING PARTY THROUGH CHEQUES AND THE DETAILS OF WHICH HAS BEEN GIVEN BY THE CIT (APPEALS) IN PARA 5 O F THE IMPUGNED ORDER AS UNDER : 5 ITA NO. 2188 /BANG/ 2016 THUS IT IS CLEAR THAT THE CIT (APPEALS) HAS NOT DISPUTED THE PAYMENT MADE BY THE ASSESSEE TO THE CONFIRMING PARTY AS WELL AS FURTHER PAYMENT TO THE INTERIOR DESIGNER FOR CARRYING OUT THE WORK. THE ASSESSEE HAS ALSO PRODU CED THE AGREEMENT DT.19.07.2010 WHICH IS A TRIPARTITE AGREEMENT BETWEEN THE ASSESSEE, CONFIRMING PARTY MR. SURESH RAO AND M/S. CHITRAK U T DEVELOPERS. ALL THE DETAILS OF THE PAYMENT IN QUESTION ARE ALSO MENTIONED IN THE SAID AGREEMENT THEREFORE THE PAYMENT TO THE CONFIRMING PARTY CANNOT BE IGNORED FOR THE PURPOSE OF SECTION 54. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE 6 ITA NO. 2188 /BANG/ 2016 CO - ORDINATE OF THIS TRIBUNAL IN THE CASE OF SRI S. TEJRAJ RANKA VS. ACIT (SUPRA) IN PARAS 12 TO 19 AS UNDER : 12. WE HAVE GIV EN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSION S . THE RELEVANT PROVISIONS OF SEC.54F OF THE ACT, IN SO FAR AS IT RELEVANT FOR THE PRESENT CASE, READS THUS: SEC.54F: CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVE STMENT IN RESIDENTIAL HOUSE. (1) SUBJECT TO THE PROVISIONS OF SUB - SECTION (4), WHERE IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG - TERM CAPITAL ASSET, NOT BEING A RESIDENT IAL HOUSE (HEREINAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DAT E CONSTRUCTED, A RESIDENTIAL HOUSE IN INDIA] (HEREINAFTER 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, (A) IF THE 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 UNDER SECTION 45; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN 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: .. 13. THE CLAIM OF THE ASSESSEE, IN THE PRESENT CASE, IS THAT HE HAS CONSTRUCTED A RESIDENTIAL HOUSE AND IS THEREFORE ENTITLED TO EXEMPTION U/S.54F OF THE ACT. THE TERM RESIDENTIAL HOUSE IS NOT DEFINED IN THE ACT. THEREFORE THE SAID EXPRESSION SHOULD BE UNDERSTOOD IN THE NORMAL SENSE OF A HOUSE, WHICH IS HABITABLE. THE RE IS NO DISPUTE THAT THE ASSESSEE IN FACT PAID A SUM OF RS.52,60,292 TO THE DEVELOPER FOR ACQUIRING A FLAT WHICH WAS HABITABLE WITH ALL AMENITIES IN PLACE. THE CONFIRMATION OF THE DEVELOPER/BUILDER IS ON RECORD. IN ADDITION TO THE SAME , THE ASSESSEE ALS O INCURRED STAMP DUTY AND REGIS TRATION CHARGES OF RS.2,10,595 . THUS THE ASSESSEE HAS INVESTED A SUM OF RS.54,70,887 IN ACQUIRING A RESIDENTIAL HOUSE. THE ASSESSEE SHOULD THEREFORE BE ALLOWED THE DEDUCTION CLAIMED U/S.54F OF THE ACT, ON A PLAIN READING OF THE PROVISIONS OF SEC.54F OF THE ACT. 7 ITA NO. 2188 /BANG/ 2016 14. THE AGREEMENT DATED 17.5.2007 IS THE FIRST DOCUMENT BETWEEN THE DEVELOPER AND THE ASSESSEE FOR PURCHASE OF THE PROPERTY. THIS AGREEMENT REFERS TO ONLY UNDIVIDED SHARE OF LAND AND FLAT MEASURING ABOUT 2025 SQ .FT. TOGETHER WITH ONE COVERED CAR PARK FOR A CONSIDERATION OF RS. 44,55,000 + REGIS TRATION CHARGES OF RS.2,00,000 AS PER SCHEDULE E TO THIS AGREEMENT. SCHEDULE E REFERS ONLY TO THE COST OF THE BUILT UP AREA OF 2025 SQ.FT. AT RS.2,200 PER SQ.FT. PAR - II O F SCHEDULE - E AND ARTICLE IV OF THE AGREEMENT GIVES A LIST OF OTHER CHARGES TO BE PAID BY THE ASSESSEE. 