Rukmani Santhanam, CHENNAI V. ITO, CHENNAI

ITA 597/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8709 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 22-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 24-03-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: J PRABHAKAR
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.597/MDS/2015 / ASSESSMENT YEAR : 2006-07 SMT. RUKMANI SANTHANAM NO.15, AISWARIYA APARTMENTS NO.6, COASTAL ROAD BESANT NAGAR CHENNAI 600 090 V S. THE INCOME TAX OFFICER BUSINESS WARD IV(4) CHENNAI [PAN AFEPR 1156 H] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI J. PRABHAKAR, CA /RESPONDENT BY : SHRI A.V. SREEKANTH, JC IT / DATE OF HEARING : 22 - 0 6 - 2016 ! / DATE OF PRONOUNCEMENT : 22 - 0 7 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-15, CHENN AI, DATED 28.1.2015 AND PERTAINS TO ASSESSMENT YEAR 2006-07 . ITA NO. 597/15 :- 2 -: 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS COMPUTAT ION OF CAPITAL GAINS ON EXEMPTION CLAIMED BY THE ASSESSEE U/S 54/54F OF THE ACT. 3. SHRI J. PRABHAKAR, LD. REPRESENTATIVE FOR THE ASSE SSEE SUBMITTED THAT THIS IS SECOND ROUND OF LITIGATION B EFORE THIS TRIBUNAL. IN THE FIRST ROUND OF LITIGATION, THIS TRIBUNAL BY AN ORDER DATED 31.1.2012 REMITTED THE MATTER BACK TO THE ASSESSING OFFICER WITH THE DIRECTION TO REEXAMINE THE SAME. THE ASSESSING OFFI CER, AFTER EXAMINING THE MATTER, FOUND THAT THE PROPERTY WAS T RANSFERRED ON 20.1.2006 WHEN THE DEVELOPMENT AGREEMENT WAS EXECUT ED. ACCORDING TO THE LD. REPRESENTATIVE, THE POSSESSION OF THE PR OPERTY WAS NOT HANDED OVER ON 20.1.2016. THE LD. REPRESENTATIVE F URTHER SUBMITTED THAT THE ASSESSEE ALONGWITH HER FATHER AND MOTHER CONTINUED TO LIVE IN THE PROPERTY TILL 12.4.2006, THEREFORE, HANDING OVE R THE POSSESSION ON 20.1.2006 IS IMPOSSIBLE. SINCE THERE WAS NO TRANSF ER OF PROPERTY ON 20.1.2006, THE CAPITAL GAIN, IF ANY, CAN BE ASSESSE D ONLY IN THE NEXT ASSESSMENT YEAR I.E 2007-08 AND NOT 2006-07. THE L D. REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE CLAIMED EXEMPT ION U/S 54 OF THE ACT. FOR THE PURPOSE OF CLAIMING EXEMPTION U/S 54 OF THE ACT, THE ASSESSEE HAS TO TRANSFER A RESIDENTIAL HOUSE. IN T HIS CASE, WHAT WAS ITA NO. 597/15 :- 3 -: TRANSFERRED IS ONLY A RESIDENTIAL HOUSE, THEREFORE, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54 OF THE ACT. REFERRING TO THE CLAIM OF THE ASSESSEE U/S 54 OF THE ACT, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSE SSEE ON THE GROUND THAT WHAT WAS TRANSFERRED WAS LAND AND NOT THE RESI DENTIAL HOUSE. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS TRANSFERRED ONLY RESIDENTIAL HOUSE AND LAND THEREFORE, THE ASSESSEE IS LIABLE FOR EXEMPTION U/S 54 OF THE ACT. THE ASSESSING OFFICE R HAS ALSO DISALLOWED THE CLAIM OF THE ASSESSEE U/S 54F OF T HE ACT ON THE GROUND THAT THE ASSESSEE HAS INVESTED IN MORE THAN ONE FL AT. THE ASSESSING OFFICER HAS ALSO FOUND THAT THE ASSESSEE HAS TRANS FERRED THE HOUSE IN WHICH THE INVESTMENT WAS MADE WITHIN THREE YEARS F ROM THE DATE OF PURCHASE. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE WAS ALLOTTED TWO RESIDENTIAL UNITS IN THE SAME BLOCK, T HEREFORE, IT HAS TO BE CONSTRUED AS ONE RESIDENTIAL UNIT. THE TRANSFER OF THE ASSET WAS NOT FOR SALE BUT IT WAS SETTLED IN FAVOUR OF THE ASSES SEES SON AND DAUGHTER. WHEN THE ASSESSEE SETTLED ONE OF THE FL AT IN FAVOUR OF HER SON AND DAUGHTER, IT CANNOT BE CONSTRUED AS SALE OF THE PLOT. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. ITA NO. 597/15 :- 4 -: 4. ON THE CONTRARY, SHRI A.V. SREEKANTH, LD. DEPARTMEN TAL REPRESENTATIVE SUBMITTED THAT THE DEVELOPMENT AGREE MENT CLEARLY SHOWS THAT THE PHYSICAL POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE DEVELOPER ON THE DATE OF THE DEVELOPMENT AGREEM ENT. THEREFORE, THE CIT(A) HAS RIGHTLY FOUND THAT THE PROPERTY WAS TRANSFERRED UNDER THE PROVISIONS OF THE INCOME-TAX ACT, 1961 ON 20.1. 2006. THEREFORE, THE CAPITAL GAIN HAS TO BE ASSESSED ONLY DURING THE YEAR UNDER CONSIDERATION. REFERRING TO THE DEVELOPMENT AGREEM ENT, THE LD. DR SUBMITTED THAT THE ASSESSEE HAS TO EXECUTE THE POW ER OF ATTORNEY AGENT AUTHORIZING THE DEVELOPER TO TRANSFER 40% OF THE UNDIVIDED SHARE OF THE LAND IN FAVOUR OF THE PROPOSED PURCHAS ER OF THE PROPERTY. UNLESS THE POWER OF ATTORNEY AGENT/DEVELOPER TOOK P OSSESSION OF THE PROPERTY ON 20.1.2006, HE CANNOT EXECUTE ANY SALE D EED IN FAVOUR OF THE PROPOSED PURCHASER. A COMBINED READING OF THE DEVELOPMENT AGREEMENT CLEARLY SHOWS THAT THE PROPERTY WAS HANDE D OVER TO THE DEVELOPER FOR DEVELOPMENT AND THE PHYSICAL POSSESSI ON WAS HANDED OVER TO THE DEVELOPER ON 20.1.2006. THEREFORE, IT IS NOT CORRECT TO SAY, ACCORDING TO THE LD. DR, THAT PHYSICAL POSSESSION O F THE PROPERTY WAS NOT HANDED OVER TO THE DEVELOPER. THE LD. DR FURTH ER SUBMITTED THAT WHAT WAS TRANSFERRED BY THE ASSESSEE IS A VACANT LAND AND NOT A ITA NO. 597/15 :- 5 -: RESIDENTIAL HOUSE, THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 54 OF THE ACT. REFERRING TO THE CLAIM OF THE ASSESSEE U/S 54F OF THE ACT, THE LD. DR SUBMITTED THAT THE ASSESSEE WA S HAVING TWO FLATS ON THE DATE OF INVESTMENT. MOREOVER, ONE OF THE FL AT WAS TRANSFERRED BY WAY SETTLEMENT IN FAVOUR OF HER SON AND DAUGHTER WITHIN THREE YEARS, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S 54F ALSO. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE ADMITTEDLY ENTERED INTO A DEVELOPMENT AGREEMENT ON 20.1.2006 WITH M/S DOSHI HOUSING LTD. THE ASSESSEE HAS EXECUTED TWO POWER OF ATTORNEY NOMINATING AGENTS ONE FOR MAKING APPLICATI ONS FOR BUILDING APPROVAL AND ANOTHER FOR SALE OF THE PROPERTY. THE ASSESSEE IN FACT NOMINATED ONE SHRI MOHUL H. DOSHI AS HER POWER OF A TTORNEY AGENT TO EXECUTE THE SALE DEED IN PURSUANCE TO THE DEVELOPME NT AGREEMENT. THEREFORE, IT IS OBVIOUS THAT THE PROPERTY WAS HAND ED OVER TO THE DEVELOPER ON 20.1.2006 WHEN THE DEVELOPMENT AGREEME NT WAS EXECUTED. A COPY OF THE LETTER WHICH IS AVAILABLE AT PAGE 117 OF THE PAPER BOOK SHOWS THAT M/S DOSHI HOUSING LTD TOOK PHYSICAL POSSESSION OF THE PROPERTY ON 20.1.2006. WHEN THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S ITA NO. 597/15 :- 6 -: DOSHI HOUSING LTD ALLOWING THEM TO RETAIN 40% OF T HE UNDIVIDED SHARE IN THE PROPERTY FOR A CONSIDERATION OF 60% OF THE S UPER BUILT-UP AREA, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE RE WAS A TRANSFER OF PROPERTY TO THE EXTENT OF 40% OF THE UNDIVIDED SHAR E IN THE LAND. THE ASSESSEE HAS EXECUTED A POWER OF ATTORNEY ENABLING THE DEVELOPER TO SELL 40% OF THE UNDIVIDED SHARE IN THE LAND TO THE PROPOSED PURCHASERS. THEREFORE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THERE WAS A TRANSFER OF PROPERTY WITHIN THE MEANING OF SEC. 2(47)(VI) OF THE ACT ON 20.1.2006. HENCE, THE CAPITAL GAIN A RISING OUT OF THE TRANSFER HAS TO BE ASSESSED DURING THE YEAR UNDER C ONSIDERATION. 6. NOW COMING TO THE EXEMPTION CLAIMED BY THE ASSESSE E, THE REVENUE CLAIMS THAT WHAT WAS TRANSFERRED BY THE AS SESSEE IS A VACANT LAND AND NOT A RESIDENTIAL HOUSE. THE COPY OF THE DEVEL OPMENT AGREEMENT AVAILABLE ON RECORD CLEARLY SHOWS THAT WHAT WAS SOL D BY THE ASSESSEE IS LAND AND BUILDING AND NOT VACANT LAND. THE SCHEDULE TO THE DEVELOPMENT AGREEMENT CLEARLY SHOWS THAT WHAT WAS TRANSFERRED B Y THE ASSESSEE IS A RESIDENTIAL HOUSE AND NOT THE VACANT LAND, THEREFOR E, THE CONTENTION OF THE LD. DR IS MISCONSTRUED. WHEN THE ASSESSEE HAS TRANSFERRED THE RESIDENTIAL HOUSE ALONGWITH THE LAND, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 5 4 OF THE ACT. ITA NO. 597/15 :- 7 -: 7. NOW COMING TO THE CLAIM OF THE ASSESSEE U/S 54F O F THE ACT, EVEN ASSUMING THAT WHAT WAS TRANSFERRED IS ONL Y A VACANT LAND, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT. THE ASSESSEES CLAIM FOR EXEMPTION U/S 54F OF THE ACT WAS REJECTED ON THE GROUND THAT THE ASSESSEE WAS HAVING TWO FLATS AND ONE OF THE FLAT WAS TRANSFERRED WITHIN A PERIOD OF THREE YEARS. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT EVEN THOUGH TWO FLATS WERE ALLOTTED, THIS HAS TO BE CONSTRUED AS ONE SINGLE UNIT THEREFORE, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT. THE SO CALLED T RANSFER OF ONE OF THE FLATS IS NOT BY SALE. THE PROPERTY WAS SETTLED IN FAVOUR OF ASSESSEES SON AND DAUGHTER. THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT A SETTLEMENT MADE BY THE ASSESSEE IN FAVOUR OF HER S ON AND DAUGHTER IS ONLY A FAMILY ARRANGEMENT IN THE FAMILY AND IT CANN OT BE CONSTRUED AS TRANSFER OF PROPERTY. THERE MAY BE VARIOUS REASONS FOR SETTLING THE PROPERTY IN FAVOUR OF THE ASSESSEES SON AND DAUGH TER. THE FACT REMAINS THAT THE PROPERTY WAS SETTLED BY WAY OF FAM ILY ARRANGEMENT FOR CONVENIENT ENJOYMENT AND THE PROPERTY REMAINS W ITH ASSESSEES SON AND DAUGHTER. THEREFORE, THE EXEMPTION U/S 54 F/54 CANNOT BE DENIED. IN VIEW OF THE ABOVE DISCUSSION, WHILE CON FIRMING THE TRANSFER OF PROPERTY DURING THE YEAR UNDER CONSIDERATION, WE HOLD THAT THE ITA NO. 597/15 :- 8 -: ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54/54F OF T HE ACT. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE MODIFIED AN D THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF EXEMPTION U/S 54/54F OF THE ACT TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLWOED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 22 ND JULY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF