Income Tax Appellate Tribunal - Hyderabad
K. Narayana Rao, Sec'Bad, Hyderabad vs Department Of Income Tax on 20 November, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND
SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER
ITA No. Assessment Appellant Respondent
year
1188/Hyd/2015 2007-08 Income Tax Late K.Jaipal,
Officer, L/R. of Smt. K.Manjula,
Ward 10(2), Secunderabad
Hyderabad
(PAN - AAYPK 8709 Q)
1189/Hyd/2015 2007-08 Income Tax Shri Chandrasekhar
Officer, Kontham, Secunderabad
Ward 10(2),
Hyderabad (PAN - AAZPK 5129 Q)
1190/Hyd/2015 2007-08 Income Tax Shri K.Murali,
Officer, Secunderabad
Ward 10(2),
Hyderabad (PAN - AXYPK 7234 P )
1191/Hyd/2015 2007-08 Income Tax Late K.Srinivas Rao, L/R.
Officer, Smt.K.Geeta Rani,
Ward 10(2), Secunderabad
Hyderabad
(PAN - AAYPK 8698 Q Q)
1192/Hyd/2015 2007-08 Income Tax Shri K.Narsing Rao,
Officer, Secunderabad
Ward 10(2),
Hyderabad (PAN - AAYPK 8712 H )
1193/Hyd/2015 2007-08 Income Tax Shri K.Venu,
Officer, Secunderabad
Ward 10(2),
Hyderabad (PAN - AAYPK 8723 A )
1194/Hyd/2015 2007-08 Income Tax Shri K.Narayana Rao,
Officer, Secunderabad
Ward 10(2),
Hyderabad (PAN - AAYPK 8705 C )
Appellants by : Shri B.Kurmi Naidu
Respondent by : Shri K.A.Saiprasad
Date of Hearing 19.11.2015
Date of Pronouncement -
2 ITA No.1188 to 1194/Hyd/2015
Shri K.Venu and others Secunderabad
ORDER
Per Bench :
These seven appeals are by the Revenue against the separate orders of the Commissioner of Income-tax(Appeals) 6, Hyderabad dated 29.7.2015 in this group of seven assessees being co-sharers. The issue involved in these appeals is with reference to the claim of deduction under S.54F on the units allotted to the respective assessees, consequent to the development agreement. Common issues are involved and common grounds raised. Hence, we have heard these appeals together and decide them by this common order. For the sake of discussion, the facts in the case of Shri K.Venu (ITA No.1193/Hyd/2015) are discussed hereinafter.
2. The Assessing Officer initiated proceedings under S.147 of the Income Tax Act,1961 on the assessee alongwith co-owners, as they have transferred a plot of land admeasuring 7,750 sq. yards open land situated at Begumpet, Hyderabad in favour of the developer, M/s. Shreemukh Creators. In the course of assessment proceedings, the following facts were admitted by the assessee-
1 The assessee and his 7 brothers had together acquired the property;
2 Each of the co-owners was entitled to receive five flats out of the total 40 flats to be received by the co-owners in lieu of surrendering 60% of the right/title interest in the land;
3 The capital gains arising from transaction were chargeable to tax in assessment year 2007-08;
3 ITA No.1188 to 1194/Hyd/2015Shri K.Venu and others Secunderabad 4 The full value of consideration attributable to 60% of the plot area was Rs.4,28,29,800 and the assessee's share therein was Rs.53,53,725.
The Assessing Officer computed long term capital gains at Rs.47,30,228 allowing exemption representing proportionate cost of one flat out of five flats received by the assessee and charged the balance sum of Rs.36,59,483 to tax.
3. The assessee has challenged the proceedings under S.147, but the same were upheld by the CIT(A). However, on the quantum of exemption claimed by the assessee, the assessee got relief, against which Revenue is in appeal before us.
4. Before the CIT(A), assessee claimed that he was entitled for deduction under S.54F on all the five flats received in lieu of his share in the area of the plot agreed to be transferred by him. It was submitted that exemption was available in respect of the gross quantum of investment in residential house property, irrespective of the number of units therein. In support of this contention, reliance was placed on the following decisions-
(a) CIT V/s. Syed Ali Adil (33 Taxmann.com.212) - AP HC
(b) Vithal Kanjeevaram Vs. ITO (ITA No.422/H/13 dt. 10.07.13) ITAT Hyderabad (144 ITD 325)
(c) CIT V/s. Gita Duggal Delhi High Court
(d) K.G.Vyas Vs. ITO (161 ITD 195) Bom.
(e) ITO V/s. PC Ramakrishna (108 ITD 251)-Chennai
(f) CIT V/s. D.Ananda Basappa (309 ITR 329) Kar. HC
(g) CIT V/s. K.G.Rukminiamma (331 ITR 211)-Kar. HC
(h) A.P. High Court in Syed Ali
(i) CIT V/s. V.R. Karpagam dt. 18.08.14 of Chennai High Court 4 ITA No.1188 to 1194/Hyd/2015 Shri K.Venu and others Secunderabad
(j) N.Revathi V/s. ITO Ward 6(4) Hyderabad (ITA No.67/Hyd/2013 order dated 2.4.2014)
(k) AP High Court in 169 ITR 564 The learned CIT(A) in her brief order allowed the contentions of the assessee stating as under-
"05.2.2. The submission has been considered . In view of the ratio of the decisions cited above, it has to be held that entire investment in the new residential house property, irrespective of the number of units thereof, is eligible for computation of exemption u/s. 54F. The Assessing Officer is directed to recompute the Long Term Capital Gains accordingly."
5. The Learned Departmental Representative reiterated the arguments of the Assessing Officer to submit that the assessee would be entitled for exemption only in respect of one apartment out of the five received by him and submitted that the assessee has restricted the claim made under S.54F to one flat only in the submissions made before the Assessing Officer. He also relied on the judgment of the Hon'ble Punjab and Haryana High Court in the case of Pavan Arya V/s. CIT (ITA No. 613 of 2010 dated 13-12-2010, reported in 2011-TIOL-01-HC). He also relied on the decisions of the coordinate benches in the case of ACIT V/s. Shri D.Sudhakar Ram (2012) 49- SOT 90(Mum) and Bertha T. Almeida V/s. ITO (2012) Tax Pub. (DT) 831 (Mum-Trib).
6. The learned counsel for the assessee in reply, however, placed before us a paper book, bringing on record before us the letters and the declarations filed before the Assessing Officer to submit that the assessee has not restricted the claim to one flat as contended by the Revenue. Further, it 5 ITA No.1188 to 1194/Hyd/2015 Shri K.Venu and others Secunderabad was submitted that that the facts are not disputed by the Revenue, and as for the only issue in dispute being whether the assessee would be entitled to claim exemption on all the units or one residential unit, he referred to the decision of Hon'ble Madras High Court in the case of CIT V/s. Smt. V.R.Karpagam (supra), wherein Hon'ble High Court has referred to the amendment brought to the provisions of the Act. He also relied on the judgment of the Hon'ble Delhi High Court in the case of CIT V/s. Gita Duggal (357 ITR 153), in which the Hon'ble Supreme Court has not a admitted further appeal by the Revenue, as reported in 228 Taxman 62(SC). On this proposition, the learned counsel also relied on the jurisdictional High Court judgment in the case of CIT V/s. Syed Ali Adil (33 taxmann.com.212)(AP), and Vittal Krishna Conjeevaram, Secunderabad (ITTA No.588 of 2013 dated 6.1.2013). Learned counsel also placed on record the decision of the coordinate bench at Hyderabad in the case of N. Revathi V/s. IT (45 taxmann.com.30 (Hyd.) Trib).
7. We have considered the issue and perused the various orders placed on record. The dispute is whether 'a residential house' stated in S.54/S.54F for allowing deduction means a single residential house or one consisting of multiple units. As for the facts involved herein, the assessee has received five flats in different floors of the same building. The Assessing Officer restricted the deduction to one such unit/flat, whereas the assessee claimed deduction for all the flats received in terms of development agreement. Therefore, the question to be decided is whether a 'residential house' would include multiple flats/residential units as well. This issue was decided by the Hon'ble High Court of Maras in its decision in CIT V/s. Smt. V.R.Karpagam (supra), wherein the amendment brought to S.54 and 54F was also considered and held as under-
"8. We have heard the learned Standing counsel appearing for the Revenue at length and perused the materials placed before this Court and the decision relied on by the Tribunal in the case of CIT V. Smt. 6 ITA No.1188 to 1194/Hyd/2015 Shri K.Venu and others Secunderabad K.G.Rukminiamma reported in 331 ITR 211. We find that the relevant provision is this case is Section 54F of the Income Tax Act, which reads as follows:
54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.--
(1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,--
(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45:
(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:
Provided that nothing contained in this sub-section shall apply where-
(a) the assessee,
(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset ; or
(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset ; or 7 ITA No.1188 to 1194/Hyd/2015 Shri K.Venu and others Secunderabad
(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 than the one residential house owned on the date of transfer of the original asset, is chargeable under the head 'ncome from house property'
9. It is relevant to note herein that an amendment was made to the above-said provision with regard to the word 'a' by the Finance (No.2) Act, 2014, which will come into effect from 01.04.2015. The said amendment reads as follows:
"32a. Words "constructed, one residential house in India" shall be substituted for "constructed, a residential house" by the Finance (No.2) Act, 2014, with effect from 01.04.2015."
10. The above-said amendment to Section 54F of the Income Tax Act, which will come into effect only from 01.04.2015, makes it very clear that the benefit of Section 54F of the Income Tax Act will be applicable to constructed, one residential house in India and that clarifies the situation in the present case, i.e, post amendment, viz., from 01.04.2015, the benefit of Section 54F will be applicable to one residential house in India. Prior to the said amendment, it is clear that a residential house would include multiple flats/residential units as in the present case where the assessee has got five residential flats. We may also mention here that all the Authorities below have clearly understood that the agreement signed by the assessee with M/s.Mount Housing Infrastructure Ltd., is that the assessee will receive 43.75% of the built-up area after development, which is construed as one block, which may be one or more flats. In that view of the matter what was before the Assessing Officer is only equivalent of 56.25% of land transferred, equivalent to 43.75% of built up area received by the assessee. This built up area got translated into five flats. Hence, we are of the opinion that the transaction in this case was not with regard to the number of flats but with regard to the percentage of the built up area, vis-a-vis, the Undivided Share of Land.
8 ITA No.1188 to 1194/Hyd/2015Shri K.Venu and others Secunderabad
11. In similar circumstances, this Court, by order dated 04.01.2012 in T.C.(A)No.656 of 2005 held as follows:
"The above provision refers to a residential house meaning thereby that even if there are four different flats and if it is considered for the property assessed as one unit and one door number is given, it should be construed as a residential unit, namely, one unit. In that sense, the said provision is available to the assessee."
12. In the decision reported in (2012) 75 DTR 56 (Dr.(Smt.) P.K.Vasanthi Rangarajan, this Court, while dealing with the benefit of exemption under Section 54F, followed the above-said decision of this Court in T.C.(A)No.656 of 2005 and granted the benefit to the assessee under Section 54F of the Income Tax Act on the investment made in the four flats.
13. Hence, the above-said decisions of this Court make it clear that the property should be assessed as one unit, even though different flats are available......"
8. The jurisdictional High Court in the case of CIT V/s. Vittal Krishna Conjeevaram (supra), following the decision in the case of CIT V/s. Syed Ali Adil (supra) and the decision of the Delhi High Court in the case of CIT V/s. Gita Duggal (supra) dismissed the appeal of the Revenue, confirming the order of the ITAT. The above judgments lay down a principle that merely because a residential house consists of several independent residential units, deduction under S.54/S.54F could not disallowed. Respectfully following the decision of the Hon'ble jurisdictional High Court in the case of CIT V/s. Syed Ali Adil (supra) as approved in the case of CIT V/s. Vittal Krishna Conjeevaram (supra) and the principles laid down by the Hon'ble High Court of Delhi and Madras discussed above, we have no option than to confirm the order of the CIT(A), which is in consonance with the principles laid down on the issue in dispute.
9 ITA No.1188 to 1194/Hyd/2015Shri K.Venu and others Secunderabad
9. We are also aware that the Hon'ble Punjab and Haryana High Court in the case of Pawan Arya V/s.CIT (supra) has not approved the above proposition, but the binding decisions of the jurisdictional High Court in the cases discussed above are in favour of the assessee, and therefore, the contentions raised by the Revenue in this appeal cannot be accepted.
10. In the result, this appeal of the Revenue, being ITA No.1193/Hyd/2015, is dismissed.
11. Facts in all the other appeals, being ITA Nos.1188 to 1192 and 1194/Hyd/2015, are also similar to the above case, viz. ITA no.1193/Hyd.2015 and all the assessees being co-sharers got five flats for the built up area in lieu of their share of land transferred under the development agreement. Since facts are similar, in the light of discussion contained in paras 8 and 9 hereinabove, we agree with the order of the CIT(A) in these cases also and dismiss these appeals of the Revenue as well.
12. To sum up, all the seven appeals of the Revenue are dismissed.
Pronounced in the court on 20th November, 2015
Sd/- Sd/-
(D.Manmohan) (B.Ramakotaiah)
Vice President. Accoutnant Member
Dt/- 20th November, 2015
Copy forwarded to:
1. Late K.Jaipal, L/R. of Smt. K.Manjula, 3-2-87 General Bazar, Secunderabad Secunderabad 10 ITA No.1188 to 1194/Hyd/2015 Shri K.Venu and others Secunderabad
2. Shri Chandrasekhar Kontham, 3-2-87, General Bazar, Secunderabad, Secunderabad
3. Shri K.Murali, General Bazar, 3-2-87 Secunderabad
4. Late K.Srinivas Rao, L/R. Smt.K.Geeta Rani, 3-2-87 General Bazar, Secunderabad
5. Shri K.Narsing Rao, 3-2-87 General Bazar, Secunderabad
6. Shri K.Venu, 3-2-87, General Bazar, Secunderabad
7. Shri K.Narayana Rao, 3-2-87, General Bazar, Secunderabad
8. Income Tax Officer Ward 10(2), Hyderabad
9. Commissioner of Income-tax(Appeals) VI, Hyderabad
10. Pr. Commissioner of Income-tax VI, Hyderabad
11. Departmental Representative ITAT, Hyderabad B.V.S.