DCIT, CHENNAI V. Kalyanaraman Nataraja, CHENNAI

ITA 638/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4683 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 21-02-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 18-03-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Capital asset; Benefit of exemption
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER . / ITA NO. 638/MDS/2016 / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE-1(2), CHENNAI-34. ( /APPELLANT) V. SHRI KALYANARAMAN NATARAJA , NO.84, 4 TH STREET, ABHIRAMAPURAM, CHENNAI 600 018. PAN AACPN1979M RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT / RESPONDENT BY : SHRI B. RAMAKRISHNAN, FCA ! / DATE OF HEARING : 21.02.2017 '# ! / DATE OF PRONOUNCEMENT: 01.05.2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 22 .12.2015. - - ITA 638/MDS/16 2 2. THE ONLY GRIEVANCE OF THE DEPARTMENT IN THIS APP EAL IS WITH REGARD TO GRANTING OF DEDUCTION U/S.54F OF THE ACT IN RESPECT OF 5 PROPERTIES, WHICH WERE PURCHASED BY THE ASSESS EE BY DRT AUCTION WHEREIN CLUBBED THE SAME AS ONE PROPERTY. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT YEAR, THE ASSESSEE HAD SOLD SHARES OF CONSUL CONSOL IDATED PVT. LIMITED IN MARCH 2012 AND DERIVED A LONG TERM CAPIT AL GAIN(LTCG) OF 12,53,05,529/-. THE ASSESSEE CLAIMED EXEMPTIONS AGAINST THE LTCG AS UNDER : I) U/S.54EC EXEMPTION FY 2011-12 50,00,000/- II) REC BONDS 2012-13 50,00,000/- III) U/S.54F INVESTMENT IN PROPERTY 8,56,89,844/- 9 ,56,89,844 THE ASSESSEE WAS ASKED TO SUBSTANTIATE ITS CLAIM U/ S.54F OF THE ACT VIDE LETTER DT.6.3.15 STATING THAT THE ASSESSEE HAD PURCHASED PROPERTY FROM THE DEBT RECOVERY TRIBUNAL VIDE DRC 211/2012 FOR A CONSIDERATION OF 10.10 CRORES BY PUBLIC AUCTION. AS PER THE DOCUMENTS IT IS SEEN THAT THE ASSESSEE HAS PURCHASE D 43,600 SQ.FT. OF LAND DESCRIBED IN SCHEDULE A AND SCHEDULE B OF THE AGREEMENT WITH FIVE PARTS. HOWEVER, AS PER PROVISI ONS OF SEC.54F OF THE ACT, ONLY INVESTMENT IN A RESIDENTIA L HOUSE - - ITA 638/MDS/16 3 PROPERTY IS ELIGIBLE FOR DEDUCTION. FURTHER, AS PE R SCHEDULE 1 A OF THE REGISTERED DOCUMENT, THE LAND VALUE IS 8,72,00,000/- AND THE BUILDING VALUE IS 1,38,00,000/- AND THE ASSESSEE IS NOT ALLOWED THE DEDUCTION FOR VAST STRETCH OF LAND INCL UDED IN THE SALE, FURTHER THE SCHEDULE B PROPERTY HAS NO RESIDE NTIAL BUILDING ITSELF, THEREFORE, THE AO DISALLOWED THE CLAIM U/S. 54F OF THE ACT. 3.1 IN RESPONSE, THE ASSESSEE SUBSTANTIATED THE CLA IM VIDE LETTER DATED 17.3.2015 AND SUBMITTED AS UNDER :- A. THE PROPERTY MEASURING LAND OF 43600 SQ.FT. ALON G WITH A BUILDING WAS AUCTIONED FOR SALE AS A SINGLE PROPERT Y BY DRT-I, IN THIS REGARD DRT ADVERTISEMENT LETTER IS ENCLOSED. B. THE LAND IS CONTIGUOUS WITH A RESIDENTIAL BUILDI NG MEASURING 5571 SQ.FT. AS MENTIONED IN FORM 1A OF TH E SALE CERTIFICATE ISSUED BY DRT-I. C. THE SAID SALE CERTIFICATE ISSUED BY THE DRT-3, C HENNAI ALSO SHOWS THE SAME AS LAND MEASURING 43600 SQ.FT. TOGETHER WITH BUILDING THEREBY TREATING THE SALE AS ONE UNIT (PROPERTY). - - ITA 638/MDS/16 4 D. THE PREVIOUS OWNERS OF THE PROPERTY FOR REASONS BEST KNOWN TO THEM HAD PURCHASED THE LAND UNDER 5 DIFFER ENT DOCUMENTS AS MENTIONED IN THE SCHEDULE IN THE DRT S ALE CERTIFICATE, HOWEVER THE DRT HAS SOLD THE PROPERTY AS A SINGLE PROPERTY AND DID NOT PERMIT BREAK-UP OF THE SAME. THE AUCTION NOTICE BY THE DRT-3, CHENNAI CLEARLY SH OWS THAT IT IS A SINGLE COMPOSITE UNIT AND WITH A CONDI TION THAT THE PROPERTY CANNOT BE SPLIT. FURTHER, THE PREVIOU S OWNER HELD THE PROPERTY AS A SINGLE RESIDENTIAL UNIT CONS ISTING OF THE ENTIRE PROPERTY OFFERED FOR SALE BY DRT, WHICH IS ALSO SUPPORTED BY THE ASSESSMENT MADE FOR PROPERTY TAX B Y LOCAL AUTHORITIES. FURTHER, THE AFORESAID RESIDENTIAL HOUSE IS BEING A SSESSED TO PROPERTY TAX BY THE CORPORATION OF CHENNAI FOR THE PAST SEVEN YEARS AS A SINGLE RESIDENTIAL HOUSE AND THE ELECTRICITY IS ALSO FOR THE SAID SINGLE RESIDENTIAL HOUSE. E. THERE IS NO EVIDENCE ON RECORD THAT THE ASSESSEE MADE TWO SEPARATE INVESTMENTS IN RESIDENTIAL HOUSE AND I N LAND SEPARATELY. - - ITA 638/MDS/16 5 F. THE ASSESSEE HAD FURNISHED BEFORE THE AO ALL THE REQUIRED DOCUMENTS TO SUPPORT ITS CONTENTION THAT THE ENTIRE PURCHASE IS A SINGLE RESIDENTIAL HOUSE COMPRISING H OUSE, SERVANT ROOM, POOJA/PRAYER HALL, MOTOR ROOM, WELL, GARDEN, ETC. COVERING THE ENTIRE LAND AREA. HENCE, THERE I S NO VACANT LAND AND FURTHER, THE HOUSE WAS SOLD WITH PR OPER COMPOUND WALL THAT COVERS ALL 4 SIDES AS ONE SINGLE UNIT. 3.2 IN SUPPORT OF HIS CONTENTION, THE ASSESSEE RELI ED ON THE FOLLOWING CIRCULARS BY CBDT AND CASE LAWS : I. CIRCULAR NO.667 DATED 18.10.1993 ISSUED BY THE CBDT II. CIT VS. KALPAGAM (SMT.)(M) 227 ITR 733 (M ADRAS) I. ITO VS. P.B.RODRIQUES [11 TTJ) (BOM) 347] II. ADDL. CIT VS. NARANDRA MOHAN UNIYAL (34 SOT 152 [DEL]) III. CIT VS. SUNITA AGGARWAL [284 ITR 20 (DEL)] IV. ACIT VS. ANANDHI KARTHIKEYAN (ITA NO.1242/MDS/2 009) FURTHER, THE ASSESSEE DREW ATTENTION TO THE PATTA, CHITTA AND ADANGAL ISSUED IN RESPECT OF THE ABOVE MENTIONED PR OPERTY BY THE REVENUE DEPARTMENT, CONVEYING THE FACT THAT THE SAID - - ITA 638/MDS/16 6 PROPERTY IS A SINGLE UNIT. THE ASSESSEE FURTHER SU BMITTED THAT THE ACTION OF THE AO IN DISALLOWING THE CLAIM OF EX EMPTION U/S.54F OF THE ACT IS ERRONEOUS AND UNJUSTIFIED AND PLEADED TO DIRECT THE AO TO DELETE THE DISALLOWANCE MADE. 4. THE CIT(APPEALS) OBSERVED THAT THE ISSUE IN THIS APPEAL IS WHETHER THE ASSESSEE INVESTED THE CAPITAL GAINS IN A RESIDENTIAL PROPERTY WHICH ALSO COMPRISED OF SOME LAND. ACCO RDING TO THE CIT(APPEALS), THE STARTING POINT IN THIS COULD BE T HE NEWSPAPER ADVERTISEMENT FOR E-AUCTION SALE MADE BY THE DEBTS RECOVERY TRIBUNAL-III(DRT) AT CHENNAI DATED 18.9.2013. THE ADVERTISEMENT WAS CAPTIONED IN THE MATTER OF STATE BANK OF INDIA, SAM BRANCH, CHENNAI V. M/S. AGNITE EDUCATION LTD. & OTHERS. THE AUCTION WHICH WAS ORIGINALLY TO BE HE LD ON 18.9.2013 WAS RESCHEDULED FOR 17.10.2013, IN THE DE SCRIPTION OF PROPERTIES SCHEDULE A AND SCHEDULE B WERE SPELT OUT IN DETAIL. THE AO HAS REPRODUCED RELEVANT PORTIONS IN HIS ORDE R TO SHOW THAT THE ASSESSEE HAD INVESTED IN 60 CENTS / 26,136 SQ.FT. OF LAND DESCRIBED IN SCHEDULE A AND SCHEDULE B. FURTHER, T HE SURVEY NUMBERS CORRESPONDING TO SCHEDULE A HOUSES THE RESI DENTIAL PROPERTY WHILE SURVEY NUMBERS CORRESPONDING TO SCHE DULE B, - - ITA 638/MDS/16 7 THE PROPERTY IS NOT HAVING ANY RESIDENTIAL BUILDING / CONSTRUCTION. THE CIT(APPEALS) OBSERVED THAT ACCORDING TO THE AO THESE ARE DIFFERENT SALE DEEDS WITH DRT WHICH ISSUED A SINGLE DEBT RECOVERING CERTIFICATE CLUBBING ALL THE FIVE PROPER TIES. FOR THE REASON THAT RELIEF U/S.54F OF THE ACT WOULD BE AVAI LABLE ONLY ON INVESTMENT IN RESIDENTIAL PROPERTY, THE AO RESTRICT ED THE RELIEF TO THE PART OF PROPERTY IN SCHEDULE A, WHICH WAS TRANS ACTED AND WHERE THE RESIDENCE WAS LOCATED. THE CIT(APPEALS) FURTHER OBSERVED THAT THE AO TREATED SCHEDULE B OF THE PROP ERTY BEING OPEN LAND WITHOUT ANY CONSTRUCTION, TO BE NOT ELIGI BLE FOR RELIEF U/S.54F OF THE ACT AND NOT DISPUTED THAT THE ASSESS EE HAD PURCHASED PROPERTY FROM THE DRT VIDE DRC 211/2012 F OR A CONSIDERATION OF 10.10 CRORES BY PUBLIC AUCTION. FURTHER, AS PER THE DOCUMENTS IT WAS SEEN THAT THE ASSESSEE HAD PURCHASED 43600 SQ.FT. OF LAND DESCRIBED IN SCHEDUL E A AND B TOGETHER WITH BUILDING THEREUPON. 4.1 BEFORE THE CIT(APPEALS), THE ASSESSEE PLACED ON RECORD THE PLAN OF PROPERTY PURCHASED AND AFTER PERUSAL OF THE SAME, HE OBSERVED THAT THE PROPERTY, WHICH IS RECTANGULAR BO UND BY COMPOUND WALLS ON FOUR SIDES HOUSES THE IMPUGNED BU ILDING - - ITA 638/MDS/16 8 BEING HOUSE PROPERTY IN THE SOUTH WESTERN CORNER OF THE PROPERTY WITH A SHED ON THE SOUTH EASTERN PART OF T HE PROPERTY, CAR PARKING AND AGAIN A SHED ON THE SOUTH WESTERN A ND NORTH WESTERN PART OF THE PROPERTY. THE OPENING OF THE G ATE GIVING ACCESS TO THE PROPERTY IS ON THE NORTH EASTERN CORN ER OF THE PROPERTY WHILE A WELL AS ALSO A MOTOR ROOM SITUATED IN THE CORNER OF NORTH EASTERN PART OF THE PROPERTY. THE CIT(APP EALS), FURTHER OBSERVED THAT THE PROPERTY CONSISTED OF A RESIDENTI AL HOUSE ALONG WITH LAND APPURTENANT THERETO HOUSING CAR PAR KING, SHEDS, WELL, MOTOR ROOM ETC. IN IT AS A SINGLE COMPOSITE U NIT. FURTHER THERE IS A ROAD / FOOT PATH RUNNING FROM THE ENTRAN CE GATE TO THE PROPERTY ITSELF AS ALSO TO THE CAR PARKING AND SHED AREAS. 4.2 AFTER PERUSING THE E-AUCTION SALE ADVERTISEMENT , THE CIT(APPEALS) OBSERVED THAT BY WAY OF A NOTE IT HAS BEEN UNDERSCORED THAT SCHEDULE A AND B WILL BE SOLD IN S INGLE LOT ONLY WHERE THE UPSET PRICE WAS 10 CRORES ONLY. THE INFERENCE SOUGHT TO BE DRAWN IS THE PROPERTY COULD NOT BE PUR CHASED IN PIECES I.E. SCHEDULE A AND SCHEDULE B SEPARATELY AN D IT FOLLOWS THAT IT HAD TO BE A COMPOSITE PURCHASE OF THE PROPE RTY WHICH INCLUDED THE HOUSE PROPERTY AND LAND APPURTENANT TH ERETO. - - ITA 638/MDS/16 9 4.3 THE CIT(APPEALS) OBSERVED THAT THE PROVISIONS A S CONTAINED IN SEC.54F OF THE ACT PROVIDES FOR RELIEF FROM CAPITAL GAINS TO BE CHARGED ON TRANSFER OF CERTAIN CAPITAL ASSETS IN THE CASE OF INVESTMENT IN RESIDENTIAL HOUSE. ACCORDING TO THE CIT(APPEALS), THE ISSUE WHICH ARISES FOR CONSIDERAT ION IS WITH REGARD TO INVESTMENT IN RESIDENTIAL HOUSE AND OBS ERVED THAT WOULD RESIDENTIAL HOUSE IN THIS CONTEXT INCLUDE LAN D APPURTENANT THERETO OR IT SHOULD BE VIEWED IN A ISOLATED MANNER . THE CIT(APPEALS) FURTHER OBSERVED THAT BY WAY OF COMMON PRUDENCE THE PERSON DESIRING TO BENEFIT FROM THE CAPITAL GAI N BY INVESTMENT PRESCRIBED IN SEC.54F OF THE ACT WOULD S ETTLE FOR PURCHASE OF A RESIDENTIAL PROPERTY AND THE QUANTUM OF CAPITAL GAINS TO BE INVESTED WAS TO THE EXTENT OF 10 CRORES. THE CIT(APPEALS) OBSERVED THAT THE PROPERTY IN QUESTION WHICH WAS PURCHASED BY THE ASSESSEE FITTED THE BILL. THE ASS ESSEE HAVING NOTICED THAT A RESIDENTIAL PROPERTY IS FOR SALE BY AUCTION BY THE DRT SETTLED FOR THE PURCHASE OF THE SAME. ACCORDI NG TO THE CIT(APPEALS), NORMALLY ANY PRUDENT PERSON WOULD HAV E LOOKED FOR SUCH AN OPPORTUNITY AND TO SAY THAT THE PROPERT Y OUGHT TO BE - - ITA 638/MDS/16 10 STAND ALONE RESIDENTIAL PROPERTY WOULD BE READING I NTO THE PROVISION SOMETHING WHICH IS ABSENT. 4.4 THE CIT(APPEALS) RELYING ON THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF SMT. ASHA GEORGE V. ITO ( 351 ITR 123) OBSERVED THAT IN THE ABOVE CASE, ON THE ISSUE OF SEC.54F OF THE ACT, THE HIGH COURT AFFIRMED THE VIEW TAKEN BY THE ITAT OF RESTRICTING THE EXEMPTION TO THE EXTENT OF LAND AVA ILABLE IN THE ACQUISITION OF RESIDENTIAL HOUSE. HOWEVER, THIS WA S SO DONE AS THE ASSESSEE HAD NOT PRODUCED MATERIAL TO SHOW THAT THE ENTIRE AREA IN QUESTION HERE BEING TO THE EXTENT OF 1.92 A CRES SHOULD BE CONSIDERED AS LAND APPURTENANT TO IT. THIS IS NOT SO IN THE CASE OF THE ASSESSEE, WHO HAS GRAPHICALLY BY WAY OF PRES ENTING THE PLAN AS ALSO PLACING RELIANCE ON SEVERAL SUPPORTING DOCUMENTS PLEADED ITS CASE THAT THE IMPUGNED PROPERTY WAS A C OMPOSITE ONE FROM WHICH VACANT LAND COULD NOT BE ARTIFICIALL Y BIFURCATED OR SEGREGATED. ACCORDING TO THE CIT(APPEALS), THE SUB MISSIONS OF THE ASSESSEE ARE UNDERSCORED. 4.5 AFTER PERUSAL OF DOCUMENTS SUBMITTED AND CASE L AWS TAKEN UP BY THE ASSESSEE, THE CIT(APPEALS) OBSERVED THAT THE - - ITA 638/MDS/16 11 CERTIFICATE OF SALE OF IMMOVABLE PROPERTY DATED 27. 11.2013 IN DRC NO. 211/2012 EVIDENCES THAT MR. K.N.RAJA, IN TH IS CASE, THE ASSESSEE, WHO HAS PAID A SUM OF 10.10 CRORES AND BEING DECLARED THE PURCHASER AT SALE BY AUCTION HELD ON 1 7.10.2013 IN RESPECT OF IMMOVABLE PROPERTY WHICH HOLDS OUT THE I MPUGNED PROPERTY AS A COMPOSITE UNIT AS IS EVIDENT FROM THE CITATION AS FOLLOWS: ALL THAT PIECE AND PARCEL OF LAND ADMEASURING 43,6 00 SQ.FT. (SCHEDULE A & B) TOGETHER WITH BUILDING THER EUPON SITUATED AT UTHANDI VILLAGE, WITHIN THE SUB REGISTR ATION DISTRIC T OF NEELANKARI AND REGISTRATION DISTRICT O F CHENNAI SOUTH, DETAILS OF WHICH ARE AS UNDER : THE CERTIFICATE OF SALE RECOGNIZES SCHEDULE A & B TOGETHER WITH BUILDING THEREUPON. 4.6 ACCORDING TO THE CIT(APPEALS), THE CIRCULAR NO. 667 DATED 18.10.1993 RELIED UPON BY THE ASSESSEE REFERS TO CO ST OF SUCH RESIDENTIAL HOUSE CAN BE TAKEN TO INCLUDE THE COST OF THE PLOT ALSO AND THAT THE COST OF LAND IS AN INTEGRAL PART OF TH E COST OF RESIDENTIAL HOUSE WHETHER PURCHASED OR BUILT. THE CIT(APPEALS) RELIED ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF CIT V. SMT. M. KALPAGAM (227 ITR 733(MAD), WHEREIN, THE COURT WAS SEIZED WITH THE MATTER WHERE THE ASSESSEE HAS S OLD THE ENTIRE PLOT CONSISTING OF MAIN BUILDING, COW SHEDS, SIT-OUTS, PATH - - ITA 638/MDS/16 12 WAYS AND VACANT LAND. WITH THE SALE PROCEEDS IT PU RCHASED A NEW HOUSE AND CLAIMED RELIEF U/S.54F OF THE ACT. T HE AO BIFURCATED THE ENTIRE LAND INTO TWO PARTS, ONE AREA CONSISTING OF COW SHEDS, SIT-OUTS ETC. CONSIDERED AS APPURTENANT TO MAIN BUILDING AND ANOTHER CONSISTING OF VACANT LAND CONS IDERED AS NOT APPURTENANT TO MAIN BUILDING AND ACCORDINGLY, HE BI FURCATED THE SALE CONSIDERATION. THE ITAT HELD, AFTER LOOKING I NTO THE PROPERTY PLAN, THAT THE ENTIRE PROPERTY WAS UTILIZED BY THE ASSESSEE AND, THEREFORE, ENTIRE PLOT SHOULD BE CONSIDERED AS ONE UNIT. FURTHER THAT NO PART OF THE LAND COULD BE SEPARATED AND TRE ATED AS SEPARATE ASSET AND THE ENTIRE PROPERTY SHOULD BE TR EATED AS ONE UNIT OF LAND AND BUILDING. THE CIT(APPEALS) FURTHE R OBSERVED THAT IN ITO V. P.B.RODRIQUES (11 TTJ 347), THE TRI BUNAL MUMBAI B BENCH SEIZED WITH THE MATTER WHERE THE ASSESSEE SOLD A RESIDENTIAL HOUSE WHICH OCCUPIED ONLY ONE TENTH ARE A OF THE LAND HELD THAT THE EXEMPTION WAS AVAILABLE TO THE WHOLE OF THE CAPITAL GAINS. THE CASE OF CIT V. SMT. SUNITHA AGGARWAL (2 84 ITR 20) DEALT WITH A PROPERTY PURCHASED BY THE ASSESSEE COM PRISING OF TWO DISTINCTIVE UNITS OWNED BY TWO DIFFERENT PERSON S WHERE THE TRIBUNAL GAVE A FINDING OF FACT TO THE EFFECT - - ITA 638/MDS/16 13 THAT THE PROPERTY PURCHASED BY THE ASSESSEE WAS A SINGLE UNIT AND WAS USED FOR RESIDENTIAL PURPOSES EVER SINCE PO SSESSION OF DIFFERENT PORTION OF SAID PROPERTY WAS TAKEN OVER F ROM VENDORS. IT FURTHER HELD THAT EXECUTION OF FOUR DIFFERENT SALE DEEDS IN RESPECT OF FOUR DIFFERENT PORTIONS DID NOT MATERIALLY AFFEC T NATURE OF TRANSACTION OR NATURE OF PROPERTY ACQUIRED SINCE PR OPERTY IN QUESTION WAS USED BY THE ASSESSEE FOR HER OWN PURPO SES AND INVESTMENT MADE IN PURCHASE OF SAME WAS CONSIDERED ELIGIBLE FOR DEDUCTION U/S.54 OF THE ACT. THE CIT(APPEALS) ALSO OBSERVED THAT IN ADDL. CIT, RANGE-1 V. NARANDRA MOHAN UNIYAL , 34 SOT 152, DELHI BENCH OF THE TRIBUNAL AFFIRMED THE COST OF VACANT LAND APPURTENANT TO LAND FORMING PART OF A RESIDENTIAL U NIT TO BE CONSIDERED FOR CLAIM OF EXEMPTION U/S.54F EVEN IF N O CONSTRUCTION HAS BEEN DONE ON THE APPURTENANT LAND. FINALLY, THE CIT(APPEALS) RELIED ON THE DECISION OF THE TRIB UNAL IN THE CASE OF ACIT V. ANANDHI KARTHIKEYAN, WHEREIN, THE T RIBUNAL, IN ITA NO.1242/MDS/2009 DATED 6.11.2009 OBSERVED THAT THE LAND COST WOULD BE PART AND PARCEL TO THE RESIDENTIAL HO USE FOR THE PURPOSE OF DEDUCTION U/S.54F OF THE ACT AND ON THOS E FACTS EVEN IF THE RESIDENTIAL HOUSE CONSTRUCTED IN A LESSER AR EA THAN THE - - ITA 638/MDS/16 14 APPROVED PLAN THE DEDUCTION CANNOT BE DENIED U/S.54 F OF THE ACT. IN THAT CASE, WHILE THE TOTAL AREA SHOWN IN THE SKETCH WAS 12000 SQ.FT., IN THE FINAL PLAN, THE COVERED AREA W AS SHOWN AS 2680 SQ.FT. WITH THREE CAR PARKING SPACE AND DRIVE WAY SMALL POOL AND PUMP HOUSE. THE CIT(APPEALS) OBSERVED THAT THE AO HAD INFERRED THAT THE SO CALLED CONSTRUCTION OF RESIDEN TIAL HOUSE WAS WITH THE DESIGN TOWARDS A MAKE BELIEVE ACTIVITY TO GET ELIGIBILITY U/S.54F OF THE ACT. BESIDES, THE ASSESSEE PLACED O N RECORD CHITTA, ADANGAL DATED 30.6.2014 AFTER REGISTRATION MENTIONING THE IMPUGNED PROPERTY AS A SINGLE PROPERTY. ACCORDINGL Y, THE CIT(APPEALS) OBSERVED THAT THE PLEA ADVANCED BY THE ASSESSEE HAS TO BE UPHELD IN AS MUCH AS THE PROPERTY WOULD C ONSTITUTE A SINGLE UNIT BEING RESIDENTIAL HOUSE PROPERTY ELIGIB LE FOR EXEMPTION U/S.54F OF THE ACT ON THE INVESTMENT MADE IN RESPEC T OF CAPITAL GAIN ARISING IN THE HANDS OF THE ASSESSEE AND THE S AME CANNOT BE DISSECTED / BIFURCATED TO LAND AND BUILDING SEPA RATELY AS HAS BEEN DONE BY THE AO. AGAINST THIS, THE REVENUE I S IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. FOR BETTER UNDERSTANDING, PROVISIONS OF SECTION 54F - - ITA 638/MDS/16 15 WHICH DEAL WITH PROVISIONS OF CAPITAL GAIN ON TRANS FER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTM ENT IN RESIDENTIAL HOUSE, READ AS UNDER : '54F. (1) [SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHERE IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HI NDU UNDIVIDED FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET, NOT BEING A RESIDENTIA L HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGI NAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFOR E OR [TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TOOK PL ACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHA LL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY,. . .' 6. IT IS CRYSTAL CLEAR FROM THE PLAIN READING OF SECTI ON 54F THAT EXEMPTION IS ALLOWABLE IN RESPECT OF AMOUNT INVESTE D IN THE CONSTRUCTION OF A RESIDENTIAL HOUSE. THERE IS NO AN Y RIDER UNDER SECTION 54F THAT NO DEDUCTION WOULD BE ALLOWED IN R ESPECT OF INVESTMENT OF CAPITAL GAINS MADE ON ACQUISITION OF LAND APPURTENANT TO THE BUILDING OR ON THE INVESTMENT ON LAND ON WHI CH BUILDING IS BEING CONSTRUCTED. WHEN THE LAND IS PURCHASED AND BUILDIN G IS CONSTRUCTED THEREON, IT IS NOT NECESSARY THAT SUCH CONSTRUCTION SHOULD BE ON THE ENTIRE PLOT OF LAND, MEANING THEREBY A PART OF THE LAND WHICH IS APPURTENANT TO THE BUILDING AND ON WHICH NO CONSTRU CTION IS MADE, - - ITA 638/MDS/16 16 THERE IS NO DENIAL OF EXEMPTION ON SUCH INVESTMENT. THEREFORE, THE CONTENTION OF THE LEARNED DR THAT THERE IS A DISTIN CTION WITH RESPECT TO INVESTMENT IN APPURTENANT LAND AS PER SECTIONS 54 A ND 54F IS NOT TENABLE AT ALL. IN THE INSTANT CASE, THERE IS NO DI SPUTE TO THE FACT THAT INVESTMENT OF CAPITAL GAINS WAS MADE WITHIN THE STA TUTORY PERIOD AND MOREOVER WITHIN THE SAME FINANCIAL YEAR. RESIDENTIA L HOUSE WAS CONSTRUCTED ON THE PART OF PLOT OF LAND, THE EXEMPT ION CLAIMED IN RESPECT OF INVESTMENT MADE IN LAND CANNOT BE DECLIN ED WHEN ALL THE OTHER CONDITIONS AS STIPULATED UNDER SECTION 54F AR E BEING SATISFIED. WHILE DEALING WITH THE OBJECTION OF THE ASSESSING O FFICER, THE CIT(A) HAS CATEGORICALLY GIVEN A FINDING THAT RESIDENTIAL BUILDING WAS LOCATED IN THE SAID LAND SO PURCHASED WAS OF A PLOT HAVING AREA OF 43,600 SQ.FT. CONSISTING OF 2 SCHEDULE OF PROPERTY A & B. IN B SCHEDULE OF PROPERTY, NO RESIDENTIAL BUILDING AND THERE IS ONLY LAND. BOTH THESE PLOTS WERE HAVING 1000 SQ.MTRS. OF LAND. BOTH THE P LOTS FORMED PART OF ONE RESIDENTIAL UNIT AND ARE CONTIGUOUS AND ADJOINI NG TO EACH OTHER. THE COMMENTS OF THE ASSESSING OFFICER TO THE EFFECT THAT EXEMPTION UNDER SECTION 54F IS ELIGIBLE ONLY FOR CONSTRUCTION OF HOUSE IS NOT TENABLE INSOFAR AS EVEN COST OF LAND FORMING PART O F THE RESIDENTIAL UNIT ON WHICH NO CONSTRUCTION IS DONE IS ALSO ELIGIBLE F OR EXEMPTION UNDER - - ITA 638/MDS/16 17 SECTION 54F. THUS, THE COST OF VACANT LAND APPURTEN ANT TO AND FORMING PART OF THE RESIDENTIAL UNIT IS TO BE CONSIDERED FO R CLAIM OF EXEMPTION UNDER SECTION 54F EVEN IF NO CONSTRUCTION HAS BEEN DONE ON THE APPURTENANT LAND. THE PROVISIONS OF SECTION 54F CLE ARLY PROVIDE FOR EXEMPTION IF THE NET CONSIDERATION RECEIVED AS A RE SULT OF TRANSFER OF ANY CAPITAL ASSET, OTHER THAN A RESIDENTIAL HOUSE, IS INVESTED IN THE PURCHASE OR CONSTRUCTION OF A RESIDENTIAL HOUSE. TH E NEW RESIDENTIAL HOUSE IS NOT DEBARRED FROM HAVING A LAND APPURTENAN T TO ANY SIZE AND IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER TH AT THE LAND APPURTENANT TO THE BUILDING IS NOT ENTITLED TO EXEM PTION UNDER SECTION 54F. HAD IT BEEN A CASE OF LAND NOT APPURTENANT TO THE BUILDING SO CONSTRUCTED, THEN THE CONTENTION OF THE ASSESSING O FFICER TO THE EFFECT THAT INVESTMENT OF CAPITAL GAINS MADE IN THE SECOND PLOT I.E. SCHEDULE B WHICH IS NOT APPURTENANT TO THE BUILDING SO CON STRUCTED IS NOT ELIGIBLE FOR EXEMPTION, CAN BE FAVOURABLY ACCEPTED. ON THE CONTRARY, THE EXPRESSION 'LAND APPURTENANT' IN SECTION 54F OF THE ACT WAS HELD TO BE CONSTRUED IN A BROAD AND NON-TECHNICAL SENSE AND IT WAS HELD THAT THE MEANING GIVEN TO THAT EXPRESSION IN OTHER ACTS SHOULD BE IRRELEVANT. THE HON'BLE DELHI HIGH COURT IN THE CAS E OF SUNITA AGGARWAL (284 ITR 20(DELHI)) HAS OBSERVED THAT WHIL E CLAIMING - - ITA 638/MDS/16 18 EXEMPTION UNDER SECTION 54, THE PROPERTY THOUGH PUR CHASED FROM TWO DIFFERENT PERSONS BY VIRTUE OF FOUR DIFFERENT .SALE INSTANCES IN THE SHAPE OF FOUR DIFFERENT PARCELS, CONSTITUTES ONE SI NGLE RESIDENTIAL UNIT OF THE ASSESSEE. 7. IN THE PRESENT CASE, THE ASSESSEE PURCHASED THE WHOLE PROPERTY AS A SINGLE PROPERTY BY AUCTION BY DRT AND IT CANNOT BE SAID THAT ALL THE PROPERTIES ARE DIFFERENT PROPERTIES SO AS TO DENY THE DEDUCTION U/S.54F OF THE ACT. FURTHER, THE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT VS. SMT. V.R.KARPAGAM IN 373 ITR 12 7(MDS.) WHEREIN HELD THAT:- 10. THE ABOVE SAID AMENDMENT TO SECTION 54F OF THE INCOME-TAX ACT, WHICH WILL COME INTO EFFECT ONLY FROM APRIL 1, 2015 , MAKES IT VERY CLEAR THAT THE BENEFIT OF SECTION 54F OF THE INCOME-TAX A CT WILL BE APPLICABLE TO CONSTRUCTED ONE RESIDENTIAL HOUSE IN INDIA AND THAT CLARIFIES THE SITUATION IN THE PRESENT CASE, I.E, POST-AMENDMENT, VIZ., FRO M APRIL 1, 2015, THE BENEFIT OF SECTION 54F WILL BE APPLICABLE TO ONE RE SIDENTIAL HOUSE IN INDIA. PRIOR TO THE SAID AMENDMENT, IT IS CLEAR THAT A RES IDENTIAL HOUSE WOULD INCLUDE MULTIPLE FLATS/RESIDENTIAL UNITS AS IN THE PRESENT CASE WHERE THE ASSESSEE HAS GOT FIVE RESIDENTIAL FLATS. WE MAY ALS O MENTION HERE THAT ALL THE AUTHORITIES BELOW HAVE CLEARLY UNDERST OOD THAT THE AGREEMENT - - ITA 638/MDS/16 19 SIGNED BY THE ASSESSEE WITH M/S. MOUNT HOUSING INFR ASTRUCTURE LTD., IS THAT THE ASSESSEE WILL RECEIVE 43.75 PER CENT. OF T HE BUILT-UP AREA AFTER DEVELOPMENT, WHICH IS CONSTRUED AS ONE BLOCK, WHICH MAY BE ONE OR MORE FLATS. IN THAT VIEW OF THE MATTER WHAT WAS BEF ORE THE ASSESSING OFFICER IS ONLY EQUIVALENT OF 56.25 PER CENT. OF TH E LAND TRANSFERRED, EQUIVALENT TO 43.75 PER CENT. OF THE BUILT-UP AREA RECEIVED BY THE ASSESSEE. THIS BUILT-UP AREA GOT TRANSLATED INTO FI VE FLATS. HENCE, WE ARE OF THE OPINION THAT THE TRANSACTION IN THIS CASE WA S NOT WITH REGARD TO THE NUMBER OF FLATS BUT WITH REGARD TO THE PERCENTAGE O F THE BUILT- UP AREA VIS-A-VIS THE UNDIVIDED SHARE OF LAND. 11. IN SIMILAR CIRCUMSTANCES, THIS COURT, BY ORDER DATED JANUARY 4, 2012, IN T. C. (A.) NO. 656 OF 2005 HELD AS FOLLOWS : 'THE ABOVE PROVISION REFERS TO A RESIDENTIAL HOUSE MEANING THEREBY THAT EVEN IF THERE ARE FOUR DIFFERENT FLATS AND IF IT IS CONSIDERED FOR THE PROPERTY ASSESSED AS ONE UNIT AND ONE DOOR NUMBER IS GIVEN, IT SHOULD BE CONSTRUED AS A RESIDENTIAL UNIT, NAMELY, ONE UNIT. IN THAT SENSE, THE SAID PROVISION IS AVAILABLE TO THE ASSESSEE.' 12. IN THE DECISION REPORTED IN SMT. DR. P. K. VASA NTHI RANGARAJAN [2012] 75 DTR 56, THIS COURT, WHILE DEALING WITH TH E BENEFIT OF EXEMPTION UNDER SECTION 54F, FOLLOWED THE ABOVESAID DECISION OF THIS COURT IN T. C. (A.) NO. 656 OF 2005 AND GRANTED THE BENEFIT TO THE ASSESSEE UNDER SECTION 54F OF THE INCOME-TAX ACT ON THE INVESTMENT MADE IN THE FOUR FLATS. 13. HENCE, THE ABOVESAID DECISIONS OF THIS COURT MA KE IT CLEAR THAT THE PROPERTY SHOULD BE ASSESSED AS ONE UNIT EVEN THOUGH DIFFERENT FLATS ARE AVAILABLE. HERE ALSO, AS PER THE ASSESSMENT ORDER, ALL THE FLATS HAVE ONE DOOR NUMBER, NAMELY, DOOR NO. 29F, RACE COURSE, COI MBATORE. 7.1 SIMILAR VIEW WAS FORTIFIED BY THE JURISDICTIO NAL HIGH COURT IN THE G.CHINNADURAI VS. ITO IN 96 CCH 148 (MAD.). SIMILA R ISSUE CAME FOR CONSIDERATION BEFORE THE MUMBAI TRIBUNAL IN THE CAS E OF ITO VS. P. B. - - ITA 638/MDS/16 20 RODRIQUES IN [1981] 11 TTJ 347 (ITAT[BOM]) WHEREIN HELD THAT:- 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS ADVANC ED BY BOTH THE SIDES. IT WOULD BE BETTER TO SET OUT S. 54 BELOW NE CESSARY FOR THE PROPER APPRECIATION OF ISSUES INVOLVED IN THIS APPE AL: '54(1), WHERE A CAPITAL GAIN ARISES FROM THE TRANSF ER OF A CAPITAL ASSET TO WHICH THE PROVISIONS OF S. 53 ARE NOT APPLICABLE, BEING BUILDINGS OR LANDS APPURTENANT TH ERETO THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD `INCOME FROM HOUSE PROPERTY', WHICH IN THE WHICH YE ARS IMMEDIATELY PRECEDING THE DATE ON WHICH THE TRANSFE R TOOK PLACE, WAS BEING USED BY THE ASSESSEE OR A PARENT O F HIS MAINLY FOR THE PURPOSES OF HIS OWN OR THE PARENT'S OWN RESIDENCE HEREINAFTER IN THIS SECTION REFERRED TO A S THE ORIGINAL ASSET, AND THE ASSESSEE HAS WITHIN A PERIO D OF ONE YEAR BEFORE OR AFTER THAT DATE PURCHASES, OR HAS WI THIN A PERIOD OF TWO YEARS AFTER THAT DATE CONSTRUCTED, TH EN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER T OOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH TH E FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SA Y,'' WE AGREE WITH THE LD. COMMENTATOR RELIED UPON BY TH E ASSESSEE THAT THE USE OF THE WORD 'MAINLY' IN THE SECTION WOULD C ONFER THE BENEFIT OF S. 54 ON THE ASSESSEE IF THE MAJOR PORTION OF TH E BUILDING WAS USED FOR RESIDENTIAL PURPOSES BY HIM OR BY HIS PARE NT. IN THE PRESENT CASE THE COMMR. (A) HAS BROUGHT ON RECORD, AND HIS FINDINGS HAVE NOT BEEN SUCCESSFULLY IMPUGNED BEFORE US, THAT WHIL E THE TOTAL AREA OR THE PLOT SOLD WAS 2146 SQ. YARDS, THE LET OUT ST RUCTURE BUILT IN 1960 OCCUPIED ONLY 108 SQ. YARDS. THUS, THE PROPERT Y SOLD WAS SUBSTANTIALLY SELF OCCUPIED BY THE ASSESSEE AND THE PROVISIONS OF - - ITA 638/MDS/16 21 S. 54 WERE RIGHTLY RELIED UPON BY THE ASSESSEE BEFO RE THE LOWER AUTHORITIES. 7. AS FOR THE CONTENTION OF THE DEPTL. REP. ABOUT T HE MEANING OF 'APPURTENANT THERETO' WE AGREE WITH SHRI V.H. PATIL THAT THE LAND APPURTENANT TO THE BUILDING WOULD NOT ONLY BE THE L AND MARRIED TO THE SUPER-STRUCTURE BUT WOULD INCLUDE THE LAND ADJA CENT TO AND SURROUNDING THE SUPER-STRUCTURES AS MAY BE FOUND NE CESSARY FOR THE BENEFICIAL AND PROPER ENJOYMENT OF THE BUILDINGS. I N OUR OPINION, LANDS APPURTENANT TO THE BUILDINGS WITHIN THE MEANI NG OF S. 54 WOULD BE THOSE ENJOYED WITH AND OCCUPIED WITH THE B UILDINGS IN QUESTION. CONSIDERING THE LOCATION AND THE VARIOUS STRUCTURES ON THE PLOT OF LAND AND HAVING SEEN THE SITE PLAN WE ARE C ONVINCED THAT THE ENTIRE PLOT OF LAND COULD BE TREATED AS LAND APPURT ENANT TO THE BUILDINGS SOLD BY THE ASSESSEE. THE DICTIONARY MEAN ING GIVEN TO US BY THE DEPTL. REP. DOES NOT REALLY BEAR OUT THE CON TENTION OF THE DEPARTMENT. THE EXTRACT FROM THE LAW LEXICON (VENKA TRAMIAH) AS GIVEN TO US BY THE DEPTL. REP. IS GIVEN BELOW : APPURTENANCE : THE WORD 'APPURTENANCE' HAS THE MEANING OF `USUALLY OCCUPIED' AND WOULD INCLUDE A STRUCTURE ERECTED ON A LAND FOR THE PURPOSE OF ITS ENJOYMENT'MOLEND VS. KISSAN 30 ITR (BOM) 250 P 263. THE TERM ALSO SIGNIFIES THINGS BOTH CORPOREAL OR INCORPOREAL BELONGING TO ANOTHER THING AS PRINCIPAL. TOMLIN'S LAW DICTIONARY . PRIMA FACIC IT SUPPORTS NOTHING MORE THAN WHAT IS STRICTLY APPERTA INING TO THE SUBJECT MATTER OF THE DEVISE OR GRANT AND WHICH WOU LD IN TRUTH PASS WITHOUT BEING SPECIALLY MENTIONED. EVANS VS. ANGEL ( 1958) 53 E.R. 874'. - - ITA 638/MDS/16 22 IT WOULD BE CLEAR THEREFROM THAT THE ENTIRE LAND IN CLUDING THE STRUCTURES COULD BE CALLED 'APPURTENANCE' AND IT DO ES NOT FOLLOW AT ALL FROM THE ABOVE DEFINITION OR MEANING THAT THE L AND APPURTENANT TO A BUILDING SHOULD BE RESTRICTED TO THAT MARRIED TO THE SUPERSTRUCTURES. WE ARE, THEREFORE, IN AGREEMENT WI TH THE ORDER OF THE COMMR. (A). 7.2 BEING SO, IN OUR OPINION, THE ASSESSEE SHALL B E GRANTED WITH DEDUCTION U/S.54F OF THE ACT AS THE INVESTMENT IN E NTIRE PROPERTY TO BE CONSIDERED AS A SINGLE RESIDENTIAL UNIT, SINCE T HE CONSIDERATION RECEIVED FROM SALE OF CAPITAL ASSET WAS SO INVESTED . 7.3 IN THE RESULT, THE APPEAL OF REVENUE IS DISMIS SED. ORDER PRONOUNCED ON 1 ST MAY, 2017 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 1 ST MAY, 2017. K S SUNDARAM 9D EFGF / COPY TO: 1 . / APPELLANT 3. H- / CIT(A) 5. FIJ K / DR 2. / RESPONDENT 4. H / CIT 6. J(L / GF