Chalasani Naga Ratna Kumari, Visakhapatnam V. THE ITO, Ward 3(2), Visakhapatnam

ITA 639/VIZ/2013

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9617 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 25-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C.V.S. MURTHY
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Retrospective amendment; Corroborative evidences; Valuation report; Set aside; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 50C; 54F; 2(14); 142(1); 143(2); 13

Judgement Text

ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.639/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) SMT. CHALASANI NAGA RATNA KUMARI, VISAKHAPATNAM VS. ITO, WARD - 3(2), VISAKHAPATNAM [PAN: AJMPR0953L ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI C.V.S. MURTHY, AR / RESPONDENT BY : SHRI M. NARAYANA RAO, DR / DATE OF HEARING : 09.12.2016 / DATE OF PRONOUNCEMENT : 23.12.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE CIT(A), VISAKHAPATNAM DATED 26.8.2013 AND IT PERTAI NS TO THE ASSESSMENT YEAR 2009-10. ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL, DERIVED INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES, FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 29.12.2009 DECLARING TOTAL INCOME OF ` 6,30,160/-. THE CASE HAS BEEN SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY NO TICES U/S 143(2) & 142(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED AS 'THE ACT') WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISH ED THE DETAILS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE ALONG WITH OTHER CO-OWNERS HAD SOLD VA CANT LAND MEASURING 5.89 ACRES SITUATED AT VEMULAVALASA VILLA GE, ANANDAPURAM MANDAL, VISAKHAPATNAM FOR A CONSIDERATION OF 3,40,0 0,000/- IN WHICH THE ASSESSEE HAD 1/3 RD SHARE. THE A.O. FURTHER OBSERVED THAT THE MARKET VALUE OF THE PROPERTY FOR THE PURPOSE OF STAMP DUTY WAS FIXED AT ` 4,12,30,000/-. SINCE, THE ASSESSEE HAS NOT OFFERED CAPITAL GAINS ON THE SAID TRANSACTION, THE A.O. ISSUED A SHOW CAUSE NOTI CE AND ASKED TO EXPLAIN WHY CAPITAL GAINS INCOME WAS NOT OFFERED TO TAX ON SALE OF LAND. 3. IN RESPONSE TO NOTICE, THE ASSESSEE SUBMITTED TH AT LAND SOLD IS AGRICULTURAL LAND WHICH IS SITUATED BEYOND 8 KMS. F ROM THE LOCAL LIMITS OF VISAKHAPATNAM MUNICIPAL CORPORATION AND HENCE THE L AND IS NOT CAPITAL ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 3 ASSETS WITHIN THE MEANING OF SECTION 2(14) OF THE A CT AND NOT LIABLE TO CAPITAL GAIN TAX. IT IS FURTHER SUBMITTED THAT LAN D IS NOT SITUATED WITHIN THE TERRITORIAL JURISDICTION OF ANY MUNICIPALITY OR WITHIN THE SPECIFIED DISTANCE OF 8 KMS. FROM ANY INDIVIDUAL MUNICIPAL LI MITS AND HENCE TREATED AS AGRICULTURAL LANDS AND NOT LIABLE FOR CA PITAL GAINS. HOWEVER INCORPORATED A NOTE IN HER RETURN OF INCOME FURNISH ED FOR THE ASSESSMENT YEAR 2009-10. IT WAS FURTHER SUBMITTED THAT THOUGH, LANDS ARE SITUATED WITHIN 8 KMS. FROM THE LIMITS OF GVMC, NOTIFICATION ISSUED BY THE GOVT. OF A.P. EXTENDING VISAKHAPATNAM MUNICIPAL CORPORATION LIMITS WAS NOTIFIED BY THE GOVERNMENT OF ANDHRA PRADESH ON 21.5.2005 VIDE GOMS NO.937 DATED 21.5.2015, HOWEVER, THE CENTRAL G OVERNMENT HAS NOT NOTIFIED THE EXTENDED LIMITS OF GVMC FOR THE PU RPOSE OF DETERMINATION OF CAPITAL ASSETS WITHIN THE MEANING OF SECTION 2(14) OF THE ACT, THEREFORE, TO DECIDE WHETHER A PARTICULAR LAND IS A CAPITAL ASSET OR NOT, NOTIFIED MUNICIPAL LIMITS HAS TO BE CONSIDE RED, BUT NOT NEWLY NOTIFIED GVMC LIMITS. ALTERNATIVELY, THE ASSESSEE CONTENDED THAT IN CASE THE LANDS ARE CONSIDERED AS CAPITAL ASSETS LIABLE F OR CAPITAL GAINS, SHE HAD INVESTED SALE CONSIDERATION FOR CONSTRUCTION OF RESIDENTIAL HOUSE PROPERTY AND HENCE ELIGIBLE FOR EXEMPTION U/S 54F O F THE ACT. THEREFORE, REQUESTED TO ALLOW EXEMPTION U/S 54F OF THE ACT, FO R AN AMOUNT OF ` ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 4 79,50,000/- FOR WHICH SHE HAD FURNISHED NECESSARY V ALUATION REPORT ALONG WITH BILLS AND VOUCHERS. 4. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE AND ALSO CONSIDERING THE DEFINITION OF CAPITAL ASSET AS DEFINED U/S 2(14) OF THE ACT, HELD THAT THE LANDS SOLD BY THE ASSESSEE A RE NOT AN AGRICULTURAL LANDS AND ALSO SITUATED WITHIN 8 KMS. FROM THE DIST ANCE OF GVMC. THE A.O. FURTHER HELD THAT THOUGH ASSESSEE CLAIMS TO HA VE SOLD AGRICULTURAL LANDS, THE LAND SOLD BY THE ASSESSEE IS ONLY A VACA NT LAND NOT SUITABLE FOR AGRICULTURAL OPERATIONS AND ALSO THERE IS NO AG RICULTURAL OPERATIONS CARRIED OUT FOR PAST SEVERAL YEARS. THEREFORE, THE RE IS NO MEANING IN THE ARGUMENTS OF THE ASSESSEE THAT THE LANDS ARE AGRICU LTURAL LANDS AND NOT LIABLE FOR CAPITAL GAINS. THE A.O. FURTHER HELD TH AT IN SO FAR AS THE ASSESSEES CONTENTION THAT FOR THE PURPOSE OF DETER MINATION OF A CHARACTERISTICS OF LANDS WHETHER THE LANDS ARE AGRI CULTURAL LANDS OR NOT, THE DISTANCE FROM THE NOTIFIED VISAKHAPATNAM MUNICI PAL CORPORATION LIMITS HAS TO BE CONSIDERED, BUT NOT THE NEWLY INCO RPORATED GREATER VISAKHAPATNAM MUNICIPAL CORPORATION LIMITS IS NOT C ORRECT, AS VISAKHAPATNAM MUNICIPAL CORPORATION IS A NOTIFIED M UNICIPAL CORPORATION U/S 2(14) OF THE ACT, FOR THE PURPOSE OF DETERMINAT ION OF WHETHER THE LANDS ARE CAPITAL ASSETS OR NOT VIDE NOTIFICATION N O.9477 DATED 6.1.1994, ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 5 WHICH WAS FURTHER ENHANCED TO GREATER VISAKHAPATNAM MUNICIPAL CORPORATION WITH EXTENDED BOUNDARY OF MUNICIPAL COR PORATION LIMITS BY THE GOVERNMENT OF ANDHRA PRADESH VIDE THEIR NOTIFIC ATION NO. GOMS 937 DATED 21.5.2005. THEREFORE, ANY LANDS SITUATED WIT HIN THE EXTENDED LIMITS OF GVMC ARE COMING WITHIN THE DEFINITION OF CAPITAL ASSETS AS DEFINED U/S 2(14) OF THE ACT AND HENCE LIABLE FOR C APITAL GAINS. SINCE, THE ASSESSEE HAS FAILED TO OFFER ANY CAPITAL GAINS ON TRANSFER OF SUCH LANDS, THE A.O. HELD THAT THE LANDS SOLD BY THE ASS ESSEE ARE CAPITAL ASSETS LIABLE FOR CAPITAL GAIN TAX AND ACCORDINGLY COMPUTED CAPITAL GAINS. IN SO FAR AS EXEMPTION U/S 54F OF THE ACT IS CONCER NED, THE A.O. HELD THAT SINCE THE ASSESSEE IS ALREADY HAVING ONE RESID ENTIAL HOUSE AT VIJAYAWADA AND ALSO THE FACT THAT THE ASSESSEE HAS CONSTRUCTED 3 INDEPENDENT RESIDENTIAL UNITS AT DR.NO.56-49-7/A, S HE IS NOT ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE HAS REITERATED SUBMISSIONS MADE BEFORE THE A.O. THE AS SESSEE FURTHER CONTENDED THAT THE LANDS SOLD BY HER ARE AGRICULTUR AL LANDS SUITABLE FOR AGRICULTURAL OPERATIONS AND ALSO SITUATED BEYOND 8 KMS. FROM THE LIMITS OF VISAKHAPATNAM MUNICIPAL CORPORATION AND HENCE, N OT LIABLE FOR CAPITAL ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 6 GAINS. THE ASSESSEE FURTHER CONTENDED THAT THE A.O . WAS INCORRECT IN CONSIDERING THE EXTENDED LIMITS OF GVMC TO DETERMIN E THE LIMITS FOR THE PURPOSE OF COMPUTATION OF DISTANCE TO DECIDE WHETHE R PARTICULAR LAND IS CAPITAL ASSET OR NOT. BUT, THE FACT IS THAT AS PER THE NOTIFICATION ISSUED BY THE GOVERNMENT OF INDIA, VIDE NOTIFICATION NO.9477 DATED 6.1.1994, ONLY VISAKHAPATNAM MUNICIPAL CORPORATION IS INCLUDED IN THE NOTIFICATION, THEREFORE, THE NEWLY INCORPORATED GREATER VISAKHAPA TNAM MUNICIPAL CORPORATION LIMITS CANNOT BE CONSIDERED TO DETERMIN E THE DISTANCE FOR THE PURPOSE OF DECIDING THE CHARACTERISTICS OF LAND . 6. THE ASSESSEE FURTHER CONTENDED THAT AS REGARDS A PPLICABILITY OF THE PROVISIONS OF SECTION 50C OF THE ACT, THE A.O. WAS ERRED IN ADOPTING VALUE OF THE PROPERTY U/S 50C OF THE ACT, AS ON THE DATE OF REGISTRATION OF THE PROPERTY. BUT, THE FACT IS THAT THE ASSESSE E HAD ENTERED INTO A REGISTERED SALE AGREEMENT IN THE YEAR 2007 AND AS O N THAT DATE, STAMP DUTY VALUE OF THE LAND IS BELOW THE CONSIDERATION R ECEIVED FOR TRANSFER OF THE LAND, THEREFORE, THE GUIDANCE VALUE AS ON THE D ATE OF AGREEMENT TO SELL HAS TO BE CONSIDERED, BUT NOT THE GUIDANCE VAL UE AS ON THE DATE OF REGISTRATION OF SALE DEED. IN SO FAR AS DEDUCTION CLAIMED U/S 54F OF THE ACT, THE ASSESSEE CONTENDED THAT SHE HAD INVESTED S ALE CONSIDERATION FOR THE PURPOSE OF CONSTRUCTION OF RESIDENTIAL HOUSE AN D INVESTED AN AMOUNT ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 7 OF ` 79,50,000/-, THEREFORE, THE A.O. WAS ERRED IN REJE CTING EXEMPTION CLAIMED U/S 54F OF THE ACT. IT WAS FURTHER SUBMITT ED THAT AS PER THE PROVISIONS OF SECTION 54F OF THE ACT, THE ASSESSEE CAN CLAIM EXEMPTION IN RESPECT OF NEW HOUSE, PROVIDED THE ASSESSEE SHOULD NOT OWN MORE THAN ONE RESIDENTIAL HOUSE AS ON THE DATE OF TRANSFER OF ASSET. SINCE THE ASSESSEE IS HAVING ONE RESIDENTIAL HOUSE, SHE CAN C LAIM EXEMPTION U/S 54F OF THE ACT FOR SECOND HOUSE. 7. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE, HELD THAT LANDS SOLD BY THE ASSESSEE ARE NOT AGRICU LTURAL LANDS AND HENCE LIABLE FOR CAPITAL GAINS. THE CIT(A) FURTHER HELD THAT THE ASSESSEE HAS NOT FURNISHED ANY PROOF FOR HAVING CARRIED OUT AGRI CULTURAL OPERATIONS IN THE IMPUGNED LANDS, THEREFORE, OPINED THAT THE LAND S ARE NOT AGRICULTURAL LANDS. THE CIT(A) FURTHER OBSERVED THAT SINCE THE LANDS SOLD BY THE ASSESSEE ARE HELD AS NON-AGRICULTURAL LANDS, THE IS SUE OF WHETHER THE PARTICULAR LAND IS A CAPITAL ASSET OR NOT WITHIN TH E MEANING OF SECTION 2(14) OF THE ACT, BECOMES ACADEMIC. IN SO FAR AS A DOPTION OF VALUE U/S 50C OF THE ACT, FOR THE PURPOSE OF DETERMINATION OF CAPITAL GAINS, THE CIT(A) HELD THAT THE DATE OF TRANSFER OF LAND IS IM PORTANT FOR THE PURPOSE OF DETERMINATION OF VALUE U/S 50C OF THE ACT, BUT N OT THE DATE OF AGREEMENT FOR SALE. AS ON THE DATE OF SALE DEED, T HE GUIDANCE VALUE OF ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 8 THE LAND FOR THE PURPOSE OF PAYMENT OF STAMP DUTY I S MORE THAN THE CONSIDERATION SHOWN IN THE SALE DEED, THEREFORE, TH E A.O. WAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT. IN SO FAR AS DISALLOWANCE OF EXPENDITURE OF TRANSFER, THE CIT(A) HELD THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCES IN SUPPORT OF EXPENSES OF TRANSFER, THEREFORE, UPHELD THE DISALLOWANCE OF EXP ENSES BY THE A.O. SIMILARLY, AS REGARDS EXEMPTION U/S 54F OF THE ACT, THE CIT(A) HELD THAT THE ASSESSEE HAS CONSTRUCTED ONLY A SINGLE RESIDENT IAL HOUSE THOUGH IT MAY HAVE 3 FLOORS WITH INDEPENDENT RESIDENTIAL UNIT IN THEM. THE SECTION 54F OF THE ACT USES THE EXPRESSION A RESI DENTIAL HOUSE AND IN THE FACTS GIVEN ABOVE, THE ASSESSEE HAS INVESTED IN A RESIDENTIAL HOUSE AND WOULD BE ENTITLED TO EXEMPTION U/S 54F OF THE A CT AND ACCORDINGLY DIRECTED THE A.O. TO ALLOW EXEMPTION CLAIMED BY THE ASSESSEE AFTER VERIFYING THE CLAIM REGARDING THE QUANTUM OF INVEST MENT IN THE RESIDENTIAL HOUSE. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS WHETHER THE LANDS SOLD BY THE ASSESSEE ARE AGRICULTURAL LANDS O R CAPITAL ASSETS LIABLE FOR CAPITAL GAINS. THE FACT RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAS SOLD A LAND FOR A CONSIDERATION OF ` 3,40,00,000/- BY ENTERING INTO A SALE ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 9 AGREEMENT ON 15.12.2007. THE SAID LAND WAS TRANSFE RRED BY A REGISTERED SALE DEED ON 1.9.2008 FOR A CONSIDERATIO N OF ` 3,40,00,000/-, WHEREAS THE MARKET VALUE OF THE PROPERTY FOR THE PU RPOSE OF STAMP DUTY WAS FIXED AT ` 4,12,30,000/-. THE ASSESSEE CLAIMS THAT THE IMPUG NED LAND IS AN AGRICULTURAL LAND SITUATED BEYOND 8 KMS. FROM THE LIMITS OF VISAKHAPATNAM MUNICIPAL CORPORATION AND HENCE NOT L IABLE FOR CAPITAL GAINS. THE A.O. OBSERVED THAT THE IMPUGNED LANDS A RE NOT AGRICULTURAL LANDS AND MERELY A VACANT LAND NOT USED FOR AGRICUL TURAL OPERATIONS. THE A.O. FURTHER OBSERVED THAT THE LANDS ARE SITUATED W ITHIN 8 KMS. FROM THE LIMITS OF GVMC AND HENCE LIABLE FOR CAPITAL GAINS. 9. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATER IALS ON RECORD, WE FIND THAT THE A.O. COMPUTED CAPITAL GAINS ON TRA NSFER OF LANDS FOR THE REASON THAT THE LANDS SOLD BY THE ASSESSEE ARE NOT AGRICULTURAL LANDS AND LIABLE FOR CAPITAL GAINS. THE A.O. FURTHER OBSERVE D THAT THE LANDS ARE SITUATED WITHIN 8 KMS. FROM THE LIMITS OF GVMC AND HENCE, PREVIOUS LIMITS OF VISAKHAPATNAM MUNICIPAL CORPORATION IS IR RELEVANT TO DETERMINE THE DISTANCE. SINCE, AS ON THE DATE OF TRANSFER O F LANDS, THE EXTENDED LIMITS OF GVMC HAS BEEN NOTIFIED BY THE GOVT. OF AN DHRA PRADESH, THE DISTANCE FROM THE EXTENDED LIMITS OF GVMC HAS TO BE CONSIDERED TO DETERMINE WHETHER THE PARTICULAR LAND IS SITUATED W ITHIN 8 KMS. FROM ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 10 SUCH DISTANCE OR NOT. THE ASSESSEE CLAIMS THAT THE LANDS ARE AGRICULTURAL LANDS AND AGRICULTURAL OPERATIONS WERE CARRIED OUT TILL 2007 AND AFTER WHICH THERE WERE DISPUTES AND AS A RESULT AGRICULTU RAL OPERATIONS COULD NOT BE CARRIED OUT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE IMPUGNED LANDS ARE CLASSIFIED A S AGRICULTURAL LANDS IN THE REVENUE RECORDS OF THE STATE GOVERNMENT. THOUG H THERE IS NO AGRICULTURAL OPERATION CARRIED OUT BY THE ASSESSEE, THE LANDS HELD BY THE ASSESSEE ARE CLASSIFIED AS AGRICULTURAL LANDS IN TH E REVENUE RECORDS AND ALSO SUITABLE FOR AGRICULTURAL OPERATIONS. THEREFO RE, IMPUGNED LANDS CANNOT BE HELD AS NON-AGRICULTURAL LANDS, JUST BECA USE THE ASSESSEE HAS NOT CARRIED OUT ANY AGRICULTURAL OPERATIONS. ONCE, THE LANDS ARE CLASSIFIED AS AGRICULTURAL LANDS IN THE REVENUE REC ORDS AND SUITABLE FOR AGRICULTURAL OPERATIONS, WHETHER OR NOT AGRICULTURA L OPERATIONS CARRIED OUT BY THE ASSESSEE, THE CHARACTERISTICS OF LAND DO ES NOT CHANGE FROM AGRICULTURAL LAND TO NON-AGRICULTURAL LANDS. THERE FORE, WE ARE OF THE VIEW THAT THE LOWER AUTHORITIES WERE ERRED IN HOLDING TH E IMPUGNED LANDS ARE NON AGRICULTURAL LANDS. 10. HAVING SAID, LET US EXAMINE WHETHER THE LANDS S OLD BY THE ASSESSEE ARE CAPITAL ASSETS WITHIN THE MEANING OF S ECTION 2(14) OF THE ACT OR AGRICULTURAL LANDS NOT LIABLE FOR CAPITAL GA IN TAX. ADMITTEDLY, THE ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 11 LANDS SOLD BY THE ASSESSEE ARE WITHIN 8 KMS. FROM T HE DISTANCE OF GVMC, HOWEVER, THE LANDS ARE BEYOND 8 KMS. FROM THE LIMIT S OF VISAKHAPATNAM MUNICIPAL CORPORATION. IT IS THE CONTENTION OF THE ASSESSEE THAT FOR THE PURPOSE OF DETERMINATION OF DISTANCE, NOTIFIED MUNI CIPAL LIMITS OF VISAKHAPATNAM MUNICIPAL CORPORATION HAS TO BE CONSI DERED, BUT NOT NEWLY INCORPORATED EXTENDED LIMITS OF GVMC. WE DO NOT FIND ANY MERITS IN THE ARGUMENTS OF THE ASSESSEE, FOR THE REASON TH AT THE VISAKHAPATNAM MUNICIPAL CORPORATION IS A NOTIFIED M UNICIPALITY VIDE NOTIFICATION NO.9477 DATED 6.1.1994. AS PER SAID N OTIFICATION, ANY LAND SITUATED WITHIN 8 KMS. FROM THE DISTANCE OF VISAKHA PATNAM MUNICIPAL CORPORATION IS AGRICULTURAL LAND COMING WITHIN THE DEFINITION OF CAPITAL ASSET. WE FURTHER OBSERVED THAT THE VISAKHAPATNAM M UNICIPAL CORPORATION HAS BEEN UPGRADED TO GREATER VISAKHAPAT NAM MUNICIPAL CORPORATION BY THE STATE GOVERNMENT OF ANDHRA PRADE SH, VIDE NOTIFICATION NO.937 DATED 21.5.2005 WITH EXTENDED B OUNDARY. SINCE, THE LANDS SOLD BY THE ASSESSEE ARE SITUATED WITHIN 8 KM S DISTANCE FROM THE NEWLY INCORPORATED BOUNDARY OF GVMC, THE DISTANCE S HOULD BE MEASURED FROM THE LIMITS OF GVMC TO DETERMINE WHETHER A PART ICULAR LAND IS A CAPITAL ASSET OR NOT FOR THE PURPOSE OF SECTION 2(1 4) OF THE ACT. IN THE PRESENT CASE, IT IS NO DOUBT LANDS ARE SITUATED WIT HIN 8 KMS. FROM THE LIMITS OF GVMC. THEREFORE, WE ARE OF THE VIEW THAT THE LANDS SOLD BY THE ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 12 ASSESSEE ARE CAPITAL ASSETS WITHIN THE MEANING OF S ECTION 2(14) OF THE ACT AND LIABLE FOR CAPITAL GAINS. THE CIT(A) AFTER CONSIDERING THE RELEVANT FACTS, HAS RIGHTLY HELD THAT THE LANDS ARE CAPITAL ASSETS AND LIABLE FOR CAPITAL GAIN TAX. THEREFORE, WE UPHOLD THE CIT(A) ORDER AND REJECT GROUND RAISED BY THE ASSESSEE. 11. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADOPTION OF VALUE U/S 50C OF THE ACT, FOR THE PURPOSE OF DETERM INATION OF CAPITAL GAINS. THE A.O. ADOPTED MARKET VALUE OF THE PROPER TY U/S 50C OF THE ACT AS ON THE DATE OF SALE DEED FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS. THE CONTENTION OF THE ASSESSEE IS THAT STAM P DUTY VALUE AS ON THE DATE OF AGREEMENT TO SALE HAS TO BE CONSIDERED, BUT NOT THE STAMP DUTY VALUE AS ON THE DATE OF SALE DEED. WE FIND FOR CE IN THE ARGUMENTS OF THE ASSESSEE, FOR THE REASON THAT THE ASSESSEE H AS SOLD THE IMPUGNED LANDS BY WAY OF REGISTERED SALE AGREEMENT DATED 15. 12.2007 FOR A CONSIDERATION OF ` 3,40,00,000/- AND RECEIVED AN ADVANCE OF ` 2,52,00,000/-. AS ON THE DATE OF AGREEMENT, THE MA RKET VALUE OF THE PROPERTY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY I S LESS THAN THE CONSIDERATION SHOWN IN THE SALE AGREEMENT. THE SAI D PROPERTY HAS BEEN CONVEYED THROUGH A REGISTERED SALE DEED ON 1.9.2008 FOR A CONSIDERATION OF ` 3,40,00,000/-, WHEREAS THE STAMP DUTY VALUATION OF THE PROPERTY ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 13 WAS FIXED AT ` 4,12,30,000/-. THE A.O. ADOPTED STAMP DUTY VALUE OF THE PROPERTY AS ON THE DATE OF SALE DEED FOR THE PURPOS E OF SECTION 50C OF THE ACT, TO COMPUTE THE DEEMED CONSIDERATION FOR TH E PURPOSE OF CAPITAL GAINS. IT IS THE CONTENTION OF THE ASSESSEE THAT M ARKET VALUE AS ON THE DATE OF AGREEMENT TO SALE HAS TO BE CONSIDERED, BUT NOT AS ON THE DATE OF SALE DEED FOR THE PURPOSE OF DETERMINATION OF DE EMED CONSIDERATION TO COMPUTE CAPITAL GAINS. 12. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIALS ON RECORD, WE FIND THAT THE A.O. HAS ADOPTED STAMP DUTY VALUE OF THE PROPERTY AS ON THE DATE OF SALE DEED. THE FACTS RELATING TO TH E MARKET VALUE AS ON THE DATE OF AGREEMENT TO SALE AND AS ON THE DATE OF SALE DEED IS NOT DISPUTED. THE ONLY DISPUTE IS WHETHER THE STAMP DU TY VALUE AS ON THE DATE OF AGREEMENT TO SALE OR SALE DEED TO BE CONSID ERED FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. THE PURPOSE OF INT RODUCING SECTION 50C OF THE ACT WAS TO COUNTER SUPPRESSION OF SALE CONSI DERATION OF SALE OF IMMOVABLE PROPERTIES. BEFORE INSERTION OF SECTION 50C OF THE ACT TO THE STATUTE, THERE ARE LOT OF LITIGATIONS AS TO CONSIDE RATION SHOWN IN DOCUMENT CONVEYING TITLE AND PAYMENT OF STAMP DUTY. TO OVERCOME THE LITIGATIONS, THE PROVISION OF SECTION 50C OF THE AC T HAS BEEN INSERTED TO THE STATUTE W.E.F. 1.6.2003 WHEREIN IT IS MADE MAND ATORY TO ADOPT VALUE ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 14 U/S 50C OF THE ACT FOR THE PURPOSE OF DETERMINATION OF CONSIDERATION. A PROVISO TO SECTION 50C OF THE ACT HAS BEEN INSERTED BY THE FINANCE ACT, 2016 W.E.F. 1.4.2007 TO RESOLVE THE GENUINE AND INT ENDED HARDSHIP, IN THE CASE IN WHICH THE DATE OF AGREEMENT TO SALE IS PRIOR TO THE DATE OF SALE AND MARKET VALUE OF THE PROPERTY AS ON THE DAT E OF AGREEMENT TO SALE AND DATE OF SALE DEED IS DIFFERENT. THE SAID PROVISO TO SECTION 50C OF THE ACT HAS BEEN EXAMINED BY THE COORDINATE BENC H OF ITAT, AHMEDABAD BENCH IN THE CASE OF DHARMA SIBAI SONANI VS. DCIT IN ITA NO.1237/AHD/2013 DATED 30.09.2016 AND HELD THAT THE PROVISO TO SECTION 50C OF THE ACT INSERTED BY THE FINANCE ACT, 2016 W.E.F. 1.4.2007 IS CURATIVE IN NATURE AND INTENDED TO REMOVE AN UND UE HARDSHIP TO THE ASSESSEE AND ACCORDINGLY GIVEN RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2003 I.E. THE DATE EFFECTIVE FROM WHICH SECTION 50C OF T HE ACT WAS INTRODUCED. ACCORDINGLY, AS PER THE PROVISO, THE STAMP DUTY VAL UE OF THE PROPERTY ON THE DATE OF EXECUTION OF THE AGREEMENT TO SALE SHOU LD BE ADOPTED INSTEAD OF VALUE ON THE DATE OF EXECUTION OF SALE D EED. 13. IN THE PRESENT CASE, ON PERUSAL OF THE FACTS AV AILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS ENTERED INTO A SALE AGRE EMENT IN THE YEAR 2007 AND AS ON THAT DATE, THE STAMP DUTY VALUE OF T HE PROPERTY WAS LESS THAN SALE CONSIDERATION AGREED TO BE PAID BETWEEN T HE PARTIES. ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 15 ALTHOUGH, STAMP DUTY VALUE OF THE PROPERTY HAS BEEN CHANGED AS ON THE DATE OF SALE DEED, FOR THE PURPOSE OF DETERMINATION OF DEEMED CONSIDERATION U/S 50C OF THE ACT, STAMP DUTY VALUE OF THE PROPERTY AS ON THE DATE OF EXECUTION OF AGREEMENT TO SALE SHOULD B E ADOPTED, INSTEAD OF VALUE ON THE DATE OF EXECUTION OF SALE DEED. TH EREFORE, WE ARE OF THE VIEW THAT THE A.O. WAS ERRED IN ADOPTING VALUE OF T HE PROPERTY AS ON THE DATE OF SALE DEED TO DETERMINE DEEMED CONSIDERATION U/S 50C OF THE ACT. HENCE, WE DIRECT THE A.O. TO ADOPT VALUE OF THE PRO PERTY AS ON THE DATE OF AGREEMENT TO SALE FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN U/S 50C OF THE ACT. 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS DISALLOWANCE OF EXPENDITURE OF TRANSFER. THE ASSESSEE HAS CLAIM ED AN EXPENDITURE OF ` 4,20,000/- BEING LITIGATION EXPENSES AND DEVELOPME NT EXPENSES WHILE COMPUTING THE CAPITAL GAINS. THE ASSESSEE CONTENDE D THAT SHE HAD INCURRED VARIOUS LEGAL EXPENSES FROM 1995, WHICH SH OULD BE CONSIDERED FOR DEDUCTION. THE A.O. OBSERVED THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCES IN SUPPORT OF EXPENSES ON TRA NSFER, THEREFORE, DISALLOWED ENTIRE EXPENDITURE OF TRANSFER FOR WANT OF PROPER SUPPORTING EVIDENCES. WE DO NOT FIND ANY MERITS IN THE FINDING S OF THE A.O. FOR THE REASON THAT THOUGH ASSESSEE NEED TO SUBSTANTIATE EX PENDITURE WITH ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 16 NECESSARY EVIDENCES, THE POSSIBILITY OF CERTAIN EXP ENDITURE ON TRANSFER CANNOT BE RULED OUT. THEREFORE, CONSIDERING THE OV ERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT CERTAIN EXPENDITURE BEING LITIGATION EXPENSES AND DEVELOPMENT EXPENSES SHOULD BE ALLOWED WHILE COMPUTING THE CAPITAL GAINS. HENCE, WE DIREC T THE A.O. TO ALLOW 50% OF THE EXPENDITURE CLAIMED UNDER THE HEAD LITIG ATION EXPENSES AND DEVELOPMENT EXPENSES. 15. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS REJECTION OF EXEMPTION CLAIMED U/S 54F OF THE ACT. THE ASSESSEE HAS CLAIMED EXEMPTION OF ` 79,50,000/- U/S 54F OF THE ACT, TOWARDS RE-INVESTM ENT OF SALE CONSIDERATION FOR CONSTRUCTION OF RESIDENTIAL HOUSE PROPERTY. THE ASSESSEE HAS FILED NECESSARY EVIDENCES IN THE FORM OF VALUATION REPORT AND BILLS AND VOUCHERS TO SUBSTANTIATE THE CLAIM. THE A.O. OBSERVED THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM EXEMPTIO N U/S 54F OF THE ACT, BECAUSE AS ON THE DATE OF TRANSFER OF ASSET, SHE HA D ONE RESIDENTIAL HOUSE AND ALSO CONSTRUCTED THREE RESIDENTIAL UNITS IN THE NEW PROPERTY, THEREFORE, OPINED THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM EXEMPTION. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAILS F ILED BY THE ASSESSEE AND ALSO ANALYSIS OF THE PROVISIONS OF SECTION 54F OF THE ACT, HELD THAT THE EXPRESSION A RESIDENTIAL HOUSE USED IN THE SE CTION 54F OF THE ACT TO ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 17 MEAN A SINGLE RESIDENTIAL HOUSE EVEN THOUGH, THER E ARE MORE THAN ONE INDEPENDENT RESIDENTIAL UNIT IN THE HOUSE AND ACCOR DINGLY, DIRECTED THE A.O. TO ALLOW THE EXEMPTION AFTER VERIFYING THE CLA IM REGARDING QUANTUM OF INVESTMENT IN THE RESIDENTIAL HOUSE. THE RELEVA NT PORTION OF THE CIT(A) ORDER IS EXTRACTED BELOW. IN THIS GROUND, THE APPELLANT HAS CHALLENGED THE A O'S ACTION IN DENYING THE CLAIM OF EXEMPTION U/S 54F. IT WAS SUBM ITTED THAT THE APPELLANT HAD INVESTED AN AMOUNT OF 79.5 LAKHS IN C ONSTRUCTING A HOUSE PROPERTY AT NO.50-49-7/A, PLOT NO.112, P&T COLONY, SEETHAMMADHARA BY UTILIZING THE SALE PROCEEDS. THE AO HAD REJECTED T HE CLAIM OF DEDUCTION ON THE GROUND THAT THE APPELLANT HAD CONSTRUCTED BUILD ING CONSISTING THREE RESIDENTIAL UNITS FIRST, SECOND AND THIRD FLOORS, AND TOOK THE VIEW THAT AS THREE RESIDENTIAL UNITS WERE CONSTRUCTED THE ASSESS EE WOULD NOT BE ENTITLED TO DEDUCTION EVEN FOR ONE RESIDENTIAL HOUS E. THE AR CONTENDED THAT ONLY ONE BUILDING WAS CONSTRUCTED WHICH COMPRI SED THREE FLOORS, AND THAT THE AO IS NOT JUSTIFIED IN TREATING IT AS THRE E RESIDENTIAL UNITS. THE AR ALSO RELIED ON THE DECISION OF HONBLE HIGH COURT O F DELHI IN THE CASE OF CIT VS. GITA DUGGAL. I HAVE CONSIDERED THE SUBMISS IONS MADE AND FIND MERITS IN THE SAME. IN MY VIEW THE APPELLANT HAS CO NSTRUCTED ONLY A SINGLE RESIDENTIAL HOUSE, THOUGH IT MAY HAVE THREE FLOORS WITH INDEPENDENT RESIDENTIAL UNIT IN THEM. THE SECTION 54F OF THE A CT USES THE EXPRESSION A RESIDENTIAL HOUSE, AND IN THE FACTS GIVEN ABOVE TH E APPELLANT HAD INVESTED IN A RESIDENTIAL HOUSE AND WOULD BE ENTITLED TO EXE MPTION U/S 54F. THE AO IS DIRECTED TO ALLOW DEDUCTION U/S 54F, HOWEVER AFTER VERIFYING THE CLAIM REGARDING THE QUANTUM OF INVESTMENT IN THE RE SIDENTIAL HOUSE. ACCORDINGLY, THIS GROUND IS ALLOWED IN FAVOUR OF TH E APPELLANT. 16. THE LD. A.R. SUBMITTED THAT THOUGH, THE CIT(A) DIRECTED THE A.O. TO ALLOW EXEMPTION CLAIMED U/S 54F OF THE ACT, THE A.O. IN THE CONSEQUENTIAL ASSESSMENT PROCEEDINGS HAS ALLOWED AN AMOUNT OF ` 63,83,000/- AS AGAINST THE CLAIM MADE BY THE ASSESS EE OF ` 79,50,000/-. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS PR ODUCED A VALUATION REPORT, WHEREIN THE VALUE OF THE PROPERTY HAS BEEN DETERMINED AT ` ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 18 75,20,000/-, THEREFORE REQUESTED TO CONSIDER THE VA LUE OF THE PROPERTY AS DETERMINED BY THE VALUER. WE FIND FORCE IN THE A RGUMENTS OF THE ASSESSEE, FOR THE REASON THAT THE ASSESSEE HAS FURN ISHED A COPY OF VALUATION REPORT IN SUPPORT OF COST OF CONSTRUCTION OF THE PROPERTY, WHEREIN REGISTERED VALUER HAS DETERMINED THE COST O F CONSTRUCTION OF ` 75,20,000/-. THOUGH THE A.O. HAS ALLOWED EXEMPTION OF ` 63,83,000/- IN THE CONSEQUENTIAL PROCEEDINGS, THE A.O. HAS NOT GIVEN ANY REASONS FOR NOT CONSIDERING THE EVIDENCES FILED BY THE ASSESSEE . THEREFORE, WE SET ASIDE THE ISSUE TO THE FILE OF THE A.O. AND DIRECT THE A.O. TO EXAMINE THE EVIDENCES FILED BY THE ASSESSEE AND ALLOW EXEMPTION ACCORDINGLY. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23 RD DEC16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 23.12.2016 VG/SPS ITA NO639/VIZAG/2013 SMT. CHALASANI NAGA RATHNAKUMARI, VSKP 19 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SMT. CHALASANI NAGA RATNA KUMARI , DR.NO.50-49-7/A, PLOT NO.112, P&T COLONY, VISAKHAPATNAM 2. / THE RESPONDENT THE ITO, WARD-3(2), VISAKHAPATN AM 3. + / THE CIT, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM