Mrs. Bharati Pawar, Pune V. Asst. CIT, Circle-7, Pune

ITA 656/PUN/2013

• Counselvise Citation: 65624514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS S PRAVINA
• Keywords: Capital asset; Business income
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 656 / P N/ 20 1 3 ASSESSMENT YEAR : 2009 - 10 MRS. BHARATI PAWAR, S. NO. 73, OFF. BANER ROAD, J.P. SHROFF MARG, BANER, PUNE VS. ASSTT. COMMISSIONER OF INCOME - T AX , CIRCLE 7, PUNE (APPELLANT) (RESPONDENT) PAN NO. AAUPP9274B APPELLANT BY: SHRI C.H. NANIWADEKAR RESPONDENT BY: MRS. S. PRAVINA DATE OF HEARING : 2 5 - 06 - 2014 DATE OF PRONOUNCEMENT : 30 - 0 6 - 2014 ORDER PER R.S . PADVEKAR , JM : - IN T HIS APPEAL , THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER O F THE LD. CIT(A) - III, PUNE DATED 3 0 - 01 - 2013 FOR THE A.Y. 2009 - 10. THE ASSESSEE HAS TAKEN THE MULTIPLE GROUNDS BUT TH E SOLITARY ISSUE WHICH ARISES FOR OUR CONSIDERATION IS WHETHER THE COST OF PLOT AT RS.73,79,200/ - IS TO BE INCLUDED FOR COMPUTING THE DEDUCTION U/S. 54F OF THE INCOME - TAX ACT ? 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS A N INDIVIDUAL AND FILED THE RETURN OF INCOME FOR THE A.Y. 2009 - 10 ON 31 - 07 - 2009 DECLARING TOTAL INCOME OF RS.19,00,62,350/ - . THE ASSESSEE S CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT. THE ASSESSING O FFICER HAS OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD 19,929 SHARES OF AJAY METACHEM PVT. LTD. TO ONE GERMAN NATIONAL FOR RS.22,50,12,437/ - ON WHICH THE ASSESSEE HAS DECLARED THE LONG TERM CAPITAL GAIN OF RS.21,48,68,365/ - AND AGAINST THE SAID LONG TERM CAPITAL GAIN THE ASSESSEE HAS CLAIMED THE DEDUCTION U/S. 54F TO THE 2 ITA NO. 6 56/PN/2013, MRS. BHARATI PAWAR, PUNE EXTENT OF RS.2,46,99,911/ - . THE ASSESSING OFFICER EXAMINED THE CLAIM OF DEDUCTION OF THE ASSESSEE MADE U/S. 54F OF THE ACT . I T WAS FOUND THAT THE ASSESSEE HAS CONSTRUCTED THE RESIDENTIAL BUNGALOW ON PLOT OF LAND WHICH WAS PURCHASED BY THE ASSESSEE MORE THAN ONE YEAR BEFORE THE DATE OF SALE OF SHARES. THE ASSESSING OFFICER WAS OF THE OPINION THAT THERE WAS NO COMPLIANCE OF ONE OF THE CONDITION S U/S. 54F AND HE, THEREFORE, HELD THAT TO THE EXTENT OF THE COST OF SAID PLOT NO DEDUCTION CAN BE MADE U/S. 54F. I T IS PERTINENT TO NOTE HERE THAT THE ASSESSING OFFICER TREATED THE TRANSACTIONS OF THE SALE OF THE SHARES AS A BUSINESS INCOME BUT THE LD. CIT(A) ALLOWED THE CONTENTION OF THE ASSESSEE THAT THE GAINS/PROFITS ON THE SALE OF 19,929 SHARES OF AJAY METACHEM PVT. LTD. IS TO BE ASSESSED AS LONG TERM CAPITAL GAIN. THE LD. CIT(A) DID NOT GIVE THE RELIEF TO THE ASSESSEE IN RESPECT OF THE CLAIM THAT THE COST OF LAND ON WHICH THE ASSESSEE HAS CONSTRUCTED THE RESIDENTIAL HOUSE CAN BE CONSIDERED FOR THE PURPOSE OF CLAIMING THE DEDUCTION/EXEMPTION U/S. 54F OF THE ACT. 3. WE MAKE IT CLEAR THAT IT WAS NOT BROUGHT TO OUR NOTICE THAT THE REVENUE HAS FILED ANY APPEAL CHALLENGING THE FINDING OF THE LD. CIT(A) THAT THE GAIN ON THE SALE OF THE SHARES OF AJAY METACHEM PVT. LTD. IS TO BE ASSESSED AS A LONG TERM CAPITAL GAIN AS AGAINST THE BUSINESS INCOME AS HELD BY THE ASSESSING OFFICER. WE ARE CONCERNED WITH THE LIMITED CONTROVERSY IN RESPECT OF THE COST OF LAND WHICH WAS ALSO CONSIDERED BY THE ASSESSEE FOR CLAIMING DEDUCTION U/S. 54F OF THE ACT. AS PER THE FACTS ON RECORD AND ALSO NOT DISPUTED THAT THE ASSESSEE HAD PURCHASED THE PLOT OF LAND ON 05 - 12 - 2004 WHICH WAS MUCH MORE THAN O NE YEAR BEFORE THE DATE OF SALE OF SHARES AND THE ASSESSING OFFICER, THEREFORE, HELD THAT TO THE EXTENT OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE COST OF THE LAND, THE SAID COST CANNOT BE CONSIDERED FOR THE PURPOSE OF CLAIMING THE DEDUCTION U/S. 54F O F THE ACT. NOW THE ASSESSEE HAS CHALLENGED THE FINDING OF THE LD. CIT(A) BEFORE US. 3 ITA NO. 6 56/PN/2013, MRS. BHARATI PAWAR, PUNE 4. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL IS FAIR TO SUBMIT THAT IN THE CASE OF ANOTHER CO - OWNER , ON THE IDENTICAL SET OF FACTS THE TRIBUNAL HAS DECIDED THE ISSUE AG AINST THE ASSESSEE. THE LD. COUNSEL FILED THE COPY OF THE TRIBUNAL DECISION IN THE CASE OF MRS. MRUNALINI PAWAR, PUNE VS. ADDL. CIT, RANGE - 7, PUNE BEING ITA NO. 657/PN/2013 ORDER DATED 26 - 05 - 2014 WHICH IS PLACED ON RECORD. 5. IN THE CASE OF ANOTHER CO - OW NER OF THE PLOT OF MRS. MRUNALINI PAWAR, PUNE (SUPRA) ON THE IDENTICAL SET OF FACTS THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE LD. CIT(A). THE OPERATIVE PART OF THE REASONS AND FINDINGS OF THE TRIBUNAL ARE AS UNDER: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE FACTS ARE NOT IN DISPUTE IN THIS CASE IN RESPECT OF THE DATE OF ACQUISITION OF THE PLOT OF LAND. THE LIMITED ISSUE WHICH WE HAVE TO EXAMINE IS EVEN IF THE ASSESSEE HAS ACQUIRED THE PLOT OF LAND BEYOND THE TIME LIMIT PRESCRIBED U/S. 54F OF THE ACT, WHETHER THE ASSESSEE CAN CLAIM THE BENEFIT U/S. 54F. THE HEAVY RELIANCE PLACED BY THE LD. COUNSEL IS ON THE CBDT CIRCULAR NO. 667 DATED 18 - 10 - 1993 WHICH IS REPRODUCED HERE - IN - UNDER: CIRCULAR: NO. 667, DATED 18 - 10 - 1993 . 431. WHETHER, IN CASES WHERE THE RESIDENTIAL HOUSE IS CONSTRUCTED WITHIN THE SPECIFIED PERIOD, THE COST OF SUCH RESIDENTIAL HOUSE CAN BE TAKEN TO INCLUDE THE COST OF THE PLOT ALSO 1. SECTIONS 54 AND 54F PROVIDE FOR A DEDUCTION IN CASES WHERE AN ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER OF A CAPITAL ASSET TAKES PLACE, PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE. THE QUANTUM OF DEDUCTION IS ITSELF DEPENDENT UPON THE COST OF SUCH NEW ASSET. IT HAS BEEN REPRESENTED TO THE BOARD THAT THE COST OF CONSTRUCTION OF THE RESIDENTIAL HOUSE SHOULD BE TAKEN TO INCLUDE THE COST OF THE PLOT AS, IN A SITUATION OF PURCHASE OF ANY HOUSE PROPERTY, THE CONSIDERATION P AID GENERALLY INCLUDES THE CONSIDERATION FOR THE PLOT ALSO. 4 ITA NO. 6 56/PN/2013, MRS. BHARATI PAWAR, PUNE 2. THE BOARD HAS EXAMINED THE ISSUE WHETHER, IN CASES WHERE THE RESIDENTIAL HOUSE IS CONSTRUCTED WITHIN THE SPECIFIED PERIOD, THE COST OF SUCH RESIDENTIAL HOUSE CAN BE TAKEN TO INCLUDE THE COST O F THE PLOT ALSO. THE BOARD ARE OF THE VIEW THAT THE COST OF THE LAND IS AN INTEGRAL PART OF THE COST OF THE RESIDENTIAL HOUSE, WHETHER PURCHASED OR BUILT. ACCORDINGLY, IF THE AMOUNT OF CAPITAL GAIN FOR THE PURPOSES OF SECTION 54, AND THE NET CONSIDERATION FOR THE PURPOSES OF SECTION 54F, IS APPROPRIATED TOWARDS PURCHASE OF A PLOT AND ALSO TOWARDS CONSTRUCTION OF A RESIDENTIAL 'HOUSE THEREON, THE AGGREGATE COST SHOULD BE CONSIDERED FOR DETERMINING THE QUANTUM OF DEDUCTION UNDER SECTION 54/54F, PROVIDED THAT THE ACQUISITION OF PLOT AND ALSO THE CONSTRUCTION THEREON, ARE COMPLETED WITHIN THE PERIOD SPECIFIED IN THESE SECTIONS. 6. THERE IS NO DISPUTE ABOUT THE PROPOSITION THAT AS PER THE PROVISIONS OF SEC. 54F, THE ASSESSEE CAN CLAIM THE DEDUCTION U/S. 54F( 1) IF HE IS AN INDIVIDUAL OR HUF IN RESPECT OF CAPITAL GAIN ARISING FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSET, THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER OF A CAPITAL ASSET TAKES PLACE, PUR CHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE THEN AS PROVIDED IN SEC. 54F(1), THE ASSESSEE CAN CLAIM THE DEDUCTION. 7. EARLIER THERE WAS A DISPUTE IN CASE IF THE ASSESSEE HAS CONSTRUCTED A RESIDENTIAL HO USE THEN WHETHER THE COST OF LAND CAN BE TREATED AS A PART OF COST OF NEW ASSET FOR THE PURPOSE OF SEC. 54F(1) OF THE ACT. THE CBDT MADE THE CLARIFICATION VIDE CIRCULAR NO. 663 DATED 18 - 10 - 1993. AS PER THE CBDT CIRCULAR THE COST OF THE LAND IS AN INTEGRA L PART OF THE COST OF THE RESIDENTIAL HOUSE, WHETHER PURCHASED OR BUILT BUT THE ACQUISITION OF THE PLOT AND ALSO THE CONSTRUCTION THEREOF HAVE BEEN COMPLETED WITHIN THE PERIOD SPECIFIED IN SEC. 54F(1). EVEN IF THE CBDT TAKEN A LIBERAL VIEW TO THE EXTENT O F THE COST OF THE LAND BUT AT THE SAME TIME THE CBDT HAS EXPLAINED IN CLEAR TERMS THAT THE TIME LIMIT PROVIDED U/S. 54F(1) FOR THE PURCHASE OR CONSTRUCTION OF THE RESIDENTIAL HOUSE IS TO BE MAINTAINED. 8. THE LD. COUNSEL RELIED ON THE DECISION IN THE CAS E OF CIT VS. J.R. SUBRAMANYA BHAT 165 ITR 571 (KAR). IN THE SAID CASE THE ASSESSEE HAS STARTED THE CONSTRUCTION PRIOR TO THE SALE OF OLD BUILDING ON 09 - 02 - 1977. THE ASSESSEE COMMENCED THE CONSTRUCTION OF THE NEW BUILDING IN 1976 WHICH WAS COMPLETED IN MA RCH, 1977. 5 ITA NO. 6 56/PN/2013, MRS. BHARATI PAWAR, PUNE IN THE SAID CASE THE HON'BLE HIGH COURT HAS HELD THAT AS THE TIME LIMIT WAS MAINTAINED FOR COMPLETION OF THE NEW BUILDING THE COMMENCEMENT WAS IRRELEVANT. 9. THE ASSESSEE ALSO RELIED ON THE DECISION IN THE CASE OF MUNEER KHAN VS. INCOME TAX OFFICER 41 SOT 504 (HYD). IN THE SAID CASE THE ISSUE WAS WHETHER FOR THE PURPOSE OF INVESTMENT THE ASSESSEE MUST USE THE FUNDS GENERATED FROM THE SALE OF THE PROPERTY. IN OUR OPINION IN THE SAID DECISION ALSO THERE WAS A COMPLIANCE OF THE TIME LIMIT. WE , THEREFORE, HOLD THAT AS THE ASSESSEE HAS NOT ACQUIRED THE PLOT OF LAND WITHIN THE TIME LIMIT SPECIFIED U/S. 54F ON WHICH THE RESIDENTIAL HOUSE HAS BEEN CONSTRUCTED, THE ASSESSING OFFICER RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE IN RESPECT OF CLAIM THAT COST OF LAND IS ALSO TO BE INCLUDED FOR CONSIDERING DEDUCTION U/S. 54F. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). 6. WE, THEREFORE, FOLLOWING THE REASONS AND FINDINGS IN THE CASE OF MRS. MRUNALINI PAWAR, PUNE (SUPRA) CONF IRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS ALL THE GROUNDS. 7. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30 - 0 6 - 20 1 4 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIA L MEMBER RK /PS PUNE , DATED : 30 TH JUNE, 20 1 4 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 4 THE CIT(A) - III, PUNE THE CIT - IV, PUNE 5 THE DR, ITAT, B BENCH, PUNE. 6 GUARD FILE. //TRUE COPY// BY ORDER P RIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE