ACIT Non Corporate Circle 10(1), CHENNAI V. K.Sridharan, CHENNAI

ITA 2658/CHNY/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5045 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-05-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 06-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N V BALAJI
• Keywords: Deduction for capital gain; Capital asset; Set aside
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.2658/CHNY/2017 ! ' / ASSESSMENT YEAR : 2012-2013. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 10(1), CHENNAI VS. SHRI. K. SRIDHARAN, NO.25/13, CHELLAMMAL STREET, SHENOY NAGAR, CHENNAI 600 030. [PAN AACPS 3473R] ( / APPELLANT) ( /RESPONDENT) # $ % / APPELLANT BY : SHRI. AR.V. SREENIVASAN, IRS, JCIT &' # $ % /RESPONDENT BY : SHRI. N.V. BALAJI, ADVOCATE ( ) $ * /DATE OF HEARING : 15-05-2019 +,'! $ * /DATE OF PRONOUNCEMENT : 22-05-2019 / O R D E R PER INTURI RAMA RAO , ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 2, CHENNAI (CIT(A) FOR SHORT) DATED 31.08.2017 FOR THE ASSES SMENT YEAR (AY) 2012-13.. ITA NO. 2658/2017 :- 2 -: 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE ORDER OF THE LEARNED C T(A) IS ERRONEOUS IN LAW AND OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE C ASE. 2.1 THE LEARNED C!T(A) ERRED IN ALLOWING THE INDEXE D COST OF IMPROVEMENT ON CONSTRUCTION OF WALL AND ADDITION I BUILDING WITHOUT ANY SUPPORTING DOCUMENTS TO PROVE THE YEAR OF CONSTRUCTION AND TOTAL COST OF IMPROVEMENT INCURRED. 2.2 THE LEARNED CIT(A) OUGHT HAVE UPHELD THE DISALLOWANCE OF COST OF IMPROVEMENT AS THE ASSESSEE HAS NOT SUBMITTED THE SUPPORTING DOCUMENTS DURING T HE SCRUTINY ASSESSMENT PROCEEDINGS OR DURING THE FIRST APPELLATE PROCEEDINGS. 3.1 THE LEARNED.CIT(A) ERRED IN DELETING THE DISALL OWANCE OF DEDUCTION OF RS.1,16,OO,OOO/- CLAIMED U/S 4 THOU GH THE ASSESSEE HAS NOT COMPLIED WITH THE CONDITIONS O F PROVISIONS OF SECTION 54(1) BY COMPLETING THE CONST RUCTION WITHIN THREE YEARS. 3.2 THE LEARNED C!T(A) OUGHT TO HAVE SEEN THAT THE ASSESSEE HAS SOLD HIS PROPERTY 2.11.2011 AND HENCE CONSTRUCTION OF RESIDENTIAL HOUSE SHOULD BE COMPLET ED WITHIN THREE YEARS I.E. 2.11.2014. BUT THE ASSESSEE HAS COMPLETED ONLY IN FEBRUARY, 2015 WHICH IS BEYOND TH REE YEARS AND HENCE NOT ELIGIBLE DEDUCTION U/S 54 OF TH E INCOME TAX ACT, 1961. 3.3 THE LEARNED CIT(A) FAILED TO CONSIDER THE FACT THE CONTRACTOR OF THE ASSESSEE, M/S.K TECH HAS STATED V IDE ITS LETTER DATED 25.1.2015 THE WORK HAS NOT BEEN COMPLETED TILL 25.1.2015 AND IT WILL TAKE 60 DAY MO RE TO COMPLETE THE CONSTRUCTION WORK. 3.4 THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE ITA NO. 2658/2017 :- 3 -: DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF M/S. SARDARMAL KOTHARI IS DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE AS THE ASSESSEE IN THE RELIED O N DECISION PRODUCED THE EVIDENCES LIKE COMPLETION CERTIFICATE ISSUED BY THE MUNICIPALITY AND INVITATI ON CARD FOR HOUSE WARMING CEREMONY CONDUCTED, ETC. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT ASSESSEE IS AN INDIVIDUAL DER IVING INCOME UNDER THE HEADS INCOME FROM HOUSE PROPERTY , CAPITAL GAINS AND OTHER SOURCES. THE RETURN OF INCOME FOR THE AY 2012-13 WAS FILED ON 28.07.2012 DISCLOSING A TOTAL INCOME OF RS.1,27 ,34,089/- AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPL ETED BY THE DY. CIT, NON CORPORATE CIRCLE-10(1), CHENNAI (HEREINAF TER REFERRED AS AO) VIDE ORDER DATED 28.03.2015 PASSED U/S. 143(3 ) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AT TOTAL INCOM E OF RS. 1,57,89,415/-, WHILE DOING SO, THE AO HAD NOT ALLOWED COST OF IMPR OVEMENT, BROKERAGE CHARGES AND OTHER EXPENSES WHILE COMPUTIN G THE INCOME UNDER THE HEAD CAPITAL GAINS IN RESPECT OF PROP ERTY SITUATED AT PORUR, CHENNAI, SOLD ON 2.11.2011 ON THE GROUND THAT NO E VIDENCE WERE FILED IN SUPPORT OF THIS COST OF IMPROVEMENT, BROKERAGE C HARGES AND OTHER ITA NO. 2658/2017 :- 4 -: EXPENSES AND ALSO DISALLOWED THE CLAIM FOR DEDUCTIO N U/S.54F OF THE ACT ON THE GROUND THAT CONSTRUCTION OF NEW HOUSE PR OPERTY WAS NOT COMPLETED WITHIN THE SPECIFIED PERIOD OF THREE YEAR S FROM THE DATE OF SALE OF ORIGINAL ASSET. 4. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, AN A PPEAL WAS PREFERRED BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS), WHO VIDE IMPUGNED ORDER ALLOWED THE CLAIM FOR DEDUCTIO N U/S.54F OF THE ACT BY HOLDING THAT IT WOULD BE SUFFICE REQUIREMEN T IF THE SALE PROCEEDS WHERE INVESTED WITHIN A PERIOD OF THREE YE ARS BY PLACING RELIANCE ON THE DECISION OF JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. SARDAMAL KOTHARI AND ANOTHER, 302 ITR 286 AND SEVERAL JUDICIAL PRECEDENTS, AS REGARDS TO THE COST OF IMPROVEMENT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING T HE DOCUMENTS OF ORIGINAL PURCHASE AND THE DOCUMENTS OF LEASE DEED, CAME TO CONCLUSION THAT IMPROVEMENT OF THE ORIGINAL BUILDIN G WAS CARRIED OUT BY THE RESPONDENT-ASSESSEE AND FURTHER BROKERAGE EXP ENDITURE OF E3,04,000/- WAS NOT ALLOWED FOR WANT OF DETAILS. T HUS, THE APPEAL WAS PARTLY ALLOWED BY THE LD. COMMISSIONER OF INCOME TA X (APPEALS). 5. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE U S CHALLENGING THE CORRECTNESS OF THE DECISION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ITA NO. 2658/2017 :- 5 -: 6. ON THE OTHER HAND, THE COUNSEL PLACED RELIANCE ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE GROUNDS OF APPEAL NO.1, & 4 ARE GENERAL IN NATU RE THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION. GRO UNDS 2.1 & 2.2 CHALLENGES THE DECISION OF LD. COMMISSIONER OF INC OME TAX (APPEALS) ALLOWING THE COST OF IMPROVEMENT AS DEDUCTION WHILE COMPUTING CAPITAL GAINS. THE FINDINGS OF THE LD. COMMISSIONER OF INC OME TAX (APPEALS) IS AS UNDER :- 8.1. I HAVE ANALYSED THE DOCUMENTS RELATED TO THE ABOVE TRANSACTIONS. THE ORIGINAL PROPERTY COMPRISED OF 6 GROUNDS AND 2160 SQFT OF LAND AND 2100 SQ FT OF ACC ROOF SH EET OF BUILDING (ORIGINAL COST OF RS 2, 0 4,520/-). THIS HAS BEEN INDEXED TO ARRIVE AT A FIGURE OF 12,84,3861-. APPELLANT HAS STATED THAT HE HAS CONSTRUCTED A BUILDING OF 1650 S Q FT (1984- 85) ( RS 100 PER SQ FT) AND INDEXED TO 10,36,200/-. THE APPELLANT HAS SHOWN COST ,OF IMPROVEMENT FOR AN RCC BUILDING OF 600 SQ FT AT RS 1,50,000 INDEXED AT RS 6,46,978 (1984-85) AND FOR WALL AT RS 1,00,0 (1986-97). 8.2. IN ORDER TO EXAMINE WHETHER THE ABOVE ADDITION AL WORK HAS BEEN CARRIED OUT, AN ANALYSIS OF DOCUMENTS HAVE BEEN MADE. IN THE ORIGINAL DOCUMENT OF PURCHASE, TH E TOTAL EXTENT OF BUILDING WAS ONLY 2100 S FT. HOWEVER, AS PER THE LEASE DEED RELATING TO THE SPACE GIVEN FOR: RENT TO M/S. AJANTAHARDWARE STORES DATED 1-6-2011, THE BUILDING WAS OF 4395 SQ FT. THIS CLEARLY INDICATE THAT THE APPEL LANT HAS MADE CONSTRUCTION IN THE ABOVE' SITE. THIS IS AMPLE PROOF ITA NO. 2658/2017 :- 6 -: FOR THE CLAIM OF COST OF CONSTRUCTION AND COST OF IMPROVEMENT. THE RETURNS FOR THE ABOVE YEARS HAVE A LSO BEEN FILED INDICATING THE ABOVE RENTAL PAYMENTS. TH E AO IS DIRECTED TO ACCEPT THE CLAIM IN THIS REGARD. NO DETAILS WERE BROUGHT ON RECORD BY THE REVENUE RE BUTTING THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (APP EALS). NO PERVERSITY IN THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS POINTED OUT BY REVENUE. IN THE CIRCUM STANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). GROUNDS 2.1 & 2.2 FILED BY THE REVENUE ARE DISMISSED. 8. GROUNDS 3.1 TO 3.4 CHALLENGES THE DECISION OF LD. COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING TH E RELIEF GIVEN U/S.54F OF THE ACT. THE FINDINGS OF THE LD. COMMISS IONER OF INCOME TAX (APPEALS) ARE AS UNDER:- 7.2 HOWEVER, THE ASSESSING OFFICER DENIED THE EXEMP TION U/S.54F FOR ANOTHER REASON THAT THE CONSTRUCTION HA S NOT COMPLETED WITHIN THE DUE DATES PRESCRIBED. IN THIS CASE, THE DUE DATE AS PER SECTION 54F FOR COMPLETION OF CONST RUCTION SHOULD BE 1.11.2014, ASSESSING OFFICER HAS NOTED T HAT AS PER THE LETTER OF THE CONTRACTOR DATED 20.01.2015, ANOT HER 60 DAYS REQUIRED TO COMPLETE THE CONSTRUCTION. THEREFORE, A SSESSING OFFICER CONCLUDED THAT THE CONSTRUCTION WAS NOT COM PLETED WITHIN 3 YEARS AND DENIED EXEMPTION . 7.3 IT IS SEEN FROM THE A COUNTS RELATED TO PAYME NTS MADE FROM CAPITAL QAINS ACCOUNTS SCHEME THAT THE APPELLA NT HAS MADE PAYMENT OF RS 1,16,92,653 FOR INVESTING IN TH E PROPERTY FROM 22-8-201 TO 25-09-2014. THE TOTAL COST OF CONS TRUCTION IS ITA NO. 2658/2017 :- 7 -: ABOUT RS.1.20 CRORE. THIS SHOWS TAT 97.43% OF THE C OST HAS BEEN INCURRED WITHIN THE DUE DATE AND THE CONSTRUCT ION CAN BE TAKEN AS ALMOST COMPLETED. THE CONTRACTOR HAS STATE D IN HIS ABOVE REFERRED LETTER THAT THE PAYMENTS FROM THE AP PELLANT RECEIVED FORM 28-9-2012 AND HE HAS MENTIONED THAT A ON THE DATE OF HIS LETTER, ONLY FINAL COAT OF PAINTING AND FRONT COMPOUND WALL WERE PENDING. THIS ALSO SHOWS THAT SUBSTANTIAL WORK HAS BEEN COMPLETED BEFORE HAND. 7.4. IN THE CASE OF SHRI SARDARMAL KOTHARI, MADRAS HIGH COURT HAS DELIBERATED ON THE ISSUE WHERE THERE ARE SIMILA R ACTS. 'THE COURT HELD THAT IT THERE IS NO DISPUTE ABOUT THE FA CT THAT THE ASSESSEES HAVE INVESTED THE ENTIRE NET CONSIDERATIO N OF SALE OF CAPITAL ASSET IN THE LAND ITSELF AND SUBSEQUENTLY T HE A SSESSEEE HAVE INVESTED LARGE SUMS OF MONEY IN THE CONSTRUCTI ON OF THE HOUSE. THE COST OF INVESTMENT-IN LAND AND THE COST OF EXPENDITURE TOWARDS THE CONSTRUCTION OF T E HOUSES IS NOT IN DISPUTE. THE ONE AND ONLY GROUND ON WHICH THE ASSES SING OFFICER AS NON SUITED THE ASSESSEES FOR THE CLAIM O F EXEMPTION WAS THAT THE HOUSES HAVE NO BEEN COMPLETED. THERE R EMAINS SOME MORE CONSTRUCTION TO BE MADE.' IN THIS CASE, T HE HIGH COURT HELD THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPT ION UNDER SECTION 54F. 7.5. AR OF THE APPELLANT HAS ALSO RELIED ON RAJNEET SAND HU VS DCIT THE DELHI BENCH OF TRIBUNAL IN THE CASE OF SATISH C HANDRA GUPTA VS ASSESSING OFFICER (SUPRA) WHILE DECIDING THE ISSUE OF CLAIM OF EXEMPTION UNDER SECTION 54 OF THE ACT HAD HELD THAT T E EMPHASIS WAS ON THE UTILIZATION OR INVESTMENT OF CA PITAL GAINS IN THE CONSTRUCTION OF RESIDENTIAL HOUSE. IF THE ENTIRE AMOUNT DEPOSITED IN THE BAN ACCOUNT IS UTILIZED IN THE PROCESS OF CONSTRUCTION OF HOUSE,' THERE IS NO PT: VISION TO WITHHOLD OR WITHDRAW THE DEDUCTION ON THE GROUND THAT THE RESID ENTIAL HOUSE, SOUGHT TO BE CONSTRUCTED IS NOTCOMPLETE. REA DING HE PROVISIONS OF SECTIONS 54(1) AND 54(2) OF THE ACT IT WAS HELD BY THE TRIBUNAL AS UNDER IT IS NOT CORRECT TO INTERPRET BENEFICIAL PROVISION OF SECTION 54 IN THE MANNER AS DONE BY THE REVENUE AUTHORITIES. THE CLAIM CANNOT BE DENIED ON THE GROUND THAT CONSTRUCTION OF THE HOUSE STARTED BY THE ASSESSEE WAS NOT COMPLETE WITHIN THE STIPULETED PERIOD OF 3 YEARS AND SOME WORK WAS CARRIED OUT THEREAFTER. ITA NO. 2658/2017 :- 8 -: .LN TERMS OF SUB-SECTION (2) OF SECTION 54, THE ASSESSEE WAS ENTITLED TO THE AMOUNT APPROPRIATED BY HIM, OUT OF THE CAPITAL GAIN FOR CONSTRUCTION OF RESIDENTIAL HOUSE. THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE AND ALLOW DEDUCTIO N UNDER SECTION 54 AS DIRECTED ABOVE. ' B) SARDARMAL KOTHARI 302 ITR 286 (MADRAS) IN THE ABOVE CITATION THE ASSESSEE HAD INVESTED T HE CAPITAL GAINS IN LAND AND SUBSTANTIALLY COMPLETED THE CONS TRUCTION. THE TRIBUNAL TAKING NOTE OF I S OWN EARLIER ORDER IN THE CASE OF SEETHA SUBRAMANIAN VS ACIT REPORTED IN 59 ITR 94, WHEREIN THE TRIBUNAL HAD HELD THAT IN ORDER TO GET THE BENEFIT OF SECTION 54F THE ASSESSEE NEED NOT COMPLETE THE CONSTRUCTION OF THE HOUSE AND OCCUPY OF THE SAME. IT IS ENOUGH IF THE ASSESSSEE ESTABLISH THAT THE ASSESSEE HAD INVESTED THE ENTIRE NET CONSIDERATION WITHIN THE S TIPULATED PERIOD. I. SMT. RAJNEET SANDHU V. DY. CIT (2010) 36 (II) ITCL 657 (CHD 'B' TRIB). II. . SMT. SHASHI VARMA VS. COMMISSIONER OF INCOME TAX III. CIT VS. HILLA J.B. WADIA , (1995) 215 ITR 37 6 (BOM) IV. SEETHE SUBRAMANIAN. VS ASSISTANT COMMISSIONER OF INCOME-TAX. [59 ITR 94} ITAT, MADRAS 7.6 IT IS NOTED THAT TWO AMOUNTS WERE SPENT ONLY ON 7-11- 2014 ( RS 1,50,000) AND 5-11-2014 (RS. 2,50,000). A R HAS EXPLAINED THAT THOUGH WORK WAS COMPLETED BEFORE 1-1 1-2014, AN AMOUNT OF RS.4 LAKHS ALONE WAS PAID AT A LATER S TAGE. THIS AMOUNT OF RS 4,00,000 CANNOT BE TREATED AS INVESTME NT IN THE PROPERTY BEFORE THE DUE DATE. AO IS DIRECTED TO RECOMPUTE THE CAPITAL GAIN EXEMPTION AFTER EXCLUDIN G THE ABOVE AMOUNT. THIS GROUND IS PARTLY ALLOWED. ITA NO. 2658/2017 :- 9 -: THE DECISION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS BASED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COUR T AND ON PROPER APPRECIATION OF EVIDENCE ON RECORD AND THEREFORE W E DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, G ROUNDS 3.1 TO 3.4 FI LED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED ON 22ND DAY OF MAY, 2019, AT CHEN NAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER -) / CHENNAI . / DATED:22ND MAY, 2019. KV /0 $0& *12032'* / COPY TO: 0 1 . # / APPELLANT 3. 0 ( 4*056 / CIT(A) 5. 278 0& * 9 / DR 2. &' # / RESPONDENT 4. 0 ( 4* / CIT 6. 8:0;) / GF