Income Tax Appellate Tribunal - Jaipur
Late Sh.Bhagwant Meena L/H Sharwan Lal ... vs Ito, Jaipur on 24 November, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM
vk;dj vihy la-@ITA No. 145/JP/2015
fu/kZkj.k o"kZ@Assessment Year : 2006-07.
Th. L/H Shravan Lal Meena
Late Sh. Bhagwanta Meena
S/o Sh. Dungar,
Village: Bhankrota, Tehsil: Sanganer,
Jaipur.
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Vs.
The Income Tax Officer,
Ward 7(2),
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. ALIPM 0318 E
vihykFkhZ@Appellant
izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA)
jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl. CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 20.10.2016.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 24/11/2016.
vkns'k@ ORDER
PER SHRI KUL BHARAT, JM.
This appeal by the assessee is directed against the order of ld. CIT (A)-3, Jaipur dated 11.12.2014 pertaining to A.Y. 2006-07. The assessee has raised the following grounds of appeal :-
The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of the AO in making addition of Rs. 51,32,482/- by computing the long term capital gain on sale of the land at Rs. 54,91,370/- as against long term capital gain of Rs. 3,58,888/- as computed by the assessee by :
Taking the indexed cost of acquisition at Rs. 1,48,630/- as against Rs. 16,72,161/- claimed by the assessee. Not allowing the deduction for indexed cost of improvement at Rs. 13,04,795/- by holding that no reliable evidence has been placed on record by the assessee to support the improvement cost claimed. Not allowing the deduction of Rs. 10,50,000/- claimed u/s 54B by holding that the investment in the agricultural land is made in the name of wife. Not allowing the deduction of Rs. 21,03,799/- u/s 54F in respect of construction expenses incurred on the house purchased by the assessee. The assessee craves right to add, alter or amend any of the grounds of the appeal.
2. Briefly stated the facts are that the case of the assessee was reopened for scrutiny and the assessment under section 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was framed vide order dated 24th March, 2014. While framing the assessment, the AO computed Long Term Capital Gain on sale of agricultural land at Rs. 1,75,92,370/- and declined deductions under section 54B and 54F of the Act, thereby computing the capital gain at Rs. 54,91,370/-. The assessee aggrieved by this order, preferred an appeal before ld. CIT (A), who after considering the submissions dismissed the appeal.
3. Now the assessee has filed this appeal before this Tribunal.
4. The ld. Counsel for the assessee reiterated the submissions as made in the written brief. The ld. Counsel submitted that the assessee had sold his 1/4th share in the agricultural land admeasuring 6.28 hectare to M/s. Om Plantations @ Rs. 28,25,000/- per bigha. The total consideration was received of Rs. 1,75,37,564/-. Out of this, a sum of Rs. 88,17,000/- was received by cheque and balance amount of Rs. 87,20,564/- was received in cash. The sale deed was executed on 11.08.2005. The ld. Counsel submitted that the assessee utilized the sale proceeds of the agricultural land by constructing a house, purchase of a house adjoining to the constructed house, purchase of agricultural land in the name of assessee and purchase of agricultural land in the name of wife. The ld. Counsel submitted that while working out the Long Term Capital Gain of Rs. 54,91,370/- as against Rs. 3,58,888/- worked out by the assessee, the AO did not allow the adjustment for assessee took FMV of the land as on 01.04.1981 at Rs. 3,36,451/- on the basis of the report of the registered valuer but the AO adopted the value as on 01.04.1981 at Rs. 4,762/- per bigha on the basis of the information from DG (Stamps) as per which Smt. Rameshwari Devi sold her land situated in Bhankrota, Tehsil Sanganer at Rs. 4,762/- per bigha on 16.07.1981. The AO did not allow the cost of improvement of Rs. 13,04,795/- claimed by the assessee as no evidence has been furnished in this regard. The AO has declined deduction of Rs. 10,50,000/- u/s 54B as the agricultural land purchased in the name of the wife. The ld. Counsel submitted that the AO held that as per section 54F, deduction is available only in respect of one house whereas assessee has purchased one house and reconstructed the old house. Accordingly, no deduction on account of investment of Rs. 21,03,799/- is allowable. The ld. Counsel submitted that the land of the assessee is situated in the vicinity of the residential houses of the village and connected to Jaipur Ajmer National Highway. The assessee, therefore, got the FMV of the land as on 01.04.1981 determined through the registered valuer. The registered valuer considering that the agricultural land is just adjacent to the residential premises of the village and the land rate announced by the Government of Rajasthan in the year 1973 worked out the FMV of the land as on 01.04.1981 at Rs. 3,36,451/-. The AO ignored the valuation report of the registered valuer, relied upon the information received from DG Stamps. The ld. Counsel submitted that the AO has no powers under the Act to disregard the FMV of the property made by the registered valuer as on 01.04.1981 and to substitute it on the basis of his own assumption or by adopting any other method except in terms of the provisions of section 55A. The ld. Counsel submitted that from the plain reading of section 55A, it can be noted that if the AO is not satisfied with the FMV of the capital asset adopted by the assessee he can ascertain the same only by making reference to the Valuation Officer. Therefore, the AO cannot substitute the FMV of the property adopted by the assessee by relying on any other material except by making reference to the Valuation Officer. It was further submitted that once the assessee has adopted the FMV of the property as on 01.04.1981 on the basis of the report of the Registered valuer, the same cannot be disturbed by making reference to DVO unless the AO is of the opinion that the value so claimed is less than its FMV. The ld. Counsel placed reliance on the judgment of Hon'ble Calcutta High Court rendered in the case of CIT vs. Umedbhai International Pvt. Ltd., 330 ITR 506 (Cal.) and also the judgment of Hon'ble Gujarat High Court rendered in the case of Hiaben Jayantilal Shah vs. ITO, 310 ITR 31 (Guj.). The ld. Counsel further placed reliance on the judgment of Hon'ble Bombay High Court rendered in the case of CIT vs. Puja Prints, 360 ITR 397 (Bom.) and also on the decision of the Coordinate Bench of the Tribunal (Third Member) in the case of Ms. Rubab M. Kazerani vs. Jt. CIT (2005) 97 TTJ 698 (Mum.). The ld. Counsel further submitted that the assessee incurred improvement cost amounting to Rs. 45,000/- in the financial year 1985-86 for tarbandi, kachi nail, well, etc. Further a sum of Rs. 5,10,000/- was incurred in F.Y. 1992-93 for bore well, replacement of bore well due to non availability of sufficient water, ramp and replacement of the existing soil with new one. The ld. Counsel submitted that the AO further erred in not allowing the deduction under section 54B in respect of investment in agricultural land in the name of his wife amounting to Rs. 10,50,000/-. The ld. Counsel, in support of his contention, placed reliance on the judgment of the Hon'ble Delhi High Court rendered in the case of CIT vs. Kamal Wahal, 351 ITR 4 (Del.), judgment of Hon'ble Madras High Court in the case of CIT vs. V. Natarajan, 287 ITR 271 (Mad.) and the judgment of Hon'ble Karnataka High Court in the case of DIT (IT) vs. Mrs. Jennifer Bhide, 349 ITR 80 (Kar.) and also the judgment of Hon'ble Delhi High Court in the case of CIT vs. Ravinder Kumar Arora, 342 ITR 38 (Del.). The ld. Counsel submitted that the authorities below have relied upon the judgment of the Hon'ble Jurisdictional High Court in the case of Kalya vs. CIT & Others, 251 CTR 174 (Raj.) wherein it was held that exemption u/s 54B on purchase of agricultural land in the name of son and daughter in law is not allowable. However, in the present case, the investment is in the name of wife and not in the name of son or daughter in law. The ld. Counsel submitted that in this judgment, the Hon'ble High Court referred to the judgments of Hon'ble Delhi High Court in 330 ITR 309 and Hon'ble Punjab & Haryana High Court in 306 ITR 335 that the investment had to be of the same assessee whose agricultural land was sold. Therefore, the Hon'ble Rajasthan High Court held that the word 'assessee' used in the Act needs to be given a legal interpretation and not a liberal interpretation, otherwise it would tantamount to giving a free hand to the assessee and his legal heirs and it shall curtail the revenue of the Government which the law does not permit. The ld. Counsel submitted that subsequent to this decision, the Hon'ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd., 367 ITR 466 © has laid down the ratio that there cannot be imposition of any tax without the authority of law. Such a law has to be unambiguous and should prescribe the liability to pay taxes in clear terms. If the concerned provision of the taxing statute is ambiguous and vague and is susceptible to two interpretations, the interpretation which favours the subjects, as against there the revenue, has to be preferred. The ld. Counsel submitted that the ratio of the judgment of the Hon'ble Supreme Court is applicable in the present case as section 54B does not state in clear terms that the investment should be made in the name of assessee only and considering the legislative intent of the deduction u/s 54B as also the various judicial pronouncements referred above, the claim u/ 54B of Rs. 10,50,000/- be directed to be allowed to the assessee. The ld. Counsel submitted that the AO further erred in not allowing deduction u/s 54F of the Act. The assessee was residing at Kirti Bhawan, Meena Mohalla, Ajmer Road, Bhankrota. After sale of the agricultural land, considering the need of the family, he purchased a residential house for Rs. 41 lacs on 31.12.2005 adjoining to the existing house. Thereafter, the existing house was demolished and a new house was reconstructed during FY 2005-06 to 2006-07 so that the house purchased and house reconstructed meet the requirement of the family. On such construction he incurred a sum of Rs. 21,03,799/- for which Valuation report obtained by him is placed at page 52-71 of the paper book. The ld. Counsel submitted that deduction was allowed u/s 54F on the house purchased but did not allow the claim of deduction pertaining to the reconstruction of the house amounting to Rs. 21,03,799/- by holding that the assessee was already having one residential house prior to the purchase of another residential house by investing Rs. 41 lacs and thereafter he reconstructed his old house and therefore deduction in respect of reconstruction of old house is not eligible for deduction u/s 54F. The ld. Counsel submitted that when the reconstruction was made, assessee was having only one residential house and therefore the expenditure on reconstruction of the house also satisfies the condition of section 54F. Further, section 54F uses the words 'a residential house' for which the deduction is allowable. The section does not lay down that it should be one unit of house. Therefore, if the asessee reinvests the amount of capital gain in purchasing and constructing a residential house, then the same is eligible for deduction u/s 54F of the Act. For this proposition, the ld. Counsel relied upon the judgment of Hon'ble Andhra Pradesh High Court rendered in the case of CIT vs. Syed Ali Adil, 352 ITR 418 (AP), judgment of Hon'ble Delhi High Court rendered in the case of Gita Duggal vs. CIT, 357 ITR 153 (Del.) and the judgment of Hon'ble Karnataka High Court rendered in the case of D. Anand Basappa vs. ITO, 309 ITR 329 (Kar.). The ld. Counsel submitted that in view of these case laws, the assessee deserves to be granted deduction under section 54B and 54F of the Act.
4.1. On the contrary, the ld. D/R supported the orders of the authorities below and placed reliance on the judgment of the Hon'ble Punjab & Haryana High Court rendered in the case of Jai Narayan vs. ITO, 306 ITR 335 in respect of allowability of deduction under section 54B wherein the Hon'ble High Court has held that purchse of agricultural land in the name of son and grandson does not qualify u/s 54B of the Act. The ld. D/R has also placed reliance on the judgment of the Hon'ble Rajasthan High Court rendered in the case of Shri Kalya vs. CIT wherein the Hon'ble Jurisdictional High Court has held that the word 'assessee' used in the Income Tax Act needs to be given a 'legal interpretation' and not a 'liberal interpretation' as contended by the ld. Counsel for the appellant. If the word 'assessee' is given a liberal interpretation, it would be tantamount to giving a free hand to the assessee and his legal heirs and it shall curtail the revenue of the Government. Accordingly, the Hon'ble High Court affirmed the view of the revenue in respect of this disallowance of deduction u/s 54B of the Act.
4.2. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. The only effective ground in this appeal is ground no. 1 that is reproduced hereinabove. The grievance of the assessee in this appeal is threefold. First, the AO has adopted wrong indexed cost of acquisition by relying upon the value adopted by the DG Stamps and not adopting the value of the Registered valuer. Secondly, the AO declined deduction claimed for making investment in the name of the wife and also not allowing deduction of Rs. 21,03,799/- under section 54F of the Act. Apart from these three grievances, the assessee is also aggrieved for not allowing the indexed cost of improvement.
4.3. The first issue which required to be adjudicated is whether the AO was justified in adopting the indexed cost of acquisition as per the value of DG Stamps. As per section 55A of the Act, the AO is required to refer the matter to DVO where the assessee claimed that Fair Market Value as claimed by the assessee is at variance with the FMV. In the present case the AO adopted the indexed cost of acquisition as per the comparable instance. However, the assessee had adopted the indexed cost of acquisition at Rs. 3,36,451/- before the AO on the basis of registered valuer's report, but the AO without considering the report adopted the indexed cost of acquisition at Rs. 1,48,630/-. The Registered Valuer in its Valuation Report has observed that as per the Circular issued by the Government of Rajasthan, land rate for the year (1981) falling between 1973 and 1990, is to be calculated by adding 10% per year (cumulative) over the rates announced by Govt. of Rajasthan in the year 1973 for residential & 20% for commercial. As the whole area was agricultural area, with close proximity of village habitant area hence the land rate on 1973 has been taken as an average of nearest land area announced by the Govt. of Rajasthan in 1973 & the such nearest area is Ajmer Road whose minimum residential rate was Rs. 80/- per sq.mts. As per the site condition the Ajmer Road in 1973 was referred to nearby area of Sodala Thana only & the property in question is far away from the property hence factoring it as linearly upto the location of property, the rate as fair market rate in 1973 becomes as Rs. 10.00 per sq.mts as median rate for the whole & similar type of areas. As the particular property in question has its own location and other parameter as very important mentioned in the above parameter of factor affecting the valuation report, hence increasing it by 10% cumulatively upto 1981, which becomes Rs. 21.43 per sq.mts for the year 1991. Hence he adopted the land value at Rs. 3,36,451/-. However, the AO has adopted the rate on the basis of sale deed registered with the Stamp Valuation Authority situated in the nearby area. The law is well settled that the DG Stamps valuation would not be a proper indicator for ascertaining the Fair Market Value. However, the registered valuer has applied the rate as per the Circular issued by the Government of Rajasthan. Such valuation ought not to have been set aside without referring the matter to the DVO as per section 55A(a) of the Act. Therefore, we set aside the order of the AO on this issue and direct the AO to adopt the valuation as reported by the Registered valuer at Rs. 3,36,451/-. This issue is decided in favour of the assessee and against the revenue.
5. Now coming to the next issue whether the assessee is entitled for indexed cost of improvement at Rs. 13,04,795/-. The AO has not allowed the indexed cost of improvement on the basis that no evidence has been furnished. This finding was affirmed by the ld. CIT (A).
5.1. The ld. Counsel for the assessee contended that the assessee has replaced the bore-well and also drew our attention to paper book page 39 wherein a letter from the Councilor confirming the incurrence of expenditure. However, no direct evidence with regard to the expenditure is placed on the record demonstrating the incurrence of the expenditure. But the fact that in the agricultural land such expenditures are incurred in the course of time. This fact cannot be lost sight of. Therefore, after considering the facts, we allow 50% of the indexed cost of improvement as claimed by the assessee being the reasonable expenditure incurred by the agriculturist on the improvement of the land. The assessee gets relief of Rs. 6,52,398/-. This ground of the assessee is partly allowed.
6. The next issue is with regard to the claim of deduction under section 54B of the Act for making investment in the agricultural land in the name of the wife.
6.1. The ld. Counsel for the assessee placed reliance on the various case laws in support of the contention and also the judgment of Hon'ble Supreme Court rendered in the case of CIT vs. Vatika Township Pvt. Ltd. (supra). He also placed reliance on the judgments of Hon'ble Delhi High Court and Hon'ble Punjab & Haryana High Court in support of the contention that the claim is allowable. We find that the judgment of Hon'ble Supreme Court is not direct on the point. However, the ld. D/R has placed reliance on the judgment of Hon'ble Jurisdictional High Court rendered in the case of Shri Kalya vs. CIT-III, Jaipur in DB Income Tax Appeal No. 112/2012 wherein the Hon'ble High Court has held in para 8 as under :-
" 8. Secondly, the word assessee used in the Income Tax Act needs to be given a 'legal interpretation' and not a 'liberal interpretation', as contended by the learned counsel for the appellant. If the word 'assessee' is given a liberal interpretation, it would be tantamount to giving a free hand to the assessee and his legal heirs and it shall curtail the revenue of the Government, which the law does not permit".
In view of the above binding precedents, the ground raised in the appeal is dismissed. This issue is decided against the assessee.
7. Next issue is not allowing the deduction of Rs. 21,03,799/- u/s 54F of the Act.
7.1. The ld. Counsel for the assessee reiterated the submissions as made in the written brief. The submissions of the assessee are as under :-
" The assessee was residing at Kirti Bhawan, Meena Mohalla, Ajmer Road, Bhankrota. After sale of the agricultural land, considering the need of the family, he purchased a residential house for Rs. 41 lacs on 31.12.2005 adjoining to the existing house. Thereafter, the existing house was demolished and a new house was reconstructed during FY 2005-06 to 2006-07 so that the house purchased and house reconstructed meet the requirement of the family. On such construction he incurred a sum of Rs. 21,03,799/- for which Valuation report obtained by him is at paper book page 52-71.
The AO allowed the deduction u/s 54F on the house purchased for Rs. 41 lacs but did not allow the claim of deduction pertaining to the reconstruction of house amounting to Rs. 21,03,799/- by holding that assessee was already having one residential house prior to the purchase of another residential house by investing Rs. 41 lacs and thereafter he reconstructed his old house and therefore the deduction in respect of reconstruction of old house is not eligible for deduction u/s 54F. The ld. CIT (A) confirmed the order of AO by holding that demolished of old house and reconstruction of the same is subsequent to the purchase of another house i.e. subsequent to the ownership of two houses.
It may be noted that the assessee is entitled to claim deduction/s 54F where he has within a period of two yers after the date of transfer purchased or within a period of three years constructed a residential house. The section further provides that the deduction u/s 54F will not be available where the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset. In the present case, the assessee has purchased a residential house for Rs.41 lacs on 31.12.2005. On that date he was having the old house. Therefore, deduction u/s 54F of Rs. 41 lacs was allowed to him. Thereafter, the assessee demolished the existing house and made reconstruction within a period of three years from the date of the transfer of the original asset. Thus, when the reconstruction was made, assessee was having only one residential house and therefore the expenditure on reconstruction of the house also satisfies the condition of section 54F. Further, section 54F uses the words 'a residential house' for which the deductions is allowable. The section does not lay down that it should be one unit of house. Therefore, if the assessee reinvests the amount of capital gain in purchasing and constructing a residential house, then the same is eligible for deduction/s 54F. for this proposition, reliance can be placed on the following cases :
CIT vs. Syed Ali Adil, 352 ITR 418 (2013)(AP) Gita Duggal vs. CIT 357 ITR 153 (Del.) D. Anand Basappa vs. ITO 309 ITR 329 (20090 (Kar.) In view of above, the AO be directed to allow the claim of Rs. 21,03,799/- on account of reconstruction of house."
7.2. On the contrary, the ld. D/R supported the orders of the authorities below and submitted that the law is clear that u/s 54F deduction is available to residential houses.
7.3. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee had purchased a residential house for Rs. 41 lacs and subsequently a new house was reconstructed, on this he incurred an expenditure of Rs. 21,03,799/-. The AO has not doubted the valuation of the assessee but has declined the benefit u/ 54F on the basis that deduction u/s 54F can only be allowed for purchase of a new residential house and the investment in the construction of old house after the purchase of new house cannot be allowed. The ld. CIT (A) affirmed this view on the basis that the demolition of old house is subsequent to purchase of new house. Accordingly he was of the view that the AO has rightly disallowed the claim of deduction under section 54F of the Act. As per section 54F deduction is allowable if the assessee within a period of one year or after two years of the date of transfer took place purchased, or has within a period of three years after that date constructed, a residential house (the word 'a' has not been replaced with one residential house with effect from 1st April, 2015). Therefore, prior to 1.4.2015 the requirement was a residential house. As per the assessee the assessee has reconstructed a residential house. The ld. Counsel contended that in the light of judgment of Hon'ble Andhra Pradesh High Court rendered in the case of CIT vs. Syed Ali Adil (supra) wherein it was held that exemption under section 54 only requires that property purchased by assessee out of sale proceeds should be of residential nature and fact that residential house consisted of several independent units could not be an impediment for granting relief under the said section, even if such independent units were situated side by side, on different floors or were purchased under separate sale deeds. Further reliance is placed on the judgment of Hon'ble Delhi High Court rendered in the case of Gita Duggal vs. CIT (supra) wherein it has been held that section 54/54F uses the expression 'a residential house'. The expression used is not 'a residential unit'. Section requires the assessee to acquire a 'residential house' and so long as the assessee acquires a building, which may be constructed, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the section should be taken to have been satisfied. Fact that the residential house consists of several independent units cannot be permitted to act as an impediment to the allowance of exemption u/s 54/54F of the Act. In the case in hand, out of the sale consideration the assessee purchased a residential house for Rs. 41 lacs on 31.12.2005 adjoining to the existing house. Thereafter the existing house was demolished and a new house was reconstructed so that the house purchased and house reconstructed would meet the requirement of the family. This fact is not rebutted by the revenue by placing any contrary material on record. Therefore, by following the ratio laid down by the Hon'ble Andhra Pradesh High Court in the case of CIT vs. Syed Ali Adil (supra) and the judgment of Hon'ble Delhi High Court in the case of Gita Duggal vs. CIT (supra), we hereby direct the AO to allow the claim of deduction under section 54F of the Act.
8. In the result, appeal of the assessee is partly allowed.
Order is pronounced in the open court on 24.11.2016.
Sd/- Sd/-
( HkkxpUn ½ ( dqy Hkkjr)
( BHAGCHAND) ( KUL BHARAT )
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Jaipur
Dated:- 24/11/2016.
Das/
vkns'k dh izfrfyfi vxzsf"kr@Copy of the order forwarded to:
1. The Appellant- Th. L/H Shravan Lal Meena, Jaipur.
2. The Respondent -The ITO Ward 7(2), Jaipur.
3. The CIT(A).
4. The CIT,
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 145/JP/2015)
vkns'kkuqlkj@ By order,
lgk;d iathdkj@ Assistant. Registrar
16
ITA No. 145/JP/2015
Th. L/H Shravan Lal Meena