15. THE NEXT DOCUMENT IS THE REGISTERED SALE DEED DATED 25.6.2008 WHICH IS FOR A SUM OF RS.22,05,000 WHICH IS TOWARDS UNDIVIDED SHARE OF LAND AND FLA T TOGETHER WITH 2 COVERED CAR PARKS. 16. THE THIRD DOCUMENT IS THE LETTER DATED 18.6.2008 BY THE DEVELOPER WHICH REFERS TO A SUM OF RS.52,60,292 AS THE TOTAL COST OF THE PROPERTY PAID BY THE ASSESSEE. THIS LETTER REFERS TO THE BASIC COST OF THE PROPER TY AS RS.22,05,000 . 2 CAR PARKS H AVE BEEN VALUED AT RS.3,00,000 . TO THIS EXTENT , THERE APPEARS TO BE A CONTRADICTION BETWEEN THE REGISTERED SALE DEED AND THIS LETTER OF THE BUILDER. THE OTHER CHARGES MENTIONED IN THIS LETTER , IN OUR VIEW , CANNOT BE REGA RDED AS IMMOVABLE PROPERTY TO BE INCLUDED IN THE REGISTERED SALE DEED AS VALUE OF PROPERTY. THESE ARE ALL PROVIDED BY THE BUILDER IN HIS CAPACITY AS DEVELOPER AND BUILDING CONTRACTOR FOR THE ASSESSEE. THEREFORE , IN OUR VIEW , THERE CAN BE NO ADVERSE INFER ENCE DRAWN AGAINST THE ASSESSEE. 17. THE FACT REMAINS THAT THE ASSESSEE HAS PARTED WITH A SUM OF RS.54,70,887 TO ACQUIRE A RESIDENTIAL HOUSE , IN THE SENSE, A HOUSE WHICH IS HABITABLE. THEREFORE AS FAR AS PROCEEDINGS UNDER THE ACT ARE CONCERNED, THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF DEDUCTION U/S.54F OF THE ACT. THE FACT THAT THERE WAS UNDERVALUATION OF THE VALUE OF THE PROPERTY FOR THE PURPOSE OF STAMP DUTY, IS AN ISSUE WHICH IS ALIEN TO THE QUESTION OF ALLOWING DEDUCTION U/S.54F OF THE ACT, WHEN THE EVIDENCE ON RECORD CLEARLY SHOWS INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE TO THE EXTENT OF RS.54,70,887 . 18. THE AO AND THE CIT(A) HAVE IGNORED THE FACT THAT THE ASSESSEE HAS IN FACT MADE INVESTMENT TO THE EXTENT OF RS.54,70,887 AND THEREFORE THE DEDUCTION CLAIMED U/S.54F OF THE ACT OUGHT TO BE ALLOWED. THE FACT THAT THERE WAS DISCREPANCY BETWEEN THE AMOUNT SET OUT IN THE REGISTERED DOCUMENT AND THE AGREEMENT WITH THE BUILDER HAS ALREADY BEEN NOTICED BY THE STATE REGISTRATION AUTHOR ITIES AND THE ASSESSEE IS CONTESTING THOSE PROCEEDINGS . THOSE PROCEEDINGS WILL NOT HAVE ANY BEARING WITH REGARD TO THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.54F OF THE ACT, AS THE FACTUM OF INVESTMENT IN ACQUIRING A RESIDENTIAL HOU SE AND PAYMENT OF RS. 54,70,887 HAS BEEN ESTABLISHED AND NOT DISPUTED BY THE REVENUE. 19. WE ARE THEREFORE OF THE VIEW THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.54F OF THE ACT OUGHT TO BE ALLOWED AS CLAIMED BY THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 8 ITA NO. 2188 /BANG/ 2016 7. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WHERE THE TOTAL PAYMENT MADE BY THE ASSESSEE FOR PURCHASE OF NEW RESIDENTIAL HOUSE IN QUESTION IS NOT IN DISPUTE THEN THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING THE CLAIM UNDER SECTION 54/54F ONLY TO THE EXTENT OF PAYMENT TO THE DEVELOPER IS NOT JUSTIFIED. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW IS SET ASIDE AND THE CLAIM OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPE AL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH F EB., 201 7 . SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 28 .02 .2017. *REDDY GP COPY TO : 1 . APPE LLANT 2 . RESPONDENT 3 . C.I.T. 4 . CIT(A) 5 . DR, ITAT, BANGALORE. 6 . GUARD FILE. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE.