ITO, Ward-3(2), Bhubaneswar, Bhubaneswar V. Gaya Santara, Bhubaneswar

ITA 468/CTK/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3669 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 02-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K AGARWA L LA
• Keywords: Capital asset; Cost of acquisition
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 468/CTK/2014 ASSESSMENT YEAR : 2008 - 09 INCOME TAX OFFICER, WARD - 3(2), BHUBANESWAR VS. GAYA SANTARA , PLOT NO.63/A, SECTOR - A, ZONE - D, MANCHESWAR INDUSTRIAL ESTATE, BHUBANESWAR. PAN/GIR NO. ADQPS 3243 J (APPELLANT ) .. ( RESPONDENT ) ITA NO. 483/CTK/2014 ASSESSMENT YEAR :2008 - 09 GAYA SANTARA, PLOT NO.63/A, SECTOR - A, ZONE - D, MANCHESWAR INDUSTRIAL ESTATE, BHUBANESWAR VS. INCOME TAX OFFICER, WARD - 3(2), BHUBANESWAR PAN/GIR NO.ADQPS 3243 J (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI S.K.AGARWALLA, AR RE VE NUE BY : SHRI SUBHENDU DUTTA, DR DATE OF HEARING : 26 /07 / 2017 DATE OF PRONOUNCEMENT : 28 /07 / 2017 O R D E R PER N.S.SAINI, AM THESE ARE CROSS APPEAL S FILED BY THE REVENUE AND THE ASSESSEE AGA INST THE ORDER OF CIT(A) - I, BHUBANESWAR , DATED 23.9.2014 , FOR THE ASSESSMENT YEAR 2008 - 09 . 2. GROUND NO.1 IN REVENUES APPEAL READS AS UNDER: 2 ITA NO. 468/CTK/2014 ITA NO.483/CTK/2014 ASSESSMENT YEAR :2008 - 09 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS NOT JUSTIFIED IN ALLOWING EXEMPTION U/S.54F OF THE ACT TO THE ASSESSEE WITHOUT CONSIDERING THAT THE ASSESSEE DID NOT FULFIL ALL THE CONDITIONS FOR CLAIMING SUCH EXEMPTIO N. 3. GROUND NO.1 IN ASSESSEES APPEAL READS AS UNDER: 1. THAT, THE LD. AUTHORITIES BELOW ARE WRONG IN INTERPRETING THE PROVISIONS OF SECTION 54F OF THE ACT AND WRONG IN HOLDING THE MEANING ASSIGNING TO WORD 'A HOUSE' AS 'ONE HOUSE' AND THEREFORE THE DISALLOWANCE OF EXEMPTION OF CAPITAL GAIN U/S 54F IS LIABLE TO BE DELETED. 4. GROUND NO.1 OF THE APPEAL OF THE REVENUE S APPEAL AND GROUND NO.1 OF THE ASSESSEE S APPEAL ARE INTERCONNECTED, THEREFORE, THEY A R E BEING DISPOSED OF TOGETHER FOR THE SAKE OF CONVENIENCE. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PURCHASED PLOT NO.88/1189, AT POKHARIPUT, BHUBANESWAR DURING APRIL, 1988 AND DONE SOME IMPROVEMENT ON THE PLOT FOR CONSTRUCTION OF HIS OWN HOUSE. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE EXECUTED AN AGREEMENT DATED 4.1.2008 WITH BUILDER, M/S. S.B. REALCON (P) LTD., BHUBANESWAR FOR CONSTRUCTION OF FLATS ON THE PLOT AND IN EXCHANGE OF THE LAND, THE ASSESSEE WILL GET 28% OF THE BUILT - UP AREA. ACCORDINGLY, THE BUILDER M/S. S.B.REALCON (P) LTD., BHUBANESWAR CONSTRUCTED THE BUILDING IN THE LAND AND DELIVERED 4 FLATS BEARING NOS.101, 103, 104 & 304 TO THE ASSESSEE TOWARDS HIS SHARE OF 28% OF THE CONSTRUCTED A REA. THE ASSESSEE FI LED RETURN U/S.1 48 OF THE ACT, SHOWING LONG TERM CAPITAL GAINS AMOUNTING TO RS.60,18,026/ - AS EXEMPT U /S.54F OF THE ACT. 3 ITA NO. 468/CTK/2014 ITA NO.483/CTK/2014 ASSESSMENT YEAR :2008 - 09 ACCORDING TO THE ASSESSING OFFICER, OUT OF FOUR FLATS DELIVERED TO THE ASSESSEE BY THE BUILDER, THE FLAT NO.103 WAS RENTED OUT, FLAT NO.S101 & 104 WE RE OCCUPIED BY THE ASSESSEE AND FLAT NO.304 WAS VACANT AT THE RELEVANT TIME. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS ACQUIRED/PURCHASED 4 INDEPENDENT RESIDENTIAL FLATS WITHIN A PERIOD OF TWO Y EARS FROM THE DATE OF TRANSFER OF ORIGINAL CAPITAL ASSETS FOR WHICH THE ASSESSEE IS NOT ENTITLED TO CLAIM EXEMPTION U/S.54F OF THE ACT. ACCORDINGLY, HE DENIED THE CLAIM OF EXEMPTION U/S.54F OF THE ACT TO THE ASSESSEE IN RESPECT OF ALL FLATS ACQUIRED BY THE ASSESSEE IN EXCHANGE OF LAND 6 . ON APPEAL, THE C IT(A) OBSERVED THAT IN VIEW OF THE DECISION OF ITAT MUMBAI SPECIAL BEN CH IN THE CASE OF ITO VS. SUSHI LA M JHAVERI, 107 ITD 327(MUM)(SB), THE ASSESSEE IS ENTITLED TO ONE RESIDENTIAL UNIT AS PER PREFERENCE AND, ACCORDINGLY, DIRECTED THE ASSESSING OFFICER TO ALLOW EXEMPTION U/S.54F OF THE ACT IN RESPECT OF ONE FLAT BEARING NO.101 FOR WHICH ASSESSEE HAS GIVEN PREFERENCE. 7 . BEFORE US, LD A.R. OF THE ASSESSEE RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SMT. K.G.RUKMINIAMMA, 331 ITR 211 (KAR), WHEREIN, IT WAS HELD THAT EXPRESSION A RESIDENTIAL HOUSE USED IN SECTION 54 SHOULD BE UNDERSTOOD IN A SENSE THAT THE BUILDING SHOULD BE OF RESIDENTIAL NATURE AND A SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER, ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION UNDER SECTION 54 IN RESPECT OF FOUR RESIDENTIAL FLATS ACQUIRED BY HER. 4 ITA NO. 468/CTK/2014 ITA NO.483/CTK/2014 ASSESSMENT YEAR :2008 - 09 8 . FURTHER, HE RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. V.R.KARPAGAM, 373 ITR 127(MAD), WHEREIN, IT WAS HELD PRIOR TO AMEN DMENT OF SECTION 54F BY FINANCE NO.(2) ACT, 2014 W.E.F. 1.4.2015, WITH REGARD TO WORD A A RESIDENTIAL HOUSE WOULD INCLUDE MULTIPLE FLATS/RESIDENTIAL UNITS, THUS WHERE UNDER THE DEVELOPMENT AGREEMENT ASSESSEE WAS ENTITLED TO RECEIVE CERTAIN BUILT - UP AREA, WHICH GOT TRANSLATED INTO FIVE FLATS, EXEMPTION U/S.54F IN RESPECT OF ALL FIVE FLATS IN A MULTI - STOREY CONSTRUCTION WOULD BE AVAILABLE. 9 . HE FURTHER RELIED ON THE DECISION OF HONBLE A.P. HIGH COURT IN THE CASE OF CIT VS. SAYED ALI ADIL, 352 ITR418(AP), WHEREIN, IT WAS HELD THAT DEDUCTION UNDER SECTION 54 OF THE ACT IS ALLOWABLE WITH RESPECT TO RESIDENTIAL HOUSE CONSISTING OF SEVERAL INDEPENDENT UNITS ALSO.. 10 . ON THE OTHER HAND, LD D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER. 11 . WE HAVE HEARD TH E RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S. S.B.REALCON PVT LTD., BHUBANESWAR FOR CONSTRUCTION AND SALE OF FLATS ON HIS LAND SITUATE D AT PLOT NO.88/1189, POKHARIPUT, OLD TOWN, BHUBANESWAR DURING THE FINANCIAL YEAR 2007 - 08. THUS, THERE WAS A DEEMED TRANSFER OF LAND WITHIN THE MEANING OF SECTION 2(47) OF THE I.T.ACT, READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY ACT DURING THE FINAN CIAL YEAR 2007 - 08 RELEVANT TO ASSESSMENT YEAR 2008 - 09. THE ASSESSEE DECLARED FU LL VALUE OF CONSIDERATION OF CAPITAL ASSET 5 ITA NO. 468/CTK/2014 ITA NO.483/CTK/2014 ASSESSMENT YEAR :2008 - 09 OF RS.70,89,600/ - AND DEDUCTED THEREFROM INDEXED COST OF ACQUISITION OF CAPITAL ASSET OF RS.2,73,003/ - , RS.6,78,571/ - TOWARDS INDEXED COST OF IMPROVEMENT AND RS.1,20,000/ - TOWARDS EXPENSES ON TRANSFER OF CAPITAL ASSET. ACCORDINGLY, THE NET LONG TERM CAPITAL GAIN WAS ARRIVED AT RS.60,18,026/ - , WHICH WAS FULLY CLAIMED AS EXEMPT UNDER SECTION 54F OF THE ACT. FROM THE LETTER DATED 21.4.2 012 OF THE BUILDER, IT IS NOTED BY THE ASSESSING OFFICER THAT THE BUILDER HAD HANDED OVER FOUR FLATS BEARING NO.101,103104 AND 30 4 TO THE ASSESSEE TOWARDS HIS SHARE CONSISTING OF 1,826 SQ.FT, 1149 SQ.FT, 1455 SQ.FT, AND 1455 SQ.FT SUPER BUILT UP AREA (1 306 SQ.FT, 885 SQ.FT. 1120 SQ.FT AND 1120 SQ.FT) PLINTH AREA RESPECTIVELY. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CALCULATED THE COST OF FOUR FLATS BY APPLYING RS.1600/ - PER SQ.FT AND ARRIVED AT THE COST OF THE ASSESSEES SHARE AS UNDER: FLA T NO. TYPE PLINTH AREA(SQ.FT) SUPER BUILT UP AREA(SQ.FT ) COST OF THE FLAT(RS.) 103 2BR 885 1149 25,65,000/ - 101 3BR 1306 1826 36,00,000/ - 104 3BR 1120 1455 32,00,000/ - 304 3BR 1120 1455 32,00,000/ - 1,25,65,000/ - 12 . THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE WAS ALLOTTED FOUR FLATS AS HIS SHARE WHICH IS NOT ONE RESIDENTIAL UNIT BUT FOUR DIFFERENT INDEPENDENT UNITS. ACCORDING TO THE PROVISIONS OF SECTION 54F OF THE ACT, THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S.54F OF THE ACT BECAUSE HE HAS ACQUIRED/PURCHASED FOUR INDEPENDENT RESIDENTIAL UNITS WITHIN A PERIOD OF 6 ITA NO. 468/CTK/2014 ITA NO.483/CTK/2014 ASSESSMENT YEAR :2008 - 09 TWO YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL CAPITAL ASSET AND THEREFORE, HE CONCLUDED THAT THE ASSESSEE IS OWNER OF MORE THAN ONE RESIDENTIAL FLAT AND HENCE, THE CLAIM OF EXEMPTION U/S.54F OF THE ACT I S NOT ALLOWED. 13 . ON APPEAL, THE CIT(A) HELD THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S.54F OF THE ACT FOR ONE RESIDENTIAL UNIT AS PER HIS PREFERENCE. THE ASSESSEE HAS ASKED FOR EXEMPTION OF CAPITAL GAINS IN RESPECT OF FLAT NO.101 U/S.54F OF THE ACT. THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO ALLOW EXEMPTION U/S.54F OF THE ACT IN RESPECT OF ONE FLAT NO. 101. 14 . WE FIND THAT THE ASSESSMENT YEAR UNDER APPEAL IS ASSESSMENT YEAR 2008 - 09. ACCORDING TO THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF SMT. K.G.RUKMINIAMM (SUPRA), WHEREIN, THE ASSESSMENT YEAR INVOLVED IS 2004 - 05, THE HONBLE COURT HA S HELD THAT THE EXPRESSION A RESIDENTIAL HOUSE USED IN SECTION 54 SHOULD BE UNDERSTOOD IN A SENSE THAT THE BUILDING SHOULD BE OF RESIDENTIAL NATURE AND A SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER. STILL FURTHER, THE HONBLE MADRAS HIGH COU RT IN THE CASE OF V.R.KARPAGAM (SUPRA), WHEREIN, THE ASSESSMENT YEAR INVOLVED IS 2007 - 08 HAS HELD THAT PRIOR TO AMENDMENT OF SECTION 54F BY FINANCE NO.(2) ACT, 2014 W.E.F. 1.4.2015, WITH REGARD TO WORD A A RESIDENTIAL HOUSE WOULD INCLUDE MULTIPLE FLAT S/RESIDENTIAL UNITS, THUS WHERE UNDER THE DEVELOPMENT AGREEMENT ASSESSEE WAS ENTITLED TO RECEIVE CERTAIN BUILT - UP AREA, WHICH GOT TRANSLATED INTO FIVE FLATS, EXEMPTION U/S.54F IN RESPECT OF ALL FIVE FLATS IN A MULTI - STOREY CONSTRUCTION WOULD BE AVAILABLE. TO 7 ITA NO. 468/CTK/2014 ITA NO.483/CTK/2014 ASSESSMENT YEAR :2008 - 09 THE SAME EFFECT IS THE DECISION OF HONBLE A.P. HIGH COURT IN THE CASE OF CIT VS. SAYED ALI ADIL,(SUPRA). 15 . RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISIONS OF VARIOUS HONBLE HIGH COURTS, WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION IN RESPEC T OF ALL FOUR FLATS RECEIVED BY HIM FROM THE BUILDER UNDER A DEVELOPMENT AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE BUILDER. THEREFORE, WE SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE AND REJECT THE GROUND OF APPEAL OF THE REVENUE. 1 6 . GROUND NO.2 OF REVENUES APPEAL READS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS NOT JUSTIFIED IN REDUCING THE MARKET PRICE OF FLATS BY 25% OF THE SAME DETERMINED BY THE AO FOR THE PURPOSE OF CALCULATING THE LONG TERM CAPITAL GAIN. 17. GROUND NO.2 OF ASSESSEES APPEAL READS AS UNDER: 2. THAT, THE LD. INCOME TAX OFFICER LEGALLY NOT CORRECT IN NOT ALLOWING THE EXEMPTION OF CAPITAL GAIN OF' 1,19,00,411 U/S 54F AND THE LD. COMMISSIONER OF INCOME TAX (APPEALS - I), BHUBANESWAR HAS COMMITTED AN ERROR OF LAW IN RESTRICTING TH E DISALLOWANCE OF EXEMPTION TO THE EXTENT OF' OF' 60,59,161 AND THEREFORE THE TOTAL LONG TERM CAPITAL GAIN ARE LIABLE TO BE ALLOWED AS EXEMPTION U/S 54F OF THE ACT. 18. GROUND NO.2 OF THE REVENUES APPEAL AND GROUND NO.2 OF THE ASSESSEES APPEAL IS INTER CONNECTED AND, THEREFORE, THEY ARE BEING DISPOSED OF TOGETHER AS UNDER: 19. IN VIEW OF OUR DECISION IN GROUND NO.1 OF THE ASSESSEE S APPEAL AND GROUND NO.1 OF REVENUE S APPEAL , THIS GROUND OF APPEAL OF THE ASSESSEE 8 ITA NO. 468/CTK/2014 ITA NO.483/CTK/2014 ASSESSMENT YEAR :2008 - 09 AND REVENUE HAS BECOME ONLY ACADEMIC IN NATURE, HENCE, INFRUCTUOUS AND DISMISSED. 20 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCE D ON 28 /07 / 2017 . SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 28 /07 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : /REVENUE: INCOME TAX OFFICER, WARD - 3(2), BHUBANESWAR 2. THE RESPONDENT /ASSESSEE: GAYA SANTARA, PLOT NO.63/A, SECTOR - A, ZONE - D, MANCHESWAR INDUSTRIAL ESTATE, BHUBANESWAR 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//