Sri T.Sri Rama Krishnayya, Mandapeta V. THE ACIT, CENTRAL CIRCLE, Rajahmundry

ITA 97/VIZ/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6716 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 24-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

ITA NO.97/VIZAG/2014 SRI T. SRIRAMAKRISHNAYYA, MANDAPETA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.97/VIZAG/2014 ( / ASSESSMENT YEAR: 2009-10) SRI T. SRI R AMA K RISHNAYYA, MANDAPETA ACIT, CENTRAL CIRCLE, RAJAHMUNDRY [PAN NO. AEGPT8308L ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M.K. SETHI, DR / DATE OF HEARING : 30.06.2017 / DATE OF PRONOUNCEMENT : 06.09.2017 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE CIT(A), GUNTUR DATED 27.12.2013 FOR THE ASSESSMENT YEAR 2009-10. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE ENTERED INT O A DEVELOPMENT AGREEMENT WITH SHRI G.V.V.S.L.N. SUBBA RAO, MANAGIN G PARTNER OF M/S. BALAJI BUILDERS FOR CONSTRUCTION OF APARTMENTS IN T HE NAME OF SAI ITA NO.97/VIZAG/2014 SRI T. SRIRAMAKRISHNAYYA, MANDAPETA 2 HASITHA RESIDENCY CONSISTING OF 32 FLATS. THE ASS ESSEE HAS TRANSFERRED LAND ADMEASURING 1011 SQ.YDS. SITUATED AT D.NO.65-2 -6/4, NARASIMHA NAGAR, KAKINADA. IN LIEU OF THE TRANSFER OF 1011 S Q.YDS., THE ASSESSEE HAS RECEIVED 9 FLATS ON DIFFERENT FLOORS. THE A.O. HELD THAT THE ASSESSEE HAS TRANSFERRED A LAND WHEN HE SIGNED A DEVELOPMENT AGREEMENT WITH DEVELOPER/BUILDER FOR CONSTRUCTION OF APARTMENT, SI MULTANEOUSLY HE HANDED OVER THE POSSESSION OF THE LAND. ACCORDINGL Y, THE A.O. HAS CALCULATED THE CAPITAL GAINS BY CONSIDERING THE CON SIDERATION RECEIVED BY THE ASSESSEE FOR HIS SHARE OF 9 FLATS, WHICH WAS DE TERMINED AT ` 41,60,143/- ON APPEAL, THE LD. CIT(A) CONFIRMED TH E ORDER OF THE A.O. BY OBSERVING AS UNDER: 8. THE ISSUE RAISED BY THE APPELLANT IS WHETHER TH E TERM 'A RESIDENTIAL HOUSE' USED IN SECTION 54 AMOUNTS TO A SINGLE RESID ENTIAL HOUSE PROPERTY OR MAY INCLUDE MULTIPLE RESIDENTIAL UNITS. AS DISCU SSED ABOVE, THE APPELLANT HAS RELIED ON CERTAIN DECISIONS OF THE HO N'BLE KARNATAKA HIGH COURT AND HON'BLE DELHI HIGH COURT. IN THE CASE OF CIT V. SMT. K.G.RUKMINIAMMA, THE KARNATAKA HIGH COURT ALSO FOUN D THAT THE FOUR FLATS RECEIVED BY THE ASSESSEE WERE ADJACENT TO ONE ANOTH ER AND RELYING ON ITS OWN DECISION IN THE CASE OF CIT V. D.ANANDA BASAPPA , IT ALLOWED EXEMPTION U/S.54. SIMILARLY, IN THE CASE OF CIT VS. GITA DUGGAL, THE HON'BLE DELHI HIGH COURT HELD THAT THE EXPRESSION A RESIDENTIAL HOUSE DOES NOT MEAN A RESIDENTIAL UNIT AND IT WENT ON TO HOLD THAT AS LONG AS THE ASSESSEE ACQUIRES A BUILDING, WHICH MAY CONSIST OF SEVERAL UNITS, WHICH CAN ALSO BE USED INDEPENDENTLY, THE REQUIREMENTS OF SECTION 54 SHALL HAVE BEEN SATISFIED. SIMILARLY, IN THE CASE OF CIT VS. SYED ALI ADIL [2013] 33 TAXMANN.COM 212, THE HONBLE ANDHRA PRADESH HIGH CO URT HAS HELD THAT THE EXPRESSION A RESIDENTIAL HOUSE COULD MEAN A B UILDING OF RESIDENTIAL NATURE AND WHERE THE ASSESSEE HAS PURCHASED TWO RES IDENTIAL FLATS IN THE SAME BUILDING, THE HON'BLE A.P. HIGH COURT HELD THA T THE SAID ASSESSEE WAS ENTITLED TO EXEMPTION U/S.54. HOWEVER, IT SHOUL D BE NOTED THAT IN THE SAID CASE, THE FLATS WERE SITUATED SIDE BY SIDE AND THE BUILDER HAD EFFECTED MODIFICATION OF THE FLATS TO MAKE IT INTO ONE UNIT DESPITE THE FACT THAT THE ITA NO.97/VIZAG/2014 SRI T. SRIRAMAKRISHNAYYA, MANDAPETA 3 FLATS WERE PURCHASED BY SEPARATE SALE DEEDS. THIS H AS BEEN CONSIDERED BY THE HON'BLE A.P. HIGH COURT WHILE ARRIVING AT ITS D ECISION. 9. ALL THE ABOVE DECISIONS REFER TO MULTIPLE RESIDE NTIAL UNITS, WHICH ARE CONTIGUOUS TO EACH OTHER AND MAY BE USED EITHER IND EPENDENTLY OR AS A SINGLE RESIDENTIAL DWELLING PLACE. THE IMPORTANT AS PECT IS THAT WHAT IS PURCHASED IS ONE RESIDENTIAL PROPERTY IRRESPECTIVE OF THE SIZE AND WHICH CAN BE CONSIDERED AS A RESIDENTIAL HOUSE. HENCE, AN ENTIRE BUILDING CONSISTING OF MANY FLATS MAY BE A RESIDENTIAL HOUSE . ON THE OTHER HAND, IF A FEW FLATS IN THE SAID BUILDING HAVE BEEN PURCHASE D AND THERE IS NO PROXIMITY BETWEEN THE SAID FLATS, IT CANNOT BE HELD THAT ALL THE FLATS COMBINED ARE A RESIDENTIAL HOUSE. IN THE CASE OF TH E APPELLANT, THE NINE FLATS RECEIVED BY HIM ARE LOCATED ON DIFFERENT FLOO RS AND NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW CONTIGUITY BETWEEN TWO OR MORE FLATS. THUS, IT CANNOT BE HELD THAT ALL THE FLATS RECEIVED BY THE A PPELLANT IN THE SAID BUILDING FORM A CONTIGUOUS WHOLE AND HENCE EXEMPTIO N U/S.54 OR 54F CANNOT BE MADE AVAILABLE IN RESPECT OF THE SAID NIN E FLATS. SECONDLY, EXEMPTION U/S.54 IS AVAILABLE ONLY IN CASE THE CAPI TAL ASSET TRANSFERRED IS A RESIDENTIAL HOUSE. IN THE INSTANT CASE, WHAT HAS BEE N TRANSFERRED IS A VACANT PIECE OF LAND AND NOTHING HAS BEEN BROUGHT O N RECORD TO SUGGEST THAT THE TRANSFERRED CAPITAL ASSET WAS A RESIDENTIA L HOUSE USED BY THE APPELLANT OR HIS FAMILY. SIMILARLY, EXEMPTION U/S.5 4F IS AVAILABLE ON TRANSFER OF A LONG TERM CAPITAL ASSET PROVIDED THE INVESTMENT IS IN A RESIDENTIAL HOUSE SUBJECT, HOWEVER, TO THE FACT THA T THE ASSESSEE DOES NOW OWN MORE THAN ONE RESIDENTIAL HOUSE PRIOR TO IN VESTMENT IN THE NEW RESIDENTIAL HOUSE/NEW ASSET. HERE AGAIN, THE APPELL ANT HAS BROUGHT NOTHING ON RECORD TO SUGGEST THAT PRIOR TO RECEIVIN G THE ABOVE NINE.JIS, HE OWNED ONLY ONE RESIDENTIAL HOUSE AND HENCE BASED ON THE FACTS AVAILABLE ON RECORD, THE APPELLANT CANNOT BE HELD AS ENTITLED TO EXEMPTION U/S 54F. HENCE, THE ADDITION MADE BY THE A.O. IS UPHELD AND THE APPELLANTS APPEAL ON GROUNDS NO.1, 2 & 3 STANDS RE JECTED. 3. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUB MITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF ITO VS. SRI RAVURI SAI CHAITANYA IN ITA NO.498/VIZAG/2013 BY ORDER DATED 2 8.3.2017, WHEREIN THE TRIBUNAL HAS HELD THAT IN PURSUANCE TO THE AGRE EMENT ASSESSEE TRANSFERRED THE LAND AND RECEIVED FLATS. THE ASSES SEE IS ELIGIBLE FOR ITA NO.97/VIZAG/2014 SRI T. SRIRAMAKRISHNAYYA, MANDAPETA 4 EXEMPTION U/S 54F OF THE INCOME TAX ACT, 1961 (HERE INAFTER CALLED AS 'THE ACT') FOR ALL THE FLATS BUT NOT FOR A SINGLE F LAT. 4. ON THE OTHER HAND, THE LD. D.R. SUPPORTED THE OR DER PASSED BY THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER ASSES SEE IS ENTITLED FOR THE BENEFIT U/S 54F OF THE ACT FOR A SINGLE FLAT OR MUL TIPLE FLATS. THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SRI RAVURI SAI CHAITANYA (SUPRA) HAS ALREADY CONSIDERED THIS ISSUE AND HELD AS UNDER: 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE M ATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX WHICH LEADS TO THE DISPUTE IS THAT T HE ASSESSEE ALONG WITH OTHER 12 CO-OWNERS ENTERED INTO A DEVELOPMENT AGREE MENT WITH SHRI SAI VENKATA RAMANA CONSTRUCTIONS FOR DEVELOPMENT OF A P IECE 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 A SSESSEE, EXEMPTION U/S 54F OF THE ACT IS ALLOWABLE EVEN IF THE FLATS/A PARTMENTS ARE SITUATED IN DIFFERENT BLOCKS OR TOWERS. THE A.O. HAS DISALLOWE D EXEMPTION CLAIMED U/S 54F OF THE ACT, ON THE GROUND THAT THE ASSESSEE HAS LET OUT THE APARTMENT TO EDUCATIONAL INSTITUTION FOR THE PURPOS E 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 RESIDENTI AL 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 ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT FOR ALL THE FLATS RECEIVED IN PURSUANCE OF A DEVELOPMENT 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 (SUPR A), HAS CONSIDERED THE ITA NO.97/VIZAG/2014 SRI T. SRIRAMAKRISHNAYYA, MANDAPETA 5 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 SHOUL D BE OF RESIDENTIAL NATURE AND A SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGLE NUMBER AND WHERE AN ASSESSEE HAD PURCHASED TWO RESIDENTIAL FLA TS, 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 RES PECT TO THE RESIDENTIAL HOUSE CONSISTING OF SEVERAL INDEPENDENT UNITS. A S IMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE HIGH COURT OF MADRAS, IN T HE CASE OF CIT VS. GUMANMAL JAIN (SUPRA), WHEREIN THE HONBLE HIGH COU RT OBSERVED THAT ALL THE FLATS ARE A PRODUCT OF ONE DEVELOPMENT AGREEMEN T 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 ADDRE SS/LOCATION, IT DOES NOT DISENTITLE THE ASSESSEE FROM GETTING THE BENEFIT OF SECTION 54F OF THE ACT. IN YET ANOTHER CASE, THE HONBLE HIGH COURT OF MADRA S IN THE CASE OF CIT VS. V.R. KARPAGAM (2015) 373 ITR 127, HELD THAT PRI OR TO AMENDMENT U/S 54F BY FINANCE ACT, 2004 W.E.F. 1.4.2015, WITH REGA RD TO WORD A, A RESIDENTIAL HOUSE INCLUDE MULTIPLE FLATS/RESIDENTIA L UNITS, WHERE UNDER THE DEVELOPMENT AGREEMENT ASSESSEE WAS ENTITLED TO RECE IVE CERTAIN BUILT-UP AREA, WHICH GOT TRANSLATED INTO FIVE FLATS, EXEMPTI ON U/S 54F IN RESPECT OF FIVE FLATS IN A MULTI-STOREY CONSTRUCTION WOULD BE AVAILABLE. 13. THUS, THE LEGAL PROPOSITION BEFORE THE AMENDMEN T 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 LA ND OWNER RECEIVES NUMBER OF FLATS, EVEN THOUGH THEY ARE LOCATED IN DI FFERENT BLOCKS AND DIFFERENT TOWERS, ONCE THEY ARE IN SAME ADDRESS/LOC ATION AND ALL THE FLATS ARE A PRODUCT OF ONE DEVELOPMENT AGREEMENT, THEN TH E ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT, IN RESPECT OF ALL THE FLATS. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR E XEMPTION U/S 54F OF THE ACT IN RESPECT OF ALL THE FLATS RECEIVED IN PURSUAN CE OF JOINT DEVELOPMENT AGREEMENT. THE REVENUE HAS FAILED TO BRING ON RECO RD ANY CONTRARY DECISION 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 FOL LOWING THE DECISION OF HONBLE A.P. HIGH COURT, IN THE CASE OF CIT VS. SYE D ALI ADIL (SUPRA), WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR E XEMPTION U/S 54F OF THE ACT, TOWARDS ALL THE FLATS RECEIVED IN PURSUANCE TO DEVELOPMENT AGREEMENT 6. TAKING INTO CONSIDERATION ALL THE FACTS AND CIRC UMSTANCES OF THE CASE AND BY FOLLOWING THE COORDINATE BENCH OF THE T RIBUNAL, THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF THE COORDINATE ITA NO.97/VIZAG/2014 SRI T. SRIRAMAKRISHNAYYA, MANDAPETA 6 BENCH IN THE CASE OF ITO VS. SRI RAVURI SAI CHAITAN YA (SUPRA). IN VIEW OF THE ABOVE, THIS APPEAL FILED BY THE ASSESSEE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 6 TH SEPT17. SD/- SD/- ( . . ' ) ( . ) (D.S. SUNDER SINGH) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER # /VISAKHAPATNAM: ' /DATED : 06.09.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SRI T. SRIRAMAKRISHNAYYA, D.NO.9 -2-25, NEAR BURUGUNTA TANK, MANDAPETA. 2. / THE RESPONDENT THE ACIT, CENTRAL CIRCLE, RAJAH MUNDRY 3. + / THE CIT(CENTRAL), HYDERABAD 4. + ( ) / THE CIT (A), GUNTUR 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM