P. Jaya Prasad Raja,, Hyderabad v. Addl.CIT, Range-8,, Hyderabad

ITA 1093/HYD/2014 | 2007-2008
Pronouncement Date: 31-07-2015 | Result: Allowed
Expert Summary: Adjacent units merged into single unit is eligible for exemption under Section 54F inspite of separate sale deeds: During the year under consideration, the taxpayer, an individual, received Rs. 35 lakhs as consideration on relinquishment of his right in one of his properties. During the same financial year, he purchased two residential house properties adjacent to each other via different sale deeds and claimed exemption u/s 54F. Assessing Officer (AO) allowed the deduction on one house and disallowed the claim on the other house on the ground that both were two distinct houses with distinct characteristics and purchased through separate sale deeds. CIT(A) confirmed the AO order. Aggrieved, the taxpayer filed further appeal before ITAT. ITAT observed that a plain reading of section 54F shows that it does not levy a bar in purchasing two separate plots and construct a single residential unit. In the present case, the taxpayer has purchased two adjacent plots and made it into a single residential house by obtaining single plan sanction from the local authorities. Further, the taxpayer argued that the house was assessed to municipal tax as a single unit. ITAT held that although the house was sold by the taxpayer now but he does not have any copy of the sale deed. Therefore, ITAT directed the AO to re-examine the issue of whether the building is of one or two units.

Appeal Details

RSA Number 109322514 RSA 2014
Assessee PAN AEYPP4523M
Bench Hyderabad
Appeal Number ITA 1093/HYD/2014
Duration Of Justice 1 year(s) 2 month(s) 1 day(s)
Appellant P. Jaya Prasad Raja,, Hyderabad
Respondent Addl.CIT, Range-8,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 31-07-2015
Date Of Final Hearing 24-07-2015
Next Hearing Date 24-07-2015
Assessment Year 2007-2008
Appeal Filed On 30-05-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B(SMC)' HYDERABAD BEFORE SHRI B.RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO.1093/HYD/2014 ASSESSMENT YEAR 2007-08 SHRI P.JAYA PRASAD RAJA HYDERABAD (PAN AEYPP 4523 M) V/S. ADDL. COMMISSIONER OF INCOME-TAX RANGE 8 HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V.RAGHURAM FOR REVENUE : SHRI RAJAT MITRA DR DATE OF HEARING : 24.7.2015 DATE OF PRONOUNCEMENT : 31.7.2015 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME- TAX(APPEALS) III HYDERABAD DATED 15.4.2014 FOR TH E ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED AS MANY AS 5 GROU NDS AND THE MAIN ISSUE ARISES FOR CONSIDERATION IS WHE THER THE AO IS RIGHT IN RESTRICTING THE BENEFIT OF DEDUC TION U/S 54F FOR THE ONE PROPERTY WHEN TWO PROPERTIES ARE ADJACENT. 3. THE FACTS OF THE CASE BRIEFLY ARE THAT TH E ASSESSEE IS AN INDIVIDUAL FILED HIS RETURN OF INCOM E FOR THE A.Y. 2007-08 DECLARING TOTAL INCOME OF RS. 2 97 40 0/- COMPRISING OF INCOME FROM BUSINESS OF AND INCOME FR OM ITA NO.1093/HYD/2014 SHRI P.JAYA PRASAD RAJA HYDERABAD 2 OTHER SOURCE. BESIDES HE DECLARED AGRICULTURAL INC OME OF RS. 1 92 300/-. DURING THE FINANCIAL YEAR RELEVANT TO A.Y. 2007-08 THE ASSESSEE HAS RECEIVED RS. 35 LAKHS UPO N RELINQUISHMENT OF HIS RIGHT IN THE PROPERTY AT SY. NO. 335 PUPPALAGUDA VILLAGE RAJENDRA NAGAR MANDAL RANGA REDDY DISTRICT CONSEQUENT A COURT SETTLEMENT WHICH HE HAD ENTERED IN TO AN AGREEMENT OF SALE DATED 24-09- 2000 BY PAYING AN ADVANCE OF RS. 2 50 000/-. DURING THE SAME FINANCIAL YEAR HE HAD PURCHASED ANOTHER RESIDENTIAL HOUSE PROPERTY AT PLOT NO. 64 DIAMOND HILLS PUPPALAGUDA HYDERABAD ADMEASURING 192 SQ. YARDS WITH A BUILT U P AREA OF 1800 SQ. FT. VIDE SALE AGREEMENT CUM POWER OF ATTORNEY DATED 16-09-2006 FOR AN AMOUNT OF RS. 11 94 000/-. HE ALSO PURCHASED PLOT NO. 63 DIAMOND HILLS PUPPALAGUDA HYDERABAD ADMEASURING 336 SQ. YARDS WITH A BUILT UP AREA OF 3000 SQ. FT. VIDE SAL E DEED DATED 12-10-2006 FOR AN AMOUNT OF RS. 19 92 000/-. THE ASSESSEE HAS COMPUTED CAPITAL GAIN ON SALE CONSIDER ATION OF RS. 35 LAKHS BY TAKING COST OF ACQUISITION OF RS . 3 LAKHS TO ARRIVE AT CAPITAL GAIN OF RS. 31.16 LAKHS AND CL AIMED EXEMPT U/S 54F ON REINVESTMENT IN THE RESIDENTIAL H OUSE PROPERTIES. DURING THE COURSE OF ASSESSMENT U/S 143 (3) THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS PURCHASED TWO SEPARATE HOUSES THROUGH TWO DIFFERENT SALE DEEDS. HE FURTHER HELD THAT PLOT NO. 63 AND 64 ARE TWO DISTINCT HOUSES PURCHASED THROUGH SEPARATE SALE DEE DS AND RETAINED THE CHARACTERISTICS AS DISTINCT HOUSES . ACCORDINGLY THE AO ALLOWED DEDUCTION ON ONE HOUSE AND DENIED THE BENEFIT FOR ANOTHER HOUSE AND COMPUTED T HE ITA NO.1093/HYD/2014 SHRI P.JAYA PRASAD RAJA HYDERABAD 3 CAPITAL GAIN BY ALLOWING DEDUCTION TO THE EXTENT OF RS. 21 81 240/- AND BALANCE AMOUNT WAS BROUGHT TO TAX. AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE FIL ED APPEAL BEFORE CIT(A)-III HYDERABAD. THE CIT(A)-III HYDERABAD CONFIRMED THE AO ORDER. AGGRIEVED THE ASSESSEE IS IN APPEAL. 3. THE AUTHORIZED REPRESENTATIVE SUBMITTED TH AT THE ASSESSEE HAS PURCHASED PLOT NO. 63 & 64 AT DIAMOND HILLS PUPPALAGUDA HYDERABAD TO MAKE IT SINGLE RESIDENTIAL HOUSE FOR HIS SELF- OCCUPATION. THE AR FURTHER SUBMITTED THAT THE HOUSE IS REMODELED/RECONSTRUCTED AS SINGLE RESIDENTIAL HOUSE AFTER OBTAINING PLAN APPRO VAL FROM THE CIVIC AUTHORITIES VIDE PLAN SANCTION COPY DATED 28-12-2006 ALONG WITH LETTER OF PERMISSION FOR CONSTRUCTION WHICH WAS AVAILABLE IN THE FILE. THE AR CLAIMED THAT THE HOUSE WAS ASSESSED TO MUNICIPAL TA X AS A SINGLE UNIT BEARING NO. 3-28/63/64 AND MUNICIPAL AUTHORITIES FIXED TAX OF RS. 4200/- WHICH WAS PAID BY THE ASSESSEE VIDE RECEIPT DATED 10-04-2008 WHICH WAS A LSO FILED BEFORE THE ASSESSING OFFICER. THE AUTHORIZED REPRESENTATIVE FURTHER ARGUED THAT THE ASSESSING OF FICER WAS NOT RIGHT IN ALLOWING PARTIAL RELIEF OF RS. 21 81 240/- AND SHOULD HAVE ALLOWED FULL DEDUCTION OF RS. 31 16 500/- U/S 54F TOWARDS REINVESTMENT IN PURCHASING RESIDEN TIAL HOUSE AS A SINGLE UNIT. IN THIS REGARD HE RELIED UP ON THE DELHI G BENCH CASE REPORTED IN (2011) 7 ITR 653 ACIT VS. SUDHA GURTOO. ITA NO.1093/HYD/2014 SHRI P.JAYA PRASAD RAJA HYDERABAD 4 4. THE DEPARTMENTAL REPRESENTATIVE ON THE OT HER HAND STRONGLY DEPENDED THE ORDERS OF LOWER AUTHORIT IES. HE FURTHER ARGUED THAT THE EVIDENCES AVAILABLE CLE ARLY SHOWS THAT THE ASSESSEE HAS PURCHASED TWO RESIDENTI AL HOUSES THOUGH ADJACENT BY TWO SEPARATE SALE DEEDS AND BOTH PROPERTIES WERE DISTINCT RESIDENTIAL HOUSES. H E FURTHER ARGUED THAT THIS IS NOT A CASE WHERE TWO P LOTS HAVE BEEN PURCHASED AND A SINGLE RESIDENTIAL HOUSE HAS BEEN CONSTRUCTED. THEREFORE URGED TO CONFIRM THE O RDERS OF CIT(A). 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIALS ON RECORD AND CAREFULLY CONSIDERED THE CA SES RELIED UPON BY THE PARTIES. THE SOLE ISSUE ARISES F OR CONSIDERATION IS WHETHER THE AO IS RIGHT IN ALLOWI NG PARTIAL RELIEF FOR CAPITAL GAIN U/S 54F FOR ONE HOU SE AND TO DENY THE BENEFIT ON THE SECOND. THE FACTUAL MATRIX OF THE CASE SHOWS THAT THE ASSESSEE REINVESTED THE PROCEED S OF RECEIPTS FROM RELINQUISHMENT OF RIGHTS IN CERTAIN C APITAL ASSETS IN BUYING TWO SEPARATE RESIDENTIAL HOUSES AT PLOT NO. 63 & 64 DIAMOND HILLS PUPPALAGUDA HYDERABAD. ADMITTEDLY THESE TWO HOUSES WERE PURCHASED BY TWO SEPARATE SALE DEEDS DATED 16-09-2006 AND 12-10-200 6. THE SALE DEED COPIES OF TWO PROPERTIES CLEARLY SHOE S THAT THESE ARE TWO INDEPENDENT HOUSES AS PER THE SCHEDUL E APPENDED TO THE SALE DEED. BUT THE CLAIM OF THE AS SESSEE IS THAT HE HAD REMODELED/RECONSTRUCTED THE HOUSE B Y MAKING SINGLE RESIDENTIAL UNIT AFTER OBTAINING PLAN SANCTION AND PERMISSION FOR CONSTRUCTION FROM MUNIC IPAL ITA NO.1093/HYD/2014 SHRI P.JAYA PRASAD RAJA HYDERABAD 5 AUTHORITIES AND HE SUBMITTED A SANCTIONED COPY ALON G WITH PERMISSION FOR CONSTRUCTION LETTER ISSUED BY T HE LOCAL AUTHORITIES. A CAREFUL STUDY OF THE TRANSLATED COPY OF PERMISSION FOR CONSTRUCTION LETTER DATED 28-12-2006 INDICATES THAT THE PERMISSION IS FOR NEW CONSTRUCTI ON. THE SAME LETTER SHOW THAT THE CONSTRUCTION SHOULD BE COMPLETED BEFORE 28-12-2007. BUT THE LOWER AUTHORIT IES FAILED TO EXAMINE WHETHER THE ASSESSEE HAS CONSTRU CTED NEW BUILDING OR NOT AS CLAIMED BY HIM WITHIN THE STIPULATED TIME FRAME AS PER SECTION 54F. THE AO J UST PLAINLY OBSERVED THAT THE ASSESSEE HAS PURCHASED T WO HOUSES HENCE NOT ELIGIBLE FOR EXEMPTION AS PER THE PROVISIONS OF SECTION 54F WITHOUT EXAMINING ANY OF THE CONDITIONS INCLUDING THE STATED FACT OF BEING ONE B UILDING AFTER RE-CONSTRUCTION. WITHOUT DOING SO THE AO JUS T CONCLUDED THE ASSESSMENT BASED ON THE SALE DEEDS W HICH IS IN MY OPINION NOT CORRECT. 6. NOW IT IS WORTHWHILE TO MENTION HERE THE P ROVISO TO SECTION 54F WHICH READS AS UNDER. 54F (1)XXX XXX XXXX PROVIDED THAT NOTHING CONTAINED IN THE SUB-SECTION SHALL APPLY WHERE- (A) THE ASSESSEE (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE OTHER THA N THE NEW ASSET ON THE DATE OF TRANSFER OF THE ORIGI NAL ASSET; OR ITA NO.1093/HYD/2014 SHRI P.JAYA PRASAD RAJA HYDERABAD 6 (II) PURCHASES ANY RESIDENTIAL HOUSE OTHER THAN TH E NEW ASSET WITHIN A PERIOD OF ONE YEAR AFTER THE DA TE OF TRANSFER OF THE ORIGINAL ASSET; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE OTHER T HAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'.] 7. A PLAIN READING OF THE SECTION SHOWS THAT THERE IS NO BAR IN PURCHASING TWO SEPARATE PLOTS AND CONSTRU CT A SINGLE RESIDENTIAL UNIT. ALL THAT SECTION RESTRICTS IS THAT THE ASSESSEE SHOULD NOT OWN MORE THAN ONE HOUSE OTHER THAN NEW HOUSE ON THE DATE OF TRANSFER HE SHOULD NOT PURCHASE ANY RESIDENTIAL HOUSE OTHER THAN NEW HOUS E WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANS FER OF THE ORIGINAL ASSET OR CONSTRUCTS ANY RESIDENTIAL HOUSE OTHER THAN NEW ASSET WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF ORIGINAL ASSET. THE ACT PUTS ST RICT RESTRICTION AS TO ACQUISITION OF ANOTHER NEW HOUSE OTHER THAN NEW ASSET WITHIN THE TIME STIPULATED THEREIN BUT IT DOES NOT RESTRICT CONSTRUCTION OF SINGLE RESIDENTIA L HOUSE ON TWO PLOTS. IN THE PRESENT CASE ON HAND THE ASSE SSEE CLAIMS THAT HE HAS PURCHASED TWO ADJACENT PLOTS AND MADE INTO A SINGLE RESIDENTIAL HOUSE BY OBTAINING S INGLE PLAN SANCTION FROM THE LOCAL AUTHORITIES. THE ASSES SEE HAS FURNISHED THE COPIES OF SANCTION PLAN COPY AND BUIL DING CONSTRUCTION PERMISSION LETTER WHICH WAS BEFORE THE LOWER AUTHORITIES. NONE OF THE LOWER AUTHORITIES THROUGH LIGHT ON ITA NO.1093/HYD/2014 SHRI P.JAYA PRASAD RAJA HYDERABAD 7 THE REAL ISSUE OF WHETHER THE ASSESSEE HAS CONSTRUC TED OR MADE IT INTO A SINGLE HOUSE. 8. THE AUTHORIZED REPRESENTATIVE BROUGHT TO THE NOTICE OF THE BENCH DELHI BENCH DECISION IN THE CA SE OF ACIT VS. SUDHA GURTOO REPORTED IN (2011) 7 ITR 653 WHEREIN THE HONBLE BENCH OBSERVED THAT. ASSESSEE HAD SOLD TWO COMMERCIAL PROPERTIES AND HAD INVESTED THE CAPITAL GAIN WITHIN THE STIPULATED PERIOD IN A GROUP HOUSING COMPLEX AT BANGALORE IN THE GROUND FLOOR AND FIRST FLOOR OF THE SAME PROPERTY NUMBERED AS IC-1 AND IC-2. BEFORE THE AO THE ASSESSEE ON QUERY HAD CONTENDED THAT BOTH THE PREMISES IN FACT CONSTITUTED ONE RESIDENTIAL UNIT INASMUCH AS THE GROUND FLOOR THEREOF COMPRISED ONE BED ROOM DINING ROOM HALL KITCHEN TOILET AND SERVANT ROOM AND THE FIRST FLOO R CONSISTED OF TWO BED ROOMS HALL KITCHEN AND TWO TOILETS. THERE WAS ONLY ONE STAIRCASE WHICH WAS INTERNAL AND LED TO THE FIRST FLOOR. THERE WAS NO INDEPENDENT ENTRY TO THE FIRST FLOOR. THERE WAS ONLY ONE KITCHEN IN THE ENTIRE HOUSE. IT DID NOT MATTER THAT THE TWO FLOORS HAD BEEN PURCHASED VIDE SEPARATE AGREEMENTS. IN FACT IC-2 I.E. THE FIRST FLOOR WAS PURCHASED JUST ONE DAY AFTER THE PURCHASE OF THE GROUND FLOOR. THE HOUSE THUS WAS A DUPLEX OR TWO STORIED HOUSE COMPRISING ONE SINGLE RESIDENTIAL UNIT. AS PER THE GROUNDS OF APPEAL RAISED BEFORE THE CIT(A) THE ASSESSEE HAD DURING THE ASSESSMENT PROCEEDINGS VERBALLY REQUESTED THE AO TO GET THE HOUSE PHYSICALLY INSPECTED BY HIS COUNTER PART IN BANGALORE. THIS THE AO DID NOT DO. IT CANNOT BE GAINSAID THAT THE AO IS AMPLY EMPOWERED TO GET SUCH AN INSPECTION DONE. (PARA 11) ITA NO.1093/HYD/2014 SHRI P.JAYA PRASAD RAJA HYDERABAD 8 APROPOS THE AOS OBSERVATION THAT NO APPROVAL WAS SHOWN TO HAVE BEEN OBTAINED BY THE ASSESSEE NOR ANY PAYMENT OF STATUTORY DUES HAD BEEN SHOWN TO HAVE BEEN MADE BY THE ASSESSEE CONCERNING THE MODIFICATION TO THE HOUSE IT IS AVAILABLE FROM THE STATEMENT OF FACTS FILED BEFORE THE CIT(A) THAT THERE WAS NO QUESTION OF THE ASSESSEE OBTAINING ANY APPROVAL OR MAKING ANY PAYMENT SINCE THE MODIFICATION WAS DONE BY THE DEVELOPER HIMSELF AS PER THE PLANS THE APPROVAL WHEREOF WAS OBTAINED DIRECTLY BY THE DEVELOPER. OTHERWISE ALSO THE ASSESSMENT ORDER DOES NOT EVINCE ANY QUERY IN THIS REGARD HAVING EVER BEEN RAISED BY THE AO TO THE ASSESSEE. (PARA 12) IT WAS AFTER CONSIDERING ALL THESE FACTORS THAT THE CIT(A) ARRIVED AT THE CONCLUSION THAT WHAT THE ASSESSEE HAD IN HER POSSESSION WAS ONE SINGLE RESIDENTIAL UNIT AND NOT TWO COMPRISING TWO FLOORS OF ONE AND THE SAME DOUBLE STORIED RESIDENTIAL HOUSE. IN VIEW OF THE ABOVE FINDING NO ERROR WHATSOEVER IN THE ORDER PASSED BY THE CIT(A) THE SAME IS HEREBY CONFIRMED. THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT BY WAY OF THE GROUND OF APPEAL TAKEN IS FOUND TO BE SHORN OF MERIT AND IS REJECTED AS SUCH. IN THE RESULT THE APPEAL FILE D BY THE DEPARTMENT IS DISMISSED.ADDL. CIT VS. NARENDRA MOHAN UNIYAL (2009) 34 SOT 152 (DEL) RELIED ON. 9. THE FACTS OF THE PRESENT CASE AND THE FACT S OF THE CASE RELIED UPON BY THE AR ARE SLIGHTLY DIFFERENT. THE ISSUE BEFORE THE HONBLE DELHI BENCH WAS WHETHER BENEFIT OF EXEMPTION U/S 54F CAN BE GIVEN TO TWO FLATS SITUATE D IN GROUND AND FIRST FLOOR WHEN THE ASSESSEE USED BOTH THE FLATS FOR OWN RESIDENTIAL PURPOSE AFTER MODIFYING I T AS DUPLEX HOUSE. THE HONBLE BENCH RIGHTLY HELD THAT W HAT THE ASSESSEE HAD IN HER POSSESSION WAS ONE SINGLE ITA NO.1093/HYD/2014 SHRI P.JAYA PRASAD RAJA HYDERABAD 9 RESIDENTIAL UNIT AND NOT TWO COMPRISING TWO FLOORS OF ONE AND THE SAME DOUBLE STORIED RESIDENTIAL HOUSE. IN T HE PRESENT CASE ON HAND THE ASSESSEE CLAIMS THAT HE HAS MADE IT INTO A SINGLE UNIT OF HOUSE BY PURCHASING T WO UNITS OF ADJACENT PLOTS. IT WAS SUBMITTED THAT THE HOUSE WAS SOLD AND ASSESSEE DO NOT HAVE ANY COPY OF THE S ALE DEED. THEREFORE THE ISSUE REQUIRE EXAMINATION WHET HER THE BUILDING IS ONE OR TWO UNITS. 10. THEREFORE I AM OF THE OPINION THAT THE I SSUE NEEDS FURTHER EXAMINATION BY THE ASSESSING OFFICER IN THE LIGHT OF THE ABOVE DISCUSSION. HENCE WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO MAKE NECESSARY ENQUIRIES AFTER GIVING DUE OPPORTUNITY TO THE ASSES SEE. ASSESSING OFFICER IS DIRECTED TO DECIDE AFRESH AS P ER FACTS AND APPLICABLE LAW. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 31 ST JULY 2015. SD/- (B.RAMAKOTAIAH) ACCOUNTANT MEMBER DATED 31 ST JULY 2015 VBP/- ITA NO.1093/HYD/2014 SHRI P.JAYA PRASAD RAJA HYDERABAD 10 COPY TO: 1. SHRI P. JAYA PRASAD RAJA ( HYDERABAD) C/O. MAHESH VIRENDER & SRIRAM CHARTERED ACCOUNTA NTS 7-3-788/36 & 37A AMEERPET HYDERABAD 2. ADDL. COMMISSIONER OF INCOME - TAX RANGE 8 HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) III HYDERABAD 4. COMMISSIONER OF INCOME - TAX II HYDERABAD . 5. D .R. ITAT B BENCH HYDERABAD. 6. GUARD FILE.