ITO, Non Corporate Ward 3(5), Chennai V. Nagaprasanna , Chennai

ITA 380/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 2991 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 01-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Cost of acquisition; Set aside; Capital Gains
• Section: 205

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.380/CHNY/2018 / ASSESSMENT YEAR: 2013-14 THE INCOME TAX OFFICER, NON CORPORATE WARD 3(5), 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. SMT. NAGAPRASANNA, 32, SHREYAS, KHADER NAWAZ KHAN ROAD, THOUSAND LIGHTS, CHENNAI 600 006. [PAN: AAXPY5630K] ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI SRIDHAR DORA, JCIT / RESPONDENT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE / DATE OF HEARING : 27.02.2019 /DATE OF PRONOUNCEMENT : 04.03.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 4, CHENNAI DATED 26.10.2017 RELEVANT TO THE ASSESSMENT YEAR 2013-14. THE SOLITARY GROUNDS RAISED BY THE REVENUE ARE THAT (I) THE LD. CIT(A) HAS ERRED DIRECTING TO ADOPT THE COST INFLATION INDEX AS ON 2005 IN RESPECT OF THE PROPERTY AT PADUR VILLAGE, BY RELYING ON THE DECISION IN THE CASE OF CIT V. MANJULA J. SHAH 355 ITR 474 (BOM) AND (II) THE LD. CIT(A) HAS ERRED IN ALLOWING INDEXED COST OF I.T.A. NO. 380/CHNY/18 2 CONSTRUCTION FOR THE RESIDENTIAL UNIT AT PADUR CLAIMED TO BE CONSTRUCTED DURING THE YEAR 2005-06 AS PER CONSTRUCTION AGREEMENT DATED 30.11.2005. 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT WITH REGARD TO ADOPTION OF COST INFLATION INDEX AS ON 2005 IN RESPECT OF THE PROPERTY AT PADUR VILLGE, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. MANJULA J. SHAH (SUPRA) AND PRAYED THAT THE SAME SHOULD BE FOLLOWED IN THIS CASE AS HAS BEEN FOLLOWED BY THE COORDINATED BENCHES OF THE TRIBUNAL. 3. PER CONTRA, THE LD. DR ARGUED THAT THE ABOVE DECISION IN THE CASE OF CIT V. MANJULA J. SHAH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL IS PENDING IN THIS CASE AND PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE SET ASIDE AND RESTORED THAT OF THE ASSESSING OFFICER. 4. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE CLAIMED THE COST INFLATION INDEX FOR THE YEAR WHEN THE IMPUGNED PROPERTY WAS FIRST HELD BY HER HUSBAND. HOWEVER, THE ASSESSING OFFICER ALLOWED THE CII FOR THE YEAR WHEN THE SAID PROPERTY WAS ACQUIRED BY THE ASSESSEE FROM HER HUSBAND THROUGH A SETTLEMENT DEED ON 22.10.2012. EARLIER, THE PROPERTY WAS ACQUIRED BY THE HUSBAND OF THE ASSESSEE ON 14.11.2005 VIDE EIGHT DIFFERENT I.T.A. NO. 380/CHNY/18 3 SALE DEEDS FOR A TOTAL CONSIDERATION OF .76,31,284/- INCLUDING THE STAMP DUTY AND REGISTRATION CHARGES, ETC. BEFORE THE LD. CIT(A), THE CONTENTION OF THE ASSESSEE IS THAT THE DATE OF ACQUISITION OF LAND BY THE HUSBAND OF THE ASSESSEE SHOULD BE TAKEN AS THE DATE FOR THE PURPOSES OF COMPUTING THE LONG TERM CAPITAL GAINS. BY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE DECISION IN THE CASE OF CIT V. MANJULA J. SHAH (SUPRA), WHEREIN, IT HAS BEEN HELD THAT WHILE COMPUTING THE CAPITAL GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED BY THE ASSESSEE UNDER A GIFT, THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE ASSESSEE BECAME THE OWNER OF THE ASSET, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ADOPT THE COST INFLATION INDEX FOR THE YEAR 2005-06 WHEN THE PROPERTY WAS FIRST HELD BY THE HUSBAND OF THE ASSESSEE. WE FIND THAT THE ABOVE DECISION IN THE CASE OF CIT V. MANJULA J. SHAH (SUPRA) WAS FURTHER CONCURRED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ARUN SHUNGLOO TRUST [2012] 205 TAXMAN 456 (DELHI). THE LD. DR COULD NOT CONTROVERT THE ABOVE JUDGMENTS OF TWO DIFFERENT HIGH COURTS BY FILING HIGHER COURTS DECISION HAVING MODIFIED OR REVERSED THE ABOVE JUDGMENTS. THUS, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) AND THE GROUND RAISED BY THE DEPARTMENT STANDS DISMISSED. 5. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE RELATES TO I.T.A. NO. 380/CHNY/18 4 DISALLOWANCE OF INDEXED COST OF CONSTRUCTION. THE ASSESSEE CLAIMED INDEXED COST OF CONSTRUCTION FOR THE RESIDENTIAL UNIT ON THE PLOTS AT PADUR, WHICH WAS CONSTRUCTED DURING THE YEAR 2005-06 FOR A SUM OF RS. 15.50 LAKHS. THE ASSESSEE FILED THE CONSTRUCTION AGREEMENT IN SUPPORT OF HER CLAIM. ON VERIFICATION OF THE CONSTRUCTION AGREEMENT DATED 30.11.2005, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE CONSTRUCTION AGREEMENT DID NOT SPEAK ABOUT CONSTRUCTION OF RESIDENTIAL HOUSE. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT, THE LD. CIT(A) PARTLY DECIDED IN FAVOUR OF THE ASSESSEE AGAINST WHICH THE REVENUE PREFERRED FURTHER APPEAL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WITH REGARD TO THE INDEXED COST OF CONSTRUCTION, THE ASSESSING OFFICER NOTED FROM THE SCHEDULE TO THE SAID CONSTRUCTION AGREEMENT THAT THE NATURE OF WORK WAS FILLING THE GROUND, FENCING, ERECTING GATES, LEVELING OF SITE AND NOT CONSTRUCTION. HE FURTHER OBSERVED THAT THERE WAS NOT EVEN A SINGLE CLAUSE FOR CONSTRUCTION OF A HOUSE OR THE SPECIFICATION. THE ASSESSING OFFICER FURTHER OBSERVED FROM THE UNREGISTERED SALE AGREEMENT DATED 02.11.2012 THAT THE AREA OF THE RESIDENTIAL BUILDING WAS STATED AT 500 SQ.FT. AS PER LEDGER ACCOUNT, ALL THE PAYMENTS WERE MADE IN CASH AND THE VERACITY OF THE SAME WAS NOT PROVED BY THE ASSESSEE. THE BUILDING PLAN APPROVAL, OTHER STATUTORY APPROVAL, COMPLETION CERTIFICATE, ETC. WERE NOT FURNISHED TO ESTABLISH THAT THE RESIDENTIAL I.T.A. NO. 380/CHNY/18 5 HOUSE HAS IN FACT BEEN CONSTRUCTED. ALL THESE FACTS SHOWS THAT THE HOUSE WAS NOT AT ALL CONSTRUCTED IN THE LAND SOLD AT PADUR. FURTHER, THE COST OF CONSTRUCTION CLAIMED OF .15,50,000/- FOR 500 SQ.FT. OF HOUSE WORKS OUT TO .3,100/- PER SQ.FT. IN THE YEAR 2005 WAS EXORBITANTLY HIGH. THEREFORE, THE ASSESSING OFFICER REJECTED THE CONSTRUCTION COST CLAIMED AT .15,50,000/- AND CONSEQUENTLY THE ASSESSING OFFICER REJECTED THE INDEXED COST OF CONSTRUCTION CLAIMED AT .25,66,309/-. ON APPEAL, THE LD. CIT(A) ALSO OBSERVED THAT THERE WAS NO CONSTRUCTION OF THE SAID RESIDENTIAL HOUSE BY THE CONTRACTOR AND THE EXPENDITURE OF .15,50,000/- INCURRED BY THE ASSESSEE WAS NOTHING BUT LAND DEVELOPMENT, ETC. AND THUS, THE CONTENTION OF THE ASSESSEE IS NOT FOUND IN ORDER. THE LD. CIT(A) FURTHER NOTED THAT THE ASSESSING OFFICER HAS RIGHTLY OBSERVED THAT THE COST OF CONSTRUCTION OF 500 SQ.FT. OF RESIDENTIAL HOUSE FOR A SUM OF .15,50,000/- @ .3,100/- PER SQ.FT. IN THE YEAR 2005 WAS VERY HIGH. HOWEVER, ON VERIFICATION OF THE CONSTRUCTION AGREEMENT DATED 30.11.2012, THE LD. CIT(A) HAS OBSERVED THAT THE LUXURY VILLA TO BE CONSTRUCTED FOR THE ASSESSEE BY M/S OPINE HOTELS PVT. LTD FOR INVESTING LTCG WAS COSTING .2,626/- PER SQ. FT. IN THE YEAR 2012. THE VILLA TO BE CONSTRUCTED BY THE BUILDER FOR THE ASSESSEE WAS A LUXURY HOUSE, WHEREAS, THE IMPUGNED HOUSE MEASURING 500 SQ.FT. WAS A NORMAL RESIDENTIAL HOUSE AND THEREFORE, EVEN IF IT IS ACCEPTED THAT THERE WAS A RESIDENTIAL HOUSE ON THE PLOT AT PADUR, ITS COST OF CONSTRUCTION WOULD NOT WORK OUT TO RS.3,100/- PER I.T.A. NO. 380/CHNY/18 6 SQ.FT. CONSIDERING THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) HELD THAT THE COST OF CONSTRUCTION OF RESIDENTIAL UNIT OF 500 SQ.FT. IN THE YEAR 2005 WOULD BE MAXIMUM OF RS.1,500/- PER SQ.FT. ACCORDINGLY, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ADOPT THE FIGURE OF .7,50,000/- [500 SQ.FT. X .1,500] AS THE COST OF CONSTRUCTION AND WORK OUT THE INDEXED COST OF CONSTRUCTION. WE FIND THAT IT IS NOT THE CASE OF THE DEPARTMENT THAT THERE WAS NO CONSTRUCTION OF 500 SQ.FT. ON THE PLOT AT PADUR. JUST BECAUSE THE ASSESSEE COULD NOT PRODUCE ANY VALID EVIDENCE, IT CANNOT BE HELD THAT THERE WAS NO CONSTRUCTION. THERE WAS NO MATERIAL ON RECORD TO SHOW THAT THERE WAS ABSOLUTELY NO CONSTRUCTION ON THE PLOT AND THE AUTHORITIES BELOW HAVE NOT RULED OUT THAT THERE WAS NO CONSTRUCTION ON THE PLOT AT PADUR, BUT THE CLAIM OF CONSTRUCTION @ .3,100/- PER SQ.FT. IN THE YEAR 2005 WAS EXORBITANTLY HIGH. BASED ON THE CONSTRUCTION AGREEMENT DATED 30.11.2012, THE LUXURY VILLA TO BE CONSTRUCTED FOR THE ASSESSEE BY M/S. OPINE HOTELS PVT. LTD FOR INVESTING LTCG WAS COSTING .2,626/- PER SQ. FT. IN THE YEAR 2012, THE LD. CIT(A) CONSIDERED THE COST OF CONSTRUCTION DURING 2005 WOULD BE @ .1,500/- PER SQ. FT. AND DIRECTED THE ASSESSING OFFICER TO ADOPT THE FIGURE OF .7,50,000/- [500 SQ.FT. X .1,500] AS THE COST OF CONSTRUCTION AND WORK OUT THE INDEXED COST OF CONSTRUCTION. THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, THE GROUND RAISED BY THE DEPARTMENT STANDS DISMISSED. I.T.A. NO. 380/CHNY/18 7 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 4 TH MARCH, 2019 AT CHENNAI. SD/- SD/- (A.MOHAN ALANKAMONY) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 04.03.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.