M/s. Anupam Ranjan (HUF), Bengaluru V. Income Tax Officer, Ward-7(2)(1), Bangalore

ITA 512/BANG/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9080 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 02-11-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 01-06-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRATIBHA
• Keywords: Capital asset; Cost of acquisition; Fair market value; Tax effect; Set aside; Capital Gains
• Section: 54; 54F; 139(1); 13

Judgement Text

ITA No.512/Bang/2022 M/s. Anupam Ranjan (HUF), Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.512/Bang/2022 Assessment Year: 2012 – 13 M/s. Anupam Ranjan (HUF) Flat No.201, Mantri Garden 1 st Block, Jayanagar Bengaluru 560 011 PAN NO : AALHA4888D Vs. ITO Ward-7(2)(1) Bengaluru APPELLANT RESPONDENT Appellant by : Smt. Pratibha, A.R. Respondent by : Smt. Priyadarshini Baseganni, D.R. Date of Hearing : 03.11.2022 Date of Pronouncement : 03.11.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against order of the CIT(A) dated 28.3.2019 for the assessment year 2012-13. The assessee has raised following grounds of appeal:- ITA No.512/Bang/2022 M/s. Anupam Ranjan (HUF), Bangalore Page 2 of 10 Sl. No. Ground of appeal Tax effect relating to each ground 1. On the facts and in the circumstances of the case, the learned CIT(A) ought to have held that bifurcation of sale consideration of the apartments with land and building as done by him was incorrect and consisted of arithmetical errors and accordingly the entire calculation of capital gain under the head "long term and short term" are incorrect and ought to be set aside. Rs.18,16,540/- 2. The learned CIT(A) ought to have appreciated that the apartments were only improvement on undivided share in the land and consequently the entire capital gain arising on the transactions are liable to be assessed only under the head "long term capital gain". Rs.18,16,540/- 3. The learned ':CIT(A) ought to have allowed the benefit of Section 54 of the Act in respect of the new asset acquired by the Appellant while computing the long term capital gain for which adequate details had been provided for. Rs.18,16,540/- 4. The learned CIT(A) erred in holding that the appellant had not furnished any document to prove that the appellant had transferred to the builder the land and building without appreciating that the appellant had furnished the joint development agreement and also the agreement for transfer of the property dated 1.6.2011 which only resulted in capital gain being brought to tax for the relevant year and in the circumstances the alleged failure as claimed by the CIT(A) was incorrect and the benefit of deduction under section 54/54F ought to have been given to the appellant. Rs.18,16,540/- 5. On the facts and in the circumstances of the case, the learned CIT(A) ought to have accepted the capital gain as offered by the Appellant and ought to have deleted the impugned additions. Rs.18,16,540/- 6. Without prejudice, the impugned additions confirmed by the learned CIT(A) are arbitrary, excessive, unreasonable and the impugned additions are required to be deleted in toto. Rs.18,16,540/- 7. For these and such other grounds that may be urged at the time of hearing, the Appellant prays that the appeal may be allowed. -- ITA No.512/Bang/2022 M/s. Anupam Ranjan (HUF), Bangalore Page 3 of 10 2. Facts of the case are that the assessee is a HUF, being a co- owner of property bearing Survey No.861, Khata No.72, Tauzi No.205, Thana Phulwari, Patna District entered into JDA on 11.1.2007 for construction of residential flats with M/s. Ashiana Marketing & Construction Pvt. Ltd., No.414, Ashiana Towers, 4 th Floor, Exhibition Road, PO GPO, Gandhi Maidan P.S., Patna, Bihar- 800 001, wherein assessee got 40% of total built-up area. The assessee received 13 flats, out of which assessee sold 12 flats in the assessment year 2012-13 and one flat was sold in 2013-14. Thus, the assessee received total consideration of Rs.1,42,64,500/- from the sale of 12 flats being 50% of share. The undivided share of land sold along with these 12 flats is 6620.89 sq.ft. The assessee declared the long term capital gain from these transactions. However, the AO bifurcated the capital gain as long term capital gain as well as short term capital gain and computed the long term and short term gain as below:- “The Long Term Capital gain and short term Capital gain from the above transaction is computed as below:- Total area of land 14,514 Sq.ft. Area of land given to developer being 60% 8708.4 Sq.ft Consideration received for 60% land Rs.3,15,70,000(against 13 flats) Consideration received for 1 Sq.ft. of land Rs.3,625.23 (3,15,70,000/8708.4) Area of land sold against undivided share 6620.89 Sq.ft. (against 12 flats) Total value received from 6620.89 Sq.ft.land-2,40,02,249 (6620.89x3625.23) Cost of acquisition of total land 7,25,700 (14514 x Rs.50 – FMV) Indexed cost of total land 56,96,745 {(7,25,700 x 785/100)} Indexed cost of 6620.89 sq.ft. land 25,98,699 {Rs.56,96,745x 6620.89} ITA No.512/Bang/2022 M/s. Anupam Ranjan (HUF), Bangalore Page 4 of 10 ITA No.512/Bang/2022 M/s. Anupam Ranjan (HUF), Bangalore Page 5 of 10 3. The assessee claimed exemption u/s 54 of the Act, which is denied, however, the deduction u/s 54F of the Act has been granted. The assessee went in appeal before Ld. CIT(A) challenging that the capital gain to be considered as long term capital gain and both deduction u/s 54 and 54F of the Act has to be granted. The Ld. CIT(A) rejected the claim of the assessee on all counts. Against this assessee is in appeal before us by way of aforementioned grounds. 4. The Ld. A.R. reiterated that the assessee’s income has to be computed from the JDA as only under head “Long term Capital gain” and there is no short-term capital gain as the gain arised consequent to the assessee entered into JDA with M/s. Ashiana Marketing & Constructions Pvt. Ltd. on 11.1.2007. It was the contention of the assessee’s counsel that on commencing from the date of transfer of the land to the developer and ending on the date when the assessee sold its share of flats constitute a single transaction. This argument is too fallacious to be accepted. The land is one capital asset transferred by the assessee and the flats allotted to it in consideration for the transfer of land constitute a different capital asset for the assessee. How can transfer of two capital assets transferred on different dates constitute a single transaction for the purpose of capital gains under the Act? It is not a conversion of an asset from one form to the other. Such a conversion is deemed to be a transfer only when a capital asset is converted into stock-in-trade by a person. In the instant case, it is not in dispute that the land held by the assessee was its capital asset. It cannot also be disputed that the flats acquired by it were also its capital assets. The acquisition of the new asset may have been by any mode, but simply because the new asset came to it by way of consideration for transfer of earlier asset, the transfer of new asset does not cease to be a transfer as per s. 2(47) of the Act constituting altogether a ITA No.512/Bang/2022 M/s. Anupam Ranjan (HUF), Bangalore Page 6 of 10 new transaction. If the argument of the learned counsel were to be accepted, the assessee can easily defeat the very charging provision of s. 45 of the Act by postponing the sale of the new asset indefinitely. Such a situation is not envisaged under the Act. And why talk of postponement at all. It may very well decide not to sell any of the flats coming to it’s share. The situation would be like this. As per the development agreement it has no claim over the land which has been given to the developer and it may not sell any of the flats coming to it’s share. In that case, despite there being transfer of land as per s. 2(47) of the Act, the assessee could escape the liability of capital gains tax. Therefore, as mentioned earlier, the stand of the assessee to treat the two transactions as one is too fallacious. It does not merit acceptance. Accordingly, we hold that transfer of land in consideration of the flats constitute one transaction giving rise to capital gains and the sale of flats by the assessee constitute another transaction giving rise to capital gains. 5. Same view was taken by the Hyderabad Bench in the case of Dr. Maya Shenoy Vs. ACIT (124 TTJ 692) (Hyd)(Trib). 6. Further contention of the assessee’s counsel is that the assessee is entitled for exemption u/s 54 as well as 54F of the Act. This argument of assessee’s counsel is totally incorrect. The exemption u/s 54 of the Act is to be granted when the following conditions are satisfied as held by Bangalore Bench of Tribunal in the case of Smt. Sujaya Seshadri Bhagawan Vs. ITO Ward-(2)(3) in ITA No.822/Bang/2019 dated 29.7.2021 as follows:- ITA No.512/Bang/2022 M/s. Anupam Ranjan (HUF), Bangalore Page 7 of 10 “21. Thus, the condition for granting deduction u/s. 54 is as follows:- 1 Nature Transfer of residential house 2 Available to Individual , HUF 3 Period held before transfer More than 36 Month (Thus only Long Term Assets) 4 Amount exemption of If capital Gain amount invested= Difference is taxable 5 Conditions Any residential house property is transferred Reinvestment in one residential house property in India either. • Purchase one year before transfer or • Purchase two year after transfer or • Constructed three year after transfer • House property cannot be 6 If amount not utilised till filling of return U/S 139(1) Deposit in nationalized bank under the Capital Gain Deposit A/c Scheme 7 If Deposit not utilised Unutilized amount taxable as LTCG in the PY in which three years the date of transfer of original asset expires. 8 Consequences of transfer before three years The cost of the new assets shall be reduced by the amount of capital gains exempted earlier. Therefore amount of Capital gain on sale of new property and (Capital gains exempted earlier) chargeable to tax in the year of sale of house property.” 7. The schedule of property transferred as mentioned in the present case as seen from the copy of JDA dated 11.1.2007 filed before us, the assessee transferred following properties:- Schedule A (Description of the Property) All the piece and parcel of lands of “Vishnu Enclave” comprising of Blocks `A’ & `B’ being portion of Survey Plot No.861, Khata No.72, Tauzi No.205, thana No.137, P.S. GANDHI Maidan. Holding No.684, Circle No.9, Ward No.2/10, situated at Maua Mohaarampur (Salimpur Ahra), district of Patna, measuring about 10.6725 Katha more of less being equivalent to 14514 Sq.ft and bounded as follows:- ITA No.512/Bang/2022 M/s. Anupam Ranjan (HUF), Bangalore Page 8 of 10 NORTH : Rai Chandi Nath Sahay SOUTH : Sauren Mitra & Others EAST : Road WEST : Dumri Kothi 8. Contrary to this, assessee has submitted before us that assessee has transferred the land and residential building, which is contrary to the records filed before us. There was no building in the scheduled property. Hence, these arguments of the assessee are totally misconceived and deserve to be dismissed. Alternatively, the argument of the assessee’s counsel is that assessee is entitled for exemption u/s 54F of the Act. The assessee claimed deduction u/s 54F of the Act at Rs.98,93,034/-. The A.O. granted proportionate deduction at Rs.88,21,925/- i.e. proportionate to the investment and sale consideration received by the assessee. The Ld. CIT(A) observed that assessee has not produced any document to prove that the assessee has transferred to the builder consisting of land and building. Further, he observed that in absence of any such document in support of its claim, no fault can be attributable to the AO for not allowing deduction u/s 54F of the Act. As discussed in earlier para, the assessee claimed deduction u/s 54F of the Act. However, assessee’s claim of deduction u/s 54F of the Act is justified if it has fulfilled the following conditions laid down in that provisions, specifically u/s 54F(3) of the Act as under. In other words, where an individual or HUF transfers any long-term capital asset, not being a residential house, and invests the net sale proceeds to acquire a residential house, the exemption under section 54F is available provided following conditions are satisfied: (i) the asset is transferred by an individual or HUF; (ii) the asset transferred is a long-term capital asset; ITA No.512/Bang/2022 M/s. Anupam Ranjan (HUF), Bangalore Page 9 of 10 (iii) the asset transferred is any capital asset other than a residential house; (iv) the assessee has purchased a residential house in India within one year before or 2 years after the date on which the transfer took place or constructed a residential house in India within a period of 3 years after the date on which transfer took place; (v) the assessee does not own more than one residential house on the date of transfer of the original asset, exclusive of the one purchased for claiming exemption under this section i.e., section 54F; (vi) the assessee should not purchase, within a period of two years after the date of transfer of original asset or construct within a period of 3 years after the date of transfer of original asset, any other residential house other than the new asset. Quantum of deduction 8.1 If the net sale consideration of the original asset is equal to or less than the cost of the new house, the entire capital gain shall be exempt. 8.2 If the net sale consideration of the original asset is greater than the cost of the new house then the exemption shall be allowed in the same proportion in which the cost of the new house bears to the net sale considerations i.e. it shall be allowed proportionately as under: ITA No.512/Bang/2022 M/s. Anupam Ranjan (HUF), Bangalore Page 10 of 10 Long-term capital gain x Amount invested in the new house/Net sale consideration. 9. With this observation, we remit the issue in dispute to the file of AO for fresh consideration. 10. The appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 3 rd Nov, 2022 Sd/- (Beena Pillai) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 3 rd Nov, 2022. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.