DCIT, CHENNAI V. Charumathy Seshadri, CHENNAI

ITA 886/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6010 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASISH TRIPATHI
• Assessee Lawyers: N R GOVINDARAJAN; N RAJAGOPALA CA
• Keywords: Capital asset; Cost of acquisition; Benefit of exemption
• Section: 54B; 54F; 54; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 886/MDS/2017 / ASSESSMENT YEAR : 2011-12 DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE -15, CHENNAI. VS. SMT. CHARUMATHYSESHADRI, PLOT NO. 41, CASURINA DRIVE, NEELANGARAI, CHENNAI 600 041. [PAN: BAYPS 8008K] ( / APPELLANT) ( / RESPONDENT) %& / APPELLANT BY : SHRI. ASISHTRIPATHI, JCIT )*%& / RESPONDENT BY : SHRI. N.R. GOVINDARAJAN, CA & SHRI. N. RAJAGOPALA, CA & /DATE OF HEARING : 12.07.2017 & /DATE OF PRONOUNCEMENT : 09.10.2017 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-15, CHENNAI IN ITA NO. 186/CIT (A)-15/2014-15/AY 2011- 12 DATED 23.12.2016. :-2-: ITA NO. 886/MDS/2017 2. SMT. CHARUMATHYSESHADRI, THE ASSESSEE, IS AN ADV OCATE BY PROFESSION. DURING THE AY 2011-12, THE ASSESSEE SO LD A VACANT LAND FOR RS. 2.35 CRORES, OF WHICH SHE COMPUTED THE CAPITAL GAINS AT RS. 2,15,56,250/- AND CLAIMED DEDUCTION U/S. 54F FOR RS. 2,15,56,250/- ON AN INVESTMENT MADE IN A NEW ASSET FOR RS. 2.6 CRORES. THE ASSESSING OFFICER FOUND HER INVESTMENT AS UNDER : (I) INVESTMENT IN 1.25 ACRES NANJA LAND AT OTTIAMPAKKAM VILLAGE IN KACHEEPURAM DISTRICT RS. 2,20,00,000/- (II) EXPENDITURE INCURRED FOR REGISTRATION RS. 17 ,20,167/- TOTAL INVESTMENT IN1.25 ACRES NANJA LAND RS. 2,37,20,167/- INVESTMENT MADE IN CAPITAL GAINS ACCOUNT SCHEME RS. 20,20,000/- 3. TO VERIFY WHETHER ANY RESIDENTIAL HOUSE WAS BUIL T OR CONSTRUCTED BY THE ASSESSEE IN THE NANJA LAND, THE AO CAUSED AN ENQUIR Y AND FOUND FROM THEM THAT THERE WAS AN INCOMPLETE STRUCTURE AT ONE CORNER OF LAND AND IT DOES NOT HAVE ANY KIND OF RESEMBLANCE OF A COMPLETED RESIDENTIAL HOU SE AND A VAST AREA LAND WAS KEPT UNUTILISED. NO RESIDENTIAL HOUSE WAS CONSTRUCT ED AND COMPLETED WITHIN 3 YEARS. FURTHER, THE AO FOUND FROM THE ELECTRICAL CO NNECTION OBTAINED THAT ASSESSEES INTENTION WAS NOT TO CONSTRUCT A WHOLLY RESIDENTIAL PROPERTY BUT AN INTENTION TO CONSTRUCT COMMERCIAL PROPERTY AND HEN CE HELD THAT THE ASSESSEE IS IN ELIGIBLE TO CLAIM DEDUCTION U/S 54F. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) . :-3-: ITA NO. 886/MDS/2017 4. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT F OR CLAIMING THE DEDUCTION U/S 54F, IT IS SUFFICIENT IF THE CONSTRUCTION COMME NCED WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF SALE OF ORIGINAL ASSET. EXP LAINING VARIOUS REASONS FOR THE DELAY IN THE COMPLETION OF CONSTRUCTION, THE ASSESS EE CLAIMED THAT THE DELAY WAS BEYOND HER CONTROL. AFTER CONSIDERING THE REASONS FOR DELAY IN THE COMPLETION OF CONSTRUCTION AND RELEVANT MATERIAL, THE CIT(A) WAS OF THE OPINION THAT THERE WERE REASONS BEYOND THE CONTROL OF ASSESSEE, WHICH PREVE NTED HER FROM COMPLETING THE CONSTRUCTION WORK WITHIN THE PERIOD OF THREE YE ARS FROM THE DATE OF SALE OF ORIGINAL ASSET. THE ASSESSEE ALSO FILED A CERTIFIC ATE FROM THE CONCERNED CONTRACTOR AND SUBMITTED THAT THE CONSTRUCTION OF RESIDENTIAL HOUSE WAS COMPLETED ON 24.03.2014. THE CIT(A) FOUND THAT THE LONG TERM CA PITAL ASSET WAS SOLD ON 04.11.2010 FOR RS. 2,35,00,000/-. THE ASSESSEE INV ESTED RS. 2,59,64,300/- (INCLUDING REGISTRATION CHARGES AND STAMP DUTY BETW EEN 06.05.2011 TO 04.06.2011) IN THE NEW ASSET AND DEPOSITED RS. 20,2 0,000/- IN THE CAPITAL GAINS ACCOUNT SCHEME BEFORE THE DUE DATE FOR FILING RETUR N U/S. 139 WHICH WAS 30.09.2011. AND FILED HER RETURN ON 22.09.2011. R ELYING ON THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/ S. SEETHA SUBRAMANIAN VS. ACIT (1996) 59 ITD 94 AND CIT VS SARDAMAL KOTHARI ( 2008) 302 ITR 286, THE CIT(A) HELD THAT THE ASSESSEE NEED NOT COMPLETE THE CONSTRUCTION AND OCCUPY THE SAME WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF SALE OF ORIGINAL ASSET, IF THE CONSTRUCTION HAD COMMENCED WITHIN THE PERIOD OF THREE YEARS. IN THE ASSESSEES CASE NOT ONLY THE CAPITAL GAIN WERE INVE STED IN THE PURCHASE OF LAND :-4-: ITA NO. 886/MDS/2017 FOR CONSTRUCTION OF RESIDENTIAL HOUSE AND INVESTED IN THE CAPITAL GAINS SCHEME ACCOUNT. THE CONSTRUCTION OF THE RESIDENTIAL HOUSE HAD ALSO COMMENCED WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF SALE OF ORIGINAL ASSET. SO , THE CIT(A) HELD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM THE BEN EFIT U/S. 54F AND ACCORDINGLY DIRECTED THE AO TO GRANT THE RELIEF. 5. AGGRIEVED AGAINST THAT ORDER, THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS: 2.1 THE LD CIT(A) FAILED TO APPRECIATE THAT THE A SSESSEE HAD FAILED EITHER TO CONSTRUCT THE RESIDENTIAL HOUSE OR IF CON STRUCTED, THE SAME WAS NOT COMPLETED WITHIN THREE YEARS FROM THE DATE OF SALE OF THE ORIGINAL ASSET. 2.2 THE LD CIT(A) ERRED IN NOT FOLLOWING THE RATIO LAID DOWN IN JAGWINDER SINGH VS CIT(P&H) REPORTED IN 50 TAXMANN.COM WHEREI N UNDER SIMILAR CIRCUMSTANCES ASSESSEE HELD TO BE NOT ELIGIBLE FOR DEDUCTION SINCE IT FAILED TO PRODUCE EVIDENCE TO PROVE COMPLETION OF THE CONSTRU CTION DURING THE PERIOD STIPULATED IN SEC 54F. 2.3) THE LD CLT(A) FAILED TO APPRECIATE THAT THE AS SESSEE HAS OBTAINED THE ELECTRICITY CONNECTION FROM THE TNEB UNDER TARIFF N O V, WHICH WILL BE GIVEN FOR ELECTRICAL CONNECTION WHICH MORE THAN 25% OF TH E BUILT UP AREA IS UTILIZED FOR COMMERCIAL PURPOSE. THIS STANDS EVIDENCE TO DEC IDE THAT THE ASSESSEE'S INTENTION WAS NOT TO CONSTRUCT A WHOLLY RESIDENTIAL PROPERTY BUT WITH AN INTENTION TO CONSTRUCT A STRUCTURE WITH COMMERCIAL PURPOSE. 2.4) THE LD CIT(A) OUGHT TO HAVE APPRECIATE THAT TH E DECISION OF ITAT C BENCH ,CHENNAI IN THE CASE OF K.V. VIJAYARAGHAVAN V S. DCIT COMPANY CIRCLE (I},CHENNAI.(2017) 78 TAXMANN.COM 177 (CHENNAI TRIB ) IN VIOLATION TO SECTION U/S 54F(3), FOR PURPOSE OF CONSTRUCTION OF A SHOPPING COMPLEX. THIS STANDS EVIDENCE TO DECIDE THAT THE ASSESSEE'S INTEN TION WAS NOT TO CONSTRUCT A WHOLLY RESIDENTIAL PROPERTY BUT WITH AN INTENTION TO CONSTRUCT A STRUCTURE WITH COMMERCIAL PURPOSE. :-5-: ITA NO. 886/MDS/2017 THE DR INVITED OUR ATTENTION TO THE PETITION FILED FOR CONDONATION OF DELAY. ON THE MERITS CANVASSED THE DELAY IS CONDONED. THE DR ARGUED THE CASE SUPPORTING THE ASSESSMENT ORDER AND ON THE LINES OF GROUNDS OF APPEAL. PER CONTRA, THE AR FILED A PAPER BOOK AND SUPPORTED THE ORDER OF THE C IT(A). 6. WE HEARD THE RIVAL CONTENTIONS, GONE THROUGH THE ORDERS AND THE MATERIAL IN THE PAPER BOOK. ON 04.11.2010, THE ASSESSEE SOL D VACANT LAND MEASURING, SAY ,2.64 GROUNDS TOGETHER WITH 1/20 TH SHARE IN THE COMMON PASSAGE MEASURING 2300 SQ.FT. LOCATED IN NEELANGARAI, CHENNAI FOR RS. 2.35 CRORES. ON THE SAME DATE, SHE ENTERED INTO A DEVELOPMENT AGREEMENT WITH THE PURCHASER FOR RS. 25 LAKHS. SO, THE TOTAL VALUE REALISED ON THE SALE OF VACANT LAND WAS RS. 2.6 CRORES. THE CAPITAL GAINS WORKED OUT ON THIS TRANSACTION WA S RS. 2.15 CRORES. ON 28.06.2011, THE ASSESSEE PURCHASED 1 ACRE AND 25 CE NTS OF NANJA LAND AT OTTIAMPAKKAM VILLAGE, SHOLINGANALUR TALUK, KANCHEEP URAM DISTRICT WITHIN THE LIMITS OF ST. THOMAS MOUNT PANCHAYAT UNION FOR RS. 2,40,00,000/- INCLUDING STAMP DUTY AND REGISTRATION CHARGES. ON 22.07.201 1, SHE DEPOSITED RS. 20,20,000/- IN STATE BANK OF TRAVANCORE (SBT) TOWAR DS CAPITAL GAINS SCHEME ACCOUNT. THUS, THE TOTAL INVESTMENTS AS ON 22.07.2 011 WAS RS. 2.6 CRORES. THE ASSESSEE ALSO OBTAINED THE PLANNING PERMISSION ON 0 4.07.2012 WELL BEFORE THE DUE DATE FOR FILING RETURN U/S. 139(1) WHICH WAS 30 .09.2011. THE OTHER INVESTMENTS MADE BY THE ASSESSEE, AS CULLED FROM T HE PAPER BOOK , ARE AS UNDER: :-6-: ITA NO. 886/MDS/2017 1. PAYMENTS MADE TO GOVERNMENT AUTHORITY FOR CONSTRUCTION OF HOUSE PROPERTY AS ON 12.06.2012 R S. 5,94,300/- 2. PAYMENTS MADE TO BHAGGYAM CONSTRUCTIONS BETWEEN 14.02.2012 & 19.10.2012 TOWARDS COMPOUND WALL AND LAND FILLING RS. 14,96,860/- 3. PAYMENTS MADE TO K. ARANGANANTHAN & CO. BETWEEN09.07.2013 & 14.03.2014 FOR THE CONSTRUCTION OF THE HOUSE PROPERTY RS. 19,65 ,000/- 6.1 DESCRIPTION OF THE PROPERTY FROM THE INSPECTION MADE ON 20.12.2013 AS EXTRACTED FROM THE ASSESSMENT ORDER IS AS UNDER : FROM THE ROAD SIDE - THE SPRAWLING 1.25 ACRES OF NANJA LAND LAND WAS FENCED WITH BORBED WIRE AND IN THE BALANCE THREE SI DES, COMPOUND WALL WAS ERECTED. FROM THE ENTRANCE , A ROUGH ROAD HAS BEEN LAID . TO THE RIGHT OF THE ROAD (FACING THE PLOT) A SMALL, THATCHED SHED W AS AVAILABLE IN WHICH CEMENT BAGS WERE ARRANGED. TO THE LEFT OF THE ROAD , A TIN SHED HAS BEEN ERECTED FOR THE STAY OF CONSTRUCTION WORKERS. AT T HE FAR LEFT HAND END OF THE PLOT (FACING THE PLOT), THERE WAS ONE BUILDING WHIC H WAS UNDER CONSTRUCTION. NO PROPER STEPS WERE PROVIDED. FIXTURES LIKE WINDO WS AND DOORS WERE NOT THERE AND NO ELECTRIC SUPPLY HAS BEEN PROVIDED TO T HE BUILDING YET. NO FLOORING AND PLASTERING OF WALLS HAD BEEN CARRIED O UT. TO HAVE A CORRECT VIEW OF PASSING SCRUTINY ORDER, THE ENTIRE PLACE WA S NEARLY PHOTOGRAPHED AND VIDEOGRAPHED,, WHICH SHOWS THE EXACT POSITION O F THE SO CALLED RESIDENTIAL HOUSE PROPERTY. FOR THE CLAIM OF DEDU CTION U/S. 54F, THE CONSTRUCTION OF RESIDENTIAL HOUSE SHOULD HAVE BEEN COMPLETED BY 06.11.2013. THE PLACE HAS BEEN VISITED ON 20.12.20 13, BEYOND 45 DAYS OF THE DUE DATE FOR COMPLETION OF CONSTRUCTION AS PER SECTION 54F OF THE IT ACT AND FOUND TO BE VERY MUCH INCOMPLETE, EMPHASIS SUPP LIED AND UTILIZATION OF LAND IS VERY MINIMAL FOR THE BUILDING, LEAVING A VA ST AREA OF LAND UNTILIZED. HENCE IT IS EVIDENT THAT THE CLAIM OF DEDUCTION U/S . 54F OF RS. 2.60 CRORES :-7-: ITA NO. 886/MDS/2017 (WHICH IS THE COST OF 1.25 ACRES OF NANJA LAND ITSE LF) IS UNTENABLE AND NEEDS TO BE DISALLOWED. SOFT COPY OF PHOTOS AND VIDEO SU BMITTED 6.2 IT IS SEEN FROM THE COPY OF THE REMAND REPORT S ENT BY THE ACIT, NON- CORPORATE CIRCLE (5)-1 TO THE CIT (A) DATED 26.08.2 016, WHICH IS IN THE PAPER BOOK, THAT THE ITI INSPECTED THE PROPERTY ON 17.0 8.2016 AND FOUND THAT THE SAID PROPERTYIS A LAND HAVING A SMALL PORTION IN TH E MIDDLE OF PROPERTY CONSTRUCTED (ABOUT 1500 SQ.FT.). THIS INDICATES TH AT THE SIZE OF HOUSE IS JUST ABOUT 1500 SQFT ONLY IN THE SPRAWLING LAND OF 1 ACRES 25 CENTS. 6.3 THOUGH THE ASSESSEE HAS MADE OUT A CASE FOR DE DUCTION U/S 54 F, AS PER THE RATIOS OF THE JURISDICTIONAL HC , HOWEVER, A QU ESTION ARISES THAT WHEN THE ASSESSEE HAS INVESTED IN 1.25 ACRES OF LAND BUT CONSTRUCTED A HOUSE IN THE LAND JUST ABOUT 1500 SQ.FT. ONLY AND CLAIMS THE BENEFIT OF DEDUCTION U/S 54F ON THE ENTIRE INVESTMENTS IN THE 1.25 ACRES LAND AND ITS C OMPOUND WALL ETC, ON THE INVESTMENT OF HOW MUCH LAND AND BUILDINGS SHOULD SH E BE GIVEN THE BENEFIT OF DEDUCTION U/S 54F HAS NOT BEEN EXAMINED BY THE LOWE R AUTHORITIES AT ALL. IN THE CASE OF COMMISSIONER OF INCOME-TAX, VS ZAIBUNNISA B EGUM,151 ITR 320 AP, THE BRIEF FACTS WERE AS UNDER : THE ASSESSEE AND HER THREE SISTERS WERE THE JOINT OWNERS OF HOUSE PROPERTY CONSISTING OF A FAIRLY LARGE BUILDING AND EXTENSIVE LAND, EACH ONE OWNING 1/4TH SHARE. THE BUILDING HAS A BUILT-UP AREA OF 17 ,136 SQ. FT. AND THE TOTAL EXTENT OF LAND INCLUDING THE LAND ON WHICH THE BUIL DING STANDS IS 13,029 SQ. YARDS. THE BUILDING AS WELL AS THE ENTIRE EXTENT OF LAND WAS ACQUIRED BY THE GOVERNMENT UNDER THE LAND ACQUISITION ACT FOR CONSTRUCTION OF THE OFFICE OF :-8-: ITA NO. 886/MDS/2017 THE ACCOUNTANT-GENERAL. COMPENSATION WAS INITIALLY AWARDED BY THE LAND ACQUISITION OFFICER AND IT WAS ENHANCED BY THE SECO ND ADDITIONAL CHIEF JUDGE, CITY CIVIL COURT, HYDERABAD, PURSUANT TO REF ERENCE MADE UNDER S. 18 OF THE LAND ACQUISITION ACT. THE COMPENSATION FINAL LY AWARDED WAS : RS. (A) COMPENSATION FOR LAND 5 ,21,160 (B) COMPENSATION FOR THE BUILDING 1 ,71,360 (C) SOLATIUM 1, 03,878 ------------- 7,96,398 ------------- IN THE INCOME-TAX RETURN FIELD FOR THE ASSESSMENT Y EAR 1964-65, THE ASSESSEE DECLARED HER SHARE OF CAPITAL GAIN ARISING ON THE TRANSFER OF THE LAND AND BUILDING BY WAY OF COMPULSORY ACQUISITION, CLAIMED THAT SHE CONSTRUCTED A BUILDING FOR HER RESIDENTIAL PURPOSES AT A COST OF RS. 80,000 WITHIN A PERIOD OF TWO YEARS FROM THE DATE OF TRANS FER OF THE ABOVESAID BUILDING TOGETHER WITH LAND. ACCORDINGLY, THE SUM O F RS. 80,000 WAS CLAIMED AS DEDUCTION UNDER S. 54 .THE ITO DETERMINED THE ASSESSEE'S 1/4TH SHARE OF CAPITAL GAIN ON THE TRANSFER OF THE LAND AND BUILDI NG JOINTLY OWNED BY THE ASSESSEE AND HER THREE SISTERS AT RS. 1,42,283 AND SET OFF AGAINST THE SAME A SUM OF RS. 75,000 WHICH HE ESTIMATED AS THE COST OF BUILDING CONSTRUCTED BY THE ASSESSEE FOR HER RESIDENTIAL PURPOSES UNDER S. 54 . DOING SO, HE ARRIVED AT THE CAPITAL GAIN FOR THE PURPOSE OF ASSE SSMENT AT RS. 67,283 AND INCLUDED THE SAME IN THE TOTAL INCOME. AGAINST THE ORDER OF THE ITO, THE ASSESSEE FILED AN APPEAL BEFORE THE AAC AND QUESTIONED THE CORRECTNESS OF THE COMPUTATION O F THE CAPITAL GAIN AT RS. 1,42,283. IN THIS CASE , THE AAC WENT FURTHER INTO THE QUESTION WHETHER THE DEDUCTION OF RS. 75,000 REPRESENTING THE COST OF CO NSTRUCTION OF THE NEW RESIDENTIAL HOUSE COULD BE SET OFF AGAINST THE ENTI RETY OF CAPITAL GAIN ARISING ON THE SALE OF BUILDING AS WELL AS THE LAND OR SHOU LD BE LIMITED TO THE EXTENT OF CAPITAL GAIN ARISING ON THE SALE OF THE BUILDING AND LAND 'REASONABLY APPURTENANT' TO THE BUILDING. THE PROVISIONS OF S. 54(1) WERE CONSTRUED BY :-9-: ITA NO. 886/MDS/2017 THE AAC AS PERMITTING THE SET-OFF OF THE AMOUNT SPE NTS ON THE CONSTRUCTION OF A NEW BUILDING FOR RESIDENTIAL PURPOSES ONLY AGA INST THE CAPITAL GAIN ARISING ON THE TRANSFER OF THE BUILDING AND LAND, W HICH IS 'REASONABLY APPURTENANT' TO THE BUILDING. THE AAC WAS OF THE VI EW THAT, IF THE LAND CONTIGUOUS TO A BUILDING IS VAST IN EXTENT, THE ENT IRE EXTENT OF LAND COULD NOT BE CONSIDERED TO BE APPURTENANT TO THE BUILDING AND ONLY A REASONABLE PORTION OF SUCH LAND COULD BE SO CONSIDERED UNDER L AW. HE, ACCORDINGLY, DIRECTED THE ITO TO REDETERMINE THE CAPITAL GAIN ON THE TRANSFER OF THE BUILDING AND THE LAND REASONABLY APPURTENANT TO THE SAME AND, IF SUCH CAPITAL GAIN SHOULD BE LESS THAN RS. 75,000, RESTRI CT THE DEDUCTION UNDER S. 54(1) ONLY TO THE EXTENT OF THE RESTRICTED SUM. THE AAC OBVIOUSLY HELD THE VIEW THAT THE CAPITAL GAIN DERIVED ON THE SALE OF L AND, WHICH IS NOT REASONABLY APPURTENANT TO THE BUILDING SHOULD BE TA XED IN ENTIRETY AND NO PART OF THE SUM OF RS. 75,000 SPENT ON THE CONSTRUC TION OF THE NEW RESIDENTIAL HOUSE SHOULD BE SET OFF AGAINST SUCH CA PITAL GAIN. AS THE ITO DID NOT EXAMINE THE QUESTION FROM THE ABOVE POINTS OF V IEW, HE DIRECTED THE ITO TO RE-WORK OUT THE CAPITAL GAIN ON THE AFORESAI D BASIS. THIS WAS THE SUBJECT MATTER BEFORE THE HONBLE HIGH COURT OF TH E AP . 6.4 THE RELEVANT PORTION OF THE ORDER OF THE HONBL E HIGH COURT IS EXTRACTED AS UNDER : 18. IT IS CLEAR FROM THE OBSERVATIONS OF SATYANARA YANARAO J. AND RAGHAVARAO J. ABOVE REFERRED TO THAT, IF THE EXPRES SION IS USED IN THE ACT IN A PRIMARY SENSE, THEN THE MEANING ATTACHED TO THAT PRIMARY SENSE MUST BE GIVEN IRRESPECTIVE OF OTHER CONSIDERATIONS. WE HAVE ALREADY STATED THAT THE EXPRESSION 'LAND APPURTENANT THERETO' WAS DEFINED I N A PRIMARY SENSE FOR PURPOSES OF S. 5(1)(IVC) OF THE W.T. ACT. IT WOULD FOLLOW THAT THE EXPRESSION OCCURRING IN S. 5 (1)(IVC) SHOULD BE UNDERSTOOD IN THAT PRIMARY SENS E AND IT IS NOT OPEN TO THE COURTS TO IMPOSE ANY OTHER CONSI DERATIONS. WHERE, HOWEVER, THE EXPRESSIONS USED CONVEY MORE THAN ONE SENSE-A PRIMARY AND SECONDARY SENSE-THAT SENSE IS TO BE ADOPTED WHICH B EST HARMONISES WITH :-10-: ITA NO. 886/MDS/2017 THE CONTEXT AND PROMOTES IN THE FULLEST MANNER THE POLICY AND OBJECT OF THE LEGISLATURE. IN OUR OPINION, THE EXPRESSION 'LAND A PPURTENANT THERETO' HAS ALSO A SECONDARY MEANING AS EQUIVALENT TO 'USUALLY ENJOYED OR OCCUPIED WITH'. THERE IS NO INDICATION THAT THE LEGISLATURE USED THE ABOVE EXPRESSION IN S. 54 OF THE I.T. ACT LIMITING ITS SENSE AND MEANING ART IFICIALLY TO ANY PARTICULAR EXTENT. CONSIDERATIONS GOVERNING THE