Velagpudi Krishna Pradad, Vijayawada V. The ITO, Vijayawada

ITA 69/VIZ/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8768 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 14-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D J P ANAND
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 69 / VIZ /201 7 (ASST. YEAR : 20 11 - 12 ) VELAGAPUDI KRISHNA PRASAD, D.NO. 32 - 15 - 110/4, FLAT NO.404, 3 RD FLOOR, KUTUMBA ENCLAVE, MOGHALARAJAPURAM, VIJAYAWADA. V S . ITO , WARD - 2 ( 2 ), VIJAYAWADA . PAN NO. ACZPV 6726 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI D.J.P. ANAND SR. DR DATE OF HEARING : 24 / 0 1 /201 8 . DATE OF PRONOUNCEMENT : 09 / 02 /201 8 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , VIJAYAWADA , DATED 22 /0 9 /201 6 FOR THE ASSESSMENT YEAR 20 11 - 12 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PROPRIETOR OF NAMITA TRA N SPORTS , FILED HIS RETURN OF INCOME BY ADMITTING TOTAL INCOME OF RS. 2,27,930/ - . THE ASSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. RAMINENI CONSTRU C TIONS A ND GOT TWO FLATS ON DEVELOPMENT, HOWEVER, HE HAD 2 ITA NO. 69/VIZ/2017 ( VELAGAPUDI KRISHNA PRASAD ) NOT ADMITTED ANY CAPITAL GAINS ON THE SAID TRANSACTION. THE ASSESSING OF FICER REOPENED THE ASSESSMENT AND WORKED OUT LONG TERM CAPITAL GAI N . THE CASE OF THE ASSESSEE BEFORE THE ASSESSING OFFICER IS THAT HE HAS RECEIVED TWO FLATS AND IS ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 54F OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'ACT'). THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE AND ONLY ONE FLAT IS ALLOWED UNDER SECTION 54F OF THE ACT. 3 . ON APPEAL, LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4 . ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. LD . COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COV E RED BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. SRI RAVURI SAI CHAITANYA IN ITA NO. 498/VIZAG/2013 DATED 28/03/2017, WHEREIN BY FOLLOWING THE JUDGMENT OF THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. GUMANMAL JAIN IN TCA NO. 33/2017 [(2017) 98 CCH 93 (CHENNAI - HC)] HAS HELD THAT THE ASSESSEE IS ENTITLED FOR BENEFIT U NDER SECTION 54F FOR MORE THAN ONE FLAT , THE SAME MAY BE FOLLOWED. 3 ITA NO. 69/VIZ/2017 ( VELAGAPUDI KRISHNA PRASAD ) 6 . THE LD. DEPARTMENTAL REPRESENTATIVE HAS STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 8 . THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER ASSESSEE IS ENTITLED FOR MORE THAN ONE FLAT OR NOT UNDER SECTION 54F OF THE ACT. THE VERY SAME ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SRI RAVURI SAI CHAITANYA (SUPRA) IN FAVOUR OF THE ASSESSEE BY FOLLO W ING THE DECISION OF THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF GUMANMAL JAIN (SUPRA) . THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: - 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FACTUAL MATRIX WHICH LEADS TO THE DISPUTE IS THAT THE ASSESSEE ALONG WITH OTHER 12 CO - OWNERS ENTERED INTO A DEVELOPMENT AGR EEMENT WITH SHRI SAI VENKATA RAMANA CONSTRUCTIONS FOR DEVELOPMENT OF A PIECE OF LAND ADMEASURING 1.68 ACRES AT S.NO.93. AS PER THE SAID JOINT DEVELOPMENT AGREEMENT, THE ASSESSEE AND 12 OTHER FAMILY MEMBERS HAVE AGREED TO SHARE THE CONSTRUCTED FLATS IN THE RATIO OF 17:23. THE ASSESSEE HAS CLAIMED EXEMPTION U/S 54F OF THE ACT ON TOTAL FLATS RECEIVED IN PURSUANCE OF JOINT DEVELOPMENT AGREEMENT. ACCORDING TO THE ASSESSEE, EXEMPTION U/S 54F OF THE ACT IS ALLOWABLE EVEN IF THE FLATS/APARTMENTS ARE SITUATED IN DIFFERENT BLOCKS OR TOWERS. THE A.O. HAS DISALLOWED EXEMPTION CLAIMED U/S 54F OF THE ACT, ON THE GROUND THAT THE ASSESSEE HAS LET OUT THE APARTMENT TO EDUCATIONAL INSTITUTION FOR THE PURPOSE OF COMMERCIAL USE. THE A.O. FURTHER OBSERVED THAT EXEMPTION U/ S 54F OF THE ACT IS AVAILABLE TO ONE RESIDENTIAL HOUSE, BUT NOT FOR ALL RESIDENTIAL FLATS RECEIVED IN PURSUANCE OF JOINT DEVELOPMENT AGREEMENT. 12. THE ONLY ISSUE TO BE DECIDED IS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEE IS E LIGIBLE FOR EXEMPTION U/S 54F OF THE ACT FOR ALL THE FLATS RECEIVED IN PURSUANCE OF A DEVELOPMENT 4 ITA NO. 69/VIZ/2017 ( VELAGAPUDI KRISHNA PRASAD ) AGREEMENT? THE ISSUE IS NO LONGER A RES INTEGRA. THE HONBLE HIGH COURT OF A.P., IN THE CASE OF CIT VS. SYED ALI ADIL (SUPRA), HAS CONSIDERED THE ISSUE AND AFTER ANALYZING THE PROVISIONS OF SECTION 54F OF THE ACT, OBSERVED THAT THE EXPRESSION A RESIDENTIAL HOUSE IN SECTION 54F OF THE ACT HAS TO BE UNDERSTOOD IN A SENSE THAT BUILDING SHOULD BE OF RESIDENTIAL NATURE AND A SHOULD NOT BE UNDERSTOOD TO INDICAT E A SINGLE NUMBER AND WHERE AN ASSESSEE HAD PURCHASED TWO RESIDENTIAL FLATS, IS ENTITLED TO EXEMPTION U/S 54F OF THE ACT, IN RESPECT OF CAPITAL GAINS ON SALE OF ITS PROPERTY ON PURCHASE OF BOTH FLATS. THE HIGH COURT FURTHER OBSERVED THAT DEDUCTION U/S 54F OF THE ACT, IS ALLOWABLE WITH RESPECT TO THE RESIDENTIAL HOUSE CONSISTING OF SEVERAL INDEPENDENT UNITS. A SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE HIGH COURT OF MADRAS, IN THE CASE OF CIT VS. GUMANMAL JAIN (SUPRA), WHEREIN THE HONBLE HIGH COURT OB SERVED THAT ALL THE FLATS ARE A PRODUCT OF ONE DEVELOPMENT AGREEMENT OF THE SAME PIECE OF LAND BEING SAID LAND, HENCE EVEN IF FLATS ARE IN DIFFERENT BLOCKS AND DIFFERENT TOWERS, AS LONG AS THEY ARE IN SAME ADDRESS/LOCATION, IT DOES NOT DISENTITLE THE ASSES SEE FROM GETTING THE BENEFIT OF SECTION 54F OF THE ACT. IN YET ANOTHER CASE, THE HONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. V.R. KARPAGAM (2015) 373 ITR 127, HELD THAT PRIOR TO AMENDMENT U/S 54F BY FINANCE ACT, 2004 W.E.F. 1.4.2015, WITH REGARD T O WORD A, A RESIDENTIAL HOUSE INCLUDE MULTIPLE FLATS/RESIDENTIAL UNITS, WHERE UNDER THE DEVELOPMENT AGREEMENT ASSESSEE WAS ENTITLED TO RECEIVE CERTAIN BUILT - UP AREA, WHICH GOT TRANSLATED INTO FIVE FLATS, EXEMPTION U/S 54F IN RESPECT OF FIVE FLATS IN A M ULTI - STOREY CONSTRUCTION WOULD BE AVAILABLE. 13. THUS, THE LEGAL PROPOSITION BEFORE THE AMENDMENT OF SECTION 54F OF THE ACT, BY THE FINANCE ACT, 2014 W.E.F. 1.4.2015, IN THE CASE OF DEVELOPMENT AGREEMENT, IS VERY CLEAR THAT IF THE LAND OWNER RECEIVES NUM BER OF FLATS, EVEN THOUGH THEY ARE LOCATED IN DIFFERENT BLOCKS AND DIFFERENT TOWERS, ONCE THEY ARE IN SAME ADDRESS/LOCATION AND ALL THE FLATS ARE A PRODUCT OF ONE DEVELOPMENT AGREEMENT, THEN THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT, IN RES PECT OF ALL THE FLATS. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT IN RESPECT OF ALL THE FLATS RECEIVED IN PURSUANCE OF JOINT DEVELOPMENT AGREEMENT. THE REVENUE HAS FAILED TO BRING ON RECORD ANY CONTRARY D ECISION AGAINST THE LAW LAID DOWN BY THE HONBLE A.P. HIGH COURT, IN THE CASE OF CIT VS. SYED ALI ADIL (SUPRA). CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RESPECTFULLY FOLLOWING THE DECISION OF HONBLE A.P. HIGH COURT, IN THE CASE OF CIT VS. SYED ALI ADIL (SUPRA), WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT, TOWARDS ALL THE FLATS RECEIVED IN PURSUANCE TO DEVELOPMENT AGREEMENT. 5 ITA NO. 69/VIZ/2017 ( VELAGAPUDI KRISHNA PRASAD ) 14. IN SO FAR AS THE ALLEGATION OF THE A.O., THAT THE FLATS CONSTRUCTED B Y THE ASSESSEE ARE COMMERCIAL PROPERTY BUT NOT RESIDENTIAL HOUSE, WE FIND THAT THE ASSESSEE HAS FILED NECESSARY EVIDENCES TO PROVE THAT THE PROPERTY IN QUESTION IS A RESIDENTIAL FLAT. THE ASSESSEE HAS FURNISHED A COPY OF PLAN SANCTIONED BY THE MUNICIPAL A UTHORITIES, WHICH CLEARLY SHOWS THAT THE APARTMENTS CONSTRUCTED BY THE BUILDER ARE RESIDENTIAL HOUSES. THOUGH THE ASSESSEE HAS LEASED OUT THE PREMISES TO AN EDUCATIONAL SOCIETY, THE TENANT HAS USED THE PREMISES FOR THE PURPOSE OF ACCOMMODATION OF STUDENTS . THEREFORE, WE ARE OF THE VIEW THAT MERELY BECAUSE THE HOUSE IS LEASED OUT TO AN EDUCATIONAL SOCIETY, IT CANNOT BE SAID THAT THE PROPERTY IN QUESTION IS A COMMERCIAL PROPERTY, WHICH IS NOT ENTITLED FOR EXEMPTION U/S 54F OF THE ACT. THE CIT(A), AFTER CON SIDERING THE RELEVANT FACTS, AND ALSO BY FOLLOWING CERTAIN JUDICIAL PRECEDENTS HAS RIGHTLY DIRECTED THE A.O. TO ALLOW EXEMPTION CLAIMED U/S 54F OF THE ACT. WE DO NOT FIND ANY REASONS TO INTERFERE WITH THE ORDER OF THE CIT(A). HENCE, WE UPHOLD THE CIT(A) ORDER AND REJECT THE GROUND RAISED BY THE REVENUE. 9. WE, THEREFORE, R ESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL HOLD THAT ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54F OF THE ACT FOR TWO FLATS RECEIVED IN PURSUANCE TO THE DEVELOPMENT AGREEMENT. THUS, WE REVERSE THE ORDER PASSED BY THE LD. CIT(A) AND APPEAL FILED BY THE ASSESSEE IS ALLOWED. 10 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 0 9 TH DAY OF FEB . , 201 8 . SD/ - SD/ - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 0 9 TH FEBRUARY , 201 8 . VR/ - 6 ITA NO. 69/VIZ/2017 ( VELAGAPUDI KRISHNA PRASAD ) COPY TO: 1. THE ASSESSEE - VELAGAPUDI KRISHNA PRASAD, D.NO. 32 - 15 - 110/4, FLAT NO.404, 3RD FLOOR, KUTUMBA ENCLAVE, MOGHALARAJAPURAM, VIJAYAWADA. 2. THE REVENUE - ITO, WARD - 2(2), VIJAYAWADA. 3. THE PR.CIT, VIJAYAWADA. 4. THE CIT(A) , VIJAYAWADA. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.