ACIT.,, CHENNAI v. Mr. R.Vasu,, CHENNAI

ITA 1656/CHNY/2008 | 2003-2004
Pronouncement Date: 09-07-2010 | Result: Dismissed

Appeal Details

RSA Number 165621714 RSA 2008
Assessee PAN ACAPV4543R
Bench Chennai
Appeal Number ITA 1656/CHNY/2008
Duration Of Justice 1 year(s) 11 month(s) 7 day(s)
Appellant ACIT.,, CHENNAI
Respondent Mr. R.Vasu,, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 09-07-2010
Date Of Final Hearing 05-07-2010
Next Hearing Date 05-07-2010
Assessment Year 2003-2004
Appeal Filed On 01-08-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER) I.T.A. NO.1656 / MDS/2008 ASSESSMENT YEAR : 2003-04 THE ASST. COMMISSIONER OF INCOME TAX COMPANY CIRCLE II(3) CHENNAI 600 034. (APPELLANT) V. SHRI R. VASU NO.11/A PENTHOUSE B RENAISSANCE RANJIT ROAD KOTTURPURAM CHENNAI 600 085. PAN : ACAPV4543R (RESPONDENT) APPELLANT BY : SMT. P.N. KAMALA DEVI RESPONDENT BY : SHRI T. BANUSEKAR O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : IN THIS APPEAL OF THE REVENUE ITS GRIEVANCE IS THA T THE CIT(APPEALS) HELD THE ASSESSEE TO BE ENTITLED FOR EXEMPTION UNDER SE CTIONS 54 AND 54F OF THE INCOME-TAX ACT 1961 (IN SHORT THE ACT) IN RESPEC T OF THE CAPITAL GAINS ON SALE OF A PROPERTY AT POES GARDEN CHENNAI AND SALE OF LAND AT MADAMBAKKAM RESPECTIVELY. 2. ACCORDING TO THE REVENUE THE ASSESSEE ENTERED IN TO AN AGREEMENT WITH THE BUILDER/DEVELOPER FOR PURCHASE/CONSTRUCTION OF THE FLATS BEFORE SALE OF THE PROPERTY; AND THIS DISENTITLED HIM FROM MAKING A CL AIM UNDER SEC. 54 OR 54F OF THE AC. FURTHER GRIEVANCE IS THAT THE CIT(A) APPLIED CI RCULAR NO.667 DATED 18-10- ITA NO.1656/MDS/08 ASST.YEAR 2003-04 2 1993 OF THE C.B.D.T WHICH AS PER THE REVENUE WAS NOT APPLICABLE ON FACTS HERE. 3. SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE SO LD A HOUSE PROPERTY AT POES GARDEN CHENNAI AND ALSO CERTAIN LAND AT MADAM BAKKAM. THE CAPITAL GAINS ARISING FROM SUCH SALE WAS CLAIMED BY THE ASSESSEE AS EXEMPT U/S. 54 AND 54F OF THE ACT ON ACCOUNT OF INVESTMENT IN A HOUSE PROP ERTY AT RANJIT ROAD KOTTURPURAM CHENNAI . THE AGRICULTURAL LAND WAS SO LD DURING THE PERIOD 9-12- 2002 TO 11-12-2002 AND POES GARDEN FLAT WAS SOLD ON 5-2-2003. CLAIM OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT HE H AD ENTERED INTO AN AGREEMENT FOR CONSTRUCTION OF A NEW HOUSE ON 11-12- 2000. HOWEVER THE UNDIVIDED SHARE OF THE LAND ON WHICH THE FLAT WAS B EING CONSTRUCTED WAS REGISTERED IN ASSESSEES NAME ON 20-3-2002 ONLY. FI NALLY THE POSSESSION WAS TAKEN BY THE ASSESSEE ON 5-6-2002. ASSESSING OFFICE R WAS OF THE OPINION THAT THE ASSESSEE HAD ALREADY STARTED CONSTRUCTION OF THE FL AT EVEN BEFORE SALE OF THE AGRICULTURAL LAND AND SALE OF POES GARDEN FLAT WERE EFFECTED. ASSESSEE REPLIED TO THIS THAT ITS INTENTION WAS ONLY TO PURCHASE A FLA T AND IT WAS AS A PART OF THE DOCUMENTATION FOR THE PURCHASE OF THE FLAT THAT THE SALE DEED FOR UNDIVIDED SHARE OF THE LAND WAS ENTERED INTO. ACCORDING TO THE ASSE SSEE THE CONSTRUCTION AGREEMENT WAS MERELY A PRACTICAL DOCUMENT WHICH CRE ATED TITLE OVER THE BUILDING THAT WAS BEING CONSTRUCTED AND THE TRANSFER TOOK PL ACE ONLY AFTER ITS COMPLETION. HOWEVER THE ARGUMENTS OF THE ASSESSEE WERE NOT ACC EPTABLE TO THE ASSESSING OFFICER. ACCORDING TO HIM IN THE CASE OF CONSTRUCTI ON OF A NEW FLAT FOR RESIDENCE SUCH CONSTRUCTION HAD TO BE COMMENCED ONLY AFTER SA LE OF THE CAPITAL ASSET. AS PER THE ASSESSING OFFICER THE CONSTRUCTION AGREEMEN T ENTERED INTO BY THE ITA NO.1656/MDS/08 ASST.YEAR 2003-04 3 ASSESSEE DID NOT AMOUNT TO PURCHASE OF A FLAT OR HO USE PROPERTY. HE THEREFORE CAME TO THE CONCLUSION THAT THE CONDITIONS NECESSAR Y FOR CLAIMING EXEMPTION UNDER SEC. 54 AND 54F WERE NOT SATISFIED. SUCH EXEM PTION WAS THEREFORE NOT ALLOWED. 4. IN HIS APPEAL BEFORE THE CIT (APPEALS) THE ARGUM ENT OF THE ASSESSEE WAS THAT EVEN IF THERE WAS AN AGREEMENT FOR CONSTRUCTI ON ENTERED EARLIER TO DATE OF SALE OF THE PROPERTIES UNDOUBTEDLY INVESTMENT IN T HE UNDIVIDED SHARE OF THE LAND WAS MADE ONLY SUBSEQUENTLY AND THE COST OF THE LAND WAS AN INTEGRAL PART OF THE COST OF THE RESIDENTIAL HOUSE. ASSESSEE ALSO PLACED RELIANCE ON THE BOARD CIRCULAR NO.667 DATED 18-10-1993. AS PER THE ASSESS EE THE COST OF INVESTMENT IN THE LAND WAS SUFFICIENT TO COVER THE CAPITAL GAI NS AND THEREFORE THE EXEMPTION CLAIMED OUIGHT TO HAVE BEEN ALLOWED. IT WAS ALSO CL AIMED THAT THE LAND SOLD AT MADAMBAKKAM VILLAGE WAS AGRICULTURAL IN NATURE. 5. THE CIT(APPEALS) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE LAND SOLD AT MADAMBAKKAM VILLAGE WAS AGRICULTURAL I N NATURE. HOWEVER HE WAS OF THE OPINION THAT ASSESSEE HAVING PAID FOR PURCHA SING THE LAND RELATING TO THE FLAT AT RANJITH ROAD KOTTURPURAM IN VIEW OF BOARD CIRCULAR NO.667 (CITED SUPRA) IT WAS ELIGIBLE FOR THE CLAIM OF EXEMPTION UNDER SE C. 54 AND 54F. 6. NOW BEFORE US THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUBMITTED THAT ASSESSEE HAD STARTED CONSTRUCTION EVEN BEFORE SALE AND THEREFORE WAS NOT ELIGIBLE FOR CLAIM OF EXEMPTION UNDER SEC. 54 AND 5 4F OF THE ACT. SPECIFIC ATTENTION WAS BROUGHT TO THE DATE OF VARIOUS TRANSA CTIONS. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE SALE OF AGRICU LTURAL LAND WAS EFFECTED ON ITA NO.1656/MDS/08 ASST.YEAR 2003-04 4 11-12-2002 AND THAT OF THE POES GARDEN FLAT ON 5-2- 2003 WHEREAS THE CONSTRUCTION AGREEMENT WAS ENTERED INTO ON 11-12-20 00. THEREFORE ACCORDING TO THE DEPARTMENTAL REPRESENTATIVE THE LEARNED CIT(A ) ERRED IN APPLYING THE BOARD CIRCULAR NO.667 AND ALLOWING THE CLAIM OF THE ASSES SEE. 7. PER CONTRA THE LD. AUTHORISED REPRESENTATIVE SU BMITTED THAT THE UNDIVIDED SHARE IN THE LAND WAS REGISTERED ON 20-3-2002 WHICH WAS AFTER THE DATE OF SALE. ACCORDING TO HIM EVEN IF THE CONSTRUCTION AGREEME NT WAS ENTERED INTO EARLIER ON11-12-2000 IT WOULD HAVE NO EFFECT WHATSOEVER S INCE THE COST OF THE LAND WAS SUFFICIENT TO COVER THE CAPITAL GAINS ARISING ON TH E TWO TRANSACTIONS. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE JURISDICTION HIGH COURT IN CIT VS. SARDARMAL KOTHARI & ANOTHER (2008-TMI-30187 DATED 17-6-2008) CIT VS. H.K.KAPOOR (234 ITR 753 ) (ALLAHABAD). CIT VS. SMT. BHARATI C.KOTHARI (200 0) 244 ITR 352 (CAL.). AND CIT VS.J.R.SUBRAMANYA BHAT (1987)165 ITR 571 (KAR.). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE GRIEVANCE OF THE REVENUE IS THAT THE ASSESSEE HAD E NTERED INTO CONSTRUCTION AGREEMENT ON 11-12-2000 WHEN THE SALE ON WHICH CAPI TAL GAINS EXEMPTION WAS CLAIMED WAS EFFECTED IN 2002 AND 2003. WHATEVER MAY BE DATE OF THE CONSTRUCTION AGREEMENT IT IS NOT DISPUTED BY THE R EVENUE THAT THE UNDIVIDED SHARE OF THE LAND WHICH WAS FOR THE FLAT FOR WHICH CONSTRUCTION AGREEMENT WAS ENTERED INTO WAS REGISTERED IN THE NAME OF THE AS SESSEE ON 20-3-2002. IT IS ALSO NOT DISPUTED THAT THE FLAT WAS TAKEN POSSESSION BY THE ASSESSEE ON 5-6-2002. FOR CLAIMING EXEMPTION UNDER SEC. 54 AND 54F OF THE ACT ASSESSEE HAD TO PURCHASE WITHIN A PERIOD OF ONE YEAR OR BEFORE TWO YEARS AFT ER THE DATE ON WHICH TRANSFER ITA NO.1656/MDS/08 ASST.YEAR 2003-04 5 TOOK PLACE A RESIDENTIAL HOUSE OR ASSESSEE HAD TO CONSTRUCT A RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF SA LE. HERE IN OUR OPINION THE INTENTION OF THE ASSESSEE WAS TO PURCHASE THE FLAT AND HE HAD NO INTENTION TO CONSTRUCT A FLAT BY HIMSELF. ASSESSEE BY HIMSELF H AD NOT CONSTRUCTED BUT ON THE OTHER HAND HAD ENTERED INTO AN AGREEMENT FOR PURCH ASING A FLAT FROM M/S.ALEXANDER PROPERTIES. NO DOUBT ASSESSEE HAD E NTERED INTO AN AGREEMENT FOR THIS PURPOSE ON 11-12-2000 BUT THE PROPERTY CA N BE DEEMED AS CONVEYED TO THE ASSESSEE ONLY WHEN THE UNDIVIDED SHARE ON WHICH THE FLAT WAS CONSTRUCTED WAS REGISTERED IN HIS NAME. UNDISPUTEDLY SUCH UNDIV IDED SHARE WAS REGISTERED ON 20-3-2002 AND THEREFORE THIS DATE ALONE COULD BE CONSIDERED FOR RECKONING THE DATE ON WHICH ASSESSEE HAD PURCHASED THE NEW FL AT. IF THAT IS SO THIS WAS WELL WITHIN THE PERIOD OF ONE YEAR BEFORE THE DATE OF SALE OR TWO YEARS AFTER SUCH SALE. AS MENTIONED BY CBDT IN CIRCULAR NO.667REFERR ED SUPRA COST OF THE PLOT CANNOT BE EXCLUDED FROM THE PURCHASE PRICE OF THE HOUSE PROPERTY. IT IS ALSO NOT DISPUTED THAT THE COST OF THE UNDIVIDED SHARE PURC HASED BY THE ASSESSEE ITSELF WAS NOT SUFFICIENT TO JUSTIFY CLAIM UNDER SECTIONS 54 AND 54F OF THE ACT. AS HELD BY BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. H.K.KAPOOR (SUPRA) EXEMPTION OF CAPITAL GAINS COULD BE ALLOWED NOTWITHSTANDING THE FACT THAT THE CONSTRUCTION OF THE NEW HOUSE HAD BEGUN BEFORE THE SALE OF THE OLD HOUSE. VIEWED FROM ANY ANGLE WE ARE OF THE OPINION THAT T HE ASSESSEE WAS ELIGIBLE FOR CLAIMING EXEMPTION UNDER SEC. 54 AND 54F OF THE ACT . THE CIT(APPEALS) HAS RIGHTLY ALLOWED SUCH CLAIM AND NO INTERFERENCE IS CALLED FOR . 9. APPEAL OF THE REVENUE IS DISMISSED. ITA NO.1656/MDS/08 ASST.YEAR 2003-04 6 THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09-07 -2010. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P.GEORGE) JUDICIAL MEMBNER ACCOUNTANT MEMBER DATED: 9TH JULY 2010 NBR COPY TO: 1)APPELLANT 2) RESPONDENT 3)CIT(A) 4)CIT 5)DR