Grandhi Anitha, Vijayawada V. The Income Tax Officer, Ward(International Taxation), , Vijayawada

ITA 515/VIZ/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7710 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 19-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Sale consideration of property below Jantri Value; Set aside; Capital Gains
• Section: 54; 54F; 201; 13; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER& SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ I.T. A.NO. 5 15 /VIZ/201 9 ( / A SSESSMENT Y EAR : 20 1 6 - 1 7 ) SMT.GRANDHI ANITHA D.NO.26 - 2 - 66/A, URVASI TRIO COMPLEX ANDHRA RATNA ROAD GRANDHI NAGAR VIJAYAWADA [ PAN : A DBPG8994P ] VS. INCOME TAX OFFICER WARD (INTERNATIONAL TAXATION) VIJAYAWADA ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N.HARI, AR / RESPONDENT BY : SMT SUMAN MALIK, DR / DATE OF HEARING : 2 8 . 10 . 201 9 / DATE OF PRONOUNCEMENT : 31 . 10 . 201 9 / O R D E R P ER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : TH IS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A ) ] - 10, HYDERABAD IN APPEAL NO. 0136/CIT(A) - 10/2018 - 19/CIT(A), HYD - 10/10066/2018 - 19 DATED 13 .0 6 .201 9 FOR THE ASSESSMENT YEAR (A.Y.) 20 16 - 17. 2 I.T.A. NO . 5 15 /VIZ/201 9 , A.Y.20 1 6 - 1 7 SMT.GRANDHI ANITHA, VIJAYAWADA 2. IN THIS CASE, ALL THE GROUNDS OF APPEAL ARE RELATED TO THE ADDITION CONFIRMED BY THE LD.CIT(A) U/S 54 OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.5,84,780/ - . THE ASSESSEE HAS SOLD HOUSE PROPE RTY ON 08.03.2016 VIDE REGISTERED DOCUMENT NO.1531/2016 WITH SRO, PATAMATA, VIJAYAWADA FOR A CONSIDERATION OF RS.2,80,00,000/ - AND CLAIMED THE DEDUCTION U/S 54 OF THE ACT AS UNDER : SALE CONSIDERATION RECEIVED (50C) RS.2,80,00,000 LESS : TRANSFER EXPENSES RS.2,80,000 RS.2,77,20,000 LESS : INDEXED COST OF LAND AND BUILDING RS.1,02,53,880 LONG TERM CAPITAL GAINS RS.1,74,66,120 LESS : DEDUCTION U/S 54 RS.1,74,66,120 BALANCE NIL 3. THE ASSESSING OFFICER (AO) HAS OBSERVED THAT THE ASSESSEE HAD INVESTED A SUM OF RS.31,53,800/ - IN CONSTRUCTION OF HOUSE PROPERTY BEFORE THE SALE OF THE PROPERTY AND ALSO DEPOSITED A SUM OF RS.1,45,00,000/ - IN CAPITAL GAINS ACCOUNT SCHEME AND CLAIMED THE DED UCTION U/S 54 FOR THE ENTIRE AMOUNT OF RS.1,74,66,120/ - . THE AO FOUND THAT THE ASSESSEE MADE THE INVESTMENT IN CONSTRUCTION OF PROPERTY PRIOR TO THE DATE OF SALE OF ORIGINAL ASSET AND WAS OF THE VIEW THAT AS PER THE PROVISIONS OF SECTION 54 3 I.T.A. NO . 5 15 /VIZ/201 9 , A.Y.20 1 6 - 1 7 SMT.GRANDHI ANITHA, VIJAYAWADA OF THE ACT, TH E INVESTMENTS MADE OR THE AMOUNTS PAID FOR CONSTRUCTION PRIOR TO THE SALE OF THE ASSET WA S NOT ELIGIBLE FOR DEDUCTION U/S 54, SINCE, THE ACT PROVIDES FOR DEDUCTION, FOR PURCHASE OF HOUSE PROPERTY WITHIN ONE YEAR BEFORE THE SALE OR TWO YEARS AFTER THE DATE ON WHICH TRANSFER TOOK PLACE OR HAS CONSTRUCTED THE HOUSE WITHIN THE PERIOD OF 3 YEARS AFTER THE DATE OF SALE OF THE ORIGINAL ASSET . THEREFORE, THE AO CALLED FOR EXPLANATION OF THE ASSESSEE AS TO WHY THE AMOUNTS SPENT FOR CONSTRUCTION OF THE HOUSE PRIOR T O THE SALE OF ORIGINAL ASSET SHOULD NOT BE DISALLOWED AND ADDED BACK TO THE INCOME. IN RESPONSE, THE ASSESSEE FILED EXPLANATION VIDE LETTER DATED 12.10.2018 STATING THAT THE SECTION PROVIDES FOR DEDUCTION U/S 54, IF THE NEW ASSET IS CONSTRUCTED WITHIN 3 Y EARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET BUT IS SILENT WITH REGARD TO COMMENCEMENT OF CONSTRUCTION, TH US , SUBMITTED THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 54, FOR THE AMOUNTS SPENT FOR CONSTRUCTION PRIOR TO THE DATE OF TRANSFER OF THE ORIGINAL ASSET ALSO. THE ASSESSEE RELIED ON VARIOUS DECISIONS OF TRIBUNAL/HONBLE HIGH COURTS DISCUSSED IN THE ASSESSMENT ORDER. THE AO DID NOT CONVINCE WITH THE EXPLANATION OFFERED BY THE ASSESSEE AND RELIED ON THE DECISION OF ITAT HYDERABAD B BENCH I N THE CASE OF NIMMAGADDA SRIDEVI VS. DCIT, CIRCLE - 3(3), HYDERABAD IN I.T.A. NO.183/HYD/2012 DATED 22.02.2013, WHEREIN, IT WAS HELD THAT THE INVESTMENT IN PROPERTY TO THE EXTENT MADE 4 I.T.A. NO . 5 15 /VIZ/201 9 , A.Y.20 1 6 - 1 7 SMT.GRANDHI ANITHA, VIJAYAWADA BEFORE THE SALE OF ORIGINAL PROPERTY IS NOT ELIGIBLE FOR DEDUCTION. ACCOR DINGLY, THE DEDUCTION CLAIMED BY THE ASSESSEE FOR THE AMOUNTS SPE NT PRIOR TO THE TRANSFER OF THE PROPERTY AMOUNTING TO RS.31,53,800/ - WAS DISALLOWED AND ADDED BACK TO THE INCOME. 4. AGAINST THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT( A) AND THE LD.CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. THE LD.CIT(A) VIEWED THAT IF THERE IS AMBIGUITY IN LEGAL PROVISION AND THERE IS SCOPE FOR INTERPRETATION OF LAW, SUCH INTERPRETATION CANNOT RESULT IN THE BENEFIT OF THE ASSESSEE, ACCORDINGLY DISMI SSED THE APPEAL OF THE ASSESSEE. 5. AGAINST THE ORDER OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. ON IDENTICAL FACTS, THIS TRIBUNAL IN THE CASE OF DCIT, CI RCLE - 3(1) VS. SRI BOLLINA SRIHARI RAO, IN I.T.A. NO.548/VIZ/2014 DATED 28.03.2017 ALLOWED THE APPEAL OF THE ASSESSEE. IN THE CITED ORDER OF THE COORDINATE BENCH OF ITAT, THE TRIBUNAL HAS OBSERVED THAT SECTION 54 DOES NOT PRESCRIBE ANY CONDITION AS TO THE DATE OF COMMENCEMENT OF CONSTRUCTION OF NEW HOUSE PROPERTY. THE ONLY CONDITION REQUIRED FOR CONSTRUCTION OF HOUSE PROPERTY 5 I.T.A. NO . 5 15 /VIZ/201 9 , A.Y.20 1 6 - 1 7 SMT.GRANDHI ANITHA, VIJAYAWADA IS THE CONSTRUCTION REQUIRED TO BE COMPLETED WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET. FOR THE SAKE OF CL ARITY AND CONVENIENCE WE EXTRACT RELEVANT PART OF THE ORDER OF THIS TRIBUNAL IN PARA 11 TO 13 WHICH READS AS UNDER : 11. HAVING HEARD BOTH THE SIDES, WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HAS HELD THAT THE ACT DOE S NOT PRESCRIBED ANY CONDITION AS TO THE DATE OF COMMENCEMENT OF CONSTRUCTION OF NEW HOUSE PROPERTY AND ONLY CONDITION IS THAT CONSTRUCTION OF HOUSE PROPERTY SHOULD BE COMPLETED WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET. THE DATE OF CO MMENCEMENT OF CONSTRUCTION IS IRRELEVANT AND THE CONSTRUCTION MAY BE COMMENCED EVEN BEFORE THE DATE OF TRANSFER OF ORIGINAL ASSET. A SIMILAR VIEW HAS BEEN EXPRESSED BY THE HON'BLE DELHI HIGH COURT, IN THE CASE OF BHARATHI MISHRA (SUPRA), WHEREIN THE HON'BL E HIGH COURT OBSERVED THAT SUB - SECTION (4) OF SECTION 54F PRESCRIBES APPROPRIATION OF SALE CONSIDERATION OF ORIGINAL ASSET TOWARDS PURCHASE OF NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE OF TRANSFER OF ORIGINAL ASSET, TWO YEARS FROM THE DATE OF TRANSFER OR CONSTRUCTION OF NEW HOUSE PROPERTY, WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET. THE ACT DOES NOT PRESCRIBE ANY CONDITION AS TO THE DATE OF COMMENCEMENT OF CONSTRUCTION OF HOUSE PROPERTY WHICH MAY EVEN COMMENCED BEFORE THE DATE OF TR ANSFER OF ORIGINAL ASSET. THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF J.R. SUBRAHMANYA BHAT (SUPRA), HAS ALSO EXPRESSED SIMILAR VIEW AND HELD THAT THE INVESTMENT MADE TOWARDS CONSTRUCTION OF HOUSE PROPERTY PRIOR TO THE DATE OF TRANSFER SHOULD ALSO BE ALLOWABLE AS DEDUCTION FOR THE PURPOSE OF SECTION 54F OF THE ACT. 12. THE COORDINATE BENCH OF VISAKHAPATNAM ITAT, IN THE CASE OF DR.CHALASANI MALLIKARJUNA RAO (SUPRA) HAD AN OCCASION TO EXAMINE THE SIMILAR ISSUE. THE COORDINATE BENCH OF THIS TRIBUNAL, AFTER CONSIDERING RELEVANT PROVISIONS OF THE ACT AND ALSO BY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE KARNATAKA & DELHI HIGH COURTS HAS OBSERVED AS UNDER: - 9. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION IS WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE IS ELIGIBLE FOR CLAIMING EXEMPTION U/S 54 OF T HE ACT. THE A.O. OBSERVED THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM EXEMPTION U/S 54 OF THE ACT, FOR THE REASON THAT THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE WAS COMMENCED BEFORE THE DATE OF TRANSFER OF ASSET. THE A.O. FURTHER OBSERVED THAT THE ASSES SEE HAS COMMENCED THE CONSTRUCTION OF NEW HOUSE BEFORE THE TRANSFER OF ASSET AND ALSO HAS INVESTED AMOUNT OUT OF BORROWED FUND, THEREFORE NOT ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE DATE OF COMMENCEMENT OF C ONSTRUCTION IS IMMATERIAL, BUT IT IS ONLY THE DATE OF COMPLETION OF CONSTRUCTION. AS PER THE PROVISIONS OF SECTION 6 I.T.A. NO . 5 15 /VIZ/201 9 , A.Y.20 1 6 - 1 7 SMT.GRANDHI ANITHA, VIJAYAWADA 54 OF THE ACT, THE CONSTRUCTION OF NEW RESIDENTIAL HOUSE SHOULD BE COMPLETED WITHIN 3 YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET, HOWE VER, THE SECTION DOES NOT PRESCRIBE ANY CONDITION AS TO DATE OF COMMENCEMENT OF CONSTRUCTION. 10. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FOR THE REASON THAT THE ACT DOES NOT PRESCRIBE ANY CONDITION AS TO THE DATE OF COMMENCEMENT OF CONSTRUCTION OF NEW HOUSE PROPERTY. THE ONLY CONDITION IS THAT CONSTRUCTION OF THE HOUSE PROPERTY SHOULD BE COMPLETED WITHIN 3 YEARS FROM THE DATE OF TRANSFER. THE DATE OF COMMENCEMENT OF CONSTRUCTION IS IRRELEVANT AND THE CONSTRUCTION MAY BE COMMENCED EVEN BEFORE THE TR ANSFER OF ASSET AS HELD BY THE HON'BLE HIGH COURT OF DELHI, IN THE CASE OF CIT VS. BHARATHI MISHRA (2014) 222 TAXMAN 2. A SIMILAR VIEW WAS EXPRESSED BY THE HON'BLE HIGH COURT OF KARNATAKA, IN THE CASE OF CIT VS. J.R. SUBRAHMANYA BHAT (1987) 165 ITR 571, WH ICH WAS IN TURN FOLLOWED BY THE HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. H.K. KAPOOR (1998) 234 ITR 753. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ELIGIBLE TO CLAIM EXEMPTION U/S 54 OF THE ACT, EVEN THOUGH THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE WAS COMMENCED PRIOR TO THE DATE OF TRANSFER OF ORIGINAL ASSET. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS COMMENCED CONSTRUCTION OF NEW HOUSE PROPERTY IN THE MONTH O F NOVEMBER, 2004 AND COMPLETED CONSTRUCTION IN THE MONTH OF MARCH, 2007. THE TRANSFER OF ASSET HAS BEEN TAKEN PLACE IN THE MONTH OF JANUARY, 2007. THE CONSTRUCTION OF NEW HOUSE PROPERTY HAS BEEN COMPLETED WITHIN 3 YEARS FROM THE DATE OF TRANSFER OF ASSET. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54 OF THE ACT. 13. IN THIS VIEW OF THE MATTER AND ALSO RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE KARNATAKA HIGH COURT AND ALSO BY FOLLOWING THE DECISION OF THE COORDINATE BENCH ITAT VISAKHAPATNAM, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 54F DOES NOT PRESCRIBE ANY CONDITION AS TO THE DATE OF COMMENCEMENT OF CONSTRUCTION OF NEW HOUSE PROPERTY. THE CONSTRUCTION OF HOUSE PROPERTY MAY BE COMMENCED BEFORE THE DATE OF TRANSFER OF O RIGINAL ASSET, HOWEVER IT SHOULD BE COMPLETED WITHIN THREE YEARS AFTER THE DATE OF TRANSFER OF ORIGINAL ASSET. IN THIS CASE, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND THAT CONSTRUCTION OF HOUSE PROPERTY HAS BEEN COMPLETED WITHIN THREE YEARS FROM THE DATE OF TRANSFER. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54F, TOWARDS AMOUNT INVESTED IN CONSTRUCTION OF HOUSE PROPERTY PRIOR TO THE DATE OF TRANSFER OF ORIGINAL ASSET. THE COMMISSIONER OF INCOME TAX (A PPEALS) AFTER CONSIDERING THE RELEVANT PROVISIONS HAS RIGHTLY DELETED ADDITIONS MADE BY THE ASSESSING OFFICER. WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), HENCE, WE INCLINE TO UPHOLD THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS) AND DISMISS THE APPEAL FILED BY THE REVENUE. 7 I.T.A. NO . 5 15 /VIZ/201 9 , A.Y.20 1 6 - 1 7 SMT.GRANDHI ANITHA, VIJAYAWADA 6.1. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE HAS COMPLETED THE CONSTRUCTION WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF THE PROPERTY. THEREFORE, THE FACTS ARE IDENTICAL TO THE CASE LAW RELIED UPON BY THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST O CTOBER, 2019 SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 31 . 10 .2019 L.RAMA, SPS 8 I.T.A. NO . 5 15 /VIZ/201 9 , A.Y.20 1 6 - 1 7 SMT.GRANDHI ANITHA, VIJAYAWADA / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE - SMT.GRANDHI ANITHA, D.NO.26 - 2 - 66/A, URVASI TRIO COMPLEX, ANDHRA RATNA ROAD, GRANDHI NAGAR, VIJAYAWADA 2 . / THE REVENUE - INCOME TAX OFFICER, WARD (INTERNATIONAL TAXATION) VIJAYAWADA 3. THE COMMISSIONER OF INCOME TAX (IT&TP) , HYDERABAD 4. THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 0 , HYDERABAD 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM