N. Lakshmi Devi, Nalgonda, Hyderabad V. ITO,Ward-1, Nalgonda, Nalgonda

ITA 345/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6284 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Capital asset; Cost of acquisition; Assessment record; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 54B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NOS. 344 & 345/HYD/2016 ASSESSMENT YEAR: 2008-09 & 2009-10 SMT. N. LAKSHMI DEVI, (W/O. LATE DAMODHAR RAO) MIRYALAGUDA, NALGONDA DIST [PAN: APWPN3758D] VS THE INCOME TAX OFFICER, WARD-1, NALGONDA (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SMT. SUMAN MALIK, DR DATE OF HEARING : 16-11-2016 DATE OF PRONOUNCEMENT : 06-01-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE TWO APPEALS ARE BY ASSESSEE AGAINST THE ORDER( S) OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, HYDERABAD F OR AYS. 2008-09 & 2009-10 RESPECTIVELY BOTH DATED 18-01-2016 . THE ISSUE IN THESE APPEALS IS WITH REFERENCE TO CLAIM OF DEVELO PMENT EXPENDITURE AND CLAIM OF DEDUCTION U/S. 54B OF THE I NCOME TAX ACT [ACT]. I.T.A. NOS. 344 & 345/HYD/2016 SMT. N. LAKSHMI DEVI :- 2 -: 2. ASSESSEE IS AN INDIVIDUAL AGED 70 YEARS, OWNED C ERTAIN LANDS IN MIRYALAGUDA, TO AN EXTENT OF AC. 5.16 GUNTAS OF AG RICULTURAL LAND. OUT OF THE SAID LAND, 25 GUNTAS WAS ACQUIRED BY RDO, MIRYALAGUDA ON 19-09-2002 FOR THE PURPOSE OF DEVELO PMENT. THE BALANCE OF THE LAND AVAILABLE WITH ASSESSEE WAS ABOUT 4.31 GUNTAS. ASSESSEE WAS UNDERTAKING AGRICULTURAL OPERATIONS AND DUE TO THE PROXIMITY TO THE ROAD, CONVERTED INTO PLOTS AND SOLD THEM AFTER MAKING CERTAIN DEVELOPMENT WORK. IN THE BARGAIN, ASSE SSEE CLAIMED SHE HAS SPENT AN AMOUNT OF RS. 14,25,508/- IN AY. 2008- 09 AND BALANCE IN AY. 2009-10. ASSESSEE SOLD THE SAI D LAND AND STATED TO HAVE RE-INVESTED THE AMOUNT TO AN EXTENT OF RS. 14,06,465/- BY PURCHASING AGRICULTURAL LANDS, BUT IN THE NAME OF HER SON MR. N. NARASIMHA RAO AND CLAIMED DEDUCTION U /S. 54B IN AY. 2008-09. AO WAS OF THE OPINION THAT THE DEVELOPMEN T EXPENDITURE CLAIM WAS EXCESSIVE AND DISALLOWED 25% O F THE CLAIM. IN ADDITION, THE CLAIM U/S. 54B WAS ALSO DISALLOWED. LD. CIT(A) CONFIRMED THOSE ACTIONS OF THE AO AND ACCORDINGLY, AS SESSEE IS IN APPEAL BEFORE US. 3. IN AY. 2008-09, THE TOTAL SALE PROCEEDS WERE TO THE EXTENT OF RS. 35,14,000/- AND BY EXCLUDING THE BROKERAGE AND O THER EXPENSES, COST OF ACQUISITION AND DEVELOPMENT EXPENSE S INCURRED BY ASSESSEE, THE CAPITAL GAINS WAS WORKED OUT AT RS. 1 7,49,541/-. ASSESSEE CLAIMED DEDUCTION U/S. 54B TO AN EXTENT OF RS. 14,06,465/- AND NET CAPITAL GAINS ADMITTED WAS AT RS. 3 ,43,076/-. AO AS STATED ABOVE, DISALLOWED 25% OF THE ABOVE EXPEND ITURE AND RESTRICTED THE CLAIM TO 75% OF THE TOTAL AMOUNT ON THE REA SON THAT THE CLAIM IS EXCESSIVE. IT WAS SUBMITTED BEFORE THE L D. CIT(A) THAT ASSESSEE HAS CONTACTED IN THE MARKET AND FOUND THAT THE I.T.A. NOS. 344 & 345/HYD/2016 SMT. N. LAKSHMI DEVI :- 3 -: EXPENDITURE WAS AROUND RS. 150 PER SQ. YD., AND WITH THE HELP OF THE FAMILY MEMBERS, UNDERTOOK THE DEVELOPMENT WORK OF H ER OWN WHICH HAS COME TO AROUND RS. 100/- PER SQ. YD. ACCO RDINGLY, THE AMOUNT WAS REASONABLE. LD. CIT(A) HOWEVER, WAS OF TH E OPINION THAT NO PROOF WAS SUBMITTED FOR INCURRING THE SAID EXPEN DITURE AND AS THE AO ALLOWED RS. 10,69,131/- WHICH WORKS OUT TO APPROXIMATELY 30% OF SALE PROCEEDS, THE SAME IS MORE THAN REASONABLE. 4. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE ORDERS OF THE AO AND CIT(A), WE ARE OF THE OPINION TH AT ACTION OF THE AO IN DISALLOWING TO THE EXTENT OF 25% IS NOT JUSTIFED. WHILE ALLOWING 75% OF THE EXPENDITURE, NO REASON WAS GIVEN BY THE AO EXCEPT THAT ASSESSEE DID NOT FURNISH NECESSARY DETAILS TO EXPENDITURE AND THE SAME IS ALSO EXCESSIVE. CONSIDER ING THAT ASSESSEE COULD NOT FURNISH COMPLETE DETAILS OF EXPEN DITURE, KEEPING IN MIND OF THE REASONABLENESS OF THE CLAIM AND ALSO THE FACT THAT AO HAS ACCEPTED 75% OF EXPENDITURE, WE ARE OF THE OPI NION THAT THE DISALLOWANCE CAN BE RESTRICTED TO 10% OF THE EXPENDITU RE CLAIMED. AO IS DIRECTED TO ALLOW THE EXPENDITURE ACCORDINGLY A ND RE-WORKOUT THE CAPITAL GAINS. 5. THE NEXT ISSUE IN AY. 2008-09 IS WITH REFERENCE TO THE CLAIM OF EXEMPTION FOR PURCHASE OF AGRICULTURAL LAND U/S. 54B. EVEN THOUGH THE PROPERTY WAS PURCHASED IN THE NAME OF ONLY SON, WHO IS ALSO LEGAL HEIR, THERE IS NO RESTRICTION FOR THE DED UCTION U/S. 54B. HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. V. NATARAJAN [287 ITR 271] HAS HELD THAT EXEMPTION U/S. 54 IS ALLOWABLE EVEN IF THE PROPERTY IN THE NAME OF WIFE. HONBLE PUNJAB I.T.A. NOS. 344 & 345/HYD/2016 SMT. N. LAKSHMI DEVI :- 4 -: & HARYANA HIGH COURT IN THE CASE OF CIT VS. GURNAM S INGH [327 ITR 278] HELD THAT EXEMPTION U/S. 54B IS ALLOWABLE IN THE CASE WHEN THE LAND WAS PURCHASED IN THE NAME OF ASSESSEE A ND HIS SON. WHAT IS IMPORTANT TO BE EXAMINED IS WHETHER THE PROCEEDS OF THE CAPITAL GAIN HAVE BEEN INVESTED IN AGRICULTURAL LA ND OR NOT? THEREFORE, INVESTING IN THE NAME OF THE SON BY ASSESSE E MAY NOT BE A DISQUALIFICATION. THE SECTION SPECIFIES THAT IF ASS ESSEE HAS, WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE, PURCHASED ANY O THER LAND FOR BEING USED FOR AGRICULTURAL PURPOSES, THEN DEDUCTION HAS TO BE WORKED OUT AS PROVIDED. THE ASPECT WHETHER ASSESSEE H AS SPENT HER MONEY FOR PURCHASE OF AGRICULTURAL LAND WAS NOT EXAMINED AT ALL BY AO. 5.1. THERE IS ONE MORE ASPECT TO THE DISALLOWANCE AS MADE BY AO. AO AS WELL AS CIT(A) HAS REJECTED THE CLAIM ON THE RE ASON THAT WHAT WAS SOLD WAS NOT AGRICULTURAL LAND BUT PLOTS. THIS OP INION OF THE AO AND CIT(A) IS NOT SUPPORTED BY THE PROVISIONS OF THE ACT. SECTION 54B(1) IS AS UNDER: SEC.54B. [(1)] [SUBJECT TO THE PROVISIONS OF SUB -SECTION (2), WHERE THE CAPITAL GAIN ARISES] FROM THE TRANSFER OF A CAPITAL ASSET BEING LAND WHICH, IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE ON WHICH THE TRANSFE R TOOK PLACE, WAS BEING USED BY [THE ASSESSEE BEING AN INDIVIDUAL OR HIS PARENT, OR A HI NDU UNDIVIDED FAMILY] FOR AGRICULTURAL PURPOSES [(HEREINAFTER REFERRED TO AS THE ORIGINAL ASSET)], AND THE ASSESSEE HAS, WITHIN A PERIOD OF TWO YEARS AFTER THAT DATE, PURCHASED ANY OTHER LAND FOR BEING USED FOR AGRICULTURAL PURPOSES, THEN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER T OOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SE CTION, THAT IS TO SAY, (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER TH AN THE COST OF THE LAND SO PURCHASED (HEREINAFTER REFERRED TO AS THE NEW ASSET), THE DIF FERENCE BETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFE R WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE, THE COST SHALL BE NIL; OR I.T.A. NOS. 344 & 345/HYD/2016 SMT. N. LAKSHMI DEVI :- 5 -: (II) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL G AIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE, THE COST SHALL BE REDUCED, BY THE AMOUNT OF THE CAPITAL GAIN.] 6. AS CAN BE SEEN FROM THE ABOVE PROVISION, WHAT IS R EQUIRED TO BE CONSIDERED IS THE CAPITAL ASSET BEING LAND IN THE IMMEDIATELY TWO PRECEDING YEARS HAS BEEN USED FOR AGRICULTURAL PURPOSES. IF ASSESSEE HAS TRANSFERRED AN AGRICULTURAL LAND AS SUC H, THERE IS NO NEED OF COMPUTATION OF CAPITAL GAIN AS THE SAME WAS EX EMPT FROM TAXATION. THEREFORE, THE PROVISIONS OF SECTION 54B ARE APPLICABLE ON A LAND WHICH WAS USED FOR AGRICULTURAL PURPOSES E ARLIER BUT SOLD SUBSEQUENTLY AND BECAME A CAPITAL ASSET, AS PER THE PR OVISIONS. IN THIS CASE WHAT ASSESSEE TRANSFERRED IS A LAND, EVEN THOUGH CONVERTED TO PLOTS BUT WAS USED FOR AGRICULTURAL PUR POSES ON WHICH THERE WAS NO DISPUTE. THEREFORE, THE DEDUCTION U/S. 54 B IS ALLOWABLE TO ASSESSEE. HOWEVER, THE CONDITIONS FOR DEDUCTION U/S. 54B HAS TO BE EXAMINED, SO WE DIRECT THE AO TO EXAMINE WHETHER SALE PROCEEDS ARE INVESTED IN THE AGRICULTURAL LAND S O PURCHASED FROM THE FUNDS OF ASSESSEE. IN VIEW OF THAT, WHILE AC CEPTING THE LEGAL CLAIM, ALLOWANCE OF THE SAME IS DIRECTED TO BE VERIFIED. IN THE RESULT, GROUND IS CONSIDERED ALLOWED FOR STATISTICAL P URPOSES. 7. IN THE RESULT, APPEAL OF ASSESSEE IN AY. 2008-09 I S ALLOWED. 8. COMING TO AY. 2009-10, THE ONLY ISSUE IS WITH REFE RENCE TO CLAIM OF DEVELOPMENT EXPENDITURE IN THIS YEAR. AS IN EARLIER YEAR, THE AO HAS RESTRICTED THE AMOUNT TO 75% OF THE CLAIM. FOR THE REASONS STATED IN PARA 4, WE ARE OF THE OPINION THAT THE ACTION OF THE AO IN RESTRICTING THE AMOUNT TO 25% OF THE CLAIM IS EXCESSIVE, I.T.A. NOS. 344 & 345/HYD/2016 SMT. N. LAKSHMI DEVI :- 6 -: THEREFORE, WE RESTRICT THE AMOUNT TO 10% OF THE CLAIM. HOWEVER, THERE SEEMS TO BE LOT OF CONFUSION WITH REFERENCE TO TH E AMOUNT CLAIMED. ASSESSEE IN THE GROUNDS CLAIMED DEVELOPMEN TAL EXPENDITURE TO THE TUNE OF RS. 23,04,435/-. AO, HOWEVE R, IN THE ASSESSMENT ORDER HAS STATED THAT THE EXPENDITURE WAS RS. 14,39,135/- AND RESTRICTED TO RS. 11,28,839/-. LD.CIT (A) CONFIRMED THE ABOVE AMOUNT BUT HAS NOTED IN PARA 6 THAT ASSESSEE C LAIMED RS. 22,90,808/- AGAINST THE SALE PROCEEDS OF RS. 37,1 0,250/-. SINCE THERE IS NO UNIFORMITY IN THE AMOUNT OF EXPENDIT URE, WE DIRECT THE AO TO VERIFY THE ASSESSMENT RECORDS AND RESTRI CT THE AMOUNT ON CORRECT AMOUNT OF CLAIM MADE AND WORK OUT THE CAPITAL GAINS. WITH THESE DIRECTIONS, THE GROUND IS CONSIDERED PARTLY ALLOWED, ACCORDINGLY THIS APPEAL IS PARTLY ALLOWED. 9. TO SUM-UP, ITA NO. 344/HYD/2016 IS ALLOWED FOR S TATISTICAL PURPOSES AND ITA NO. 345/HYD/2016 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JANUARY, 2017 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 6 TH JANUARY, 2017 TNMM I.T.A. NOS. 344 & 345/HYD/2016 SMT. N. LAKSHMI DEVI :- 7 -: COPY TO : 1. SMT. N. LAKSHMI DEVI, W/O. LATE DAMODHAR RAO, MIRYALAGUDA. C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO. 9, HIMA YAT NAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-1, NALGONDA. 3. CIT (APPEALS)-3, HYDERABAD. 4. PR.CIT-3, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.