ACIT, CHENNAI V. Dr. G.Usha Gurram Reddy, CHENNAI

ITA 436/CHNY/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68729 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 02-09-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 03-04-2009
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: G BASKAR
• Keywords: Capital asset; Benefit of exemption; Revised return
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 436/MDS/2009 ASSESSMENT YEAR 2005-06 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-II, NO. 121, M.G. ROAD, CHENNAI 34. VS DR.G. USHA GURRAM REDDY, NO. 13, HABIBULLAH ROAD, T. NAGAR, CHENNAI -17. [PAN: AADPR 6837 M] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI S. DAS GUPTA, JCIT ASSESSEE BY : SHRI G.BASKAR, ADVOCATE DATE OF HEARING : 02-09-2013 DATE OF PRONOUNCEMENT : 20-09-2013 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VI, CHEN NAI, DATED 17-12-2008 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 5-06. THE I.T.A. NO. 436/MDS/2009 :- 2 -: ONLY ISSUE RAISED IN APPEAL BY THE REVENUE IS ALLOW ING OF EXEMPTION CLAIMED U/S. 54 OF THE INCOME TAX ACT, 19 61 (HEREIN AFTER REFERRED TO AS THE ACT) BY THE CIT(APPEALS) . 2. THE BRIEF FACTS OF THE CASE ARE, THE ASSESSEE WA S THE OWNER OF THE PROPERTY SITUATED AT DOOR NO. 52, KODAMBAKKA M, CHENNAI. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE AY. 2005-06 ON 31-10-2005 DECLARING TOTAL INCOME OF ` 28,22,493/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U /S. 143(2) WAS ISSUED TO THE ASSESSEE. THE ASSESSEE FILED REVISED RETURN OF INCOME ON 01-05-2007 DECLARING A TOTAL INCOME OF ` 29,49,488/-. THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR DEVE LOPMENT OF LAND INTO A RESIDENTIAL APARTMENTS WITH M/S. SURYA FOUNDATIONS ON 24-03-2003. IN THE AGREEMENT, THE ASSESSEE HAD EXP RESSED HER DESIRE CONSTRUING A MULTI-STORIED RESIDENTIAL APART MENT ON PLOT NO. 9, 10, 11 & 12 OLD DOOR NO. 52, PALAYAKKARAN STREET , KODAMBAKKAM, CHENNAI OWNED BY HER AFTER DEMOLITION OF OLD BUILDING. AS PER THE TERMS AND CONDITIONS OF THE A GREEMENT, 50% OF THE CONSTRUCTED AREA IN THE FORM OF RESIDENTIAL APARTMENTS WAS TO BE HANDED OVER TO THE ASSESSEE AND THE REMAINING 50% OF THE I.T.A. NO. 436/MDS/2009 :- 3 -: CONSTRUCTED AREA WAS TO BE RETAINED BY THE DEVELOPE R I.E., M/S. SURYA FOUNDATIONS. THE ASSESSEE HAD AGREED TO EXT END FULL CO- OPERATION TO THE DEVELOPER FOR DEMOLITION OF THE EX ISTING BUILDING AND OBTAINING BUILDING PLAN FOR FRESH CONSTRUCTION AND FOR SEEKING NECESSARY APPROVALS TO ACCOMPLISH THE PROJECT. THE ASSESSEE ALSO EXECUTED REGISTERED GENERAL POWER OF ATTORNEY IN THE NAME OF MR. G.P. MADHUSUDHAN REDDY, PROPRIETOR: M/S. SUR YA FOUNDATIONS ON 25 TH MARCH 2003. ANOTHER SUPPLEMENTARY AGREEMENT DATED 24 TH MARCH 2004 WAS EXECUTED BETWEEN THE ASSESSEE AND M/S. SURYA FOUNDATIONS. BY EXECUTING SUPPLEMENTARY AGREEMENT, THE ASSESSEE RELINQUISHED HER SHARE IN THE REMAINING 50% OF THE CONSTRUCTED RESIDENTIAL APARTMENTS IN LIEU OF LUMP-SUM PAYMENT OF ` 80.00 LAKHS TO BE PAID BY M/S. SURYA FOUNDATIONS WITHIN A PERIOD OF SIX MONTHS FRO M THE DATE OF EXECUTION OF THE SUPPLEMENTARY AGREEMENT. ON THE S AME DAY, THE ASSESSEE EXECUTED SECOND GENERAL POWER OF ATTOR NEY IN FAVOUR OF SHRI G.P. MADHUSUDHAN REDDY, AUTHORIZING HIM TO SELL THE BALANCE 50% SHARE OF LAND. ON 15-08-2004, THE ENTIRE SALE CONSIDERATION OF ` 80.00 LAKHS WAS RECEIVED BY THE ASSESSEE FROM M/S. SURYA FOUNDATIONS. I.T.A. NO. 436/MDS/2009 :- 4 -: 3. THE FACTS NARRATED ABOVE HAVE NOT BEEN DISPUTED BY EITHER OF THE PARTIES. THE ASSESSEE IN HER ORIGINAL RETUR N OF INCOME FILED ON 31 ST OCTOBER 2005, HAD CLAIMED EXEMPTION U/S. 54F. HOW EVER, IN THE REVISED RETURN OF INCOME, THE ASSESSEE CLAIM ED EXEMPTION U/S. 54 INSTEAD OF 54F. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE IS NEITHER ENTITLED TO CLAIM EXEM PTION U/S. 54 OR 54F, AS THE ASSESSEE HAD NOT SOLD ANY RESIDENTIAL B UILDING BUT HAD INTEND TO SELL A VACANT PLOT. THE ASSESSING OF FICER VIDE ASSESSMENT ORDER DATED 24-12-2007 DECLINED TO GRANT BENEFIT UNDER SECTION 54/54F TO THE ASSESSEE. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE C IT(APPEALS) VIDE ORDER DATED 17-12-2008 HELD THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING EXEMPTION U/S. 54 AS THE ASSESSEE HAS TRAN SFERRED LAND AND BUILDING AND GOT BACK PROPORTIONATE SHARE OF LA ND AND BUILDING. AGGRIEVED AGAINST THE ORDER OF THE CIT(A PPEALS), THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. I.T.A. NO. 436/MDS/2009 :- 5 -: 4. SHRI S. DAS GUPTA, APPEARING ON BEHALF OF THE REVENUE SUBMITTED THAT THE PROPERTY TRANSFERRED BY THE ASSE SSEE IS A VACANT LAND AND NOT A RESIDENTIAL HOUSE. IN ORDER TO SUPPORT HIS CONTENTIONS, THE LD. DR REFERRED TO AGREEMENT FOR D EVELOPMENT DATED 24-03-2003 AT PAGE NOS. 1 TO 11 OF THE PAPER BOOK AND SUPPLEMENTARY AGREEMENT DATED 24-03-2004 AT PAGE NO S. 19 TO 23 OF THE PAPER BOOK. THE LD. DR ALSO REFERRED TO GENERAL POWER OF ATTORNEY EXECUTED BY THE ASSESSEE IN FAVOUR OF T HE DEVELOPER ON 24-03-2004 AT PAGE NOS. 24 TO 30 OF THE PAPER BO OK TO SHOW THAT WHAT WAS INTENDED TO BE TRANSFERRED WAS LAND A ND NOT THE RESIDENTIAL BUILDING. THE LD. DR SUBMITTED THAT NO WHERE FROM THE AGREEMENTS EXECUTED BETWEEN THE ASSESSEE AND THE DE VELOPER IT CAN BE INFERRED THAT THE SALE IS WITH REGARD TO A R ESIDENTIAL BUILDING. THE FIRST AGREEMENT OF DEVELOPMENT DATED 24-03-2003 MAKES IT CLEAR THAT THE BUILDING WAS TO BE DEMOLISH ED AND 50% OF THE NEWLY CONSTRUCTED MULTI-STORIED RESIDENTIAL APA RTMENTS WERE TO BE GIVEN TO THE ASSESSEE AND THE REMAINING 50% WERE TO BE RETAINED, BY THE DEVELOPER. THE LD. DR STRONGLY SU PPORTED THE ASSESSMENT ORDER AND PRAYED FOR SETTING ASIDE THE O RDER OF THE CIT(APPEALS). I.T.A. NO. 436/MDS/2009 :- 6 -: 5. ON THE OTHER HAND, SHRI G. BASKAR, ADVOCATE APPE ARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT ON THE DATE O F AGREEMENT I.E., 24-03-2003 THE BUILDING WAS VERY MUCH IN EXIS TENCE ON THE PLOT-IN-QUESTION. HE CONTENDED THAT SUBSEQUENT AGR EEMENT IS ONLY NOVATION OF ORIGINAL AGREEMENTS. THE LD. COUN SEL REFERRED PAGE NOS. 2, 3, 6 & 11 OF THE PAPER BOOK CONTAINING AGREEMENT FOR DEVELOPMENT DATED 24-03-2003 TO SHOW THAT THE B UILDING WAS VERY MUCH IN EXISTENCE AT THE TIME OF AGREEMENT. T HE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAD TRANSFERRED THE LAN D ALONG WITH THE BUILDING. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD A SHEET CONTAINING CHRONOLOGY OF THE EVENTS. IN ORDER TO SUPPORT HIS CONTENTIONS , THE ASSESSEE RELIED ON TH E JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF D. KASTURI VS. CIT REPORTED AS 251 ITR 532. THE LD. COUNSEL STATED THAT THE ASSESSEE IS ELIGIBLE TO CLAIM THE BENEFIT OF SECTIO N 54 OF THE ACT. THE LD. COUNSEL MADE A STATEMENT AT THE BAR THAT TH E ASSESSEE IS NOT SEEKING EXEMPTION U/S. 54F OF THE ACT. THE LD. COUNSEL SUBMITTED THAT IF THE THEORY OF INTENTION IS TO B E FOLLOWED, THEN SALE OF 3,634 SQ. FT., CAN BE BROUGHT TO TAX IN THE AY. 2004-05, AS THE SALE DEEDS WERE EXECUTED BY POWER OF ATTORNEY C ONVEYING I.T.A. NO. 436/MDS/2009 :- 7 -: 3,634 SQ. FT., FROM THE UN-DIVIDED TOTAL AREA OF 7, 063 SQ. FT., UPTO 31-03-2004. THE SALE DEEDS WITH RESPECT TO REMAINI NG LAND MEASURING 3,424 SQ. FT., OF UN-DIVIDED SHARE IN LAN D WERE EXECUTED BETWEEN 04-04-2004 AND 30-06-2004 I.E., PERIOD RELE VANT TO AY. 2005-06. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE LD. CO UNSEL FOR THE ASSESSEE AS WELL AS THE REPRESENTATIVE OF T HE DEPARTMENT. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DOCUMENTS PLACED ON RECORD IN THE FORM OF PAPER BOO K. THE ASSESSEE IS CLAIMING DEDUCTION U/S. 54 OF THE ACT. BEFORE ADVERTING TO THE FACTS OF THE CASE, LET US FIRST SE E THE PRE- CONDITIONS REQUIRED TO BE SATISFIED FOR CLAIMING EX EMPTIONS UNDER THE PROVISIONS OF SECTION 54. I. THE HOUSE PROPERTY TRANSFERRED IS A RESIDENTIAL HOUSE WHOSE INCOME IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY; I.T.A. NO. 436/MDS/2009 :- 8 -: II. THE HOUSE PROPERTY WHICH IS TRANSFERRED SHOULD BE A LONG TERM CAPITAL ASSET; III. THE ASSESSEE HAS PURCHASED A RESIDENTIAL HOUSE WITHIN A PERIOD OF ONE YEAR BEFORE THE TRANSFER OR WITHIN TWO YEARS AFTER THE DATE OF TRANSFER OR HAS CONSTRUCTED A RESIDENTIAL HOUSE PROPERTY WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF SUCH TRANSFE R; IV. THE BENEFIT OF EXEMPTION U/S. 54 IS AVAILABLE O NLY TO AN INDIVIDUAL OR A HUF. IN PURSUANCE OF THE CONDITIONS LAID DOWN IN SECTION 54 FOR AVAILING EXEMPTION, WE HAVE TO SEE WHETHER THE PROP ERTY TRANSFERRED BY THE ASSESSEE IS A RESIDENTIAL HOUSE PROPERTY? THE LD. COUNSEL FOR THE ASSESSEE DURING THE COURSE OF A RGUMENTS HAS PLACED ON RECORD THE LIST OF DATES AND EVENTS WHICH IS AS UNDER: I.T.A. NO. 436/MDS/2009 :- 9 -: DATE EVENT 23.12.02 SANCTION FROM THE CORPORATION OF CHENNAI F OR DEMOLITION OF THE EXISTING BUILDING 24.03.03 DEVELOPMENT AGREEMENT WITH M/S. SOORYA FOU NDATIONS ON 50:50 SHARING BASIS 25.03.03 GENERAL POWER OF ATTORNEY EXECUTED BY ASSE SSEE IN FAVOUR OF M/S. SOORYA FOUNDATIONS FOR CONVEYING 50% UNDIVIDED SHARE IN THE LAND 09.10.03 BUILDING PLAN APPROVAL ISSUED BY CHENNAI M ETROPOLITAN DEVELOPMENT AUTHORITY 24.03.04 SUPPLEMENTARY AGREEMENT WITH M/S. SOORYA F OUNDATIONS BALANCE 50% LAND ALSO AGREED TO BE SOLD TO M/S. SOORYA FOUNDATIONS TOTAL CONSIDERATION FIXED AT ` 80,00,000/- FOR THE ENTIRE PROPERTY 24.03.04 SECOND GENERAL POWER OF ATTORNEY EXECUTED BY ASSESSEE IN FAVOUR OF M/S. SOORYA FOUNDATIONS, AUTHORIZING S ALE OF THE BALANCE 50% OF LAND 15.08.04 THE ENTIRE SALE CONSIDERATION OF ` 80,00,000/- RECEIVED BY ASSESSEE FROM M/S. SOORYA FOUNDATIONS 30.12.04 NEELANKARAI PROPERTY PURCHASED BY ASSESSEE FOR ` 76,30,233 (INCLUDING REGISTRATION CHARGES) 09.02.04, 08.03.04, 12.03.04, 22.03.04, 26.03.04 & 31.03.04 SALE DEEDS EXECUTED BY POWER AGENT, CONVEYING 3,634 SQ.FT OF UNDIVIDED SHARE IN LAND, OUT OF 7,063 SQ.F T. 14.04.04, 06.05.04, 24.05.04 & 30.06.04 SALE DEEDS EXECUTED BY ASSESSEE, CONVEYING 3,424 SQ .FT. OF UNDIVIDED SHARE IN LAND, OUT OF 7,063 SQ.FT. 7. AS PER THE ASSESSEES OWN CONTENTION, THE ASSESS EE HAD SOUGHT PERMISSION FOR DEMOLITION OF THE EXISTING BU ILDING FROM THE CORPORATION OF CHENNAI. SUBSEQUENT TO SEEKING SANC TION FOR DEMOLITION, THE ASSESSEE ENTERED INTO AGREEMENT FOR DEVELOPING I.T.A. NO. 436/MDS/2009 :- 10 - : THE LAND BY CONSTRUCTING MULTI-STORIED BUILDING IN THE FORM OF RESIDENTIAL APARTMENTS. A PERUSAL OF CLAUSE-2 (SH ARING OF PLINTH AREA) OF THE AGREEMENT DATED 24-03-2003 WOULD SHOW THAT AFTER CONSTRUCTION OF THE RESIDENTIAL APARTMENTS ON THE L AND, THE DEVELOPER HAD TO HANDOVER 50% OF THE CONSTRUCTED AR EA IN THE FORM OF RESIDENTIAL APARTMENTS TO THE OWNER I.E., T HE ASSESSEE. THE DEVELOPER WAS ENTITLED TO RETAIN REMAINING 50% OF THE CONSTRUCTED AREA IN THE FORM OF RESIDENTIAL APARTME NTS. THUS, IT IS CLEAR FROM THE CHRONOLOGY OF EVENTS AND THE TERMS A ND CONDITIONS AS LAID DOWN IN THE AGREEMENT FOR DEVELOPMENT THAT THE INTENTION OF THE ASSESSEE WAS NOT TO SELL RESIDENTIAL HOUSE B UT THE PLOT. THE AGREEMENT FOR DEVELOPMENT SPECIFICALLY MENTIONS THE FACT THAT THE OWNER (ASSESSEE) DESIRES TO DEVELOP THE SAID PIECE OF LAND CONSTRUCTING STORIED BUILDING IN THE FORM OF RESIDE NTIAL APARTMENTS, AFTER DEMOLITION OF THE OLD BUILDING. THIS BELIES THE CLAIM OF THE ASSESSEE THAT WHAT WAS SOLD BY THE ASS ESSEE TO THE DEVELOPER WAS A RESIDENTIAL BUILDING AND NOT THE VA CANT LAND. 8. IN OUR CONSIDERED OPINION, THE STRUCTURE ON THE LAND-IN- QUESTION WAS NOT A RESIDENTIAL HOUSE BUT AN OLD BUI LDING TO GIVE I.T.A. NO. 436/MDS/2009 :- 11 - : WAY FOR THE CONSTRUCTION OF A MULTI-STORIED RESIDEN TIAL APARTMENTS. AFTER TAKING INTO CONSIDERATION THE DOCUMENTS ON RE CORD AND PECULIAR FACTS OF THE CASE, BY NO STRETCH OF IMAGIN ATION, THE SAID BUILDING CAN BE CLASSIFIED AS A RESIDENTIAL HOUSE F OR THE PURPOSE OF GRANT OF EXEMPTION U/S. 54. THE ASSESSEE HAS ADMIT TED THE FACT THAT SANCTION FOR DEMOLITION OF THE BUILDING WAS TA KEN PRIOR TO THE EXECUTION OF AGREEMENT FOR DEVELOPMENT. THE AGREEM ENT SPECIFICALLY STATES THAT MULTISTORIED RESIDENTIAL A PARTMENTS ARE TO BE CONSTRUCTED AFTER DEMOLITION OF OLD BUILDING, TH IS CLEARLY SHOWS THE INTENTION OF THE ASSESSEE WAS TO SELL THE PLOT AND NOT THE BUILDING. SIMILARLY, THE INTENTION OF THE DEVELOPE R WAS TO CONSTRUCT OR DEVELOP MULTISTORIED RESIDENTIAL APARTMENTS AND NOT TO ACQUIRE AN OLD BUILDING. BOTH THE PARTIES WERE AT AD IDEM WHILE EXECUTING THE AGREEMENTS. THE NOMENCLATURE OF THE AGREEMENT AGREEMENT FOR DEVELOPMENT ITSELF SHOWS THAT THE INTENTION WA S TO DEVELOP LAND AND NOT TO BUY OR SELL BUILDING. MOREOVER, IN THE ENTIRE AGREEMENT, THE TERMS USED TO DESCRIBE THE ALLEGED H OUSE PROPERTY IS SUPER STRUCTURE OR THE BUILDING, NOWHERE IT HAS BEEN MENTIONED THAT THE BUILDING IS A HOUSE PROPERTY. A FURTHER PERUSAL OF THE GENERAL POWER OF ATTORNEY PLACED ON RECORD S HOWS THAT THE I.T.A. NO. 436/MDS/2009 :- 12 - : ASSESSEE INTENDED TO DEVELOP THE LAND/PLOT AND NOT SELL THE BUILDING ON THE PLOT. 9. THE LD. COUNSEL FOR THE ASSESSEE RAISED A CONTEN TION THAT OUT OF TOTAL UNDIVIDED SHARE OF LAND MEASURING 7063 SQ.FT., 3634 SQ. FT., WAS TRANSFERRED IN AY. 2004-05 AND SALE DE EDS W.R.T. REMAINING 3,424 SQ. FT., WERE EXECUTED IN AY. 2005- 06, THEREFORE THE SALE PROCEEDS HAVE TO BE ASSESSEE ACCORDINGLY. IT IS AN UN- DISPUTED FACT THAT IN PURSUANCE OF SUPPLEMENTARY AG REEMENT DATED 24-03-2004, THE ASSESSEE HAS RECEIVED A SUM O F ` 80.00 LAKHS FROM THE DEVELOPER IN AUGUST 2004 TOWARDS SAL E CONSIDERATION OF THE PROPERTY IN QUESTION. IT IS A LSO AN ADMITTED FACT THAT PRIOR TO AUGUST, 2004, THE ASSESSEE HAD H ANDED OVER THE POSSESSION OF PROPERTY TO THE DEVELOPER. THE TRANS ACTION COMPLETED ON RECEIPT OF CONSIDERATION. ONCE THE TR ANSACTION IS COMPLETE, THE DATE OF EXECUTION OF SUBSEQUENT SALE DEEDS IS IMMATERIAL. SINCE, THE ASSESSEE HAD RECEIVED FULL AND FINAL CONSIDERATION IN AY. 2005-06, THE CAPITAL GAIN ARIS ING OUT OF SALE OF LAND IS TAXABLE IN AY. 2005-06. I.T.A. NO. 436/MDS/2009 :- 13 - : 10. THUS, IN VIEW OF OUR ABOVE FINDINGS, WE ARE OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS ERRED IN COMING TO THE CONCLUSION THAT THE ASSESSEE IS ENTITLED TO CLA IM EXEMPTION U/S. 54 OF THE ACT. THE IMPUGNED ORDER IS SET ASID E AND THE APPEAL OF THE REVENUE SUCCEEDS. ORDER PRONOUNCED ON FRIDAY, THE 20 TH SEPTEMBER, 2013 AT CHENNAI. SD/- SD/- (N.S. SAINI ) ACCOUNTANT MEMBER (VIKAS AWASTHY) JUDICIAL MEMBER DATED: 20 TH SEPTEMBER, 2013 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR