Nani Rao Vittala, Visakhapatnam V. THE ITO, WARD-1(3), Visakhapatnam

ITA 351/VIZ/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85502 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Fair market value; Benefit of exemption
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BEFORE S/SHRI D.MANMOHAN (VP) & J.SUDHAKAR REDDY, ( AM) ITA. NO. 351/VIZ/2013 ASSESSMENT YEAR : 2009-10 SHRI NANI RAO VITTALA, P-3, PRAGATHI, SUN N SEA APARTMENTS, EAST POINT COLONY, VISAKHAPATNAM VS INCOME TAX OFFICER, WARD 1(3), PRATYAKSHAKAR BHAVAN, MVP COLONY DOUBLE ROAD, VISAKHAPATNAM [PAN: A A HP N 5259 R ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI I. KAMASASTRY, AR RESPONDENT BY : SMT. D.KOMALI KRISHNA, DR DATE OF HEARING : 05-12-2014 DATE OF PRONOUNCEMENT : 19-12-2014 O R D E R PER J. SUDHAKAR REDDY, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V ISAKHAPATNAM, DATED 16-04-2013 FOR THE ASSESSMENT YEAR (AY) 2009- 10. 2. THE FACTS OF THE CASE IN BRIEF ARE: :- 2 -: I.T.A.NO. 351/VIZ/2013 THE ASSESSEE HAS FILED THE RETURN OF INCOME, DECLA RING TOTAL INCOME OF RS.1,59,583/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 (ACT) AND WAS SUBSEQUENTLY SEL ECTED FOR SCRUTINY UNDER CASS. THE ASSESSING OFFICER NOTED T HAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SOLD TWO PROPERTIES I.E., PROPERTY-1 BEARING UNIT NO.168 MEASURING 1100 SQ. Y RDS OR 836 SQ. MTRS. IN SURVEY NOS.118(P), 119(P), 120(P), 252 AND 258(P), SITUATED AT GOPANPALLY VILLAGE, SERILINGAMPALLY MANDALAM, R. R.DIST., FOR CONSIDERATION OF RS.34,00,000/- AND RS.34,00,000/- RESPECTIVELY. WHEREAS AS PER THE SUB-REGISTRAR, SERILINGAMAPALLY, THE MARKET VALUE OF BOTH THESE PROPERTIES AS PER THE REGISTERE D DOCUMENTS WERE VALUED AT RS.77,00,000/- AND RS.70,00,000/- RESPECT IVELY. THUS, THE MARKET VALUE DETERMINED FOR STAMP DUTY PURPOSE WAS RS.1,47,000/-. HOWEVER, IN THE RETURN OF INCOME FILED, THE ASSESSE E HAS TAKEN THE FULL VALUE OF CONSIDERATION AT RS.68,00,000/- AND H AS COMPUTED LONG TERM CAPITAL GAINS (LTCG) AT RS.55,59,836/-, AFTER TAKING INTO ACCOUNT COST OF ACQUISITION OF RS.7,40,164/-, COST OF DEVELOPMENT OF RS.4,00,000/- AND COMMISSION & OTHER EXPENSES OF RS .1,00,000/-. THE ASSESSEE HAS CLAIMED EXEMPTION OF THE ENTIRE CA PITAL GAINS U/S.54F OF THE ACT. 3. THE ASSESSING OFFICER CALLED UPON THE ASSESSEE T O EXPLAIN WHY THE CAPITAL GAINS SHOULD NOT BE COMPUTED BY TAKING THE FULL VALUE OF :- 3 -: I.T.A.NO. 351/VIZ/2013 CONSIDERATION AT RS.1,47,00,000/- INSTEAD OF RS.68, 00,000/- ADMITTED BY THE ASSESSEE. 4. THE ASSESSEE FILED DETAILED REPLY BEFORE THE ASS ESSING OFFICER VIDE LETTER DT.23-12-2011. IN THAT LETTER, THE ASS ESSEE HAD SUBMITTED THAT HE HAD PURCHASED TWO PROPERTIES IN THE YEAR 20 03-04, ONE IN THE NAME OF HIS SON FOR RS.2,81,250/- AND ANOTHER IN TH E NAME OF HIS DAUGHTER FOR RS.3,09,375/-. HE HAD SPENT RS.4,00,0 00/- TOWARDS DEVELOPMENT OF THE SITES AND ALSO INCURRED AN EXPEN DITURE OF RS.1,00,000/- TOWARDS COMMISSION AND OTHER EXPENSES . IT WAS FURTHER SUBMITTED THAT HE HAD SOLD THE SAID TWO PRO PERTIES AT RS.68,00,000/- AND PURCHASED TWO RESIDENTIAL HOUSE SITES AT BHEEMUNIPATNAM FOR AN AMOUNT OF RS.90,00,000/-, USI NG THE SALE PROCEEDS OF HIS PROPERTIES ALONG WITH LOANS AND OTH ER FUNDS. IT WAS ALSO SUBMITTED THE PURCHASE OF TWO RESIDENTIAL HOUS E SITES WAS A CONTIGUOUS PROPERTY AND ON WHICH HE HAS CONSTRUCTED A RESIDENTIAL HOUSE INVESTING AN AMOUNT OF RS.4,90,000/-. HENCE, IT WAS CONTENDED THAT THE REAL AND FAIR MARKET VALUE OF TH E PROPERTIES WAS ONLY RS.68,00,000/- AND REQUESTED THAT THE PROVISIO NS OF SECTION 50C CANNOT BE APPLIED. 5. THE ASSESSING OFFICER AFTER CONSIDERING THE DETA ILS AND EXPLANATION FILED BY THE ASSESSEE, RESTRICTED THE C LAIM OF EXPENSES TOWARDS DEVELOPMENT AND OTHER EXPENSES TO RS.3,00,0 00/- AS AGAINST :- 4 -: I.T.A.NO. 351/VIZ/2013 RS.5,00,000/- CLAIMED BY THE ASSESSEE. THE ASSESSI NG OFFICER ALSO COMPUTED THE CAPITAL GAINS BY TAKING THE TOTAL CONS IDERATION OF RS.1,47,00,000/- AND ARRIVED AT TAXABLE CAPITAL GAI NS OF RS.80,20,632/- AFTER ALLOWING EXEMPTION U/S.54F OF RS.55,59,836/-. 6. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL CHALLENGING THE COMPUTATION OF EXEMPTION U/S.54F . THE FIRST CONTENTION IS THAT NOTIONAL CONSIDERATION U/S.50C, SUBSTITUTING THE CONSIDERATION ACTUALLY RECEIVED BY, THE STAMP DUTY VALUATION CANNOT BE CONSIDERED FOR COMPUTING RELIEF U/S.54F. ALTERN ATIVELY THE ASSESSING OFFICER IS NOT CORRECT IN IGNORING THE TO TAL INVESTMENT OF RS.94.73 LAKHS MADE BY THE ASSESSEE ON CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE WHILE COMPUTING EXEMPTION U/S.54F . THE FIRST APPELLATE AUTHORITY (FAA) APPLIED THE DECISION OF T HE HON'BLE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF GOUL I MAHADEVAPPA (128 ITD 503) AND HELD THAT THE ASSESSING OFFICER H AS RIGHTLY ADOPTED THE FULL VALUE OF CONSIDERATION AS DETERMINED BY AP PLICATION OF SECTION 50C. HE REVISED THE COMPUTATION INCONSONANCE WITH THE DECISION OF GOULI MAHADEVAPPA (SUPRA). ON THE ALTERNATIVE CONT ENTION OF THE ASSESSEE, THAT THE AMOUNT OF RS.94.73 LAKHS INCURRE D BY THE ASSESSEE FOR THE CONSTRUCTION OF THE HOUSE HAS TO B E CONSIDERED FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.54F, HE HELD THAT THE :- 5 -: I.T.A.NO. 351/VIZ/2013 ARGUMENTS ARE TOTALLY CONTRARY TO THE CONTENTIONS R AISED UNDER GROUND NO.1 AND REJECTED THE CONTENTIONS. AGGRIEVED, THE ASSESSEE IS BEFORE US ON THE FOLLOW ING GROUNDS: '1. THE LD.CIT(APPEALS) IS NOT CORRECT IN REJECTING THE PLEA OF THE ASSESSEE/APPELLANT THAT THE EXEMPTION U/S.54F HAS T O BE COMPUTED WITH REFERENCE TO THE CAPITAL GAINS COMPUTED BY INCORPOR ATING THE STAMP DUTY VALUE AS PER THE PROVISIONS OF SECTION 50C IN THE R ATIO OF ACTUAL INVESTMENT IN THE NEW ASSET TO THE ACTUAL CONSIDERATION AS AGREED TO BETWEEN THE PARTIES. 2. THE LD.CIT(APPEALS) IS NOT CORRECT IN REJECTING THE ALTERNATE PLEA OF THE ASSESSEE APPELLANT, THAT THE EXEMPTION U/S.54F HAS TO BE GRANTED IN THE RATIO OF THE ACTUAL INVESTMENT IN THE NEW ASSET TO THE DEEMED CONSIDERATION U/S.50C'. 7. WE HAVE HEARD SHRI I. KAMASASTRY, LD.AR ON BEHAL F OF THE ASSESSEE AND SMT. D. KOMALI KRISHNA, LD. DEPARTMENT AL REPRESENTATIVE ON BEHALF OF THE REVENUE. ON A CARE FUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERU SAL OF THE PAPERS ON RECORD AND THE ORDER OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED, WE HOLD AS FOLLOWS: 8. THE COMPUTATION MADE BY THE ASSESSEE AND THE COM PUTATION MADE BY THE REVENUE OF THE ORDER AT PAGE NO.4 OF TH E CIT(APPEALS) WHICH IS EXTRACTED FOR READY REFERENCE. COMPUTATION OF CAPITAL GAIN (BY ASSESSEE) SALE CONSIDERATION 6800000.00 LESS: INDEXED COST OF ACQUISITION 740164.00 LESS: COST OF DEVELOPMENT 400000.00 LESS: EXPENSES THEREON 100000.00 1240164.00 :- 6 -: I.T.A.NO. 351/VIZ/2013 LONG TERM CAPITAL GAIN 5559836.00 LESS: INVESTMENTS U/S.54 (LAND + REG. EXP/(5082000 + 482950) TAXABLE CAPITAL GAIN 0.00 COMPUTATION OF CAPITAL GAIN (BY AO) COST OF ACQUISITION TOWARDS PROPERTY-1 2,81,250.00 COST OF ACQUISITION TOWARDS PROPERTY-2 3,09,375.00 COST OF DEVELOPMENT TOWARDS BOTH PROP.1 & 2 3,00,000.00 TOTAL COST OF ACQUISITION 8,90,625.00 TOTAL SALE CONSIDERATION AS PER SRO RATES 1,47,00, 000.00 LESS: INDEXED COST OF ACQUISITION [890625 X 582/463] 11,19,532.00 LONG TERM CAPITAL GAINS 1,35,80,468.00 LESS: EXEMPTION U/S.54F AS CLAIMED 55,59,836.00 TAXABLE LONG TERM CAPITAL GAINS 80,20,632.00 THE FIRST ISSUE IS WHETHER THE FULL VALUE OF CONSID ERATION, TO BE TAKEN FOR THE PURPOSE OF COMPUTATION OF RELIEF U/S.54F, S HOULD BE THE ACTUAL CONSIDERATION RECEIVED OR THE DEEMED CONSIDERATION U/S.50C. THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF GOULI M AHADEVAPPA VS. ITO (356 ITR 90) ON IDENTICAL ISSUE HAS UPHELD THE FINDING OF THE TRIBUNAL THAT RELIEF U/S.54F SHOULD BE COMPUTED ONL Y WITH REFERENCE TO THE DEEMED FULL VALUE OF CONSIDERATION COMPUTED U/S.50C OF THE ACT. THUS, THIS GROUND OF THE ASSESSEE FAILS. 9. COMING TO THE ALTERNATIVE CONTENTION THAT RELIEF SHOULD BE ALLOWED U/S.54F ON THE TOTAL INVESTMENT OF 94.73 LA KHS, WE FIND THAT THE HON'BLE KARNATAKA HIGH COURT HAS IN THIS VERY C ASE OF GOULI MAHADEVAPPA VS. ITO (SUPRA) HAS AT PARA NO. :- 7 -: I.T.A.NO. 351/VIZ/2013 '6. IN THE INSTANT CASE, IT IS TO BE NOTICED THAT T HE ASSESSEE HAS NOT AVAILED THE OPPORTUNITY TO QUESTION THE CORRECTNESS OF THEREGISTRATION VALUE FIXED BY THE STATE GOVERNMENT, IF HE HAD DONE SO, T HEN THE ASSESSING AUTHORITY WOULD HAVE INVOKED THE POWER OF APPOINTIN G VALUATION OFFICER FOR ASSESSING THE FAIR MARKET VALUE. WHEN THE REGISTRA TION VALUE IS NOT THE DISPUTED QUESTION, NOW, AT THIS STAGE, IT IS NOT PE RMISSIBLE FOR THE ASSESSEE TO CONTEND THAT THE REGISTRATION VALUE IS EXCESSIVE AN D DISPROPORTIONATE TO THE MARKET VALUE OF THE PROPERTY. IN THE ABSENCE OF CO NTRA MATERIAL, THE DEEMED FULL VALUE OF CONSIDERATION AS STATED IN SECTION 60 0 OF THE IT ACT WOULD COME INTO EFFECT. 7. THE ASSESSEE BEFORE THE ASSESSING AUTHORITY HAD STATED THAT HE HAS INVESTED RS.20,00,000/- OUT OF THE SALE CONSIDERATI ON AND FURTHER INVESTMENT OF RS.4,00,000/- OF AGRICULTURAL INCOME TOWARDS CON STRUCTION OF THE HOUSE AT GANGAVATHI. THE TOTAL AMOUNT SHOWN TO BE INVESTED FOR CONSTRUCTION OF HOUSE AT GANGAVATHI IS RS.24,00,000/-. THE ASSESSING AUT HORITY HAS DISALLOWED THE BENEFIT OF EXEMPTION OF RS.4,00,000A, THAT PART OF THE ORDER OF THE ASSESSING AUTHORITY AND THE APPELLATE AUTHORITY DOE S NOT APPEAR TO BE SOUND AND PROPER. THE ULTIMATE OBJECT AND PURPOSE OF SEC TION 50C OF THE IT ACT IS TO SEE THAT THE UNDISCLOSED INCOME OF CAPITAL GAINS RE CEIVED BY THE ASSESSEES SHOULD BE TAXED AND THE LAW SHOULD NOT ENCOURAGE AN D PERMIT THE ASSESSEE TO PEG DOWN THE MARKET VALUE AT THEIR WHIMS AND FAN CY TO AVOID TAX. IN OTHER WORDS, THE ULTIMATE OBJECT IS TO CURB THE GROWTH OF BLACK MONEY. WHEN THE CAPITAL GAIN IS ASSESSED ON NOTIONAL BASIS, WHETEVE R AMOUNT INVESTED IN NEW RESIDENTIAL HOUSE WITHIN THE PRESCRIBED PERIOD, U/S .54F OF IT ACT THE ENTIRE AMOUNT INVESTED, SHOULD GET THE BENEFIT OF DEDUCTIO N IRRESPECTIVE OF THE FACT THAT THE FUNDS FROM OTHER SOURCES ARE UTILIZED FOR NEW RESIDENTIAL HOUSE. IN THAT CONTEXT, WHATEVER TOTAL AMOUNT ACTUALLY INVEST ED BY THE ASSESSEE FOR CONSTRUCTION OF HOUSE AT GANGAVATHY SHOULD BE DEDUC TED IRRESPECTIVE OF THE FACT THAT PART OF THE FUNDS INVESTED ARE FROM SOURC ES AND NOT FROM THE CAPITAL GAIN THAT VIEW OR THE MATTER, THE AMOUNT ASSESSABLE TOWARDS NET CAPITAL GAIN SHOULD BE RS.10,33,404/-'. RESPECTFULLY FOLLOWING THIS DECISION OF THE HON'BLE HIGH COURT, WE UPHOLD THE CONTENTIONS OF THE ASSESSEE AND SET ASID E THE MATTER TO THE FILE OF AO TO COMPUTE THE RELIEF BY APPLYING TH E DECISION OF GOULI MAHADEVAPPA VS. ITO (SUPRA). IN THE RESULT, THIS G ROUND OF THE ASSESSEE IS ALLOWED. :- 8 -: I.T.A.NO. 351/VIZ/2013 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DECEMBER, 2014 SD/- SD/- (D. MANMOHAN) VICE PRESIDENT (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER DATED: 19 TH DECEMBER, 2014 TNMM COPY TO: 1. SHRI NANI RAO VITTALA, P-3, PRAGATHI, SUN N SEA APARTMENTS, EAST POINT COLONY, VISAKHAPATNAM 2. INCOME TAX OFFICER, WARD 1(3), PRATYAKSHAKAR BHAVAN, MVP COLONY DOUBLE ROAD, VISAKHAPATNAM 3. THE CIT(A), VISAKHAPATNAM 4. THE CIT-1, VISAKHAPATNAM 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT VISAKHAP ATNAM