LIM ITATIONS IMPOSED UPON THE MEANING OF THAT EXPRESSION UNDER SISTER ENACTMENTS LIKE THE W.T. ACT AND THE URBAN CEILING AND REGULATION ACT , 1976, CANNOT BE IMPORTED INTO S. 54 OF THE I.T. ACT. IN OUR OPINION, THAT EXPRESSION I S USED IN S. 54 OF THE I.T. ACT IN A WIDER SENSE. IT IS, THEREFORE, IMPERATIVE THAT THE TAX AUTHORITIES WILL HAVE TO DETERMINE THE EXTENT OF LAND APPURTENANT TO A BUILDING TRANSFERRED, TAKING INTO CONSIDERATION A VARIETY OF CIRCUMSTANCE S THAT MAY BE RELEVANT FOR THE PURPOSE. IT IS NOT POSSIBLE TO LAY DOWN INFALLI BLE TESTS TO BE APPLIED FOR THE DETERMINATION OF THE EXTENT OF LAND APPURTENANT TO A BUILDING, AS THE TESTS VARY DEPENDING UPON THE FACTS AND ATTENDANT C IRCUMSTANCES OF EACH CASE. FOR INSTANCE : (1) IF THE BUILDING TOGETHER W ITH THE LAND IS TREATED AS AN INDIVISIBLE UNIT AND ENJOYED AS SUCH BY THE PERS ONS OCCUPYING THE BUILDING, IT IS AN INDICATION THAT THE ENTIRE EXTEN T OF LAND IS APPURTENANT TO THE BUILDING; (2) IF THE BUILDING HAS EXTENSIVE LAN DS APPURTENANT THERETO AND EVEN IF THE BUILDING AND THE LAND HAVE BEEN TREATED AS ONE SINGLE UNIT AND ENJOYED AS SUCH BY THE OCCUPIERS, AN ENQUIRY COULD BE MADE TO FIND OUT WHETHER ANY PART OF THE LAND CONTIGUOUS TO THE BUIL DING CAN BE PUT TO INDEPENDENT USER WITHOUT CAUSING ANY DETRIMENT TO T HE EFFECTIVE AND PROPER ENJOYMENT OF THE BUILDING AS SUCH. SUCH AN ENQUIRY SHOULD BE CONDUCTED NOT BASED ON ANY ARTIFICIAL CONSIDERATIONS BUT FROM THE POINT OF VIEW OF THE PERSONS OCCUPYING THE BUILDING. THE NUMBER OF PERSO NS OR DIFFERENT BRANCHES OF FAMILIES RESIDING IN THE BUILDING, THE REQUIREMENTS OF THE PERSONS OCCUPYING THE BUILDING CONSISTENT WITH THEI R SOCIAL STANDING, ETC., ARE RELEVANT FOR THE PURPOSE. IF ANY SURPLUS IS ARR IVED AT ON SUCH ENQUIRY, THEN THE EXTENT OF SUCH SURPLUS LAND MAY NOT QUALIF Y TO BE TREATED AS LAND APPURTENANT TO THE BUILDING; (3) IF THERE IS ANY EV IDENCE TO INDICATE THAT ANY PORTION OF THE LAND CONTIGUOUS TO THE BUILDING WAS PUT TO USER OTHER THAN THE ENJOYMENT OF THE BUILDING, THEN THAT PROVIDES A SAF E INDICATION REGARDING THE :-11-: ITA NO. 886/MDS/2017 EXTENT OF LAND PUT FOR SUCH USER. FOR INSTANCE, THE LAND USED BY THE OCCUPIERS FOR COMMERCIAL, AGRICULTURAL AND HORTICUL TURAL PURPOSES, ALTHOUGH FORMING PART OF THE LAND ADJACENT TO THE BUILDING, DOES NOT QUALIFY TO BE TREATED AS LAND APPURTENANT TO THE BUILDING; (4) IF THE OWNER OR OCCUPIER IS DERIVING ANY INCOME FROM THE LAND WHICH IS NOT LIAB LE TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY UNDER S. 22 OF THE I.T. ACT, THEN THE EXTENT OF SUCH LAND DOES NOT QUALIFY TO BE TREATED AS LAND AP PURTENANT TO THE BUILDING; AND (5) ANY MATERIAL POINTING TO THE ATTEMPTED USER OF THE BUILDING FOR PURPOSES OTHER THAN THE EFFECTIVE AND PROPER ENJOYM ENT OF THE HOUSE WOULD ALSO AFFORD A SAFE GUIDE TO DETERMINE THE EXTENT OF SURPLUS LAND NOT QUALIFYING TO BE TREATED AS LAND APPURTENANT TO THE BUILDING. 19. THE ABOVE TESTS ARE ILLUSTRATIVE AND BY NO MEAN S EXHAUSTIVE. IT IS FOR THE TAX AUTHORITIES TO APPLY THEIR MIND PROPERLY TO THE FACTS OF EACH CASE AND TO DEVISE TESTS SUITABLE AND APPROPRIATE TO EACH CASE. 20. IN THE PRESENT CASE, IT IS STATED THAT THE TOTA L EXTENT OF LAND IS 13,029 SQ. YARDS AND THIS INCLUDED THE LAND ON WHICH THE B UILDING IS CONSTRUCTED. IT IS ALSO STATED THAT FOUR CO-OWNERS ARE SEPARATELY R ESIDING IN THIS BUILDING PRIOR TO ITS ACQUISITION. ALTHOUGH THE AAC DID NOT SPELL OUT HOW THE LAND APPURTENANT SHOULD BE DETERMINED, HE MERELY DIRECTE D THE ITO TO MAKE AN ENQUIRY TO DETERMINE THE EXTENT OF LAND THAT IS REA SONABLY APPURTENANT TO THE BUILDING. WE DO NOT FIND ANY ERROR IN THE DIREC TION GIVEN BY THE AAC. WHILE IT IS TRUE, AS SRI PARVATHARAO, LEARNED COUNS EL FOR THE ASSESSEE, CONTENDS, THAT THERE IS NO MATERIAL ON RECORD TO IN DICATE THAT THE LAND WAS PUT TO ANY NON-RESIDENTIAL USER AND THE BUILDING AN D LAND WAS NOT TREATED AS A SINGLE UNIT IN THE PAST, IT IS CLEAR THAT THE ITO DID NOT APPLY HIS MIND TO THE MATTER. IF THE ITO APPLIES HIS MIND AND MAKES AN AP PROPRIATE ENQUIRY TO DETERMINE THE EXTENT OF LAND APPURTENANT TO THE BUI LDING IN THE PRESENT CASE, HE MAY CONCEIVABLY COME TO A CONCLUSION THAT THE ENTIRE EXTENT OF LAND APPURTENANT TO THE BUILDING COULD BE TREATED A S 'LAND APPURTENANT' TO THE BUILDING. WE SEE NO REASON WHY THIS ENQUIRY DIR ECTED BY THE AAC SHOULD BE SHUT OUT, INASMUCH AS THERE IS NO LEGAL INFIRMIT Y IN GIVING A DIRECTION TO THE ITO MAKE AN APPROPRIATE ENQUIRY. IN OUR OPINION , THE TRIBUNAL WAS IN :-12-: ITA NO. 886/MDS/2017 ERROR IN COMING TO THE CONCLUSION THAT THE AAC WAS NOT JUSTIFIED IN DIRECTING THE ITO TO ENQUIRE INTO THE MATTER FOR THE ABOVE PU RPOSE. 21. IN THE ABSENCE OF NECESSARY DETAILS, IT IS NOT POSSIBLE FOR THIS COURT TO INDICATE ANY ANSWER TO THE QUESTION REFERRED, THAT IS TO SAY, WHETHER THE ENTIRE LAND OR ANY PART OF IT COULD BE TREATED AS A PPURTENANT TO THE BUILDING FOR THE PURPOSE OF APPLYING THE PROVISIONS OF S. 54 OF THE I.T. ACT. WE, THEREFORE, RETURN THE REFERENCE UNANSWERED WITH A D IRECTION THAT THE ITO SHALL MAKE AN ENQUIRY INTO THE MATTER BEARING IN MI ND THE PRINCIPLES SET OUT ABOVE AND COME TO AN APPROPRIATE CONCLUSION REGARDI NG THE EXTENT OF LAND APPURTENANT TO THE BUILDING. 6.5 THOUGH, THE HONBLE HIGH COURT HAS LAID THE TES TS TO BE APPLIED FOR THE DETERMINATION OF THE EXTENT OF LAND APPURTENANT TO A BUILDING IN THE CASE INVOLVING SALE OF LAND AND BUILDINGS, IN SUB PARA 1 8, SUPRA, WE ARE OF THE VIEW THAT THEY COULD VERY WELL BE APPLIED IN THE CASE OF PURCHASE OF LAND AND CONSTRUCTION OF HOUSE AS IS INVOLVED IN THIS CASE ALSO. FURTHER, IN THE CASE OF SMT. ASHA GEORGE VERSUS INCOME-TAX OFFICER, WARD 2(1), THRISSUR, IN IT APPE AL NO. 114 OF 2012, DT 16.01.2013 IN THE HOBLE HIGH C OURT OF KERALA, THE FACTS OFTHAT CASE WAS AS UNDER : ASSESSEE RETURNED NIL INCOME FOR THE ASSESSMENT YE AR 2005- 2006. ACTING ON INFORMATION THAT THE ASSESSEE HAD TRANSACTED A P ROPERTY ON 05.11.2004, THE ASSESSMENT WAS REOPENED. APPELLANT HAD 1/4TH SH ARE IN 1.10 ACRES OF LAND IN AYYANTHOLE VILLAGE. THE SAME WAS SOLD FOR R S. 44 LAKHS ON 14.11.2004. THE ASSESSEE RECEIVED RS.11 LAKHS AS HE R SHARE. IN HER RETURN, SHE COMPUTED HER CAPITAL GAIN AT NIL AFTER CLAIMING INDEXATION ON COST OF ACQUISITION AND COST OF IMPROVEMENT AND FURTHER CLA IMING EXEMPTION UNDER SECTION 54F OF THE INCOME TAX ACT (HEREINAFTER REFE RRED TO AS THE ACT) ON :-13-: ITA NO. 886/MDS/2017 THE BASIS OF A PROPERTY PURCHASED AT KOOTHATTUKULAM , A FARM HOUSE WITH 1.92 ACRES OF LAND FOR RS.11 LAKHS ON 28.3.2005. DU RING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE APPELLANT TOOK UP THE C ONTENTION THAT SHE IS ENTITLED TO EXEMPTION UNDER SECTION 54B OF THE ACT. THE TRIBUNAL HAS AFFIRMED THE FINDINGS OF THE AUTHORITIES THAT THE A PPELLANT IS NOT ENTITLED TO THE BENEFIT OF SECTION 54B FOR THE REASON THAT THE PROPERTY AT AYYANTHOLE VILLAGE WHICH SHE SOLD WAS NOT USED FOR AGRICULTURA L PURPOSES FOR A PERIOD OF TWO YEARS PRIOR TO THE DATE OF THE SALE AS REQUIRED UNDER SECTION 54B OF THE ACT. IT IS THE FURTHER FINDING OF THE TRIBUNAL THAT THE APPELLANT IS ENTITLED ONLY TO TAKE RS.2 LAKHS AS THE COST OF ACQUISITION OVER AND ABOVE RS.1 LAKH ALLOWED AS VALUE OF SUPER-STRUCTURE UNDER SECTION 5 4F OF THE ACT. IT IS BEING AGGRIEVED BY THE SAME, THE ASSESSEE WAS BEFORE TH E HONOURABLE HIGH COURT OF KERALA. 6.6 THE RELEVANT PORTION OF THE ORDER OF THE HONBL E HIGH COURT IS EXTRACTED AS UNDER : 11. NEXT, IT IS CONTENTED THAT THE OFFICER SHOULD HAVE GRANTED, AT ANY RATE, THE BENEFIT OF EXEMPTION U/S. 54F OF THE ACT IN REGARD TO THE VALUE OF THE PROPERTY, NAMELY THE OFFICER SHOULD HAVE DEDUCT ED THE ENTIRE RS. 11 LAKHS PAID FOR PURCHASING 1 ACRE 92 CENTS WITH THE FARM HOUSE. 12. SECTION 54F IS INTENDED TO ENCOURAGE CONSTRUCT ION OF OR ACQUISITION OF RESIDENTIAL HOUSE WITH THE AID OF TH E PROCEEDS FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSET, WHICH IS N OT A RESIDENTIAL HOUSE. THE PROVISION CONTEMPLATED COMPUTING THE COST OF TH E RESIDENTIAL BUILDING, BUT THE VALUE OF THE PLOT ON WHICH THE FARM HOUSE S TANDS AND THE AND APPURTENANT COULD ALSO BE CONSIDERED. THE TRIBUNAL HAS CATEGORICALLY FOUND THAT THE APPELLANT HAS NOT PRODUCED MATERIAL TO SHO W THAT THE ENTIRE AREA OF 1.92 ACRES SHOULD BE CONSIDERED AS LAND APPURTENANT TO IT. IT IS IN SUCH CIRCUMSTANCES, THE TRIBUNAL MADE AN ESTIMATION AND DIRECTED THAT THE VALUE OF THE PLOT ON WHICH THE FARM HOUSE IS LOCATED AND THE LAND APPURTENANT BE FIXED AS RS. 2 LAKHS. WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE :-14-: ITA NO. 886/MDS/2017 APPELLANT THAT THE VALUE OF THE ENTIRE LAND MUST BE CONSIDERED IN ARRIVING AT THE VALUE OF THE RESIDENTIAL BUILDING. WE FIND NO ILLEGALITY COMMITTED BY THE TRIBUNAL. 6.7 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AN D FOLLOWING THE ABOVE DECISIONS , WE DEEM IT FIT TO RESTORE THE MATTER FOR THE DETERMINATION OF THE EXTENT OF LAND APPURTENANT TO A BUILDING (IN THIS C ASE THE HOUSE) TO THE AO AND DIRECT HIM TO RE-DETERMINE THE ELIGIBLE DEDUCTIO N U/S 54F , AFRESH , ON THE LINES ON WHICH THE HONOURABLE HIGH COURTS HAVE LAID THE GUIDELINES, SUPRA, AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 7. IN THE RESULT, THE REVENUES APPEAL IS TREATED A S PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON MONDAY, THE 09 TH DAY OF OCTOBER, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) !' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 09 TH OCTOBER, 2017 JPV &)1232 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ) (/CIT(A) 4. 4 /CIT 5. 2) /DR 6. 7 /GF