Sri Nekkundi Munireddy Thulasiram, Bangalore V. The Deputy commissioner of Income Tax, Circle - 4(3)(1), Bangalore

ITA 985/BANG/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3323 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-11-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 08-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWAL BENGALURU
• Assessee Lawyers: V SRINIVASAN
• Keywords: Capital asset; Cost of acquisition; Fair market value; Valuation report
• Section: 250; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N V VASUDEVAN, VICE PRESIDENT AND SHRI A K GARODIA, ACCOUNTANT MEMBER ITA NO.985/BANG/2019 ASSESSMENT YEAR : 2012-13 SHRI NEKKUNDI MUNIREDDY THULASIRAM #12, BEHIND GOVERNMENT SCHOOL, MARATHALLI POST, BENGALURU 560 037. PAN: AAUPT 3097I VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4(3)(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI SUNIL KUMAR AGARWAL, ADDL.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 07.11.2019 DATE OF PRONOUNCEMENT : 13.11.2019 O R D E R PER N V VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER D ATED 29.03.2019 OF THE CIT(APPEALS), BANGALORE-9, BANGALORE RELATI NG TO ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE IS AN INDIVIDUAL. FOR THE AY 2012- 13, HE FILED A RETURN OF INCOME DECLARING AN INCOME OF RS.33,94,370 WHICH WAS INCOME FROM HOUSE PROPERTY. THE AO NOTICED THAT DURING THE PRE VIOUS YEAR, THE ASSESSEE SOLD PROPERTY BEING FLAT B-105, HABITAT SP LENDOUR, FOR A SALE ITA NO. 985/BANG/2019 PAGE 2 OF 9 CONSIDERATION OF RS.52 LAKHS UNDER SALE DEED DATED 24.2.2012. THE ASSESSEE INVESTED THE SALE CONSIDERATION BY PAYING AN ADVANCE FOR PURCHASE OF RESIDENTIAL SITE BEARING NO.16 & 25, HO RAMAVU VILLAGE, BANGALORE. SUBSEQUENTLY, THE SALE DEED WAS REGISTE RED ON 13.8.2012. THE ASSESSEE CLAIMED EXEMPTION U/S. 54 OF THE INCOM E-TAX ACT, 1961 [THE ACT] ON THE GROUND THAT THE ENTIRE SALE CONSIDERAT ION WAS USED IN ACQUIRING A SITE OVER WHICH THE ASSESSEE INTENDED TO PUT UP C ONSTRUCTION OF A RESIDENTIAL HOUSE. IT IS NOT DISPUTED THAT THE TIM E LIMIT FOR CONSTRUCTION OF HOUSE PROPERTY TO CLAIM EXEMPTION U/S. 54 OF THE AC T IS A PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER OF THE CAPITAL ASSET, WHI CH RESULTED IN LONG TERM CAPITAL GAIN AND THAT WITHIN THE SAID PERIOD, THE A SSESSEE DID NOT PUT UP ANY CONSTRUCTION. 3. THE AO DENIED THE BENEFIT OF DEDUCTION U/S. 54 O F THE ACT AND BROUGHT THE ENTIRE SALE CONSIDERATION OF RS.52 LAKH S RECEIVED ON TRANSFER OF THE PROPERTY TO TAX AS LONG TERM CAPITAL GAIN. 4. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT A S EARLY AS 1.7.2013, THE ASSESSEE OBTAINED PLAN SANCTION FOR CONSTRUCTIO N OF RESIDENTIAL HOUSE OVER THE SITE FROM BBMP WHICH HE HAD PURCHASED BY U TILIZING THE SALE CONSIDERATION ON SALE OF THE FLAT. THE ASSESSEE SU BMITTED THAT FOR VARIOUS REASONS, CONSTRUCTION OF THE RESIDENTIAL HOUSE COUL D NOT BE PROCEEDED WITH, BUT SINCE THE ENTIRE SALE CONSIDERATION WAS INVESTE D IN THE PURCHASE OF THE SITE, ASSESSEE SHOULD BE ENTITLED TO EXEMPTION U/S. 54 OF THE ACT. THIS PLEA WAS REJECTED BY THE CIT(A) FOR THE REASON THAT THE ASSESSEE DID NOT SATISFY THE CONDITION THAT CONSTRUCTION SHOULD BE COMPLETED WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF SALE OF THE FLAT AND THIS CO NDITION WAS MANDATORY U/S. 54 OF THE ACT TO CLAIM EXEMPTION. ITA NO. 985/BANG/2019 PAGE 3 OF 9 5. THE NEXT SUBMISSION MADE BY THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE AO WAS NOT JUSTIFIED IN BRINGING TO TAX TH E ENTIRE SALE CONSIDERATION ON SALE OF THE FLAT AND THAT U/S. 48 OF THE ACT, CA PITAL GAIN HAS TO BE COMPUTED BY REDUCING FROM THE FULL VALUE OF CONSTRU CTION RECEIVED ON TRANSFER, COST OF ACQUISITION OF THE PROPERTY AND E XPENSES INCURRED IN CONNECTION WITH THE TRANSFER. THE ASSESSEE GAVE TH E FOLLOWING COMPUTATION OF LONG TERM CAPITAL GAIN BEFORE THE CIT(A):- PARTICULARS AMOUNT GROSS SALE CONSIDERATION RECEIVED ON SALE OF FLAT NO.B 105, HABITAT SPLENDOUR, MAHADEVAPURA, K R PURAM, BENGALURU 52,00,000 LESS: EXPENDITURE ON TRANSFER NET SALE CONSIDERATION OF FLAT 52,00,000 LESS: INDEXED COST OF ACQUISITION AND IMPROVEMENT TOE COST OF ACQUISITION OF THE AFORESAID FLAT IS ADOPTED AS PER VALUATION REPORT DATED 21.02.2015 ISSUED BY A REGISTERED VALUER @ RS.19,34,100/- (RS.19,34,100 * 785/497) (CII: FY 2005-06 497 & FY 2011-12 785) 30,54,866 LONG TERM CAPITAL GAIN 21,45,134 TAX ON LONG TERM CAPITAL GAIN @ 20% 4,29,027 6. BEFORE THE CIT(APPEALS), THE ASSESSEE HAS ALSO G IVEN AN ALTERNATIVE COMPUTATION OF LONG TERM CAPITAL GAIN BY SEPARATELY WORKING OUT THE COST OF LAND AND COST OF SUPER BUILT-UP AREA SEPARATELY AND ARRIVING AT A LONG TERM CAPITAL GAIN OF NIL AND THE SAID COMPUTATION IS AS FOLLOWS:- ITA NO. 985/BANG/2019 PAGE 4 OF 9 1 GROSS SALE CONSIDERATION RECEIVED ON SALE OF FLAT NO.B-105 5,200,000 2 COST OF ACQUISITION OF FLAT NO.B-105 PARTICULARS AREA COST PER SFT COST OF ACQUISITION LAND 472 50 23,600 SBA 1,315 2,930 3,852,950 TOTAL 3,876,550 3 INDEXED COST OF ACQUISITION PARTICULARS AREA COST OF ACQUISITION INDEX INDEXED COST LAND 472 23,600 785/100 185,260 SBA 1,315 3,852,950 785/497 6,085,645 TOTAL 6,270,905 4 LONG TERM CAPITAL GAIN NIL 7. THE CIT(APPEALS) NOTICED THAT AS PER THE FIRST C OMPUTATION OF CAPITAL GAIN FILED BY THE ASSESSEE WHICH WAS SUPPORTED BY A REPORT OF REGISTERED VALUER, THE VALUE OF THE BUILT-UP AREA WAS TAKEN AS RS.1200 PER SFT. HE WAS OF THE VIEW THAT RS.1200 PER SFT. WAS ON THE HIGHER SIDE. HE DIRECTED THE AO TO CONSIDER THE COMPARABLE SALE DEEDS OR COMPARA BLE JOINT DEVELOPMENT AGREEMENTS OF THE CORRESPONDING YEAR AN D IF THAT IS NOT POSSIBLE, ADOPTED THE GUIDELINE VALUE AS PUBLISHED BY THE STATE GOVT. FOR ARRIVING AT THE COST OF CONSTRUCTION IN BANGALORE F OR THE FY 2005-06. 8. AS FAR AS REVISED COMPUTATION OF CAPITAL GAIN FI LED BY THE ASSESSEE BEFORE THE CIT(APPEALS) IN WHICH NIL CAPITAL GAIN W AS COMPUTED, THE CIT(A) HAS NOT GIVEN ANY SPECIFIC FINDING, BUT DIRECTED TH E AO TO COMPUTE THE LONG ITA NO. 985/BANG/2019 PAGE 5 OF 9 TERM CAPITAL GAIN AFTER FACTUAL VERIFICATION. AGGR IEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS PREFERRED THE PRESENT APPE AL BEFORE THE TRIBUNAL. 9. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS:- ITA NO. 985/BANG/2019 PAGE 6 OF 9 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. AS FAR A S EXEMPTION CLAIMED BY THE ASSESSEE U/S. 54 IS CONCERNED, THE ASSESSEE HAS NOT SATISFIED THE CONDITION THAT THE CONSTRUCTION OF NEW ASSET HAS TO BE COMPLIED WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER. THIS CONDITION HAVING NOT BEEN SATISFIED IN THE CASE OF ASSESSEE, THE DEDUCTION U/ S. 54 OF THE ACT WAS RIGHTLY DENIED BY THE REVENUE AUTHORITIES. EVEN TO DAY, THERE HAS BEEN NO CONSTRUCTION ON THE SITE PURCHASED BY THE ASSESSEE AND THEREFORE THE ACTION OF THE REVENUE AUTHORITIES IN DENYING THE BE NEFIT OF EXEMPTION U/S. 54 OF THE ACT IS UPHELD. 11. WE ARE OF THE VIEW THAT THE LONG TERM CAPITAL G AIN ON SALE OF THE FLAT HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISION S OF SECTION 48 OF THE ACT. THE FACTS WHICH WE NOTICE IN THIS REGARD FROM THE STATEMENTS FILED BY THE ASSESSEE BEFORE THE CIT(APPEALS) IS THAT THE FL AT WHICH WAS SOLD BY THE ASSESSEE DURING THE PREVIOUS YEAR WAS ACQUIRED BY T HE ASSESSEE UNDER A JOINT DEVELOPMENT AGREEMENT DATED 7.3.2003. THE AS SESSEE HAD 1/3 RD SHARE IN 2 ACRES 35 GUNTAS WHICH WAS GIVEN TO M/S. GOPALAN ENTERPRISES UNDER A JOINT DEVELOPMENT AGREEMENT AND SUPPLEMENTA RY AGREEMENT DATED 7.3.2004 AND 27.4.2004 RESPECTIVELY. THE ASSESSEE GOT 13 FLATS AND 4 CAR PARKS FROM THE DEVELOPER. THE ASSESSEE RETAINED 77 08 SFT. AND UNDIVIDED INTEREST IN LAND. 12. THE ASSESSEE WORKED OUT THE COST OF LAND AND TH E COST OF SUPER BUILT-UP AREA OF FLAT B 105 THAT WAS GOT UNDER THE JOINT DEVELOPMENT AGREEMENT AND WHICH WAS SOLD DURING THE PREVIOUS YE AR IN THE FOLLOWING MANNER:- ITA NO. 985/BANG/2019 PAGE 7 OF 9 1. FLATS RECEIVED BY THE APPELLANT S.NO. FLAT NO. SBA (IN SFT) UDI 1. H-302 2,020 708 2. C-208 1,840 472 3. C-M08 1,290 472 4. A-M10 1,290 472 5. H-L02 1,290 472 6. D-M07 1,290 472 7. A-M13 1,290 472 8. D-002 1,265 472 9. B-105 1,315 472 10. C-M03 1,265 472 11. D-M02 1,265 472 12. D-007 1,275 472 13. A-304 2,545 708 14. BASEMENT 250 - TOTAL 18,975 6,608 2. EXTENT OF LAND TRANSFERRED TO THE DEVELOPER. 111,367 3. FAIR MARKET VALUE (FMV) OF THE ABOVE @ RS.500 PER SFT. 55,683,500 4. COST PER SFT OF THE SUPER BUILT-UP AREA, BEING THE EXCHANGE VALUE 2,930 13. AS FAR AS THE AFORESAID COMPUTATION OF LONG TER M CAPITAL GAIN IS CONCERNED, THE SAME IS A SECOND COMPUTATION OF THE LONG TERM CAPITAL GAIN FILED BY THE ASSESSEE BEFORE THE CIT(A) AND THIS IS NOT SUPPORTED BY A REPORT OF ANY REGISTERED VALUER. THE FLAT THAT WAS SOLD BY THE ASSESSEE COMPRISES OF UNDIVIDED SHARE OF INTEREST IN THE LAN D OF 472 SFT. AND THE BUILT- ITA NO. 985/BANG/2019 PAGE 8 OF 9 UP AREA OF THE FLAT IS 1315 SFT. THE LAND WAS PURC HASED PRIOR TO 1.4.1981 AND THEREFORE THE ASSESSEE HAS AN OPTION TO ADOPT F AIR MARKET VALUE AS ON 1.4.1981 INSOFAR AS IT RELATES TO THE LAND COMPONEN T THAT WAS SOLD ALONG WITH THE BUILT-UP AREA OF FLAT B 105. THE ASSESSEE WILL BE ENTITLED TO BENEFIT OF INDEXATION ON SUCH VALUE. AS FAR AS COST OF AC QUISITION OF SUPER BUILT-UP AREA OF 1315 SFT. OF FLAT B 105 IS CONCERNED, THE V ALUATION WOULD BE PROPORTIONATE VALUE FOR 1315 SQ.FT. BASED ON THE CO ST WHICH THE BUILDER HAD INCURRED IN CONSTRUCTING FLATS ALLOTTED TO THE ASSE SSEE OR THE VALUE OF THE LAND CONVEYED TO THE DEVELOPER AS PER THE SUB-REGIS TRARS VALUATION, WHICHEVER IS HIGHER. THE ASSESSEE WILL BE ENTITLED TO BENEFIT OF INDEXATION ON SUCH COST. THE AO IS DIRECTED TO COMPUTE THE CA PITAL GAIN AS PER DIRECTIONS GIVEN ABOVE. 14. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS TR EATED AS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF NOVEMBER, 2019. SD/- SD/- ( A K GARODIA ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 13 TH NOVEMBER, 2019. / DESAI SMURTHY / ITA NO. 985/BANG/2019 PAGE 9 OF 9 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.