ITO, Bangalore V. Shri. Mukthar Ahmed Khan, Bangalore

ITA 718/BANG/2011

• Counselvise Citation: 71821114 RSA 2011
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.7 18/BANG/2011 (ASST. YEAR - 2007-08) THE INCOME-TAX OFFICER, WARD-6(2), BANGALORE. . APPELLANT PAN AARPK7125R. VS. SHRI MUKTHAR AHMEMD KHAN, PRO : B.K CONCRETE BLOCKS & TILES, NO.1727, 3 RD STAGE, SONAPPA BLOCK, KACHARAKANAHALLI, PILLANNA GARDEN, BANGALORE-560 045. . RESPONDENT CO NO.49/BANG/2011 (BY ASSESSEE) REVENUE BY : SHRI A SUNDARARAJAN, JCIT RESPONDENT BY : SHRI A GANESH, ADVOCATE DATE OF HEARING : 25-09-2012 DATE OF PRONOUNCEMENT : 11-10-2012 ITA NO.718 & CO 49/B/11 2 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THE REVENUE HAS FILED THE APPEAL AND THE ASSESSEE H AS FILED THE CROSS OBJECTION. THE RELEVANT ASSESSMENT YEAR IS 20 07-08. THE APPEALS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX - (APPEALS) IV AT BANGALORE DATED 14.03.2011. THE AP PEAL ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME- TAX ACT, 1961. ITA NO.718/BANG/2011 2. IN THE REVENUES APPEAL, THE ONLY GRIEVANCE IS T HAT THE CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 54F IN RESPECT OF CAPITAL GAINS OF RS.23,27,215/- ARISI NG FROM THE SALE OF SITE AT HBR LAYOUT, BANGALORE AND IN RESPECT OF CAP ITAL GAINS OF RS.2,09,857/- ARISING FROM THE SALE OF PROPERTY AT AROKIANUR LAYOUT, BANGALORE. THE GRIEVANCE OF THE REVENUE IS THAT THE ASSESSEE DOES NOT SATISFY THE CONDITIONS LAID DOWN U/S 54F SO AS TO B E ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT. ITA NO.718 & CO 49/B/11 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSEESE E WHO IS AN INDIVIDUAL AND IS IN THE BUSINESS OF MANUFACTURING AND SELLING OF CONCRETE AND HALLOW BLOCKS AND ALSO RECEIVES LORRY TRANSPORTATION CHARGES, FILED HIS RETURN OF INCOME FOR THE ASSESSM ENT YEAR 2007-08 ON 31-10-2007 ADMITTING AN INCOME OF RS.4,80,990/-. D URING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME-TAX ACT, THE ASSESSING OFFICER EXAMINED THE ASSESEES CLAIM OF E XEMPTION U/S 54F OF THE ACT. FROM THE RETURN OF INCOME, THE AO OBSE RVED THAT THE ASSESSEE HAS ADMITTED LONG TERM CAPITAL GAIN ON SAL E OF SITES AND ALSO CLAIMED EXEMPTION U/S 54F OF THE ACT TO THE EXTENT OF RS.35,71,429/-. HE OBSERVED THAT THE ASSESEE OWNED THREE SITES AT 1) HENNUR BELLARY ROAD, 2) HENNUR HBR LAYOUT 3) AROKIANUR LAYOUT 4. THE PROPERTY AT HENNUR BELLARY ROAD WAS SOLD ON 14.10.2006 RESULTING IN THE CAPITAL GAIN OF RS.10,34,357/-. T HE ASSESSEE HAS CLAIMED TO HAVE INVESTED IN THE LONG TERM CAPITAL G AIN IN THE PURCHASE OF HOUSE AT D. COSTA ROAD ON 11.10.2006. THE A SSESSEE HAD CLAIMED EXEMPTION U/S 54F OF THE ACT OF THE SAID LO NG TERM CAPITAL ITA NO.718 & CO 49/B/11 4 GAIN. HOWEVER, THE AO OBSERVED THAT ON THE DATE OF PURCHASE OF HOUSE AT DCOSTA ROAD, THE ASSESSEE HAD ALREADY HA D TWO RESIDENTIAL HOUSES, ONE AT H.NO.12, 1 ST CROSS ROAD, AROKIANUR LAYOUT, WHICH WAS PURCHASED ON 7.2.2004 AND THE OTHER ONE AT NO.7 , COLES ROAD PURCHASED ON 6.9.2006. HE, THEREFORE, HELD THAT LO NG TERM CAPITAL GAINS OF RS.10,34,357/- CANNOT BE ALLOWED AS EXEMPT ION U/S 54F OF THE ACT, AS THE ASSESSEE HAS ALREADY OWNING TWO RE SIDENTIAL HOUSES AS ON THE DATE OF PURCHASE OF NEW HOUSE. THIS DISALLO WANCE WAS CONFIRMED BY THE CIT(A) ALSO. 5. AS REGARDS THE LONG TERM CAPITAL GAIN ARISING OU T OF THE SALE OF SITE AT HENNUR ROAD IS CONCERNED, IT WAS THE SUBMIS SION OF THE ASSESSEE THAT THE ASSESSEE HAD ONLY ONE RESIDENTIAL HOUSE I.E NO.12, AROKIANUR LAYOUT AS ON THE DATE OF PURCHASE OF THE NEW PROPERTY AT COLES ROAD. IT WAS SUBMITTED THAT HOUSE NO.7 AT C OLES ROAD WAS DEMOLISHED ON 06-09-2006 AND PLAN SANCTION TO CON STRUCT THE NEW HOUSE WAS OBTAINED FROM CORPORATION ON 19.12.2006, WHICH SHOWS THAT ONLY ONE RESIDENTIAL HOUSE WAS AVAILABLE TO TH E ASSESSEE AS ON THE DATE OF PURCHASE OF NEW HOUSE AND, THEREFORE, ACCOR DING TO THE ASSESSEE, THE LONG TERM CAPITAL GAIN OF RS.23,27,21 5/- WAS ELIGIBLE FOR EXEMPTION U/S 54F OF THE INCOME-TAX ACT. SIMILARLY , AS REGARDS THE ITA NO.718 & CO 49/B/11 5 CAPITAL GAIN OF RS.2,09,857/- ARISING OUT OF THE SA LE OF PROPERTY AT NO.12, AROKIANUR. LAYOUT ON 16.3.2007 IS CONCERNED, THE ASSESSEE CLAIMED THAT THE ASSESSEE HAD NO HOUSE AT ALL AS TH E HOUSE AT NO.7 COLES ROAD WAS ALREADY DEMOLISHED ON 6.9.2006 AND T HE HOUSE AT HENNUR ROAD WAS ALREADY SOLD ON 14.10.2006 AND, THEREFORE, THE LONG TERM CAPITAL GAIN IS TO BE EXEMPTED U/S 54F OF THE INCOME-TAX ACT. THE ASSESSING OFFICER HOWEVER MADE A SPOT INSPECTIO N OF THE HOUSE AT NO.7, COLES ROAD, BANGALORE ON 20.10.2009 AND OBSER VED THAT THE PROPERTY HAS BEEN DEMOLISHED AND CONSTRUCTED AND TH AT THE NEW CONSTRUCTION CONSISTED OF THREE FLOORS RESIDENTIAL HOUSE WHICH IS IN FINAL STAGES. HE ALSO OBSERVED THAT THE ASSESEE AN D HIS FAMILY MEMBERS HAVE OCCUPIED 3 RD FLOOR WHICH HAS ALREADY BEEN COMPLETED WHILE 1 ST AND 2 ND FLOOR ARE NEARING COMPLETION. HE OBSERVED THAT SI NCE THE CONSTRUCTION OF THE NEW HOUSE WAS COMPLETED WIT HIN A PERIOD OF 3 YEARS AFTER THE DATE OF TRANSFER OF ORIGINAL ASSET, THE ASSESSEE IS NOT ENTITLED TO CLAIM EXEMPTION U/S 54F OF THE ACT. HE ACCORDINGLY CALLED FOR ASSESSEES EXPLANATION. AFTER CONSIDERING THE A SSESSEES CONTENTION THAT THE HOUSE AT NO.7 , COLES ROAD WAS NOT COMPLET ED AS ON THE DATE OF INSPECTION, HE HELD THAT THE ASSESSEES CONTENTI ONS ARE NOT ACCEPTABLE. HE ACCORDINGLY DISALLOWED THE CLAIM OF EXEMPTION U/S 54F TO THE EXTENT OF RS.35,71,429/- AND BROUGHT IT TO TAX. ITA NO.718 & CO 49/B/11 6 6. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A) WHO ALLOWED THE SAME AND THE REVENUE IS IN APPEAL B EFORE US AGAINST THE RELIEF GIVEN BY THE CIT(A). 7. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ONLY DISPUTE BETWEEN THE ASSESSEE AND THE REVENUE IS WHETHER THE CONSTRUCTION OF THE RESIDENTIAL BUILDING AT ROAD NO.7, COLES ROAD, BANGALORE WAS COMPLETED WITHIN A PERIOD OF 3 YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSETS I.E 16.3.2207 2.1.2007 RESPECTIVELY . THE HOUSE AT D. COSTA ROAD WAS PURCHASED ON 11.10.2006 AND AS PER THE PROVISION OF SEC. 54F(1)(III), THE ASSESSEE WILL NOT BE ELIGI BLE FOR THE EXEMPTION U/S 54F, IF HE OWNS MORE THAN ONE RESIDENTIAL HOUSE , OTHER THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR HE HAS CONSTRUCTED ANY RESIDENTIAL HOUSE WITHIN THE PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET ON 16.5. 2010 AND THE ASSESSEE SHOULD NOT HAVE COMPLETED THE CONSTRUCTION OF THE H OUSE WITHIN THE PERIOD OF THREE YEARS. THE ASSESSING OFFICER HAD M ADE THE SPOT INSPECTION OF THE BUILDING ON 20.10.2009, AS ON WHI CH DATE THE CONSTRUCTION OF THREE FLOOR RESIDENTIAL HOUSE WAS I N THE FINAL STAGES AND THE ASSESSEE AND HIS FAMILY MEMBERS HAVE ALREAD Y OCCUPIED THE 3 RD FLOOR. THE ASSESSE HAS FILED COPY OF THE ENGINEER CERTIFICATE DATED ITA NO.718 & CO 49/B/11 7 7.9.2010 BEING ON ESTIMATION OF THE AMOUNT SPENT FO R THE CONSTRUCTION OF THE RESIDENTIAL BUILDING BELONGING TO THE ASSESE E AND HIS WIFE. AS PER THIS CERTIFICATE, THE FLOORING WAS NOT DONE IN 2 ND AND 3 RD FLOORS AND ALSO PAINING WORK WAS NOT COMPLETED FOR THE ENTIRE BUILDING AND THE OWNER HAD OCCUPIED THE BUILDING WITH THE SAID BALAN CE WORKS. THE ASSESSEE HAS ALSO FILED AN AFFIDAVIT TO THE EFFECT THAT THE PROPERTY AT NO.7, COLES ROAD WAS DEMOLISHED AND THE PLAN TO CON STRUCT A NEW HOUSE WAS APPROVED BY THE B.B.M.P ON 19.12.2006. H OWEVER, THE DATE OF THE COMPLETION OF THE BUILDING WAS NOT MEN TIONED IN THE AFFIDAVIT. ACCORDING TO THE LEARNED DR, THE SPOT I NSPECTION OF THE AO CLEARLY PROVES THAT SOME PORTION OF THE HOUSE WAS COMPLETED ON THE DATE OF INSPECTION BECAUSE WITHOUT THE BASIC WORKS SUCH AS PLUMING, WATER SUPPLY ETC., THE ASSESSEE CANNOT BE OCCUPYING THE PREMISES. HE SUBMITTED THAT EVEN ACCORDING TO THE CERTIFICATE OF THE ENGINEER SUBMITTED BY THE ASSESSEE, ONLY THE FLOORING AND PA INTING OF THE CERTAIN PORTION OF THE BUILDING WERE YET TO BE COMP LETED WHICH CLEARLY SHOWS WITH SOME PORTION OF THE BUILDING WA S ALREADY COMPLETED. THE LEARNED DR PLACED RELIANCE UPON THE DECISION OF BN BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI SAMBANDA M UDAYKUMAR IN IN ITA NO.634 OF 2010 DATED 21.1.2011 FOR THE PROPO SITION THAT WHERE THE CONSTRUCTION WORK IS SUBSTANTIALLY COMPLETED, T HE BUILDING HAS TO ITA NO.718 & CO 49/B/11 8 BE TAKEN AS COMPLETED ONLY. WE FIND THAT IN THE SA ID CASE, THE TRIBUNAL WAS DEALING WITH A CASE WHERE THE ASSESSEE HAD CLAIMED EXEMPTION OF LONG TERM CAPITAL GAINS U/S 54F OF THE INCOME-TAX ACT ON THE GROUND THAT ASSESSEE HAD INVESTED THE CAPITA L GAIN IN THE CONSTRUCTION OF A RESIDENTIAL HOUSE WITHIN THE PERI OD OF 3 YEARS FROM THE DATE OF TRANSFER. AFTER CONSIDERING THE PROVIS IONS OF SEC. 54F OF THE INCOME-TAX ACT, THE TRIBUNAL HAS HELD THAT THE ASSESSEE WOULD BE ELIGIBLE FOR CLAIM OF EXEMPTION U/S 54F OF THE INCO ME-TAX ACT IF THE SUBSTANTIAL PORTION OF THE BUILDING WAS COMPLETED. IN THE SAID CASE ONLY MINOR FITTINGS LIKE WATER AND ELECTRICAL WORK WAS REQUIRED TO BE DONE. IN THE CASE BEFORE US, THE FLOORING OF 2 ND AND 3 RD FLOORS AND ALSO PAINTING WORK WAS YET TO BE DONE. IN THE ABSENCE OF THESE WORKS, THE BUILDING CANNOT BE SAID TO BE COMPLETED SUBSTANTIAL LY. THE LEARNED COUNSEL FOR THE ASSESSEE HAD ALSO FILED BEFORE US T HE COPIES OF HIS RETURNS OF INCOME, WHEREIN HE HAS CLEARLY MENTIONED THAT THE BUILDING AT NO.7, COLES ROAD WAS AT UNDER-CONSTRUCTION STAGE AND THERE WAS NO RENTAL INCOME FROM THE SAID PROPERTY. HE ALSO FILED COPY OF THE LEDGER ACCOUNT OF THE SAID PROPERTY TO DEMONSTRATE THAT HE STARTED RECEIVING RENTS ONLY FROM 5 TH OCT, 2010. ALL THESE EVIDENCES ARE TO THE EFFECT THAT THE ASSESSEE HAS NOT COMPLETED CONSTRUCTION OF THE RESIDENTIAL BUILDING AS ON 1.1.2010 OR 1.3.2010 RESPECTIVELY. THE FLOORING OF A ITA NO.718 & CO 49/B/11 9 BUILDING CANNOT BE SAID TO BE A MINOR WORK LIKE WAT ER SUPPLY AND SOME ELECTRICAL CONNECTION. THE ASSESSE MIGHT BE OC CUPYING THE 3 RD FLOOR OF THE BUILDING IN ORDER TO SAVE RENT OR TO PERSONALLY SUPERVISE AND MONITOR THE CONSTRUCTION WORK. BUT BY HIS MERE OCCUPYING THE 3 RD FLOOR BEFORE EVEN COMPLETION OF THE FLOORING AT 2 ND AND 3RD FLOORS CANNOT BE SAID THAT THE CONSTRUCTION OF THE BUILDIN G IS COMPLETED. THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSEE HAS NOT YET COMPLETED THE CONSTRUCTION OF THE BUILDING AT NO.7, COLES ROAD WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSETS I.E ON 1.1.2007 AND 16.3.2007 RESPECTIVELY AND, THEREFO RE, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE INCOME-TAX A CT IN RESPECT OF THE LONG TERM CAPITAL GAIN ARISING OUT OF SALE OF THESE TWO PROPERTIES. 8. IN THE RESULT THE REVENUES APPEAL IS DISMISSED. CO NO.49/BANG/2011 9. IN THE CROSS-OBJECTION, THE ASSESSEE HAS ONLY SU PPORTED THE ORDER OF THE CIT(A) AND HENCE NEEDS NO ADJUDICATION AND I S ACCORDINGLY DISMISSED. ITA NO.718 & CO 49/B/11 10 10. IN THE RESULT, CROSS APPEALS FILED BY THE REVE NUE AS WELL AS THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH OCT, 2012. SD/- SD/- (JASON P BOAZ) (MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE, DATED : 11/10/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGAL ORE.