The ITO,Vapi Ward-2, Vapi V. Shri Jitendrasinh M.Parmar(HUF),

ITA 3102/AHD/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6632 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 16-07-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value; Valuation report
• Section: 54F

Judgement Text

ITA NO.3102-3111/AHD/200 7 . ASSESSMENT YEAR 2004-05. 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDA BAD. (BEFORE SHRI BHAVNESH SAINI AND SHRI A. K. GARODI A) I.T.A. NO. 3102/AHD/2007 (ASSESSMENT YEAR: 2004-2005 ) INCOME TAX OFFICER, WARD 2, VAPI, SHIVAM COMPLEX, NEAR P.F. OFFICE, N.H. NO.8, GIDC, VAPI . (APPELLANT) VS. SHRI JITENDRASINH M. PARMAR, (HUF), BHUMIKA CITY CENTER, OPP. WOODLAND HOTEL, SILVASSA, U.T. OF D & N.H. DIST. VALSAD. (RESPONDENT) PAN: AADHP 2497 R I.T.A. NO. 3111/AHD/2007 (ASSESSMENT YEAR: 2004-2005 ) INCOME TAX OFFICER, WARD 1, VAPI, SHIVAM COMPLEX, NEAR P.F. OFFICE, N.H. NO.8, GIDC, VAPI . (APPELLANT) VS. SHRI ASHWINSINH M. PARMAR, (HUF), BHUMIKA CITY CENTER, OPP. WOODLAND HOTEL, SILVASSA, U.T. OF D & N.H. DIST. VALSAD. (RESPONDENT) PAN: AAGHP 3402 H APPELLANT BY : SHRI BHUVNESH KULSHRESTHA, SR. D. R. RESPONDENT BY : NONE. ITA NO.3102-3111/AHD/200 7 . ASSESSMENT YEAR 2004-05. 2 ( )/ ORDER PER: SHRI A.K. GARODIA , A.M. BOTH THESE APPEALS ARE FILED BY THE REVENUE WHICH ARE DIRECTED AGAINST THE TWO SEPARATE ORDERS OF LD. C.I.T.(A)-VA LSAD BOTH DATED 15-3- 2007 FOR ASSESSMENT YEAR 2004-05 IN RESPECT OF TWO DIFFERENT ASSESSES I.E. JITENDRASINH M. PARMAR, HUF AND ASHWINSINH M. PARMA R, HUF. 2. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE B EING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. NOTICE HAS BEEN SERVED ON THE ASSESSEE AND ACKNOWLEDGEMENT REGARDING SERVICE OF NOTICE IS AVAILABLE ON RECORD AND HENCE, WE PROCEED TO DECIDE THESE APP EALS EX-PARTE QUA THE ASSESSEE. 4. THE GROUNDS RAISED BY THE REVENUE IN BOTH THESE CASES ARE IDENTICAL AND HENCE WE REPRODUCE GROUND FROM ITA NO.3102/AHD/ 2007, WHICH ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C.I.T. (A) HAS ERRED BY HOLDING THAT THE INDEXED CO ST OF ACQUISITION FOR THE PURPOSE OF CALCULATING THE LONG TERM CAPITAL GA IN HAS TO BE WORKED OUT ON THE FSI OF THE LAND EVEN THOUGH SUCH FSI WAS NOT IN EXISTENCE IN THE YEAR 1981. ITA NO.3102-3111/AHD/200 7 . ASSESSMENT YEAR 2004-05. 3 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT (A) HAS ERRED IN DIRECTING THE AO TO GRANT DEDU CTION U/S. 54F ON THE NET CAPITAL GAIN WITHOUT REDUCING THE DEDUCTION U/S. 54EC. 5. IT WAS AGREED BY THE LD. D.R. OF THE REVENUE THA T BOTH THESE CASES ARE IDENTICAL AND HENCE, WE REPRODUCE THE FACTS FROM IT A NO.3102/AHD/2007. 6. BRIEF FACTS ARE THAT IT IS NOTED BY THE AO IN PA RAGRAPH 3 OF THE ASSESSMENT ORDER THAT DURING THIS YEAR, THE ASSESSE E HAS SOLD LAND ADMEASURING 8523.56 SQ. METERS FOR RS. 87,36,649/- AND THE ASSESSEE HAD NOT OFFERED ANY CAPITAL GAIN FOR TAXATION IN THE CO MPUTATION OF INCOME STATING THAT IT WAS A SALE OF AGRICULTURAL LAND. IT IS ALSO NOTED BY THE AO THAT FURTHER IN THE COMPUTATION OF TOTAL INCOME, THE ASSESSEE HA S GIVEN A STATEMENT THAT IF THE CAPITAL GAIN TAX FOR THIS SALE OF AGRICULTURAL LAND IS TO BE LEVIED, DEDUCTION SHOULD BE ALLOWED U/S. 54F FOR INVESTMENT IN RESIDE NTIAL PROPERTY AND THE AMOUNT HAS BEEN SPENT ON CONSTRUCTION UP TO 31-3-20 04 IS OF RS.45,08,652/- AND THE ASSESSEE HAS FURTHER INVESTED IN SIDBI BOND OF RS.27.50 LAKHS FOR WHICH THE ASSESSEES CLAIM SHOULD BE CONSIDERED FOR DEDUCTION U/S. 54EC. SIMILARLY, IN THE CASE OF OTHER ASSESSEE I.E. ASHWI NSINH M. PARMAR, HUF, IT IS NOTED BY THE AO IN THE ASSESSMENT ORDER THAT SIM ILAR QUANTITY OF LAND WAS SOLD FOR SIMILAR VALUE AND SIMILAR IS THE CLAIM. IT IS THE CLAIM IN THAT CASE THAT FOR DEDUCTION U/S. 54F, THE AMOUNT SPENT ON CONSTRU CTION UPTO 31-3-2004 IS OF RS.4,46,223/- AND THE BALANCE AMOUNT OF RS.48,12 ,921/- HAS BEEN DEPOSITED IN THE SEPARATE BANK ACCOUNT AND THE ASSE SSEE HAS FURTHER INVESTED IN SIDBI BOND RS.27.50 LAKHS. REGARDING THIS CLAIM OF THE ASSESSEE THAT IT IS THE SALE OF AGRICULTURAL LAND, THE AO HAS HELD THAT IT IS NOT THE SALE OF AGRICULTURAL LAND. FOR THE PURPOSE OF WORKING OUT THE CAPITAL GAIN ON THE SALE OF LAND, IT IS NOTED BY THE A.O. THAT ALTHOUGH IT I S A CLAIM OF THE ASSESSEE THAT ITA NO.3102-3111/AHD/200 7 . ASSESSMENT YEAR 2004-05. 4 THE ASSESSEE HAS RECEIVED THIS PROPERTY UNDER GIFT AND THE PREDECESSOR OF THE ASSESSEE WAS HOLDING THE LAND UNDER HIS POSSESSION BEFORE, 1981 AND HENCE COST OF THE CAPITAL ASSET IS GOVERNED BY PROVISIONS OF SECTION 55 (2) (B) (II) OF THE ACT AS PER WHICH THE COST OF CAPITAL ASSET I S TO BE TAKEN BEING THE MARKET VALUE OF THE ASSET AS ON 1-4-1981 AT THE OPT ION OF THE ASSESSEE. IT IS FURTHER NOTED BY THE AO THAT IN COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSEE SUBMITTED A VALUATION REPORT FROM THE APPR OVED VALUER AND AS PER VALUATION REPORT AS ON 1-4-1981, THE COST OF SAID LAND PER SQ. METER IS RS.100/- ONLY. THE A.O. WORKED OUT THAT THE COST OF ACQUISITION OF THE CAPITAL ASSET SOLD AS PER THE MARKET VALUE OF THE ASSET AS ON 1-4-1981 IS ONLY RS.3,74,246/-. THE A.O. ALLOWED DEDUCTION OF INDEX ED COST OF ACQUISITION AT RS.17,32,759/- AND WORKED OUT THE CAPITAL GAIN AT R S.70,03,890/- IN THE CASE OF JITENDRASINGH M. PARMAR, HUF. IN THE CASE OF OTH ER ASSESSEE I.E. ASHWINSINGH M. PARMAR, HUF, THE A.O. WORKED OUT THE CAPITAL VALUE OF THE LAND AS ON 1-4-1981 FOR RS. 840933 @ RS.100/- PER S Q. METER FOR 8409.33 SQ. METERS OF LAND. THE INDEXED COST OF ACQUISITION FOR WHICH THE DEDUCTION WAS ALLOWED BY THE A.O. HAS BEEN WORKED OUT AT RS.38,93 ,519/-.IN THIS MANNER, THE A.O. WORKED OUT LONG TERM CAPITAL GAIN AT RS.70 ,03,890 IN THE CASE OF JITENDRASINH M. PARMAR, HUF AND RS.48,43,130/- IN T HE SECOND CASE I.E. SHRI ASHWINSINH M. PARMAR, HUF. THE A.O. ALLOWED THE DED UCTION OF RS.27.50 LAKHS IN EACH CASE U/S. 54EC. REGARDING THE DEDUCT ION CLAIMED U/S. 54F, THE A.O. ALLOWED DEDUCTION OF RS.20,43,474/- IN THE CAS E OF SHRI JITENDRASINH M. PARMAR, HUF AND IN THE SECOND CASE, HE ALLOWED DEDU CTION OF RS. 4,77,909/- U/S. 54F BEING AGGRIEVED, BOTH THE ASSESSEES CARRI ED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). HE HAS DIRECTED THE A.O. TO ALLOW DEDUCTION OF INDEXED COST OF ACQUISITION ON THE BASIS OF FAIR MA RKET VALUE OF FSI AS ON 1- 4-1981 AS AGAINST FAIR MARKET VALUE OF LAND AS HAS BEEN DONE BY THE A.O. ITA NO.3102-3111/AHD/200 7 . ASSESSMENT YEAR 2004-05. 5 REGARDING THE QUANTUM OF DEDUCTION TO BE ALLOWED U/ S. 54F, IT WAS HELD BY THE CIT (A) THAT THERE ARE NO PROVISION FOR REDUCIN G THE DEDUCTION U/S. 54EC WHILE GRANTING DEDUCTION U/S. 54F AND HENCE, THE A. O. SHOULD ALLOW DEDUCTION U/S. 54F WITHOUT REDUCING THE DEDUCTION A LLOWED BY HIM U/S. 54EC FOR THE PURPOSE OF DEDUCTION ALLOWABLE U/S. 54F. N OW, THE REVENUE IS IN APPEAL BEFORE US IN BOTH THESE CASES. 7. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE D.R. A ND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOTED BY THE CIT (A) THAT THERE ARE TWO DISPUTES BEFORE HIM. FIRST IS WITH RE GARD TO INDEXED COST OF ACQUISITION AND THE SECOND DISPUTE IS REGARDING CAL CULATION OF DEDUCTION U/S. 54F. FIRST ASPECT HAS BEEN DECIDED BY HIM ON THE BA SIS OF PARAGRAPH 6 AND 7 OF HIS ORDER WHICH ARE BEING REPRODUCED BELOW FROM HIS ORDER IN THE CASE OF JITENDRASINH M. PARMAR, HUF IN ITA NO.3102/AHD/2007 :- 6. I HAVE PERUSED THE SUBMISSION MADE BY THE LD. A .R. APPEARING ON BEHALF OF THE APPELLANT ALONG WITH THE FACTS OF THE CASE. THE APPELLANT HAS SOLD FSI ADMEASURING 8523.56 SQ. MTRS . THE A O HAS ARRIVED AT THE AREA OF LAND BY APPLYING FORMULA OF FSI AS APPLICABLE. THEREAFTER THE INDEXED COST OF LAND WAS CALCULATED AND CAPITAL GAINS DETERMINED. THE APPELLANT HAS SUBMITTED VALUATION A S AT 1-4-1981 FROM THE AUTHORIZED VALUER. THERE IS NO DISPUTE AS REGARDS THE VALUE OF FSI. THE AO HAS STATED THAT FSI WAS NOT IN EXIST ENCE IN THE YEAR 1981 AND HENCE HE CALCULATED THE RELATABLE PROPORTI ONATE AREA OF LAND AND INDEXED COST OF ACQUISITION ON THE BASIS OF FAR I MARKET VALUE AS ON 1-4-1981. 7. THERE IS NO BASIS FOR CALCULATION OF CAPITAL GAI NS BASED ON SOME ESTIMATES. THE APPELLANT HAS SOLD FSI IN THE FORM O F DEVELOPMENT RIGHT. AS CONSIDERATION HE HAS RECEIVED SOME CONSTR UCTED SHOPS AND ITA NO.3102-3111/AHD/200 7 . ASSESSMENT YEAR 2004-05. 6 MONETARY CONSIDERATION AMOUNTING TO RS.17,61,354/-. THE APPELLANT HAS INVESTED PART OF PROCEEDS IN BONDS ISSUED BY SI DBI AND PART IN A RESIDENTIAL HOUSE. THE LANGUAGE OF THE RELEVANT PRO VISIONS ARE CLEAR AND UNAMBIGUOUS. CAPITAL GAINS ARE CHARGED TO TAX U /S. 45 BY VIRTUE OF A DEEMING FICTION. THE APPELLANT HAS TRANSFERRED A CAPITAL ASSET IN THE FORM OF FSI. THE ASSESSING OFFICER IS NOT CORRECT I N HOLDING THAT ONLY 3742.46 SQ. METERS LAND HAS BEEN SOLD. THE CAPITAL ASSET, ITS AREA AND VALUE HAS TO BE ADOPTED AS PER THE SALE/TRANSFER DO CUMENT IN THE ABSENCE OF ANY OTHER FACTS. THERE IS NO DISPUTE AS REGARDS FAIR VALUE OF FSI AS ON 1-4-81. THE APPELLANT SUCCEEDS IN GROUND NO.1 AND THE ASSESSING OFFICER IS DIRECTED TO RECALCULATE THE CO ST OF ACQUISITION AS PER DIRECTIONS IN THIS ORDER. 9. FROM THE ABOVE TWO PARAGRAPHS OF THE ORDER OF CI T (A), WE FIND THAT IT IS STATED BY HIM IN PARAGRAPH 6 OF HIS ORDER THAT T HERE IS NO DISPUTE AS REGARDS THE VALUE OF FSI WHEREAS WE FIND THAT IT HAS BEEN P OINTED OUT BY THE A.O. IN PARAGRAPHS 5.1 TO 5.3 OF THE ASSESSMENT ORDER THAT AS PER THE VALUATION REPORT SUBMITTED BY THE ASSESSEE FROM THE APPROVED VALUER, VALUATION AS ON 1-4- 1981 OF LAND WAS RS.100 PER SQ. METER. THE AO HAS WORKED OUT THAT FROM THE FACTS OF THE CASE, IT CAN BE SEEN THAT THE LAND OF GROUND FLOOR ADMEASURING 1235.01 SQ. METER ONLY IS TANGIBLE ASSET AND THE BA LANCE FSI OF 7288.55 IS IN FACT INTANGIBLE ASSET AVAILABLE. IT IS ALSO NOTED BY THE A.O. THAT AS PER THE REVISED PLAN AREA FOR CONSTRUCTION OF GROUND FLOOR IS 33% OF THE LAND AVAILABLE AND THEREFORE, UNDER THE GIFT DEED, ASSES SEE IS IN RECEIPT OF LAND IN QUESTION OF 3742.46 SQ. METER ONLY. 10. THE LD. CIT (A) HAS NOT GIVEN ANY FINDING AS TO HOW THESE WORKING OF THE A.O. ARE NOT CORRECT AND HOW THERE IS NO DISPUT E REGARDING VALUE OF FSI COST. IT IS NOT NOTED BY HIM THAT ANY VALUATION RE PORT OF FSI AS ON 1-4-81 WAS BEFORE THE A.O. OR BEFORE THE LD. CIT (A). VALU ATION REPORT OF REGISTERED VALUER MADE AVAILABLE BEFORE THE A.O. WA S FOR VALUATION OF LAND AS ITA NO.3102-3111/AHD/200 7 . ASSESSMENT YEAR 2004-05. 7 ON 1-4-81 AS HAS BEEN NOTED BY THE A.O. AND REFERRE D TO. UNDER THESE CIRCUMSTANCES, WE FEEL THAT THIS ISSUE SHOULD GO BA CK TO THE FILE OF THE A.O. FOR FRESH DECISION. THE ASSESSEE HAS TO FURNISH BEF ORE THE A.O., THE COPY OF GIFT DEED IN QUESTION AS PER WHICH THE PROPERTY WAS RECEIVED BY THE ASSESSEE TO FIND OUT WHAT WAS ACTUALLY GIFTED TO THE ASSESSE E WHETHER IT WAS LAND GIFTED TO THE ASSESSEE OR FSI AND WHAT IS THE MARKE T RATE AS ON 1-4-81 OF THE LAND/FSI AS THE CASE MAY BE. ON THE BASIS OF MARKE T VALUE OF LAND/FSI RECEIVED BY THE ASSESSEE AS GIFT TO THE EXTENT SOLD BY THE ASSESSEE FOR WHICH CAPITAL GAIN IS BEING CALCULATED, COST OF ACQUISITI ON SHOULD BE WORKED OUT AND THE SAME SHOULD BE INDEXED AS PER THE INDEX OF 1-4- 81 AND IN THE YEAR OF SALE. IT IS SUBMISSION OF THE ASSESSEE BEFORE THE L D. CIT (A) THAT FOR THE PURPOSE OF ARRIVING THE COST OF LAND, AREA OF LAND MAY PLEASE BE TAKEN 8253.56 SQ. MTR. AND THE SAME HAS BEEN ACCEPTED BY THE LD. CIT (A) BUT NO BASIS HAS BEEN INDICATED BY THE ASSESSEE IN HIS SUB MISSIONS WHICH ARE REPRODUCED BY THE LD. CIT (A) ON PAGES 3 AND 4 OF T HE ORDER AND NO BASIS HAS BEEN GIVEN BY THE CIT(A) AS TO HOW THE AREA OF LAND IS 8523.56 SQ. METER. THE AREA OF LAND IN QUESTION SHOULD BE EXAC TLY WORKED OUT ON THE BASIS OF GIFT DEED, CERTIFICATE FROM ARCHITECT CERT IFYING AREA AND APPROVED PLAN ETC. THE AO SHOULD PASS NECESSARY ORDER AS PER LAW, AS PER ABOVE DISCUSSION AFTER ALLOWING ADEQUATE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. 11. REGARDING THE SECOND ISSUE, THE FINDING OF THE LD. CIT (A) IS THIS THAT THERE ARE NO PROVISION TO REDUCE DEDUCTION U/S. 54E C WHILE GRANTING DEDUCTION U/S. 54F. WHEN WE GO THROUGH THE PROVISIO NS OF SECTION 54F, WE FIND THAT DEDUCTION IS ALLOWABLE IN PROPORTION TO T HE INVESTMENT IN NEW ASSET AND NET CONSIDERATION IN RESPECT OF SALE OF ORIGINA L ASSET. THE SAME ITA NO.3102-3111/AHD/200 7 . ASSESSMENT YEAR 2004-05. 8 PROPORTION SHOULD BE APPLIED TO THE AMOUNT OF CAPIT AL GAIN AND DEDUCTION IS ALLOWABLE. SUPPOSE IF THERE IS CONSIDERATION OF RS. 100/- AND RS.60 HAS BEEN INVESTED IN THE NEW ASSET AND THE TOTAL LONG TERM C APITAL GTAIN IS RS.80/-, THE DEDUCTION ALLOWABLE IS RS.48 U/S. 54F. THE A.O. SH OULD RE-CALCULATE THE DEDUCTION ALLOWABLE TO ASSESSEE U/S.54F IN THIS MAN NER AS DISCUSSED ABOVE. THE JUDGMENT OF LD. CIT (A) IS ALSO SIMILAR AND HEN CE, ON THE SECOND ISSUE, WE FEEL THAT NO INTERFERENCE IS CALLED FOR. 12. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE A RE PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 13 - 05 - 2011. SD/- SD/- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER. AC COUNTANT MEMBER. AHMEDABAD. DATED: 13 -05- 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VALSAD. 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR I TAT,AHMEDABAD. ITA NO.3102-3111/AHD/200 7 . ASSESSMENT YEAR 2004-05. 9 1.DATE OF DICTATION 9 - 5 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 11 / 5 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER.