Smt.S.Suma , Bangalore V. Income Tax Officer Ward-4(4), Bangalore

ITA 568/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7619 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 01-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RENUGA DEVI JT BENGALURU
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value
• Section: 54F; 142(1); 147; 148; 54; 6; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 568/BANG/2018 ASSESSMENT YEAR : 2006 - 07 MRS. S. SUMA, NO.159, 2 ND MAIN, KENGERI SATELLITE TOWN, BANGALORE 560 060. PAN: CFYPS 1314E VS. THE INCOME TAX OFFICER, WARD 4(4), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI BALRAM R. RAO, ADVOCATE RE SPONDENT BY : SMT. P. RENUGA DEVI, JT.CIT(DR)(ITAT), BENGALURU. DATE OF HEA RING : 14 .06 .201 8 DATE OF PRONOUNCEMENT : 20.07 .2018 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 15.02.2018 OF THE CIT(APPEALS)-3, BENGALURU RELATIN G TO ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IS AN INDIVIDUAL. SHE OWNED A PROP ERTY AT 269, 2 ND MAIN, BANASHANKARI III STAGE, CHENNAMMANAKERE ACHUK ATTU, BANGALORE, [HEREINAFTER REFERRED TO AS THE OLD PROPERTY] COM PRISING OF LAND MEASURING 3500 SQ.FT. TOGETHER WITH CONSTRUCTION MEASURING 1 SQ. (100 SQ.FT.) WITH AC SHEET ROOF, MUD WALL, MUD FLOORING AND JUNGLE WOOD USED FOR DOORS & WINDOWS WITHOUT ANY CIVIC AMENITIES. THE ASSESSEE GOT THIS PROPERTY ITA NO. 568/BANG/2018 PAGE 2 OF 13 THROUGH REGISTERED GIFT/SETTLEMENT DEED DATED 27.04 .2002. THE DESCRIPTION OF THE PROPERTY IN THE AFORESAID SETTLEMENT DEED IS AS FOLLOWS:- SCHEDULE ALL THAT PIECE AND PARCEL OF IMMOVABLE PROPERTY BEA RING NO.66, KATHA NO.42, HOUSE LIST NO.38 MEASURING EAST TO WES T : 30'-0' (THIRTY FEET) AND NORTH TO SOUTH : 50'-0' (FIFTY FE ET) AND PROPERTY BEARING NO. 67 KATHA NO.10/3, MEASURING EA ST TO WEST : 30'-0' (THIRTY FEET) AND NORTH TO SOUTH : 50-0' (F IFTY FEET) SITUATED AT ITTAMADU VILLAGE, UTTARAHALLI HOBLI, BA NGALORE SOUTH TALUK, NOW COMING UNDER THE PURVIEW OF BANGALORE MA HANAGARA PALIKE WARD NO.55, IN ALL MEASURING EAST TO WEST : 60'-0' ( SIXTY FEET) AND NORTH TO SOUTH : 50'-0' ( FIFTY FEET) AND BOUNDED ON:- EAST BY : ROAD. WEST BY : PROPERTY BEARING NO.65, NORTH BY : ROAD, SOUTH BY : PROPERTY BEARING NOS.61 AND 62. BUILDING DESCRIPTION : RESIDENTIAL BUILDING CONSTRUCTED ON THE SCHEDULE PROPERTY WITH PLINTH AREA OF ONE SQ UARE HAVING A.C.SHEET ROOF, MUD WALL, MUD FLOORING AND JUNGLE W OOD USED FOR DOORS AND WINDOWS WITHOUT ANY CIVIC AMENITIES. 3. THE ASSESSEE ENTERED INTO A JOINT DEVELOPMENT AG REEMENT (JDA) IN RESPECT OF THE AFORESAID PROPERTY DATED 14.12.2005 WITH M/S. VASTHUSHREE DEVELOPERS, A PARTNERSHIP FIRM (THE DEVELOPER). AS PER THE JDA, THE ASSESSEE WAS TO RECEIVE 40% OF THE SHARE OF THE LAN D OF THE PROPERTY AND 40% OF THE SUPER BUILT-UP AREA AND PROPORTIONATE CA R PARKING IN THE PREMISES TO BE CONSTRUCTED OVER THE OLD PROPERTY. THE DEVELOPER WAS ENTITLED TO 60% OF THE SUPER BUILT-UP AREA + CAR PA RKING. IT APPEARS THAT THE ASSESSEE DID NOT FILE RETURN OF INCOME FOR THE AY 2 006-07. THE JDA WAS ENTERED INTO ON 14.12.2005. ITA NO. 568/BANG/2018 PAGE 3 OF 13 4. ACCORDING TO THE REVENUE, BY ENTERING INTO THE A FORESAID JDA, THE ASSESSEE HAD EFFECTED TRANSFER OF OLD PROPERTY AND THE CAPITAL GAIN ON SUCH TRANSFER WAS LIABLE TO BE TAXED IN AY 2006-07. THE PROCEEDINGS U/S. 147 OF THE ACT WERE INITIATED BY THE AO ON THE BASIS OF CO PY OF JDA WHICH IS A REGISTERED DOCUMENT, COPY OF WHICH WAS IN THE POSSE SSION OF THE AO. THE NOTICE U/S. 148 OF THE ACT DATED 27.03.2013 WAS SEN T TO THE ASSESSEE AT BANASHANKARI III STAGE ADDRESS, BUT THE SAME WAS RE TURNED BY THE POSTAL AUTHORITIES WITH THE POSTAL REMARKS NO SUCH PERSON . ANOTHER NOTICE U/S. 148 OF THE ACT WAS SERVED BY AFFIXTURE AND AT THE S AME ADDRESS. VIDE NOTICE DATED 142(1) OF THE ACT WHICH IS STATED TO B E SERVED ON THE ASSESSEE, THE AO CALLED UPON THE ASSESSEE TO PRODUC E THE DETAILS OF LONG TERM CAPITAL GAIN ON TRANSFER OF THE OLD PROPERTY U NDER THE JDA. ACCORDING TO THE ORDER OF ASSESSMENT, THE ASSESSEE DID NOT AP PEAR IN THE PROCEEDINGS DESPITE OPPORTUNITIES. IN THE CIRCUMSTANCES, THE A O PROCEEDED TO COMPLETE THE ASSESSMENT U/S. 144 OF THE ACT TO THE BEST OF H IS JUDGMENT. THE AO COMPUTED THE LTCG ON TRANSFER OF OLD PROPERTY AS FO LLOWS:- RS. ESTIMATED SALE CONSIDERATION IN RESPECT OF LAND MEA SURING 60% OF 3000 SQUARE FEET (GUIDANCE VALUE/FMV) 1800 X 220 = 396000 + 216000 25,56,000 LESS: COST OF ACQUISITION (AS ON 24.07.2002) RS.9 ,00,000/- FOR 1800 SQUARE FEET @ RS.500/- PER SQUARE FEET COST INDEXED VALUE RS.9,00,000 X 497/ 426 10,50,000 TAXABLE CAPITAL GAIN 15,06,000 5. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(APPEALS). BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S. 54 OF THE ACT. UNDER SECTION 54 OF THE ACT, IF A LONG TERM CAPITAL ASSET BEING A BUILDING OR LAND APPURTENANT THERETO AND BEING A RESIDENTIAL HOUSE I S TRANSFERRED, THE CAPITAL ITA NO. 568/BANG/2018 PAGE 4 OF 13 GAIN ARISING FROM SUCH TRANSFER IF IT IS INVESTED I N ACQUIRING A NEW ASSET, THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION TO THE EXTE NT OF CAPITAL GAIN SO UTILIZED. UNDER SECTION 54F OF THE ACT, SIMILAR DE DUCTION IS ALLOWED, BUT SECTION 54F APPLIES ONLY WHERE THE CAPITAL ASSET TH AT IS TRANSFERRED IS NOT A RESIDENTIAL HOUSE. THUS, SECTION 54 APPLIES TO TRA NSFER OF A RESIDENTIAL HOUSE AND SECTION 54F APPLIES TO TRANSFER OF LONG T ERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE. 6. IN THE PRESENT CASE, THE STAND OF THE CIT(APPEAL S) WAS THAT THERE WAS NO RESIDENTIAL HOUSE IN THE OLD PROPERTY AND TH EREFORE DEDUCTION U/S. 54 CANNOT BE ALLOWED. THE PLEA OF THE ASSESSEE WAS TH AT IN ANY EVENT, THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S. 54F OF THE ACT, WHICH APPLIES TO LONG TERM CAPITAL ASSET, OTHER THAN A RESIDENTIA L HOUSE WHICH MAY ALSO INCLUDE THE LAND WHICH IS THE SUBJECT MATTER OF TRA NSFER. 7. THE CIT(APPEALS) EXAMINED THE CLAIM OF ASSESSEE FOR DEDUCTION U/S. 54 OF THE ACT. THERE WAS ALSO A CLAIM MADE BY THE ASSESSEE BEFORE THE CIT(APPEALS) THAT A TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT WOULD TAKE PLACE ONLY IN THE PREVIOUS YEAR IN WHICH THE ASSESSEE RECEIVED HER SHARE OF BUILT-UP AREA OF CONSTRUCTION FROM THE BUILDER AS PER THE TERMS OF THE JDA AND NOT IN THE PREVIOUS YEAR IN WHICH TH E JDA WAS ENTERED INTO BETWEEN THE ASSESSEE AND THE BUILDER. THIS ISSUE W AS, HOWEVER, DECIDED AGAINST THE ASSESSEE BY THE CIT(APPEALS) BY PLACING RELIANCE ON THE PROVISIONS OF SECTION 2(47)(V) OF THE ACT WHICH DEA LS WITH TRANSACTION INVOLVING ALLOWING POSSESSION OF IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF THE CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882. 8. AS FAR AS DEDUCTION U/S. 54 OF THE ACT IS CONCER NED, THE CIT(APPEALS) TOOK THE FOLLOWING VIEW:- ITA NO. 568/BANG/2018 PAGE 5 OF 13 5.0 A) IT IS OBSERVED THAT THE PROPERTY SOLD WAS A PIECE OF LAND AND THE DESCRIPTION OF THE SAME IS CLEAR FROM THE S ALE DEED. ALTHOUGH THE APPELLANT HAS TRIED TO SHOW ON THE BAS IS OF CERTAIN DOCUMENTS THAT THERE WAS A STRUCTURE ON THE PROPERT Y AND THE SAME WAS ALSO LET OUT BY HER AND THAT PROPERTY TAX WAS P AID ON THE SAME, HOWEVER THESE DOCUMENTS DO NOT SHOW THAT SUCH STRUCTURE EXISTED ON LAND AS ON THE DATE OF SALE OF THE PROPE RTY. EVEN IF FOR THE SAKE OF ARGUMENT IT IS CONSIDERED THAT THE TEMP ORARY STRUCTURE WITHOUT CIVIC AMENITIES WAS A RESIDENTIAL HOUSE FOR THE PURPOSES OF SECTION 54 OF THE ACT, THIS IS ALWAYS POSSIBLE T HAT THE TEMPORARY STRUCTURE WAS DEMOLISHED AND A CLEAR PIEC E OF LAND WAS HANDED OVER TO THE DEVELOPER. THE INTIMATION OF THA T MIGHT NOT HAVE BEEN GIVEN TO THE RELEVANT AUTHORITIES AND AS SUCH PROPERTY TAX WAS COMPUTED BY SUCH AUTHORITY FOR THE TEMPORAR Y STRUCTURE EVEN AFTER THE SAME WAS DEMOLISHED. THIS IS IMPORTA NT TO NOTE THAT THERE ISN'T ANY REFERENCE TO ANY SUCH STRUCTUR E IN THE JOINT DEVELOPMENT AGREEMENT (JDA) AND IT ONLY REFERS TO T HE LAND. THE SALE CONSIDERATION IS ONLY FOR LAND. THE SCHEDULE T O THE JDA DESCRIBES THE DIMENSIONS OF THE LAND AND THERE ISN' T ANY REFERENCE TO ANY STRUCTURE ON THE LAND. AS PER CLAUSE 12.1 ON PAGE 25 OF THE JDA THE APPELLANT HAS TRANSFERRED HER 60% SHARE IN THE LAND COMPRISED IN THE SCHEDULED PROPERTY. THIS IS ALSO P OSSIBLE THAT THE TEMPORARY STRUCTURE WAS IN 40% PART OF THE LAND WHI CH WAS NOT TRANSFERRED AND THUS RETAINED BY THE APPELLANT. THU S CLAIM OF THE APPELLANT UNDER SECTION 54 OF THE ACT WOULD NOT SUR VIVE. 9. THE CIT(APPEALS) ALSO EXAMINED THE CLAIM OF ASSE SSEE U/S. 54F OF THE ACT AND WAS OF THE VIEW THAT THE ASSESSEE OWNED ANOTHER HOUSE AT BANASHANKARI 3 RD STAGE AND THEREFORE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S. 54F OF THE ACT. U/S. 54F OF THE ACT , LONG TERM CAPITAL GAIN WILL BE EXEMPT IF THE ASSESSEE UTILIZES THE LONG TE RM CAPITAL GAIN IN CONSTRUCTING A RESIDENTIAL HOUSE. UNDER PROVISO TO SECTION 54F OF THE ACT, THE ASSESSEE SHOULD NOT OWN MORE THAN ONE RESIDENTI AL HOUSE, OTHER THAN THE NEW ASSET ON THE DATE OF TRANSFER OF THE ORIGIN AL ASSET. ACCORDING TO THE CIT(APPEALS), THE ASSESSEE OWNED ANOTHER HOUSE AND THEREFORE DEDUCTION ITA NO. 568/BANG/2018 PAGE 6 OF 13 U/S. 54F OF THE ACT CANNOT BE GIVEN. THE FOLLOWING WERE THE CONCLUSIONS OF CIT(APPEALS) IN THIS REGARD:- B) AS REGARDS CLAIM OF THE APPELLANT UNDER SECTION 54F OF THE ACT, IN CASE THE TEMPORARY STRUCTURE WAS PART OF TH E APPELLANT'S 40% SHARE OF LAND AND IF IT EXISTED AS ON THE DATE OF THE TRANSFER, THE APPELLANT WOULD NOT BE ELIGIBLE FOR DEDUCTION U NDER SECTION 54F OF THE ACT AS THE APPELLANT HERSELF HAS CLAIMED THE SAME TO BE A RESIDENTIAL HOUSE. FURTHER A PERUSAL OF THE INCOM E TAX RETURN OF THE APPELLANT FOR AY 2007-08 SHOWS THAT THE APPELLA NT WAS OWNER OF A RESIDENTIAL HOUSE AT `BSK 3RD STAGE', WITH A V ALUE OF RS 4,83,100/-. IN THE STATEMENT OF AFFAIRS AS ON 31.03 .2011 (AS ENCLOSED WITH THE RETURN OF INCOME FOR AY 2011-12), THE DESCRIPTION OF THIS PROPERTY WITH VALUE OF RS 4,83, 100/- IS GIVEN AS HOUSES(FLATS) AT BSK 3RD STAGE. THUS THE APPELLA NT WOULD NOT SATISFY THE CONDITIONS LAID DOWN IN THE PROVISO TO SECTION 54F(1) OF THE ACT AND SUCH SHE WOULD NOT BE ELIGIBLE TO CL AIM ANY DEDUCTION UNDER THIS SECTION. 10. APART FROM THE ABOVE, THE AO ADOPTED THE COST O F CONSTRUCTION OF THE FLATS WHICH THE ASSESSEE WAS TO RECEIVE FROM THE BU ILDER AS 40% OF HER SHARE BY APPLYING THE COST OF CONSTRUCTION RATE AT RS.1,800 PER SQ.FT. THE CIT(APPEALS) WAS OF THE VIEW THAT AS PER CLAUSE 9 O F THE JDA, IF THE DEVELOPER AND THE ASSESSEE WANT TO ADJUST THE BUILT -UP AREA OVER AND ABOVE THEIR RESPECTIVE SHARES, CONSIDERATION FOR EA CH SQ.FT. OF BUILT-UP AREA TO E ADJUSTED WAS FIXED AT RS.2,000 PER SQ.FT. THE CIT(APPEALS) WAS OF THE VIEW THAT THIS RATE SHOULD BE APPLIED TO ARRIVE AT THE FULL VALUE OF THE CONSIDERATION ON TRANSFER OF THE CAPITAL ASSET. HE ACCORDINGLY ENHANCED THE QUANTUM OF LONG TERM CAPITAL GAIN. 11. AGGRIEVED BY THE AFORESAID ORDER OF CIT(APPEALS ), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS CLEAR EVIDENCE TO SHOW A BUILDING VIZ., A ITA NO. 568/BANG/2018 PAGE 7 OF 13 RESIDENTIAL HOUSE EXISTED OVER THE OLD PROPERTY AND THEREFORE THE PROVISIONS OF SECTION 54 OF THE ACT OUGHT TO HAVE BEEN APPLIED . IN THIS REGARD, THE LD. COUNSEL PLACED RELIANCE ON THE DECISION OF THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF DR. R. BALAJI (2014) 22 TAXMAN 305 (KAR) WHEREIN THE HONBLE HIGH COURT IN THE CONTEXT OF SECTION 54 OF THE ACT, HELD THAT A HOUSE OF 200 SQ.FT. WITH RCC CEMENT FLOORING ETC. C AN BE SAID TO BE A RESIDENTIAL HOUSE. HIS ALTERNATE SUBMISSION WAS TH AT EVEN ASSUMING THAT THE PROVISIONS OF SECTION 54F OF THE ACT ARE APPLIC ABLE, STILL THE ASSESSEE WOULD BE ENTITLED TO THE DEDUCTION. IN THIS REGARD , THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. K.G. RUKMINIAMMA, 331 ITR 221 (KAR) WHEREIN THE HONBLE HIGH COURT TOOK THE VIEW THAT I F ON A JDA, MULTIPLE FLATS ARE RECEIVED BY THE ASSESSEE, THAT HAS TO BE CONSTR UED AS ONE HOUSE AND DEDUCTION U/S. 54 CANNOT BE DENIED. IT WAS ALSO SU BMITTED THAT THE CONCLUSIONS OF CIT(APPEALS) THAT ASSESSEE OWNED ANO THER HOUSE AT BSK 3 RD STAGE IS INCORRECT BECAUSE THE PROPERTY REFERRED T O BY THE CIT(A) IN HIS ORDER IS NOTHING BUT THE PROPERTY WHICH WAS SUBJECT MATTER OF JDA. 13. IT WAS FURTHER SUBMITTED THAT THE CIT(APPEALS) WAS NOT JUSTIFIED IN ENHANCING THE LONG TERM CAPITAL GAIN BECAUSE THE CL AUSE IN THE JDA REGARDING ADJUSTMENT AND HOW THE RATE ON WHICH BUIL T-UP AREA HAS TO BE ADJUSTED IS ONLY IN THE EVENT OF CHANGE IN THE CONS TRUCTED ARE OF FLATS ALLOTTED TO THE ASSESSEE AND WHEN SUCH CHANGE IS VE RY MARGINAL. THAT CANNOT BE APPLIED AS THE COST OF CONSTRUCTION OF TH E NEW ASSET. 14. THE LD. DR RELIED ON THE ORDER OF THE CIT(APPEA LS). 15. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. AS FAR AS THE QUESTION WHETHER SECTION 54 OF THE AC T WOULD APPLY, IT IS CLEAR FROM THE SETTLEMENT DEED DATED 24.07.2002 UNDER WHI CH THE ASSESSEE GOT ITA NO. 568/BANG/2018 PAGE 8 OF 13 THE PROPERTY THAT THERE WAS A RESIDENTIAL HOUSE IN THE PROPERTY WHICH WAS SUBJECT MATTER OF JDA. THE CIT(APPEALS), HOWEVER, PROCEEDED ON THE BASIS THAT THE JDA DOES NOT MAKE ANY REFERENCE TO A NY BUILDING. WE HAVE PERUSED THE JDA AND WE FIND THAT THE DESCRIPTION AS GIVEN IN THE SCHEDULE TO JDA IS AS FOLLOWS:- SCHEDULE ALL THE PIECE AND PARCEL OF PROPERTY BEARING BANGAL ORE MAHANAGARA PALIKE OLD NO.66 & 67, NEW NO.17 SITUATE D AT ITTAMADU VILLAGE, UTTARAHALLI HOBLI, BANGALORE SOUT H TALUK, BANGALORE 560 085, NOW COMING UNDER BANGALORE MAH ANAGARA PALIKE WARD NO.55, IN ALL MEASURING EAST TO WEST : 60'-0' ( SIXTY FEET) AND NORTH TO SOUTH : 50'-0' ( FIFTY FEET), TO TALLY MEASURING 3000 SQ. FEET OR THEREABOUT AND BOUNDED ON:- EAST BY : ROAD. WEST BY : PROPERTY BEARING NO.65, NORTH BY : ROAD, SOUTH BY : PROPERTY BEARING NOS.61 AND 62. 16. FROM THE ABOVE DESCRIPTION, WE CANNOT COME TO THE CONCLUSION THAT THE SUBJECT MATTER OF THE JDA IS ONLY A LAND, BECAU SE THE REFERENCE IS TO PROPERTY BEARING BANGALORE MAHANAGARA PALIKE OLD NO .66 & 67, NEW NO.17 SITUATED AT ITTAMADU VILLAGE, UTTARAHALLI HOB LI, BANGALORE SOUTH TALUK, BANGALORE 560 085. IN THE CASE OF DR. R. BALAJI VS DCIT, THE DECISION OF THE ITAT BANGALORE WHICH WAS CONFIRMED BY THE HONBLE KARNATAKA HIGH COURT AS REPORTED IN (2014) 222 TAXMAN 305 (KARN) , WHEREIN THE QUESTION WAS WHETHER A HOUSE OF 200 SQ .FT. RCC WITH CEMENT FLOOR AND CIVIC AMENITIES ON THE SAID PROPERTY COUL D BE SAID TO BE A RESIDENTIAL HOUSE FOR THE PURPOSE OF ALLOWING DEDU CTION U/S. 54 OF THE ACT. THE HONBLE HIGH COURT APPROVED THE FINDINGS OF THE TRIBUNAL AND HELD THAT ITA NO. 568/BANG/2018 PAGE 9 OF 13 THE ASSESSEE FULFILLED CONDITIONS FOR GRANT OF EXEM PTION UNDER SECTION 54 OF THE ACT. THERE IS NO OTHER BASIS GIVEN BY THE REVE NUE AUTHORITIES TO COME TO CONCLUSION THAT THERE WAS NO BUILDING IN EXISTEN CE AT THE TIME WHEN THE JDA WAS ENTERED INTO. THE ASSESSEE WOULD THEREFORE BE ENTITLED TO DEDUCTION U/S. 54 OF THE ACT. 17. EVEN ASSUMING THAT THERE WAS NO BUILDING OVER T HE PROPERTY THAT WAS SUBJECT MATTER OF JDA, STILL THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S. 54F OF THE ACT. WE ARE OF THE VIEW THAT THERE IS N O BASIS FOR THE CONCLUSION OF CIT(A) THAT THE ASSESSEE OWNED MORE THAN TWO RES IDENTIAL HOUSES. THE CONCLUSIONS OF THE CIT(A) IN THIS REGARD ARE WITHOU T ANY BASIS. AS ALREADY OBSERVED, THE PROPERTY REFERRED TO BY THE CIT(A) IS NOTHING BUT BSK 3 RD STAGE WHICH WAS SUBJECT MATTER OF THE JDA, AS STAT ED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US. 18. AS FAR AS THE DEDUCTION U/S. 54F OF THE ACT ON THE QUESTION WHETHER IF UNDER A JDA MULTIPLE FLATS ARE GIVEN TO THE OWNER W HETHER DEDUCTION U/S.54F OF THE ACT CAN BE GIVEN, THE DECISION OF T HE HONBLE HIGH COURT OF KARNATAKA AND THE OTHER DECISION CITED BEFORE US SU PPORTS THE PLEA OF THE ASSESSEE THAT DEDUCTION U/S. 54F OF THE ACT CANNOT BE DENIED ON THE GROUND THAT MULTIPLE FLATS ARE OBTAINED BY THE ASSE SSEE. THE LD. DR IN THIS REGARD HAD PLACED RELIANCE ON THE DECISION OF THE H ONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. LATE KHUBCHAND M MAKHIJA, ITA NO.496/2007 DATED 18.12.2013 . 19. WE HAVE GIVEN CAREFUL CONSIDERATION TO THE RIVA L SUBMISSIONS. WE FIND THAT THE FACTS OF THE ASSESSEES CASE ARE SIMI LAR TO THE CASE OF SMT.K.G.RUKMINIAMMA (SUPRA) DECIDED BY THE HONBLE KARNATAKA HIGH COURT. IN THE CASE OF K.G.RUKMINIAMMA , THE FACTS WERE, ON A SITE MEASURING 30 X 110' THE ASSESSEE HAD A RESIDENTIAL PREMISES. UNDER A ITA NO. 568/BANG/2018 PAGE 10 OF 13 JOINT DEVELOPMENT AGREEMENT SHE GAVE THAT PROPERTY TO A BUILDER FOR PUTTING UP FLATS. UNDER THE AGREEMENT 8 FLATS ARE TO BE PUT UP IN THAT PROPERTY AND 4 FLATS REPRESENTING 48% IS THE SHARE OF THE ASSESSEE AND THE REMAINING 52% REPRESENTING ANOTHER 4 FLATS IS THE SHARE OF THE BU ILDER. SO THE CONSIDERATION FOR SELLING 52% OF THE SITE WAS 4 FLATS REPRESENTIN G 48% OF BUILT UP AREA AND THE 4 FLATS ARE SITUATED IN A RESIDENTIAL BUILDING. THE COURT HELD THAT THE 4 FLATS CONSTITUTE 'A RESIDENTIAL HOUSE' FOR THE PURP OSE OF SEC 54. THE 4 RESIDENTIAL FLATS CANNOT BE CONSTRUED AS 4 RESIDENT IAL HOUSES FOR THE PURPOSE OF SEC 54. IT HAS TO BE CONSTRUED AS 'A RES IDENTIAL HOUSE' AND THE ASSESSEE IS ENTITLED TO THE BENEFIT ACCORDINGLY. IN THAT VIEW OF THE MATTER, THE COURT HELD THAT THE TRIBUNAL AS WELL AS THE APP ELLATE AUTHORITY WERE JUSTIFIED IN HOLDING THAT THERE IS NO LIABILITY TO PAY CAPITAL GAINS TAX AS THE CASE SQUARELY FALLS UNDER SEC. 54 OF THE INCOME TAX ACT, 1961. 20. AS FAR AS THE DECISION OF THE HONBLE MADRAS HI GH COURT IN THE CASE OF V.R. KARPAGAM, INCOME TAX APPEAL NO.301 OF 2014. JU DGMENT DATED 18/8/2014 IS CONCERNED, THE FACTS WERE SIMILAR TO THE CASE O F THE ASSESSEE. THE ASSESSEE IN THE CASE OF V.R.KARPAGAM ENTERED INTO AN AGREEMENT WITH M FOR DEVELOPMENT OF A PIECE OF LAND OWNED BY IT. A S PER AGREEMENT, ASSESSEE WAS TO RECEIVE 43.75% OF BUILT UP AREA AFT ER DEVELOPMENT, WHICH WAS TRANSLATED INTO FIVE FLATS. THE ASSESSEE CLAIME D EXEMPTION U/S 54F ON THE VALUE OF FIVE FLATS. THE AO GRANTED BENEFIT OF CAPITAL GAINS IN RESPECT OF ONE FLAT AND THE CIT(A) AFFIRMED FINDINGS OF AO HOL DING THAT CLAIM OF ASSESSEE U/S 54F FOR ALL FIVE FLATS COULD NOT BE AD MITTED, BUT HOWEVER, HE TOOK THE VIEW THAT THE ASSESSEE WOULD BE ENTITLED T O BENEFIT OF S. 54F IN RESPECT OF ONE SINGLE FLAT WITH LARGEST AREA. IN AP PEAL, THE TRIBUNAL HELD THAT ASSESSEE WAS ELIGIBLE FOR EXEMPTION U/S 54F ON ALL FIVE FLATS RECEIVED BY HER IN LIEU OF LAND SHE HAD PARTED WITH AND THE WORD A APPEARING IN S. 54F SHOULD NOT BE CONSTRUED IN SINGULAR, BUT SHOULD BE UNDERSTOOD IN PLURAL. THE ITA NO. 568/BANG/2018 PAGE 11 OF 13 HONBLE MADRAS HIGH COURT UPHELD THE ORDER OF THE T RIBUNAL. IT WAS ALSO HELD THAT AMENDMENT WAS MADE TO S. 54F WITH REGARD TO WORD A BY FINANCE (NO.2) ACT, 2014 WITH EFFECT ONLY FROM 01.0 4.2015 WITHDRAWING DEDUCTION FOR MORE THAN ONE FLAT (RESIDENTIAL HOUSE ). POST AMENDMENT, VIZ., FROM 01.04.2015, BENEFIT OF S. 54F WILL BE APPLICAB LE TO ONE RESIDENTIAL HOUSE IN INDIA. HOWEVER, PRIOR TO SAID AMENDMENT, A RESIDENTIAL HOUSE WOULD INCLUDE MULTIPLE FLATS/RESIDENTIAL UNITS. SIM ILAR DECISIONS WERE RENDERED ON IDENTICAL FACTS BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS GUMANMAL JAIN [2017] 80 TAXMANN.COM 21 (MDS ) . 21. AS FAR AS THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF KHUBCHAND MAKHIJA (SUPRA) IS CONCERNED, AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE FACTS OF THE AFORESAID CASE ARE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE CASE OF THE ASSESSEE AND THE FACTS OF THE CASE OF K.G.RUKMANIAMMA (SUPRA) DECIDED BY THE HONBLE KARNATAKA HIGH COURT. IN THE CASE OF THE LATE KHUBCHAND M MAKHIJA (SUPRA) , THE FACTS WERE THAT ONE RESIDENTIAL HOUSE WAS SOL D AND THE LONG TERM CAPITAL GAIN ON SUCH SALE WAS USED TO BUY TWO INDEPENDENT RESIDENTIAL HOUSES. THIS ASPECT HAS BEEN NOTICED BY THE HONBLE COURT IN PARAGRAPH 15 & 16 OF THE JUDGMENT IN THE CASE OF KHUBCHAND M.MAKHIJA (SUPRA) WHEREIN THE DISTINGUISHING FACTS BETWEEN THE FACTS OF K.G.RUKMINIAMMA (SUPRA) AND THE FACTS OF THE CASE IN KHUBCHAND M.MAKHIJA (SUPRA) WERE BROUGHT OUT BY THE HONBLE KARNATAKA HIGH COU RT. 22. IN THE LIGHT OF THE LAW AS EXPLAINED IN THE VAR IOUS JUDICIAL PRONOUNCEMENTS REFERRED TO ABOVE, WE ARE OF THE VIE W THAT THE CIT(APPEALS) OUGHT TO HAVE ALLOWED DEDUCTION CLAIME D BY THE ASSESSEE EITHER U/S. 54 OR 54F OF THE ACT. ITA NO. 568/BANG/2018 PAGE 12 OF 13 ANOTHER ASPECT WHICH NEEDS TO BE CONSIDERED IS THAT THE CONCLUSION OF CIT(APPEALS) THAT SINCE THE ASSESSEE DID NOT FILE R ETURN OF INCOME MAKING CLAIM FOR DEDUCTION U/S. 54 OF 54F OF THE ACT, THE SAME CANNOT BE ALLOWED. ON THIS ASPECT, WE ARE OF THE VIEW THAT THE CIT(APP EALS) AS AN APPELLATE AUTHORITY CANNOT DENY THE BENEFIT OF DEDUCTION WHIC H THE ASSESSEE IS ENTITLED TO IN LAW. IN THIS REGARD, THE LD. COUNSE L FOR THE ASSESSEE HAS BROUGHT TO OUR NOTICE THAT THE DECISION OF THE ITA T MUMBAI BENCH IN THE CASE OF DR. ASHWIN BALCHAND MEHTA V. JCIT , ITA NO.5329 &6923/MUM/2012, ORDER DATED 06.11.2015, WHEREIN THE TRIBUNAL AFTER CONSIDERING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD., 34 9 ITR 336 (BOM) , HELD THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE AO, IT CAN BE MADE BEFORE THE APPELLATE AUTHORITIES. WE ARE OF THE VIEW THAT A L AWFUL CLAIM OF DEDUCTION CANNOT BE DENIED BY THE REVENUE AUTHORITIES PURELY ON TECHNICALITIES. TAX IS TO BE LEVIED AND COLLECTED IN ACCORDANCE WITH THE L AW. IF THE ASSESSEE IS ENTITLED TO DEDUCTION WHILE COMPUTING THE LONG TERM CAPITAL GAIN, THAT CANNOT BE DENIED ON THE GROUND THAT SUCH A CLAIM WAS NOT B EFORE THE AO. IN MANOHAR REDDY BASANI VS. ITO ITA. NO. 1307/HYD/2017 ORDER DATED 30.5.2018, THE ITAT HYDERABAD BENCH TOOK THE VIEW T HAT DEDUCTION U/S.54F OF THE ACT CANNOT BE DENIED FOR THE REASON THAT A C LAIM TO THAT EFFECT WAS NOT MADE IN A RETURN OF INCOME. 23. THE CIT(APPEALS) HAS PLACED RELIANCE ON A DECIS ION IN THE CASE OF GOETZ INDIA LTD. 284 ITR 323) (SC) WHICH WAS RENDER ED IN THE CONTEXT OF RAISING AN ADDITIONAL GROUND WHICH, IN OUR VIEW, IS NOT APPROPRIATE. IN THE GIVEN FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW T HAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S. 54 / 54F OF THE ACT AND THE SAME IS DIRECTED TO BE ALLOWED. ITA NO. 568/BANG/2018 PAGE 13 OF 13 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JULY, 2018. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 20 TH JULY, 2018. / D ESAI S MURTHY / COPY TO: 1. THE APP ELL ANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.