Asha Marthanda Pillai, CHENNAI V. ITO, CHENNAI

ITA 3435/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4840 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 21-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MURALI MOHAN
• Assessee Lawyers: NITHYA SANKARAN
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO.3435/MDS/2016 / ASSESSMENT YEAR : 2013-2014. ASHA MARTHANDA PILLAI, NO.137, 4 TH STREET, RAMNAGAR, VELACHERY, CHENNAI 600 042. [PAN ANOPA 6890K] VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 16(1) CHENNAI. ( !' / APPELLANT) ( #$ !' /RESPONDENT) / APPELLANT BY : SMT. NITHYA SANKARAN, C.A. /RESPONDENT BY : SHRI. M. MURALI MOHAN, JCIT. /DATE OF HEARING : 25-04-2017 !' /DATE OF PRONOUNCEMENT : 27-04-2017 % / O R D E R ASSESSEE IN THIS APPEAL THROUGH ITS SEVEN GROUNDS RAISES TWO ISSUES. FIRST IS ON DENIAL OF EXEMPTION U/S.54 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON CAPITAL GAINS ARISIN G OUT OF SALE OF PROPERTY. SECOND IS REGARDING DISALLOWANCE OF BROK ERAGE OF ITA NO.3435/MDS/2016 :- 2 -: E1,00,000/- AS EXPENDITURE WHILE COMPUTING INCOME UNDER THE HEAD CAPITAL GAINS. 2. FACTS APROPOS ARE THAT ASSESSEE A SALARIED EMPLOYEE HAD FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSM ENT YEAR DISCLOSING INCOME OF E4,47,140/-. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, IT WAS NOTED THAT ASSESSEE HAD SOLD A PROPERTY AT M ADIPAKKAM, CHENNAI FOR A CONSIDERATION OF E63,00,000/- ON 28.0 9.2012. ASSESSEE HAD CLAIMED EXEMPTION U/S.54 OF THE ACT ON THE GAIN S ARISING OUT OF SALE OF ABOVE PROPERTY. AS PER THE ASSESSEE, SHE H AD INVESTED A SUM OF E58,00,000/- IN CONSTRUCTION OF A HOUSE PROPERT Y AND HENCE ELIGIBLE FOR SUCH CLAIM. INVESTMENTS CLAIMED BY THE ASSESSE E ON HER CONSTRUCTION OF A NEW RESIDENCE WERE AS UNDER:- SL. NO DATE OF PAYMENT AMOUNT PAID IN E 1 22.01.2012 5,00,000 2 06.02.2012 8,17,680 3 21.02.2012 13,17,680 4 10.04.2012 13,17,680 5 11.05.2012 13,31,554 6 12.03.2013 13,85,534 LD. ASSESSING OFFICER WAS OF THE OPINION THAT AS PE R SEC. 54 OF THE ACT, ASSESSEE OUGHT TO HAVE A PURCHASED A RESIDENTIAL P ROPERTY WITHIN A PERIOD OF ONE YEAR BEFORE THE DATE ON WHICH THE TR ANSFER TOOK PLACE. ITA NO.3435/MDS/2016 :- 3 -: AS PER LD. ASSESSING OFFICER THE WINDOW FOR MAKING SUCH PURCHASE WAS 28.09.2011 TO 28.09.2012. ACCORDING TO HIM UPTO 29 .09.2012 ASSESSEE HAD PAID ONLY A SUM OF E52,84,594/-. CLAI M OF THE ASSESSEE U/S. 54 OF THE ACT WAS RESTRICTED BY THE LD. ASSESS ING OFFICER TO THIS AMOUNT. LD. ASSESSING OFFICER ALSO DISALLOWED THE CLAIM OF BROKERAGE EXPENDITURE OF E1 LAKH ON THE SALE EFFECTED BY THE ASSESSEE, FOR WANT OF EVIDENCE. 3. ASSESSEES APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT ONLY UNSUCCESSFUL BUT RESULTED IN A REDUCTION OF THE CLAIM U/S. 54F OF THE ACT. AS PER LD. COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE HAD CONSTRUCTED A NEW HOUSE AND NOT PURCHASED A NEW HOUSE. OPINION OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) WAS THAT WHERE AN ASSESSEE CONSTRUCTED A RESIDENTIA L HOUSE SUCH CONSTRUCTION SHOULD HAVE HAPPENED WITHIN A PERIOD O F THREE YEARS FROM THE DATE OF TRANSFER OF THE ASSET GIVING ARISE TO C APITAL GAINS FOR CLAIMING EXEMPTION U/S. 54F OF THE ACT. AS PER LD. COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE HAD STARTED CONSTRUCT ION MUCH PRIOR TO THE DATE OF TRANSFER. IN OTHER WORDS, AS PER LD. C OMMISSIONER OF INCOME TAX (APPEALS) THE WINDOW OF ONE YEAR PRIOR U PTO THE DATE OF TRANSFER OF THE ASSET GIVING ARISE TO CAPITAL GAINS , FOR MAKING AN INVESTMENT, WAS AVAILABLE ONLY WHERE THE INVESTMENT WAS IN THE NATURE ITA NO.3435/MDS/2016 :- 4 -: OF PURCHASE AND NOT IN THE NATURE OF CONSTRUCTION. LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS OF THE OPINION THAT CON STRUCTION EXPENDITURE INCURRED BY THE ASSESSEE AFTER THE DATE OF TRANSFER WAS ONLY E13,85,534/- WHICH WAS SPENT ON 12.03.2013. A CCORDING TO HIM, THEREFORE ASSESSEE WAS ELIGIBLE FOR EXEMPTION OF E1 3,85,534/- U/S.54F OF THE ACT. HE RESTRICTED THE DEDUCTION ACCORDINGL Y. HE ALSO UPHELD THE DISALLOWANCE OF BROKERAGE EXPENDITURE OF E1,00, 000/-. 4. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INC OME TAX (APPEALS) SUBMITTED THAT LD. COMMISSIONER OF INCOME TAX (APPE ALS) HAD TAKEN A VERY NARROW VIEW OF SEC. 54(1) OF THE ACT. AS PER LD. AUTHORISED REPRESENTATIVE THE APARTMENT WHICH WAS PURCHASED BY THE ASSESSEE WAS BEING CONSTRUCTED BY ONE M/S. OZONE PROJECTS PR IVATE LIMITED AS A PART OF A MULTISTORIED FLAT PROJECT METROZONE PROJE CT. FURTHER AS PER LD. AUTHORISED REPRESENTATIVE, ASSESSEE ALONG WITH HER HUSBAND SHRI. P. KARTHIKEYAN, HAD ENTERED INTO AN AGREEMENT FOR SALE ON 31.01.2012 WITH THE PROJECT DEVELOPERS BASED ON WHICH THE PAYM ENTS WERE MADE. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT ASSESSEE WAS ONLY PURCHASING THE FLAT FROM THE DEVELOPER AND TWO SEPARATE AGREEMENTS, ONE FOR UNDIVIDED SHARE OF THE LAND AND OTHER FOR CONSTRUCTION OF A RESIDENTIAL FLAT WOULD NOT, PERSE CONVERT THE ITA NO.3435/MDS/2016 :- 5 -: ACQUISITION DONE BY THE ASSESSEE AS ONE WHICH WAS N OT A PURCHASE. RELYING ON THE JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS. J.R. SUBRAMANYA BHAT 165 ITR 571 AND THAT OF CO -ORDINATE BENCH IN THE CASE OF ACIT VS. SHRI. R. VASU (ITA NO.1656 /MDS/2008, DATED 9.7.2010 ), LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT DAT E OF COMMENCEMENT OF CONSTRUCTION OF NEW BUILDING WAS IR RELEVANT AND ASSESSEE WAS ENTITLED FOR DEDUCTION U/S. 54 OF THE ACT. 5. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTED THAT INVESTMENTS IN THE NEW RESIDENTIAL PROPERTY DONE BY THE ASSESSEE WAS WITHIN A TOTAL PERIOD OF THREE YEARS, OF WHICH ONE YEAR FELL PRIOR TO THE DATE OF TRANSFER OF ASSET ON WHICH CAPITAL GAINS AROSE AND TWO YEARS FELL AFTER THE SAID DATE. LD. ASSESSING OFFICER ALLOWED THE CL AIM FOR THE INVESTMENTS MADE BY THE ASSESSEES PRIOR TO THE D ATE OF TRANSFER WHEREAS LD. COMMISSIONER OF INCOME TAX (APPEALS) RE STRICTED SUCH CLAIM TO THE EXTENT OF THE PAYMENT MADE BY THE ASSE SSEE AFTER THE DATE OF TRANSFER. IT IS NOT DISPUTED THAT WHEN ASS ESSEE MADE PAYMENTS TO M/S. OZONE PROJECTS PRIVATE LIMITED, FO R ACQUIRING A 3 BHK APARTMENT IN ITS PROJECT CALLED METROZONE, ASSESSEE HAD NO INTENTION ITA NO.3435/MDS/2016 :- 6 -: TO DO A CONSTRUCTION ON HER OWN. HER ONLY INTENTION WAS TO ACQUIRE AN APARTMENT. IN MY OPINION, JUST FOR A REASON THAT C ONSTRUCTION WAS STARTED BEFORE THE DATE OF TRANSFER OF THE ASSET O N WHICH CAPITAL GAINS AROSE WOULD NOT BE A REASON TO DENY THE ASSESSEE TH E CLAIM OF DEDUCTION U/S. 54(1) OF THE ACT, WHEN IT HAD SATISF IED ALL OTHER CONDITIONS. HONBLE KARNATAKA HIGH COURT IN THE CA SE OF J .R. SUBRAMANYA BHAT (SUPRA) HAD HELD AT PARA 6 OF ITS JUDGMENT IS REPRODUCED HEREUNDER:- SO TOO WAS THE NEXT CONCLUSION REACHED BY THE TRIBUNAL. THE DATE OF THE SALE OF THE OLD BUILDING WAS FEBRUARY 9, 1977. THE COMPLETION OF THE CONSTRUCTION OF THE NEW BUILDING WAS IN MARCH, 1977 , ALTHOUGH THE COMMENCEMENT OF THE CONSTRUCTION STARTED IN 1976. IT IS IMMATERIAL, AS THE TRIBUNAL, IN OUR OPINION, HAS RIGHTLY OBSERVED, ABOUT THE DATE O F COMMENCEMENT OF THE CONSTRUCTION OF THE NEW BUILDING. SINCE THE ASSESSEE HAS CONSTRUCTED THE BUILDING WITHIN TWO YEARS FROM THE DATE OF SALE OF THE OLD BUILDING, HE WAS ENTITLED TO RELIEF UNDER SECTION 54 OF THE ACT . FURTHER, WE ALSO FIND THAT CO-ORDINATE BENCH IN THE CASE OF SHRI. R. VASU (SUPRA) HAD HELD AS UNDER AT PARA 8 OF ITS OR DER DATED 09.07.2010 IN ALMOST IN SIMILAR FACT SITUATION. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORDS. THE GRIEVANCE OF THE REVENUE IS THAT THE ASSESSEE HAD ENTERED INTO CONSTRUCTION AGREEMENT ON 11- 12-2000 WHEN THE SALE ON WHICH CAPITAL GAINS EXEMPT ION WAS CLAIMED WAS EFFECTED IN 2002 AND 2003. WHATEVER ITA NO.3435/MDS/2016 :- 7 -: MAY BE DATE OF THE CONSTRUCTION AGREEMENT, IT IS NO T DISPUTED BY THE REVENUE THAT THE UNDIVIDED SHARE OF THE LAND WHICH WAS FOR THE FLAT FOR WHICH CONSTRUCTION AGREEMENT WAS ENTERED INTO, WAS REGISTERED IN THE N AME OF THE ASSESSEE ON 20-3-2002. IT IS ALSO NOT DISPUT ED THAT THE FLAT WAS TAKEN POSSESSION BY THE ASSESSEE ON 5- 6- 2002. FOR CLAIMING EXEMPTION UNDER SEC. 54 AND 54F OF THE ACT, ASSESSEE HAD TO PURCHASE WITHIN A PERIOD O F ONE YEAR OR BEFORE TWO YEARS AFTER THE DATE ON WHICH TR ANSFER TOOK PLACE, A RESIDENTIAL HOUSE OR ASSESSEE HAD TO CONSTRUCT A RESIDENTIAL HOUSE WITHIN A PERIOD OF TH REE YEARS AFTER THE DATE OF SALE. HERE, IN OUR OPINION, THE INTENTION OF THE ASSESSEE WAS TO PURCHASE THE FLAT AND HE HAD NO INTENTION TO CONSTRUCT A FLAT BY HIMSELF. AS SESSEE BY HIMSELF HAD NOT CONSTRUCTED, BUT ON THE OTHER HA ND, HAD ENTERED INTO AN AGREEMENT FOR PURCHASING A FLAT FROM M/S.ALEXANDER PROPERTIES. NO DOUBT, ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR THIS PURPOSE ON 11-12 - 2000, BUT THE PROPERTY CAN BE DEEMED AS CONVEYED TO THE ASSESSEE ONLY WHEN THE UNDIVIDED SHARE ON WHICH THE FLAT WAS CONSTRUCTED WAS REGISTERED IN HIS NAME. UNDISPUTEDLY SUCH UNDIVIDED SHARE WAS REGISTERED ON 20- 3-2002 AND THEREFORE, THIS DATE ALONE COULD BE CONSIDERED FOR RECKONING THE DATE ON WHICH ASSESSEE HAD PURCHASED THE NEW FLAT. IF THAT IS SO, THIS WAS WEL L WITHIN THE PERIOD OF ONE YEAR BEFORE THE DATE OF SALE OR T WO YEARS AFTER SUCH SALE. AS MENTIONED BY CBDT IN CIRC ULAR NO.667REFERRED SUPRA, COST OF THE PLOT CANNOT BE EX CLUDED FROM THE PURCHASE PRICE OF THE HOUSE PROPERTY. IT I S ALSO NOT DISPUTED THAT THE COST OF THE UNDIVIDED SHARE PURCHASED BY THE ASSESSEE ITSELF WAS NOT SUFFICIENT TO JUSTIFY CLAIM UNDER SECTIONS 54 AND 54F OF THE ACT. AS HELD BY THE HONBLE ALLAHABAD HIGH COURT IN THE CA SE OF CIT VS. H.K.KAPOOR (SUPRA) EXEMPTION OF CAPITAL GAI NS COULD BE ALLOWED NOTWITHSTANDING THE FACT THAT THE CONSTRUCTION OF THE NEW HOUSE HAD BEGUN BEFORE THE SALE OF THE OLD HOUSE. VIEWED FROM ANY ANGLE, WE ARE OF THE OPINION THAT THE ASSESSEE WAS ELIGIBLE FOR CLAIMING EXEMPTION UNDER SEC. 54 AND 54F OF THE ACT. THE CIT(APPEALS) HAS RIGHTLY ALLOWED SUCH CLAIM AND NO INTERFERENCE IS CALLED FOR . ITA NO.3435/MDS/2016 :- 8 -: IN THE CIRCUMSTANCES, I AM OF THE OPINION THAT ASSE SSEES CLAIM U/S. 54(1) OF THE ACT WAS UNJUSTLY CURTAILED BY THE LD. ASSESSING OFFICER AS WELL AS BY LD. COMMISSIONER OF INCOME TAX (APPEALS) . I AM OF THE OPINION THAT ASSESSEE WAS ELIGIBLE FOR THE WHOLE OF THE CLAIM OF E58,00,000/- MADE BY HER U/S. 54F OF THE ACT. HOW EVER VIZ-A-VIZ ITS CLAIM REGARDING ALLOWANCE OF BROKERAGE FEES OF E1,0 0,000/-, ASSESSEE COULD NOT PRODUCE ANY EVIDENCE, EXCEPT FOR MAKING S UBMISSIONS OF GENERAL NATURE. I DO NOT FIND ANY REASON TO INTERF ERE WITH THE ORDERS OF THE LOWER AUTHORITIES ON THE ASPECT OF BROKERAGE DI SALLOWANCE. I ALLOW GROUNDS 2 TO 6 OF THE ASSESSEE WHEREAS HER GROUND N O.7 IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED ON THURSDAY, THE 27 TH DAY OF APRIL, 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 27 TH APRIL, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF