SHRI DHARMENDRA KUMAR PAREEK, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR

ITA 457/JPR/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9644 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 02-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K RAWAT JT CIT DHK
• Keywords: Capital asset; Business income; Depreciation; Cost of acquisition
• Section: 54B; 54F; 2(14); 41(2); 32; 2; 15; 54

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 457/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2014-15.. SHRI DHARMENDRA KUMAR PAREEK, 2821, HARIJETHI KA CHOWK, BAGRUWALO KA RASTA, CHANDPOLE BAZAR, JAIPUR. CUKE VS. THE DCIT, CIRCLE-2 JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ALOPP 7220 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI A.K. RAWAT (JT.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06.06.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 17/06/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 01.01.2019 OF LD. CIT (A)-I, JAIPUR FOR THE ASSESSMENT YEAR 2014- 15. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD. CIT (A) HAS ERRED ON FCTS AND IN LAW I N NOT ALLOWING THE CLAIM OF DEDUCTION U/S 54 OF RS. 68,41,728/- BY INC ORRECTLY HOLDING THAT INCOME F5ROM HOUSE CONSTRUCTED ON THE AGRICULTURAL LAND SOLD BY THE ASSESSEE IS NOT CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY BUT IS CONSIDERED A S AGRICULTURAL INCOME U/S 2(1A) AND THEREFORE, BENEFI T OF SECTION CANNOT BE AVAILED ON SALE OF AGRICULTURAL LAND HAVI NG CONSTRUCTED HOUSE THEREON BY IGNORING EXPLANATION 2 TO SECTION 2(1A). 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN NOT ALLOWING DEDUCTION U/S 54F WHILE DISALLOWING THE CLAIM OF DE DUCTION U/S 54. 2 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. 3. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIFY ANY GROUND OF APPEAL. 4. NECESSARY COST BE AWARDED TO THE ASSESSEE. GROUND NO. 1 IS REGARDING DISALLOWANCE OF CLAIM OF DEDUCTION U/S 54. 2. THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETU RN OF INCOME ON 31 ST JULY, 2014 DECLARING TOTAL INCOME OF RS. 8,85,82,260/- INCLUDI NG LONG TERM CAPITAL GAIN ARISING FROM THE SALE OF AGRICULTURAL LAND AND BUILDING. T HE ASSESSEE SOLD AGRICULTURAL LAND ALONG WITH CONSTRUCTION ON IT FOR A CONSIDERATION O F RS. 9,90,00,000/- VIDE SALE DEED DATED 21.08.2016. THE ASSESSEE HAS COMPUTED THE CA PITAL GAIN AFTER CLAIMING DEDUCTION ON ACCOUNT OF PURCHASE OF LAND AND CONSTR UCTION OF BUILDING AS WELL AS BOUNDARY WALL AT RS. 9,53,88,740/-. AGAINST THE SA ID CAPITAL GAIN, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 54 OF THE IT ACT AT RS. 68,41,728/- AS WELL AS DEDUCTION UNDER SECTION 54B AT RS. 42,56,250/-. TH E AO OBSERVED THAT THE ASSESSEE HAS SOLD THE AGRICULTURAL LAND WHEREAS THE DEDUCTIO N UNDER SECTION 54 IS ALLOWABLE ON SALE OF RESIDENTIAL HOUSE. THE AO FURTHER NOTED TH AT THE AGRICULTURAL LAND HAS BEEN SOLD BY THE ASSESSEE VIDE SINGLE SALE DEED AND, THE REFORE, THE AGRICULTURAL LAND AND CONSTRUCTION THEREON WAS CONSIDERED AS SINGLE UNIT IN THE SAID SALE DEED. SINCE NO SEPARATE SALE DEED HAS BEEN EXECUTED REGARDING HOUS E BUILT UPON THE LAND, THEREFORE, THE AO DENIED THE CLAIM OF DEDUCTION UND ER SECTION 54 OF THE IT ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) BUT COULD NOT SUCCEED. THE LD. CIT (A) HAS ALSO CONSIDERED THE ENTIRE PROPERTY BEING AGRICULTURAL LAND IN TERMS OF SECTION 2(1A) WHICH DEFINES AGRICU LTURAL INCOME. 3 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT T HERE IS NO DISPUTE AS TO THE FACT THAT ASSESSEE HAS SOLD THE AGRICULTU RAL LAND MEASURING 4.32 HECTARE, I.E. 43,200 SQ. MT . ALONG WITH 2,000 SQ. FT. CONSTRUCTION THEREON FOR RS.9.90 CRORES. HOWEVER, THE STAMP DUTY AUTHORITIES HAVE EVALUATED ITS VALUE AT RS.5,53,86,000/- COMPRISING OF THE VALUE O F LAND AT RS.5,31,36,000/-, VALUE OF CONSTRUCTION AT RS. 12 L ACS AND VALUE OF BOUNDARY WALL AT RS.10,50,000/-. IN THE SAID EVALUATION, THE PROPERTY CRITERIA IS MENTIONED AS 'RESIDENTIAL-MAIN ROAD (ABADI BHOOMI)' . THUS, IT IS A FACT ON RECORD THAT WHAT IS CONSTRUCTED ON THE LAND IS A RE SIDENTIAL CONSTRUCTION. THE LD. CIT(A) HAS NOT BROUGHT ANY MATERIAL ON RECORD T HAT THE CONSTRUCTION EXISTING ON THE LAND IS NOT A RESIDENTIAL CONSTRUCT ION AND THEREFORE, ONLY BECAUSE IN THE SALE DEED THE WORD 'RESIDENTIAL CONS TRUCTION' IS NOT MENTIONED WOULD NOT MEAN THAT WHAT IS CONSTRUCTED IS NOT A RE SIDENTIAL CONSTRUCTION BY IGNORING THE VALUE EVALUATED BY THE STAMP AUTHORITI ES WHERE THE CONSTRUCTION IS SPECIFICALLY STATED TO BE RESIDENTI AL CONSTRUCTION. THEREFORE, THE FINDING OF LD. CIT(A) TO THIS EXTENT IS INCORRE CT. THE LD. A/R FURTHER SUBMITTED THAT THE OBSERVATION OF THE LOWER AUTHORI TIES THAT THE SALE DEED IS EXECUTED AS A SINGLE UNIT WITHOUT BIFURCATING THE S ALE CONSIDERATION BETWEEN THE VALUE OF LAND AND VALUE OF CONSTRUCTION AND THA T THE PROPERTY IS RECORDED AS AGRICULTURAL LAND IN THE REVENUE RECORD AS PER K HASRA GIRDAVARI/JAMABANDI WOULD NOT MEAN THAT THE CONSTRUCTION EXISTING ON TH E LAND IS NOT RESIDENTIAL CONSTRUCTION OR THAT NO CONSIDERATION IS THERE IN R ESPECT OF THE CONSTRUCTION 4 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. EXISTING ON THE SAID LAND BY IGNORING THE VALUE OF LAND AND CONSTRUCTION EVALUATED BY THE STAMP AUTHORITIES. IT IS A SETTLED LAW THAT WHEN THERE IS A COMBINED CONSIDERATION FOR A PROPERTY WHICH COMPRIS ES OF LAND AND CONSTRUCTION THEREON, SUCH CONSIDERATION HAS TO BE REASONABLY APPORTIONED BETWEEN THE LAND AND THE CONSTRUCTION AS THESE ARE TWO SEPARATE ASSETS AS HELD BY HON'BLE RAJASTHAN HIGH COURT IN CASE OF CIT VS. VIMAL CHAND GOLECHA 201 ITR 442 (RAJ.) AND HON'BLE BOMBAY HIGH COURT IN CASE OF CIT VS. CITIBANK N.A. 261 ITR 570 (BOM). ACCORDINGLY, THE A SSESSEE HAS CORRECTLY BIFURCATED THE ACTUAL SALE CONSIDERATION OF RS.9.90 CRORES TOWARDS THE VALUE OF LAND AT RS.9,49,78,226/-, VALUE OF BOUNDARY AT RS.1 8,76,828/- AND VALUE OF BUILDING AT RS.21,44,946/- ON THE BASIS OF VALUE EV ALUATED BY THE STAMP AUTHORITIES. ON THIS BASIS THE VALUE OF RESIDENTIAL HOUSE IN THE TOTAL SALES CONSIDERATION HAS BEEN WORKED OUT AS UNDER:- (I) VALUE OF 2,750 SQ. MT. LAND APPURTENANT TO THE RESIDENTIAL LAND RS. 60,46,068/- (II) VALUE OF 2,000 SQ. FT. CONSTRUCTION RS. 21 ,44,946/- TOTAL VALUE OF THE RESIDENTIAL HOUSE RS.81,91, 014/- AGAINST THE ABOVE, THE INDEXED COST OF ACQUISITION OF CORRESPONDING LAND AND CONSTRUCTION THEREON IS WORKED OUT AT RS.14,43,224/ - AND THUS, LONG TERM CAPITAL GAIN WITH REFERENCE TO THE RESIDENTIAL HOUS E IS WORKED OUT AT RS.67,47,789/-. THIS HAS BEEN ACCEPTED BY THE AO. S INCE ASSESSEE HAS PURCHASED THE RESIDENTIAL LAND FOR RS.23,41,728/- A ND RS.45,00,000/- IS DEPOSITED IN CAPITAL GAIN ACCOUNT SCHEME, TOTALING TO RS.68,41,728/-, 5 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. ASSESSEE HAS RIGHTLY CLAIMED DEDUCTION U/S 54 TO WO RK OUT CAPITAL GAIN SEPARATELY ON SALE OF HOUSE AND SALE OF AGRICULTURA L LAND. THE LD. A/R SUBMITTED THAT THE LD. CIT(A) BY REFERRING TO DEFIN ITION OF AGRICULTURAL INCOME U/S 2(1A) HAS OBSERVED THAT INCOME DERIVED F ROM THE BUILDING IN THE IMMEDIATE VICINITY OF THE AGRICULTURAL LAND REQUIRE D AS DWELLING HOUSE OR STORE HOUSE OR OTHER OUT BUILDING IS REGARDED AS AG RICULTURAL INCOME AND THEREFORE, EVEN IF THE BUILDING IS USED AS A DWELLI NG HOUSE, IT WOULD NOT CHANGE THE NATURE OF THE LAND AND IT WILL BE REGARD ED AS AGRICULTURAL LAND ONLY. HOWEVER, IN HOLDING SO HE IGNORED EXPLANATION 2 TO SECTION 2(1A) WHERE IT IS HELD THAT INCOME DERIVED FROM ANY BUILD ING ARISING FROM THE USE THEREOF FOR ANY PURPOSE (INCLUDING LETTING FOR RESI DENTIAL PURPOSE OR FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION) OTHER THAN A GRICULTURAL SHALL NOT BE THE AGRICULTURAL INCOME. IN THE PRESENT CASE, THE B UILDING CONSTRUCTED ON THE LAND IS USED BY THE ASSESSEE FOR RESIDENTIAL PURPOS E AND THEREFORE, THE INCOME THEREFROM, IF ANY, WOULD BE ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS REQUIRED U/S 54 AND THUS, ASSESSE E IS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 54 ON THE SALE VALUE OF THE RESIDENTIAL HOUSE CONSTRUCTED ON SUCH AGRICULTURAL LAND. THE LD. A/R SUBMITTED THAT WITHOUT PREJUDICE TO ABOVE, IN CASE EVEN IT IS ASSUMED THAT THE RESIDENTIAL HOUSE SOLD BY THE ASSESSEE ON THE AGRICULTURAL LAND IS NOT ELI GIBLE FOR DEDUCTION U/S 54, THEN SUCH DEDUCTION WOULD BE ALLOWABLE U/S 54F IN A S MUCH AS EVEN WHEN AN 6 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. AGRICULTURAL LAND IS SOLD AND THE SAME IS INVESTED IN PURCHASE/ CONSTRUCTION OF RESIDENTIAL HOUSE, THE SAME IS ELIGIBLE FOR DEDUCTI ON U/S 54F. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T EXCEPT THE AGRICULTURAL LAND, NO OTHER ASSET IS SOLD UNDER THE SAID SALE DE ED. THEREFORE, THE ASSESSEE HAS SOLD ONLY THE AGRICULTURAL LAND ALONG WITH THE CONS TRUCTION OF THE BUILDING. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AGRICULTURAL INCOME HAS BEEN DEFINED U NDER SECTION 2(1A) OF THE IT ACT WHICH IS QUOTED AS UNDER :- 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES , 3 [( 1 ) XXXX XXXXX 4 [ 5 ( 1A )] 6 'AGRICULTURAL INCOME' 7 MEANS 8 9 [( A ) ANY RENT 10 OR REVENUE 10 DERIVED 10 FROM LAND 10 WHICH IS SITUATED IN INDIA AND IS USED FOR AGRICULTURAL PURPOSES 10 ;] ( B ) ANY INCOME DERIVED FROM SUCH LAND 10 BY ( I ) AGRICULTURE 10 ; OR ( II ) THE PERFORMANCE BY A CULTIVATOR OR RECEIVER OF RENT -IN- KIND OF ANY PROCESS ORDINARILY EMPLOYED BY A CULTIVATOR OR RECEIVER OF RENT-IN- KIND TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN T O MARKET; OR ( III ) THE SALE BY A CULTIVATOR OR RECEIVER OF RENT-IN- KIND OF THE PRODUCE RAISED OR RECEIVED BY HIM, IN RESPECT OF WHICH NO PROCESS HAS BEEN PERFORMED OTHER THAN A PROCESS OF THE NATURE DESCRIBED IN PARAGRAPH ( II ) OF THIS SUB-CLAUSE; ( C ) ANY INCOME DERIVED FROM ANY BUILDING OWNED AND OCCU PIED BY THE RECEIVER OF THE RENT OR REVENUE OF ANY SUCH LAND, OR OCCUPIED BY THE CUL TIVATOR OR THE RECEIVER OF RENT-IN- KIND, OF ANY LAND WITH RESPECT TO WHICH, OR THE PRODUCE O F WHICH, ANY PROCESS MENTIONED IN PARAGRAPHS ( II ) AND ( III ) OF SUB-CLAUSE ( B ) IS CARRIED ON : 9 [ PROVIDED THAT ( I ) THE BUILDING IS ON OR IN THE IMMEDIATE VICINITY OF THE LAND, AND IS A BUILDING WHICH THE RECEIVER OF THE RENT OR REVENUE OR THE CU LTIVATOR, OR THE RECEIVER OF RENT-IN- KIND, BY REASON OF HIS CONNECTION WITH THE LAND, RE QUIRES AS A DWELLING HOUSE, OR AS A STORE-HOUSE, OR OTHER OUT-BUILDING, AND ( II ) THE LAND IS EITHER ASSESSED TO LAND REVENUE IN INDI A OR IS SUBJECT TO A LOCAL RATE 7 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. ASSESSED AND COLLECTED BY OFFICERS OF THE GOVERNMEN T AS SUCH OR WHERE THE LAND IS NOT SO ASSESSED TO LAND REVENUE OR SUBJECT TO A LOCAL RATE, IT IS NOT SITUATED ( A ) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNI CIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COM MITTEE, TOWN COMMITTEE OR BY ANY OTHER NAME) OR A CANTONMENT BOA RD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND 11 [***]; OR 12 [( B ) IN ANY AREA WITHIN THE DISTANCE, MEASURED AERIALLY, ( I ) NOT BEING MORE THAN TWO KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM ( A ) AND WHICH HAS A POPULATION OF MORE THAN TEN THOUSAN D BUT NOT EXCEEDING ONE LAKH; OR ( II ) NOT BEING MORE THAN SIX KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM ( A ) AND WHICH HAS A POPULATION OF MORE THAN ONE LAKH BU T NOT EXCEEDING TEN LAKH; OR ( III ) NOT BEING MORE THAN EIGHT KILOMETRES, FROM THE LOCA L LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM ( A ) AND WHICH HAS A POPULATION OF MORE THAN TEN LAKH. 1 3 [ 14 [ EXPLANATION 1 .]FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT REVENUE DERIVED FROM LAND SHALL NOT INCLUDE AND SHALL BE DE EMED NEVER TO HAVE INCLUDED ANY INCOME ARISING FROM THE TRANSFER OF ANY LAND REFERR ED TO IN ITEM ( A ) OR ITEM ( B ) OF SUB- CLAUSE ( III ) OF CLAUSE ( 14 ) OF THIS SECTION.] 1 5 [ EXPLANATION 2. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED TH AT INCOME DERIVED FROM ANY BUILDING OR LAND REFERRED TO IN SU B-CLAUSE ( C ) ARISING FROM THE USE OF SUCH BUILDING OR LAND FOR ANY PURPOSE (INCLUDING LE TTING FOR RESIDENTIAL PURPOSE OR FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION) OTHER TH AN AGRICULTURE FALLING UNDER SUB- CLAUSE ( A ) OR SUB-CLAUSE ( B ) SHALL NOT BE AGRICULTURAL INCOME.] 16 [ EXPLANATION 3. FOR THE PURPOSES OF THIS CLAUSE, ANY INCOME DERIVED FROM SAPLINGS OR SEEDLINGS GROWN IN A NURSERY SHALL BE DEEMED TO BE AGRICULTURAL INCOME.] 17 [ EXPLANATION 4. FOR THE PURPOSES OF CLAUSE ( II ) OF THE PROVISO TO SUB-CLAUSE ( C ), 'POPULATION' MEANS THE POPULATION ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR;] AS PER SUB-CLAUSE (C) OF SECTION 2(IA) ANY INCOME D ERIVED FROM ANY BUILDING OWNED AND OCCUPIED BY THE RECEIVER OF REVENUE OR RENT OF THE LAND OR OCCUPIED BY THE CULTIVATOR WHICH IS CONSIDERED AS A DWELLING HOUSE OR A STORE HOUSE OR OTHER OUT BUILDING BY THE REASON OF ITS CONNECTION WITH THE L AND, THE SAME IS TREATED AS AGRICULTURAL INCOME. EXPLANATION 2 TO THE SAID SEC TION EXPLAINS THAT THE INCOME 8 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. DERIVED FROM ANY BUILDING OR LAND REFERRED TO IN SU B-CLAUSE (C) ARISING FROM THE USE OF SUCH BUILDING OR LAND FOR ANY PURPOSES INCLUDING LETTING FOR RESIDENTIAL PURPOSE OR FOR PURPOSES OF ANY BUSINESS OR PROFESSION OTHER TH AN THE PURPOSES FALLING AS AGRICULTURE UNDER SUB-CLAUSES (A) OR (B) SHALL NOT BE TREATED AS AGRICULTURAL INCOME. THUS SO FAR AS ANY BUILDING ON THE AGRICULTURAL LAN D WHICH IS USED AND OCCUPIED ONLY FOR THE PURPOSES OF AGRICULTURAL OPERATIONS, THEN T HE INCOME FROM SUCH BUILDING IS TREATED AS AGRICULTURAL INCOME. ON THE OTHER HAND, IF THE SAID BUILDING IS NOT USED OR OCCUPIED FOR THE PURPOSE OF AGRICULTURAL OPERATION, THEN THE INCOME FROM SUCH BUILDING WILL NOT BE TREATED AS AGRICULTURAL INCOME . IN THE CASE IN HAND, THE STRUCTURE CONSTRUCTED ON THE LAND IN QUESTION AS PER THE DESC RIPTION GIVEN IN THE SALE DEED IS ABOUT 2000 SQ. FT. AND IT IS A DOUBLE STOREY BUILDI NG. THE VERY NATURE OF STRUCTURE AND BUILDING WHICH WAS SOLD ALONG WITH THE LAND MAN IFEST THAT IT WAS NOT MERE A OUT- HOUSE OR A STORE BUILDING USED FOR AGRICULTURAL PUR POSES BUT IT WAS A PROPER RESIDENTIAL BUILDING USED FOR RESIDENTIAL PURPOSES. THE ASSESSEE HAS ASSIGNED THE SALE CONSIDERATION TO THE BUILDING AS PER THE VALUE DETERMINED BY THE STAMP DUTY VALUATION AUTHORITY AND, THEREFORE, THE ASSESSEE HA S APPLIED THE SAME RATIO/PROPORTION TO THE TOTAL SALE CONSIDERATION AS ADOPTED BY STAMP DUTY VALUATION AUTHORITY. THE DETAILS OF THE VALUATION DETERMINED BY THE STAMP DUTY VALUATION AUTHORITY ARE AS UNDER :- PARTICULARS AREA DLC VALUE OR EVALUATED VALUE LAND 43200 53136000 BOUNDARY 3500 1050000 BUILDING 2000 1200000 48700 55386000 9 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. THUS THE STAMP DUTY VALUATION AUTHORITY HAS DETERMI NED THE TOTAL VALUE AT RS. 5,53,86,000/- DIVIDED INTO 3 COMPONENTS (1) LAND MEASURING 43200 SQ. MTR. @ RS. 1230/- PER SQ. MTR. AMOUNTING TO RS. 5,31,36,000/-; (2) BOUNDARY WALL MEASURING 3500 SQ. FT @ RS. 300/- PER SQ. FT. AMOUNTING TO RS . 10,50,000/- AND (3) BUILDING AREA 2000 SQ. FT @ RS. 600/- PER SQ. FT AMOUNTING T O RS. 12,00,000/-. THE ALLOCATION OF THE VALUE IN PERCENTAGE COMES AS UNDER :- LAND 95.94% BOUNDARY 1.90% BUILDING 2.17% -------- 100% THE ASSESSEE HAS ALLOCATED THE TOTAL SALE CONSIDERA TION OF RS. 9,90,00,000/- BY APPLYING THE SAME RATIO TO TOTAL VALUE ADOPTED BY T HE STAMP DUTY VALUATION AUTHORITY AND THE SHARE OF EACH COMPONENT IN SAID R ATIO COMES AS UNDER : LAND RS. 9,49,78,226/- BOUNDARY RS. 18,76,828/- BUILDING RS. 21,44,946/- --------------------- RS. 9,90,00,000/- WE FIND THESE DETAILS ARE FACTUALLY CORRECT AND, TH EREFORE, AS FAR AS THE ALLOCATION OF THE SALE CONSIDERATION TO THE CONSTRUCTION OF BUILD ING AND BOUNDARY IS NOT IN DISPUTE. THE ASSESSEE HAS ASSIGNED THE SALE CONSIDERATION TO WARDS BUILDING AND LAND UNDERNEATH BY APPLYING THE RATIO AS VALUE ADOPTED BY THE DLC WHICH COMES TO RS. 81,91,014/-. THEREFORE, THE COMPUTATION OF CAPITA L GAIN ON THE BASIS OF VALUATION AND RATIO AS APPLIED BY THE STAMP DUTY VALUAT ION AUTHORITY CANNOT BE DISPUTED. THE ONLY ISSUE IS WHETHER THE TWO STOREY BUILDING SOLD BY THE ASSESSEE 10 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. ALONG WITH THE LAND CAN BE TREATED AS A SEPARATE AS SET AND RESIDENTIAL HOUSE FOR THE PURPOSE OF CLAIMING THE DEDUCTION UNDER SECTION 54 OF THE IT ACT OR NOT. THE LD. A/R HAS RELIED UPON THE DECISION OF HONBLE JURISDI CTIONAL HIGH COURT IN CASE OF CIT VS. VIMAL CHAND GOLECHA, 201 ITR 442 (RAJ.) WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER :- LAND IS A CAPITAL ASSET IN TERMS OF SECTION 2(14) O F THE ACT AND, IN ACCORDANCE WITH THE SCHEME OF THE ACT, IT IS TREATED AS A SEPARATE ASSET. EVEN FOR TH E PURPOSE OF SECTION 32, A BUILDING WHICH IS ENTITL ED FOR DEPRECIATION WOULD MEAN ONLY THE SUPERSTRUCTURE AND WOULD NOT INCLUDE THE SITE. UNDER SECTION 48 OF TH E ACT, THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL G AINS' HAS TO BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET IN TH E MANNER- PROVIDED IN THIS SECTION. IT IS NOT IN DISP UTE THAT LAND IS A CAPITAL ASSET AND ONLY THEN ( SIC ) IT IS LIABLE TO TAX. IF THE PRICE OF TWO CAPITAL ASSETS H AS BEEN CHARGED AT ONE CONSOLIDATED PRICE, THEN THE ASSESSEE IS ENTITLED TO BIFURCATE THE SAME. A SITUA TION MAY ARISE WHERE A GAIN FROM ONE OF THE CAPITAL ASSETS IS A SHORT-TERM CAPITAL GAIN WHILE FROM THE OTHER IT IS A LONG-TERM CAPITAL GAIN AS IN THE PRES ENT CASE AND, IN SUCH A SITUATION, THE BENEFIT TO THE ASSESS EE CANNOT BE DENIED IN RESPECT OF THE GAIN ARISING FROM THE SALE OF AN ASSET WHICH COULD BE CONSIDERED AS A LONG-TERM CAPITAL GAIN. EVEN FOR THE PURPOSE OF VA LUE, THE VALUER AND THE DEPARTMENT HAVE TAKEN THE VALUE OF THE LAND AND SUPERSTRUCTURE THEREON SEPARATELY; THEREFORE, WE ARE OF THE VIEW THAT THE INCOME-TAX A PPELLATE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE CAPITAL GAINS ARISING FROM THE SALE OF LAND HAS TO BE TREATED AS LONG-TERM CAPITAL GAINS. THE REFERENC E IS, ACCORDINGLY, ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. NO ORDER AS TO COSTS. THUS THE HONBLE HIGH COURT HAS HELD THAT IF THE PR ICES OF TWO CAPITAL ASSETS HAVE BEEN CHARGED AT CONSOLIDATED PRICE THEN THE ASSESSE E IS ENTITLED TO BIFURCATE THE SAME. IN THE CASE IN HAND, WE FIND THAT THE BIFURC ATION OF SALE CONSIDERATION BETWEEN AGRICULTURAL LAND AND THE RESIDENTIAL HOUSE IS BASED ON THE SAME RATIO AS APPLIED BY THE STAMP DUTY VALUATION AUTHORITY. SIM ILARLY, IN CASE OF CIT VS. CITIBANK N.A. 261 ITR 570, THE HONBLE BOMBAY HIGH COURT HAS HELD IN PARA 5 AS UNDER :- 5. SECTION 32 OF THE INCOME-TAX ACT, INTER ALIA, LAYS DOWN THAT IN RESPECT OF DEPRECIATION OF BUILDINGS, MACHINERY, PLANT OR FURN ITURE OWNED BY THE ASSESSEE AND USED FOR THE PURPOSES OF BUSINESS OR PROFESSION , THE ASSESSEE IS ENTITLED TO DEDUCTION. IN THIS CASE, WE ARE CONCERNED WITH THE ASSESSMENT YEAR 1979-80. UNDER SECTION 32(1)( II ), THE ASSESSEE WAS ENTITLED TO DEDUCTION FOR DEPRE CIATION IN CASE OF BUILDINGS, MACHINERY, PLANT OR FURNITURE , ETC. THAT DEDUCTION WAS TO CONSIST OF A CERTAIN PERCENTAGE ON THE WRITTEN DOWN VALUE. THEREFORE, UNDER SECTION 32, THE ASSESSEE WAS ENTITLED TO DEPRECIATI ON ONLY IN RESPECT OF THE BUILDINGS AND NOT THE LAND. IN THE CASE OF ALPSTHEATRE ( SUPRA ), IT HAS BEEN HELD 11 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. THAT DEPRECIATION UNDER THE INCOME-TAX ACT WAS NOT ALLOWABLE ON THE COST OF THE LAND ON WHICH THE BUILDING IS ERECTED BUT ONLY ON THE COST OF THE SUPERSTRUCTURE. IN THAT MATTER, THE ASSESSEE CARRIE D ON THE BUSINESS AS EXHIBITOR OF FILMS. THE INCOME-TAX OFFICER INITIATED PROCEEDI NGS UNDER SECTION 34(1)( B ) OF THE INDIAN INCOME-TAX ACT, 1922, ON THE GROUND T HAT IN THE ORIGINAL ASSESSMENT DEPRECIATION WAS WRONGLY ALLOWED ON THE ENTIRE COST OF RS. 85,091 SHOWN AS COST OF THE BUILDING WHICH INCLUDED RS. 12 ,000 AS COST OF LAND. BY ORDER DATED FEBRUARY 22, 1959, THE INCOME-TAX OFFIC ER RECOMPUTED THE DEPRECIATION EXCLUDING THE COST OF LAND. BEING AGGR IEVED, THE ASSESSEE APPEALED TO THE APPELLATE ASSISTANT COMMISSIONER (A AC), WHO UPHELD THE ORDER OF THE INCOME-TAX OFFICER. THE ASSESSEE CARRI ED THE MATTER IN APPEAL TO THE TRIBUNAL WHICH CAME TO THE CONCLUSION THAT IT I S NOT POSSIBLE TO CONCEIVE OF A BUILDING WITHOUT A BOTTOM. THAT, THE WORD 'BUILDI NG' INCLUDED THE LAND UPON WHICH THE SUPERSTRUCTURE WAS CONSTRUCTED, AND, THER EFORE, IT WAS WRONG ON THE PART OF THE DEPARTMENT TO EXCLUDE THE VALUE OF THE LAND UPON WHICH THE SUPERSTRUCTURE WAS CONSTRUCTED. THIS FINDING OF THE TRIBUNAL HAS BEEN REVERSED BY THE SUPREME COURT WHICH TOOK THE VIEW THAT DEPRE CIATION UNDER SECTION 10(2)( VI ) WAS NOT ALLOWABLE ON THE COST OF THE LAND ON WHIC H THE BUILDING WAS ERECTED. THAT, DEPRECIATION WAS ALLOWABLE ONLY ON T HE COST OF THE SUPERSTRUCTURE. HENCE, THE ASSESSEE FAILED. THEREFO RE, DEPRECIATION UNDER SECTION 32(1) OF THE INCOME-TAX ACT, 1961, WAS ALLO WABLE ONLY ON THE COST OF THE SUPERSTRUCTURE AND NOT ON THE COST OF THE LAND. SECTION 50 OF THE INCOME-TAX ACT, 1961, AS IT STOOD AT THE RELEVANT TIME, RELATE S TO SPECIAL PROVISION FOR COMPUTING COST OF ACQUISITION IN THE CASE OF DEPREC IABLE ASSETS. SINCE LAND IS NOT A DEPRECIABLE ASSET, SECTION 50 WILL NOT APPLY TO THE SITE ON WHICH THE BUILDING IS ERECTED. SECTION 50, THEREFORE, PROVIDE S FOR DETERMINATION OF THE COST OF ACQUISITION OF A DEPRECIABLE ASSET WHICH IN THE PRESENT CASE IS A SUPERSTRUCTURE ON THE SITE. SECTION 50 REFERS TO TH E PROVISIONS OF SECTION 48 WHICH IN TERM DEALS WITH MODE OF COMPUTATION AND DE DUCTIONS IN RESPECT OF THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS '. SECTION 48 STATES THAT SUCH INCOME SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED, THE EXPENDITURE INCURRED WH OLLY IN CONNECTION WITH SUCH TRANSFER AND THE COST OF ACQUISITION OF THE CA PITAL ASSET AS ALSO THE COST OF IMPROVEMENT THERETO. SECTION 43(6) DEFINES THE EXPR ESSION 'WRITTEN DOWN VALUE' TO MEAN THE ACTUAL COST TO THE ASSESSEE LESS DEPRECIATION ACTUALLY ALLOWED TO HIM UNDER THE ACT IN THE CASE OF ASSET A CQUIRED BEFORE THE PREVIOUS YEAR. THEREFORE, ONE HAS TO READ SECTION 50 WHICH P ROVIDES FOR DETERMINATION OF COST OF THE ACQUISITION OF THE ASSET ALONG WITH SECTION 43(6) AND SECTION 48 OF THE ACT. THEREFORE, TO SUM UP SECTION 48, READ W ITH SECTION 50 PROVIDES FOR COMPUTATION OF INCOME CHARGEABLE UNDER THE HEAD 'CA PITAL GAINS' WHEREAS, SECTION 45 IS THE CHARGING SECTION AND IT STATES, INTER ALIA, THAT ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET SHALL BE CHARGEABLE TO INCOME- TAX UNDER THE HEAD 'CAPITAL GAINS'. IT IS WELL-SETT LED THAT IN THE MATTER OF CAPITAL GAINS, THE CHARGING SECTION 45 AND THE COMP UTATION PROVISIONS UNDER SECTIONS 48 AND 50, CONSTITUTE ONE INTEGRATED CODE. THAT, THE CHARACTER OF COMPUTATION PROVISIONS BEAR DIRECT RELATIONSHIP TO THE NATURE OF THE CHARGE UNDER SECTION 45 OF THE INCOME-TAX ACT. THIS POINT IS IMPORTANT TO DECIDE THE POINT AT ISSUE IN THIS CASE BECAUSE, WITHOUT THE CO MPUTATION PROVISIONS, THE CHARGE BY ITSELF UNDER SECTION 45 CANNOT STAND. HEN CE, BIFURCATION IS NECESSARY 12 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. BETWEEN THE SITE AND THE BUILDING FOR THE PURPOSES OF CAPITAL GAINS. THEREFORE, PROFITS ARISING FROM THE SALE OF SITE ARE REQUIRED TO BE TREATED SEPARATELY FROM PROFITS ARISING FROM THE SALE OF BUILDING. NOW, IN THE PRESENT CASE, THE ASSESSEE RECEIVED RS. 14,00,000 FOR LAND UNDER THE ABOVE CON VEYANCE AS AGAINST THE COST OF RS. 9,20,530 RESULTING IN THE CAPITAL GAIN OF RS. 4,79,470. ACCORDING TO THE DEPARTMENT, THIS WORKING IS CORRECT (SEE PAGE 8 2 OF THE PAPER BOOK). HOWEVER, ACCORDING TO THE DEPARTMENT, SINCE THE LAN D WAS A PART OF THE SUPERSTRUCTURE, THE SAID AMOUNT OF RS. 4,79,470 WAS NOT A LONG-TERM CAPITAL GAIN BUT IT WAS TO BE TREATED AS SHORT-TERM CAPITAL GAIN. THIS IS THE ONLY ISSUE WHICH ARISES IN THIS CASE. AS STATED ABOVE, THIS VI EW OF THE DEPARTMENT IS ERRONEOUS FOR TWO REASONS. FIRSTLY, UNDER SECTION 3 2(1), NO DEPRECIATION IS ADMISSIBLE FOR LAND - JUDGMENT OF THE SUPREME COURT IN THE CASE OF ALPS THEATRE ( SUPRA ). SECONDLY, THE DEPARTMENT CAN ASSESS THE COMPANY TO SHORT- TERM CAPITAL GAINS ONLY QUA DEPRECIABLE ASSETS WHICH IN THE PRESENT CASE IS TH E SUPERSTRUCTURE ERECTED ON THE SITE [ SEE SECTION 41(2) OF THE INCOME-TAX ACT AS IT STOOD AT THE RELEVANT TIME]. FOR BOTH THE ABOVE REA SONS, WE HOLD THAT IN THE PRESENT CASE, ON THE SALE OF LAND CARRIED TO THE BU ILDING VIDE CONVEYANCE DATED AUGUST 7, 1978, THE GAIN WHICH ACCRUED TO THE ASSES SEE WAS LONG-TERM CAPITAL GAIN AND THE DEPARTMENT WAS WRONG IN TREATING SUCH GAIN AS SHORT-TERM CAPITAL GAIN. OUR VIEW IS SUPPORTED BY THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF DR. D.L. RAMACHANDRA RAO ( SUPRA ) WHICH HAS TAKEN THE VIEW THAT IF THE LANDS ARE HELD BY THE ASSESSEE FOR A PERIOD MORE TH AN THE PERIOD PRESCRIBED UNDER SECTION 2( 42A ) OF THE INCOME-TAX ACT, 1961, VIZ., 36 MONTHS, THEN, IT IS NOT POSSIBLE TO SAY THAT BY CONSTRUCTION OF THE BUI LDING THEREON, THE LAND WHICH WAS A LONG-TERM CAPITAL ASSET CEASES TO BE SUCH LON G-TERM CAPITAL ASSET. THIS IS BECAUSE, THE LAND IS AN INDEPENDENT AND IDENTIFIABL E CAPITAL ASSET, AND IT CONTINUES TO REMAIN SO EVEN AFTER CONSTRUCTION OF T HE BUILDING THEREON. WE RESPECTFULLY AGREE WITH THE VIEW TAKEN BY THE MADRA S HIGH COURT IN THE ABOVE JUDGMENT. THE HONBLE HIGH COURT HAS ALLOWED THE BIFURCATION OF THE LAND BEING A LONG TERM CAPITAL ASSET AND BUILDING AS A SEPARATE ASSET AND WOULD NOT CHANGE THE LONG TERM CAPITAL ASSET NATURE OF LAND TO SHORT TERM CAPITAL ASSET. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE BUILDING IN QUESTION WAS NOT FALLING IN THE SUB-CLAUSE (C) OF SECTION 2(1A) BUT IT IS FALLING I N THE EXPLANATION 2 TO THE SAID SECTION, THEN THE SAME IS REQUIRED TO BE TREATED AS SEPARATE ASSET BEING RESIDENTIAL HOUSE AND THE CAPITAL GAIN ARISING FROM THE SALE OF THE SAID RESIDENTIAL HOUSE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 54 OF THE ACT. ACCORDINGLY, WE ALLOW THE CLAIM OF THE ASSESSEE. 13 ITA NO. 457/JP/2019 SHRI DHARMENDRA KUMAR PAREEK, JAIPUR. GROUND NO. 2 IS REGARDING THE CLAIM OF DEDUCTION UN DER SECTION 54F. 6. THIS IS AN ALTERNATIVE CLAIM OF THE ASSESSEE. S INCE WE HAVE ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 54, THEREFORE, THIS GROU ND OF THE ASSESSEES APPEAL BECOMES INFRACTUOUS. THE SAME IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 17/06/ 2019. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 17/06/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI DHARMENDRA KUMAR PAREEK, JAI PUR. 2. THE RESPONDENT THE DCIT CIRCLE-2, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 457/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR