DCIT, Tiruppur V. S.R.Lakshmi Narayan, Tiruppur

ITA 419/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7915 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 07-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 25-02-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S SRIDHAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 50C; 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ' # . $ & ' BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A. NO. 419/MDS/2016 / ASSESSMENT YEAR : 2011-12 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -2, 121, SIXTY FEET ROAD, TIRUPUR- 641 602. VS. SHRI S.R. LAKSHMI NARAYAN, 15/222, SREE LAKSHMI FARMS, PERUMPALLAM, AMARAVATHI NAGAR, UDUMALPET, TIRUPUR - 642 102. [PAN: AGEPL 1232D] ( / APPELLANT) ( / RESPONDENT) ) * / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT -.) * / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE * /DATE OF HEARING : 07.02.2017 * /DATE OF PRONOUNCEMENT : 08.02.2017 /O R D E R PER M. BALAGANESH, ACCOUNTANT MEMBER: THIS APPEAL OF THE REVENUE ARISE OUT OF THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, VIDE PROCEE DINGS IN ITA NO. 44/2014- 15 DATED 16.11.2016 FOR THE ASSESSMENT YEAR 2011-12 . :-2-: I.T.A. NO.419/MDS/2016 2. THE ONLY ISSUE TO BE DECIDED IN THIS FILE AS TO WHE THER THE LD. CIT(A) WAS JUSTIFIED IN GRANTING RELIEF U/S. 54F OF THE AC T TO THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THE CASE THAT ASSESSEE ENTERE D INTO A JOINT DEVELOPMENT AGREEMENT WITH M/S. LANDMARK CONSTRUCTI ONS ON 07.10.2010 FOR CONSTRUCTION OF APARTMENTS ON HIS SHARE OF LAND AND RECEIVED RS. 1,50,00,000/- AS ADVANCE WHICH WAS TREATED AS INTER EST FREE REFUNDABLE DEPOSIT. LATER, THE ASSESSEE MODIFIED THIS JOINT D EVELOPMENT AGREEMENT THROUGH MEMORANDUM OF SUPPLEMENTAL DEVELOPMENT AGRE EMENT ON 27.01.2011 TO PURCHASE THE APARTMENTS FROM M/S. LAN DMARK CONSTRUCTIONS IN LIEU OF THIS RIGHTS OVER THE APARTMENTS BEING CONST RUCTED ON HIS LAND. THE POSSESSION OF THE NEWLY CONSTRUCTED APARTMENT WAS C OMPLETED AND HANDED OVER TO THE ASSESSEE ON 27.09.2013. THE ASSESSEE W HILE FILING RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 CLAIMED DEDU CTION U/S. 54F OF THE ACT TO THE TUNE OF RS. 4,40,91,566/- IN RESPECT OF CAPITAL GAINS ARISEN ON TRANSFER OF LAND. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS DIRECTED TO FILE THE ENTIRE DETAILS IN CONNECTI ON WITH THE SUBJECT MENTIONED PROPERTY WHICH WAS DULY FILED TOGETHER WITH THE COP IES OF AGREEMENTS DATED 07.10.2010 AND 27.01.2011. THE LD. AO ON PERUSAL O F AGREEMENT DATED 27.01.2011 OBSERVED THAT ASSESSEE HAD RELINQUISHED RIGHTS OF THE ENTIRE :-3-: I.T.A. NO.419/MDS/2016 PROPERTY IN FAVOUR OF DEVELOPERS WITH A TOTAL CONST RUCTION OF RS. 7,84,92,450/-, (ASSESSEEES SHARE WORKS OUT TO RS. 5,39,35,500/-) AND THE LAND OWNERS REQUESTED THE DEVELOPERS TO PAY THE CONSIDERATION O THER THAN BY WAY OF MONETARY CONSIDERATION. THE ASSESSEE EVINCED INTER EST ON PURCHASING PROPERTY IN ANOTHER PROJECT OF THE DEVELOPERS SITUA TED AT DOOR NO. 153 TO 156, PETER ROAD, ROYAPETTAH BY NAME OF 'VERTICA' AND SEL ECTED TWO APARTMENTS THEREON. THE ASSESSEEE COMPUTED THE LONG TERM CAPI TAL GAINS FOR SALE OF LAND AS BELOW: 27.01.2011 SALES CONSIDERATION 53935500 VALUE U/S. 50C 52668000 RATE FOR SQ. FT. RS. 2000/ - TOTAL SQ.FT. 49.40+11 CENT*436=26334 SQ.FT LESS: TRANSFER EXPENSES 750000 NET SALES CONSIDERATION 53185500 LONG TERM CAPITAL GAIN 46049857 DEDUCTION U/S. 54F INVESTMENT IN HOUSE C.GAIN/SALES CONSIDERATION INVESTMENT IN HOUSE 27.01.2011 VERTICA APARTMENT COST 38966875 28.05.2012 ADDITIONAL ALTRATION 9223053 27.07.2012 ADDITIONAL ALTRATION 2733835 50923763 RS. 50923763* RS. 46049857/RS.53185500= 44091566 TAXABLE GAIN 1958291 :-4-: I.T.A. NO.419/MDS/2016 THE LD. AO SOUGHT TO CONSIDER THIS AGREEMENT DATED 07.10.2010, THE DATE OF SALE IN TERMS OF PART PERFORMANCE OF CONTRACT CONTE MPLATED U/S. 2(47)(V) OF THE ACT R.W.S. 53A OF TRANSFER OF PROPERTY ACT, 188 2 AND CONCLUDED THAT SINCE THE POSSESSION OF FLAT IN VERTICA WAS HANDED OVER T O THE ASSESSEE ON 27.09.2013, THE ASSESSEE IS NOT ENTITLED FOR DEDUCT ION U/S. 54F OF THE ACT. THE LD. AO CONCLUDED THAT ASSESSEE HAD ONLY INVESTED IN PURCHASE OF NEW ASSET IN THE PROJECT VERTICA FROM LANDMARK CONSTRUCTION AND THE SAME DOES NOT TANTAMOUNT TO CONSTRUCTION OF NEW ASSET. ACCORDING LY, HE CONCLUDED THAT THE ASSESSEE OUGHT TO HAVE MADE A PURCHASE OF NEW ASSET WITHIN THE PERIOD OF TWO YEARS FROM THE DATE OF TRANSFER OF THE OLD ASSE T AND SINCE THE SAME WAS NOT DONE BY THE ASSESSEE, HE IS NOT ENTITLED FOR DE DUCTION U/S. 54F OF THE ACT. 4. BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED T HE BASIC FACTS AND ARGUED THAT ACQUISITION OF NEW ASSET FROM LANDMARK CONSTRUCTION IN THE PROJECT VERTICA WHICH WAS SUPPORTED BY AN INDEPENDE NT BUILDER AGREEMENT TANTAMOUNT TO CONSTRUCTION OF RESIDENTIAL HOUSE AND HENCE ASSEESSEE IS ENTITLED FOR PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF OLD PROPERTY. IN SUPPORT OF THIS, HE PLACED RELIANCE ON VARIOUS DEC ISIONS OF THE HIGH COURT AND THE CIRCULAR ISSUED BY THE CBDT IN THIS REGARD. A PPRECIATING THESE CONTENTIONS, THE LD. CIT(A) DELETED THE DISALLOWANC E AND DIRECTED THE LD. AO TO GRANT DEDUCTION U/S. 54F OF THE ACT. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. :-5-: I.T.A. NO.419/MDS/2016 5. THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF TH E LD. AO. IN RESPONSE TO THIS, THE LD. AR STATED THAT SIMILAR IS SUE HAD CROPPED UP BEFORE THIS TRIBUNAL IN THE CASE OF ASSESSEEES SISTER FOR THE SAME PROJECT IN ITA NO. 375/MDS/2015 AND ITA NO. 281/MDS/2015 DATED 02-11-2 016, WHEREIN THIS TRIBUNAL HAD UPHELD THE COMMISSIONER ORDER AND GRAN TED RELIEF TO THE ASSESSEE ON THE SAME FACTS. IN SUPPORT OF THIS, HE PLACED A COPY OF THE SAID TRIBUNAL ORDER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS STATED HEREIN REMAI N UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED HEREIN FOR THE SAKE OF BREV ITY. AT THE OUTSET, WE ARE IN AN AGREEMENT WITH THE ARGUMENTS OF THE ASSESSEE THAT ACQUISITION OF NEW RESIDENTIAL HOUSE THROUGH THE BUILDERS AGREEMENT WO ULD CONSTITUTE ONLY CONSTRUCTION OF HOUSE AND NOT PURCHASE OF THE SAME. AS RIGHTLY POINTED OUT, CIRCULAR ISSUED BY THE CBDT IN THIS REGARD IS CLEAR . WE FIND THAT THE SUBJECT MENTIONED DISPUTE IS SQUARELY ADDRESSED BY THIS TRI BUNAL IN ASSESSEEES SISTER CASE ON THE SAME SET OF FACTS IN ITA NO. 375 /MDS/2015 AND ITA NO. 281/MDS/2015 DATED 02.22.2016 WHEREIN IT WAS HELD: 7.5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE ASSESSEE HAD MADE THE INVESTMENT OF RS.1,50,00,000/ - FOR CONSTRUCTION OF THE FLAT BY MAKING PAYMENT TO THE BUILDER. THE B UILDER HAD DEFAULTED :-6-: I.T.A. NO.419/MDS/2016 DUE TO WHICH THE DELAY HAD OCCURRED IN CONSTRUCTION OF THE FLAT WITHIN THE TIME LIMIT PRESCRIBED UNDER THE ACT. THE FAULT OF THE BUILDER IS BEYOND THE CONTROL OF THE ASSESSEE WHOSE INTENTION WAS ONLY BONAFIDE TO COMPLY WITH THE PROVISIONS OF THE ACT FOR ENTITL ING THE BENEFIT OF DEDUCTION UNDER SECTION 54 OF THE ACT. IN THIS SITU ATION WE FIND THAT THE DECISION OF THE HON'BLE MADHYA PRADESH HIGH COURT I N THE CASE SMT. SHASI VARMA VS. CIT REPORTED IN 224 ITR 106 CITED B Y THE LEARNED AUTHORIZED REPRESENTATIVE IS RELEVANT. THE HON'BLE HIGH COURT HAD HELD THE ISSUE AS FOLLOWS:- 'HELD THAT THE CBDT HAD ISSUED CIRCULAR NO.471 DAT ED 15.10.1986 STATING THAT CASES OF ALLOTMENT OF FLATS UNDER THE SELF- FINANCIAL SCHEME OF THE DELHI DEVELOPMENT AUTHORITY SHALL BE TREATED AS CASES OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS. SECTION 54 OF THE ACT SAYS THAT WITHIN TWO YEARS OF SALE THE A SSESSEE SHOULD HAVE CONSTRUCTED THE HOUSE BUT IT DOES NOT MEAN THA T THE CONSTRUCTION SHOULD NECESSARILY BE COMPLETE WITHIN TWO YEARS. IF SUBSTANTIAL INVESTMENT WAS MADE IN THE CONSTRUCTION OF THE HOUSE, IT AMOUNTED TO SUFFICIENT STEPS BEING TAKEN THUS SATIS FYING THE REQUIREMENTS OF SECTION 54. THE TRIBUNAL WAS NOT JU STIFIED IN DENYING EXEMPTION UNDER SECTION 54 TO THE ASSESSEE. ' 7.6 IN THE CASE OF THE ASSESSEE ALSO THE FACTS ARE MORE OR LESS IDENTICAL BECAUSE THE ASSESSEE HAD MADE THE PAYMENT TO THE BUILDER AND IT WAS BEYOND HER CONTROL TO COMPEL THE BUILDER TO COMPLY WITH THE TERMS AND CONDITIONS OF THE INITIAL AGREEMENT SHE E NTERED WITH THE BUILDER FOR CONSTRUCTING HER RESIDENTIAL FLAT. THER EFORE, FOLLOWING THE ABOVE MENTIONED DECISION OF THE HON'BLE MADHYA PRAD ESH HIGH COURT, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED FOR THE DEDUCTION UNDER SECTION 54 OF THE ACT. HENCE, WE DI RECT THE LEARNED :-7-: I.T.A. NO.419/MDS/2016 ASSESSING OFFICER TO GRANT THE BENEFIT OF DEDUCTION UNDER SECTION 54 OF THE ACT TO THE ASSESSEE FOR THE AMOUNT OF RS.1,50,0 0,000/-.' RESPECTFULLY FOLLOWING THE SAID DECISION, WE HOLD T HAT THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN THIS REGARD. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 08TH DAY OF FEBR UARY, 2017 AT CHENNAI. SD/- ( ' # . $ ) (DUVVURU RL REDDY) & /JUDICIAL MEMBER SD/- ( ) (M. BALAGANESH) /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED: 08TH FEBRUARY, 2017 JPV * -&45 65 /COPY TO: 1. ) APPELLANT 2. -.) /RESPONDENT 3. 7 ( )/CIT(A) 4. 7 /CIT 5. 5 -&& /DR 6. 9 /GF