Income Tax Appellate Tribunal - Pune
Shri Sharad Sitaram Bhinge [Huf], Pune vs Ito Wd - 5[4] Pune, Pune on 1 February, 2017
आयकर अपील य अ धकरण]] iq.ks यायपीठ "ए" iq.ks म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
सु ी सुषमा चावला, या यक सद य
एवं ी आर. के. पांडा, लेखा सद य के सम#
BEFORE MS. SUSHMA CHOWLA, JM
AND SHRI R.K. PANDA, AM
आयकर अपील सं. / ITA No.619/PUN/2012
नधा%रण वष% / Assessment Year : 2001-02
Shri Sharad Sitaram Bhinge (HUF), .......... अपीलाथ /
At Post Baramati, Appellant
Dist. Pune
PAN : AAEHB6724L
बनाम v/s
.......... यथ /
ITO, Ward-5(4), Pune Respondent
अपीलाथ क ओर से / Appellant by : Shri M.K. Kulkarni
यथ क ओर से / Respondent by : Shri Suhas Kulkarni
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing :15.12.2016 Date of Pronouncement:01.02.2017
आदे श / ORDER
PER R.K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 28-02-2011 of the CIT(A)-III, Pune relating to the Assessment Year 2001-02.
2. Facts of the case, in brief, are that the assessee filed the return of income on 31-10-2001 in individual capacity declaring total loss of Rs.84,189/-. During the course of assessment proceedings in the Individual status of the assessee, the Assessing Officer noticed that the assessee had obtained clearance certificate under section 230A of the Act for sale of property belonging to 2 ITA No.619/PUN/2012 assessee's HUF. The capital gain thereof had been included in the hands of the individual. It was brought to the notice of the assessee by the Assessing Officer that the capital gain was to be taxed in the hands of HUF as the property belonged to the HUF. The assessee stated that the HUF was the owner of the property and showing capital gain in the individual case was a mistake. However, the assessee pointed out that the whole capital gain was exempt under section 54F because the same had been invested in capital gain account with State Bank of India as envisaged u/s. 54F(4) of the Act. As the entire capital gain was exempt, the HUF thought it fit not to file any return of income.
3. The Assessing Officer, however, issued a notice under section 148 of the I.T. Act, 1961 to the assessee on 29-2-2004, as according to him, the income of the HUF was included in the individual hand and the claim of deduction was not taken on the net consideration. In response to this notice, the assessee HUF filed return of income on 15-3-2004 declaring total income of Rs.44,535/-, where the capital gain Income was offered at NIL.
4. During the course of assessment proceedings, the assessee submitted that the impugned land at Jalochi, Tal. Baramati, Dist. Pune belonged to the HUF and as per valuation report of architect M/s. Nitin Farsole & Associates Ltd. the value of the land in the year 1-4-1981 was shown at Rs.100/- per sq.ft. It was pointed out that the land as on 1-4-1981 was agricultural land and total area of the land was 45 guntas. In the year 1998, the assessee had applied for N.A. conversion of the land and the Town Planning Authorities granted permission for only 21 guntas out of 45 guntas 3 ITA No.619/PUN/2012 as N.A. plot. After receiving the permission for conversion of the land as N.A. for 21 guntas (2194 sq.mtrs.) out of the 45 gunthas (4500 sq.mtrs.), the assessee sold 1580 sq. mtrs. of the converted N.A. plot in April, 2000 for a total consideration of Rs.23,00,000/-. Since the value of the land had increased due to conversion into N.A. land, the cost of agricultural land as on 1-4-1981 was taken at Rs.200/- per sq.mtr. Accordingly, the cost of acquisition of the agricultural land admeasuring 3240 sq.mtrs (equivalent to 1580 sq.mt. of NA land) as on 1-4-1981 in possession of the assessee was taken at Rs.3,24,000/-. Out of the sale proceeds, an amount of Rs.10 ,19,940/ - was deposited with capital gain account scheme in the State Bank of India, Baramati Branch under Account No.01190/015245 on 24-10-2000 besides spending a sum of Rs.3,00,000/- in the construction. The total sum invested was thus shown at Rs.13,19,490/-. After sale of 1580 sq. mtrs. out of the land converted into N.A. land admeasuring 2194 sq.mtrs., the assessee was left with 614 sq.mtrs of NA land. This remaining area of 614 sq.mtrs. was utilized for construction of residential house. It was submitted that the cost of the land utilized for construction admeasuring 614 sq.mtrs. was also to be considered as being part of cost of construction, which the assessee worked out at Rs.8,93,797/- at the rate of Rs.1,455/- per sq.mtr. based on the valuation of 1580 sq.mtrs. of land sold for Rs.23 lakhs. It was stated that the members of the HUF had released their rights in favour of the HUF for making available the land for construction of the residential property, which amounted to utilization of the funds realized out of sale of land towards construction of the property. The assessee drew attention of the Assessing Officer to the decision 4 ITA No.619/PUN/2012 of the ITAT New Delhi in the case of Twenty First Century Steels Ltd. vs. DCIT in ITA No.8472/Del./91 dated 3-12-2003, where the decision of the Hon'ble Supreme Court in the case of CIT vs. Gwalior Rayon Silk Mfg. Co. Ltd. reported in 196 ITR 149 was followed. The assessee also referred to the decision of the Hon'ble Supreme Court in the case of CIT vs. T.N. Arvinda Reddy reported in 120 ITR 46, where issue relating to interpretation of section 54 has been dealt with. In this decision, reference has also been made to the decision in the case of Bobshow Brothers Ltd. vs. Mayer (1956) 3 ALL ER 833. Thus, according to the assessee, in view of the Supreme Court decision in the case of T.N. Arvind Reddy (supra), release of rights of the members of the HUF in favour of the HUF amounted to utilization of the land in the construction of the residential house within the meaning of section 54 of the Act and, therefore, the resultant capital gain was exempt under the provisions of the law. The working of capital gains and investment of the consideration was furnished as under:-
i. Sale proceeds Rs.23,00,000/-
ii. Less : Indexed cost of acquisition
(3,24,000 x 406/100) Rs.13,15,440
Development expenses Rs. 56,730
-----------------
Rs.13,72,170/-
-------------------
Long Term Capital Gains Rs.9,27,830/-
-------------------
Investment of Net Consideration Rs.23,00,000/-
1) Cost of construction Rs.10,19,490
2) Further investment Rs. 3,00,000
3) Cost of land on which
Construction has been
put up Rs.9,30,000
4) Development expenses
and commission paid Rs.56,730
----------------
Rs.23,06,220/-
--------------------
5
ITA No.619/PUN/2012
5. During the assessment proceedings, the Assessing Officer asked the assessee to explain as to how the cost of plot was taken at Rs.2,37,000/- in the individual return while the same was taken at Rs.3,24,000/- in the HUF return filed in response to the notice under section 148 of the Act. It was explained by the assessee that the cost of the land was taken on estimate basis of land cost @ 150 per sq. ft., whereas in the HUF return the same was taken on the basis of valuation report as the cost of the land had doubled due to conversion of part of the land Into N.A. plot. The assessee stated that the land belonged to HUF and no such documents releasing the rights by the members were required as HUF was the owner of the land.
6. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He noted that the assessee had changed the cost of acquisition three times which was clearly to avoid payment of capital gain tax. He observed that the capital gains was worked out at Rs.2,61,560/- in the return of income of the individual, which was with the intention to set off of the business loss. He also observed that while filing the return of income the assessee had worked out the capital gains and not the net consideration for claim of deduction under section 54F and no part of the sale consideration was appropriated towards the acquisition of new asset and only capital gains had been invested in the scheme. Referring to the provisions of section 54F, the Assessing Officer held that what was material for allowing deduction u/s.54F(4) relating to transfer of capital asset was the deposit of 'net consideration' in the capital gain scheme and cost of acquisition was immaterial. Relying on the decision of the Hon'ble 6 ITA No.619/PUN/2012 Supreme Court in the case of CIT vs. Gwalior Rayon Silk Mfg. Co. Ltd. reported in 196 ITR 149 the Assessing Officer did not entertain the assessee's claim for consideration of cost of the land admeasuring 614 sq.mtrs. utilized for construction of the house. The Assessing Officer observed that in the said case before the Supreme Court, the property had been totally partitioned and rights of the other brothers had got released in favour of one brother as joint owner of the property. However, in assessee's case there was no total partition, nor did there any question of release of rights of other members in the land to the HUF arise. Therefore, the decisions relied on by the assessee are distinguishable. According to the Assessing Officer, as per section 54F, the net consideration was to be invested in the new asset and as such the land already in possession of the HUF could not be said to be a new asset. The Assessing Officer thus came to the conclusion that the assessee had not complied with the provisions of section 54F(
4) of the Act for availing the benefit. According to the Assessing Officer, the assessee was changing its stand according to the queries raised from time to time with an intention to avoid payment of taxes on capital gain arising on transfer of land. The Assessing Officer observed that as per the provisions of sec.54F(4), the net considerations, if not appropriated towards the purchase of new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilized, should be deposited in the specified savings account before due date of filing of the return and proof thereof ought to be attached with the return of income. In the opinion of the Assessing Officer, the assessee in the present case, did not apportion any sum of the 7 ITA No.619/PUN/2012 net consideration towards purchase of new asset before the due date for filing of the return. The Assessing Officer accordingly worked out the capital gain as under:
Net Sale Consideration Rs.22,43,270/-
Less : Expenditure incurred for transfer
i) Development expenses Rs.33,730
ii) Commission paid Rs.23,000
-------------
Rs.56,730/-
-------------------
Net Consideration Rs.22,43,270/-
Less : Deduction u/s.54F(4) being
amount deposited in capital
gains a/c scheme Rs.10,19,490/-
--------------------
Long term capital gains Rs.12,23,780/-
--------------------
7. Before CIT(A) the assessee strongly objected to the
conclusion of the Assessing Officer that the capital gains was worked out without apportioning any sum out of the net consideration towards purchase of new asset before the due date of filing of the return. It was argued that the total construction cost was of Rs.13,19,490/- and the construction was made on the land admeasuring 614 sq.mtrs., valuation of which was done at Rs.8,93,797/-. It was submitted that as per section 54F(4), the unutilized net consideration amounting to Rs.10,19,490/- was deposited in capital gain account with State Bank of India, Baramati in A/c.No.01190/015245 on 24-10-2000, which was before the due date for filing the return of the assessment year under appeal. It was argued that the valuation of the land admeasuring 614 sq. mtrs. utilized for construction of residential house was done on the basis of the sale of land admeasuring 1580 sq. mtrs. at Rs.23,00,000/-. The said land got available by release 8 ITA No.619/PUN/2012 of the same in favour of HUF for utilization of construction of house property and such utilization amounts to acquisition of new property. For the above proposition, the assessee relied upon the decision of the ITAT Special Bench in the case of Twenty First Century Steels Ltd. vs. DCIT in ITA No.8472/Del./91 order dated 03-12-2003. It was accordingly submitted that the total cost of construction was Rs.22,13,287/- which includes Rs.10,19,490/- being deposit in capital gain account, Rs.3,00,000/- being further amount utilized in construction and Rs.8,93,797/- being cost of the land as against the total sale proceeds of the land of Rs.23,00,000/-. It was accordingly argued that the whole proceeds of the land were utilized for deposit in capital gains account scheme and in the construction of the new house property and therefore, the Assessing Officer was not legally justified in taxing long term capital gain of Rs.12,23,780/-, since the assessee had fulfilled the conditions of both the sections 54F(2) and 54F(4) of the Act.
8. However, the CIT(A) was also not satisfied with the arguments advanced by the assessee. He observed that the assessee during the year has received an amount of Rs.23 lakhs on account of sale of land admeasuring 1580 sq.mtrs out of which the assessee has deposited an amount of Rs.10,19,940/- in the capital gain account scheme of the State Bank of India, Baramati Branch and there is no dispute to the above. The assessee claimed to have invested an amount of Rs.3 lakhs for construction of residential house. The assessee also claimed that the residential house was constructed on the land remained with the HUF admeasuring 614 sq.mtrs. for which the assessee had adopted the valuation at 9 ITA No.619/PUN/2012 Rs.8,93,797/- on the basis of the sale of other part of the land admeasuring 1580 sq.mtrs. for Rs.23,00,000/-.
9. So far as investment of Rs.3 lakhs in the construction of residential house property is concerned, the Ld.CIT(A) rejected the claim of the assessee in absence of any supporting evidence such as the nature of construction, permission from the competent authority for construction, date of utilization of funds for construction, bills and vouchers for various items of expenses, whether the new building is complete within the specified period of 3 years from the date of transfer, completion certificate, the nexus between the consideration received and the capacity in the construction of house, valuation report etc.
10. So far as the claim of the assessee that the land admeasuring 1614 sq.mtrs was made available to the assessee by release of the same in favour of HUF for utilization of construction of house property and such release amounts to purchase by the assessee and therefore deduction u/s.54F is available towards the cost of the land is concerned the Ld.CIT(A) also rejected the same. While doing so, he held that the property in the instant case stands in the name of the assessee HUF itself and therefore the claim that there was transfer of land by release in favour of the same HUF by co-parceners does not stand the reason. Further, no evidence whatsoever was produced by the assessee to show that the assessee received the land by way of release from other co- parceners. Without prejudice to the above he observed that even presuming that there was a release as claimed by the assessee, still the release was not for a consideration since the assessee has 10 ITA No.619/PUN/2012 not paid any price to the other co-parceners for release of their share in favour of the assessee. There is no appropriation or utilization of net sale consideration towards cost of the plot as no consideration was paid for alleged release of land and the assessee has taken only notional estimated cost based on the consideration received from sale of other part of the land. Distinguishing the various decisions cited before him he rejected the claim of the assessee that cost of the land received by way of release is also to be taken into consideration for the purpose of determining the quantum of deduction u/s.54F of the Act,
11. So far as the claim of the assessee that Assessing Officer has not allowed the claim of indexed cost of acquisition while computing the long term capital gain is concerned he directed the Assessing Officer to adopt the cost of acquisition as on 01-04- 1981 at Rs.100/- per sq.mtrs for indexation purpose as against Rs.200/- per sq.mtrs claimed by the assessee.
12. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds :
"1. On the facts and circumstances of the case and in law the Ld. C.I.T. (A) was not justified in rejecting the claim of the appellant that the release of land by the members of the HUF in favour of HUF for utilization in construction of residential property and therefore was required to be included in the exemption claimed u/s. 54-F of the Act. The decision of the Ld. CIT (A) was contrary to the provisions of law and without jurisdiction. The claim of the appellant be accepted.
2. On the facts and circumstances of the case and in law the Ld. C.I.T. (A) also erred in not accepting the claim of the appellant that an amount of Rs.3,00,000/- was utilized towards construction of residential property and therefore, was required to be included in claim of exemption u/s. 54-F of the Act. The order of the Ld. C.LT. (A) is without jurisdiction being contrary to the provisions of law and Rules thereto. The claim of the appellant be accepted.11 ITA No.619/PUN/2012
3. On the facts and circumstances of the case and in law the Ld. C.I.T. (A) was not justified in estimating the cost of acquisition as on 01-04-1981 for adopting the same for Indexation @ 100/- per Sq.Mtr. instead of Rs.200/- per Sq. Mtrs. as claimed by the appellant. The order of the Ld. C.I.T. (A) is without any legal support. The appellant's claim be accepted.
4. On the facts and circumstances of the case and in law the interest levied u/s.234-A, 234-B and 234-C is not justified and it be deleted.
5. The appellant craves leave to add/amend or alter any of the above grounds of appeal.
13. The Ld. Counsel for the assessee strongly opposed the order of the CIT(A). He reiterated the same arguments as made before the Assessing Officer and the CIT(A). He also relied on the following decisions :
1. CIT Vs. Gurucharan Singh reported in 292 ITR 0387
2. CIT Vs. Bai Shirinbai K. Kooka reported in 46 ITR 86 (SC)
14. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A).
15. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer on the basis of return filed in individual capacity showing capital gain on sale of land belonging to the HUF of Shri Sharad Sitaram Bhinge issued notice u/s.148 to the assessee HUF. The assessee HUF filed return of income in response to notice u/s.148 declaring total income of Rs.44,535/-. We find assessee has sold 1580 sq.mtrs of land out of total land of 2194 sq.mtrs at Jalochi, Taluka Baramati, Dist. Pune for a consideration of Rs.23 lakhs. The 12 ITA No.619/PUN/2012 assessee has invested an amount of Rs.10,19,940/- in capital gain account scheme in the State Bank of India, Baramati Branch. The assessee claimed to have spent Rs.3 lakhs for construction of the house on the remaining area of 614 square meters. The assessee also considered the cost of the remaining land admeasuring 614 square meters utilized for construction at Rs.8,93,797/- by adopting the rate of Rs.1455/- per sq.mtrs for the purpose of deduction u/s.54F. The assessee accordingly calculated the long term capital gain at Nil after indexation, the details of which are already given at Para 5 of the order. We find the Assessing Officer in the assessment order allowed only the investment in capital gain account scheme amounting to Rs.10,99,490/- as deduction u/s.54F. After allowing the development expenses of Rs.33,730/- and commission of Rs.23,000/- being expenditure incurred for the transfer of the land, the Assessing Officer determined the long term capital gains at Rs.12,23,780/-.
16. We find in appeal the Ld.CIT(A) upheld the action of the Assessing Officer in disallowing the investment of Rs.3 lakhs towards construction of the house. He also rejected the claim of the assessee that the release of land by the members of the HUF in favour of the HUF be considered as utilization in construction of residential property and thereby eligible for deduction u/s.54F of the Act. He however directed the Assessing Officer to adopt the cost of acquisition of the land as on 01-04-1981 for the purpose of indexation @ Rs.100/- per sq.mtr as against Rs.200/- per sq.mtr claimed by the assessee.
13ITA No.619/PUN/2012
17. We do not find any infirmity in the above observation of the Ld.CIT(A. So far as the issue relating the admissibility of deduction u/s.54F of the land received by way of release is concerned we find the Ld.CIT(A) distinguishing the various decisions cited before him and relying on the CBDT Circular No.667 dated 18-10-1993 has held that when the property already stands in the name of the HUF and there is no evidence on record to show that the assessee received the land by way of release from the co-owners and the assessee has not paid any price to the co- owners, there is no justification on the part of the assessee to claim deduction u/s.54F on the value of 614 square meters of land. The relevant observation of the CIT(A) from Para Nos. 5.4 to 5.4.7 reads as under :
"5.4 The submissions of made by the Ld. Counsel for the appellant are carefully examined with reference to the facts of the case and the provisions of sec. 54F of the I T Act. During the year under, it is not in dispute that the total consideration received by the appellant on sale of land in question admeasuring 1580 sq. mtrs. was Rs.23,00,000/-. The claim of the appellant is that an amount of Rs.10,19,940/- was deposited with the capital gain account scheme of the State Bank of India, Baramati and another Rs.3,00,000/- was utilized for construction of residential house. The appellant further claimed that the residential house was constructed on the land remained with them admeasuring 614 sq. mtrs., valuation of which was done at Rs.8,93,797/-, on the basis of the sale of other part of the land admeasuring 1580 sq. mtrs. for Rs.23,00,000/-. It is stressed upon that the said land got available to the appellant by release of the same in favour of HUF for utilization of construction of house property and utilization amounts to acquisition of new property. According to the appellant, the entire sale proceeds of the land were utilized in making deposit in capital gains account scheme and the construction of the new house property and therefore, the Assessing Officer was not legally justified in taxing long term capital gain of Rs.12,23,780.
5.4.1 The main contention of the appellant is that remaining land admeasuring 614 sq.mtrs. was made available to the appellant by release of the same in favour of HUF for utilization of construction of house property and such release amounts to 'purchase' by the appellant and therefore deduction under sec. 54F is available towards cost of this land. The relevant portion of Section 54F of the Income-tax Act provides as under:14 ITA No.619/PUN/2012
"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 or [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 :
Thus, the main ingredients of section 54F of the Act are asunder:
(i) Capital gain arises to an appellant being an individual or a Hindu undivided family.
(ii) The asset transferred must be a long term capital asset.
(iii) The asset transferred can be any capital asset other than a residential house.
(iv) The appellant purchases within a period of one year before or two years after the date on which the transfer took place, or constructs within a period of three years after the date of transfer, a residential house.
(v) The appellant does not own more than one residential house on the date of transfer of the original asset exclusive of one purchased for claiming exemption under section 54F.
The claim of the appellant that cost of the land received by way of 'release' is also to be taken into consideration for the purpose of for determining the quantum of deduction under section 54F. This claim of the appellant has no merit. Firstly, in the present case, the property stands in the name of the appellant HUF himself and therefore, the claim of the appellant that there was transfer of land by release in favour of the same HUF by the coparceners does not stand to reason. Even otherwise, no evidence whatsoever was produced by the appellant to show that the appellant received the land by way of release from other coparceners. Secondly, even presuming there was a release as claimed by the appellant; release was not for a consideration as the appellant has not paid any price to the other coparceners for release of their share in favour of the appellant. There is no appropriation or utilization of net sale consideration towards cost of the plot as no consideration was paid for alleged 15 ITA No.619/PUN/2012 release of land and the appellant has taken only notional estimated cost based on the consideration received from sale of other part of the land. Therefore, the claim of the appellant that cost of the land received by way of 'release' is also to be taken into consideration for the purpose of for determining the quantum of deduction under section 54F is not legally tenable.
5.4.2 In support of its contention, the appellant referred to the decision of Supreme Court in the case of T.N. Aravinda Reddy (120 ITR 46), Board Circular No.667 dated 18.10.1993, decision of Special Bench of ITAT, Delhi in the case of Twenty First Century steels Ltd. (94 ITD 258), the decision of Supreme Court in the case of Gwalior Rayon Silk Mfg. Co. Ltd. (196 ITR 149). The relevance and applicability of these authorities to the facts of the present case are now examined.
5.4.3 In the case of T.N. Aravinda Reddy, four brothers, members of Hindu coparcenary, partitioned their family properties, leaving a common house in the occupation of their mother. The assessee (the eldest brother) sold his own house attracting charge to capital gains tax. He, however, acquired the' common house from his three brothers who executed three separate release deeds for a consideration of Rs. 30,000 each, adjusted towards the extra share agreed to be given. The question raised by Revenue was whether said release deeds in favour of assessee would constitute "purchase" of a house property by him making him eligible for relief within the ambit of section 54(1). In that background, the Apex Court held that there is no reason to divorce the ordinary meaning of the word "purchase" as buying for a price or equivalent of price by payment In kind or adjustment towards an old debt or for other monetary consideration from its legal meaning in section 54(1). Undoubtedly each release in this case is a transfer of the releasor's share for consideration to the releasee. The transferee purchases the share of each brother at a price of Rs. 30,000 each. Thus, it would be evidently called a "purchase" by the assessee who would, accordingly, be entitled to relief under section 54(1). As already mentioned hereinabove, firstly, in the present case, the property stands in the name of the appellant HUF himself and therefore, the claim of the appellant that there was transfer of land by release in favour of the same HUF by the coparceners does not stand to reason. Even otherwise, no evidence whatsoever was produced by the appellant to show that the appellant received the land by way of release from other coparceners. Secondly, even presuming there was a release as claimed by the appellant; release was not for a consideration as the appellant has not paid any price to the other coparceners for release of their share in favour of the appellant. Therefore, the decision of the Supreme Court in case of T N Aravinda Reddy (supra) does not advance the case of the appellant.
5.4.4 The Board Circular No. 667 dated 18.10.1993, which is relied upon by the appellant, reads as under:
1. Sections 54 and 54F provide for a deduction in cases where an assessee has, within a period of one year before or two years after the date on which the transfer of a capital asset takes place, purchased, or has within a period of three years after that date 16 ITA No.619/PUN/2012 constructed a residential house. The quantum of deduction is itself dependent upon the cost of such new asset. It has been represented to the Board that the cost of construction of the residential house should be taken to include the cost of the plot as, in a situation of purchase of any house property, the consideration paid generally includes the consideration for the plot also.
2. The Board has examined the issue whether, in cases where the residential house is constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also.
The Board are of the view that the cost of the land is an integral part of the cost of the residential house, whether purchased or built. Accordingly, if the amount of capital gain for the purposes of section 54, and the net consideration for the purposes of section 54F, is appropriated towards purchase of a plot and also towards construction of a residential house thereon, the aggregate cost should be considered for determining the quantum of deduction under section 54/54F, provided that the acquisition of plot and also the As per the above Board circular, if the amount of capital gain for the purposes of section 54, and the net consideration for the purposes of section 54F, is appropriated towards purchase of a plot and also towards construction of a residential house thereon, the aggregate cost should be considered for determining the quantum of deduction under section 54/54F, provided that the acquisition of plot and also the construction thereon, are completed within the period specified in these sections. In the present case, there is no such appropriation towards cost of the plot as no consideration was paid for alleged release of land and the appellant has taken only estimated cost based on the consideration received from sale of other part of the land. In such circumstances, it is not known as to how the board circular is applicable to the facts of the case.
5.4.5 In the case of Twenty First Century steels Ltd. (94 ITD 258), the special Bench of ITAT, Delhi in the context of provisions of sec. 32AB held that the terms 'utilization' or 'purchase' of 'new machinery' are not to be taken in strict literal sense and, therefore, the benefit of deduction is to be allowed also in those cases where the entire machinery has not been purchased from market, but the same has been fabricated or assembled by the assessee. The Special Bench observed that the object is to encourage investment in new machinery and plant. If an assessee purchases the parts or components of the machinery and fabricates the same at its own premises by incurring expenditure and labour, etc., and, thus, assemble the entire machinery himself or itself, then investment in the purchase of components of such machinery and expenditure in the cost of labour for fabricating such machinery, should be taken to be 'utilization of the amount for the purchase of the machinery'. In such circumstances it was held that the term 'purchase' cannot mean purchase for price from the market only. In the present case, the facts are totally different in the sense that nothing is placed on record to show that the appellant incurred any expenditure towards so-called 'release' of the land by other coparceners or towards cost of the land. Therefore, the said decision has no application to the facts of the present case.
17ITA No.619/PUN/2012
5.4.6 In the case of Gwalior Rayon Silk Mfg. Co. Ltd. (196 ITR 149), the Apex Court in the context of admissibility of depreciation on roads treating the same as 'building' held that it is equally settled law that if the language is plain and unambiguous one can only look fairly at the language used and interpret it to give effect to the legislative intention. Nevertheless tax laws have to be interpreted reasonably and in consonance with justice adopting purposive approach. The contextual meaning has to be ascertained and given effect to. A provision for deduction, exemption or relief should be construed reasonably and in favour of the assessee. The object being that in computation of the net income, the statute provides deductions, exemptions or depreciation of the value of the capital assets from taxable income. The facts in the case of the present appellant are totally different. It may be true that a provision for deduction, exemption or relief should be construed reasonably and in favor of the assessee. When the admissibility of deduction under sec 54F is subject to certain conditions including utilization of sale proceeds towards purchase or construction of a new house, it cannot be said that the deduction should be allowed by liberal construction or interpretation of such provisions even when basic conditions for deduction are not fulfilled. In this connection, reference can be made to the decision of the Apex Court in the case of Petron Engineering Construction (P) Ltd. Vs. CSDT reported in 175 ITR 523 wherein it is observed as under:-
" .... It is true that an exemption provision should be liberally construed but this does not mean that such liberal construction should be made doing violence to the plain meaning of such exemption provision. Liberal construction will be made whenever it is possible to be made without impairing the legislative requirement and the spirit of the provision. ... "
Thus, none of the decisions and the Board circular relied upon by the appellant are applicable to the facts of the present case 5.4.7 For the foregoing reasons, the claim of the appellant that there was transfer of land by release in favor of the same HUF by the coparceners is not tenable on the facts of the case. Even presuming there was a release as claimed by the appellant; release was not for a consideration as the appellant has not paid any price to the other coparceners for release of their share in favor of the appellant and therefore there was no appropriation of sale consideration towards cost of the land. Accordingly, the estimated and notional cost of the land without actual appropriation or utilization of sale proceeds towards the cost of the land cannot be allowed as deduction under sec. 54F from the capital gains on sale of the impugned property."
18. The Ld. Counsel for the assessee could not controvert the above observation of the Ld.CIT(A) nor could bring any material before us to take a different view than the view taken by the Ld.CIT(A). The two decisions relied on by the Ld. Counsel for the 18 ITA No.619/PUN/2012 assessee are distinguishable and not applicable to the facts of the present case. We, therefore, uphold the order of the CIT(A) in rejecting the claim of the assessee that the release of land by the members of the HUF in favour of HUF for utilization in construction of residential property be included in the exemption claimed u/s.54F of the Act. The first ground raised by the assessee is accordingly dismissed.
19. So far as the issue relating to investment of Rs.3 lakhs towards construction of residential property is concerned we find the Ld.CIT(A) after elaborately discussing the issue has given clear cut finding that the assessee did not furnish any details towards the construction expenditure of Rs.3 lakhs such as the nature of construction, permission from the competent authority for construction, date of utilization of funds for construction, bills and vouchers for various items of expenses for construction and above all whether the new building was completed within the specified period of 3 years from the date of transfer, completion certificate from competent authority and the nexus between the consideration received and the investment in the construction of house property. The Ld. Counsel for the assessee could not adduce any evidence before us to counter the above factual findings given by the Ld.CIT(A). Since the assessee failed to substantiate with evidence regarding the investment of Rs.3 lakhs in construction of the house property, therefore, we find no infirmity in the order of the CIT(A) rejecting the claim of the assessee that an amount of Rs.3 lakhs was utilized towards construction of the house property. The request of the Ld. Counsel for the assessee to set aside the issue to the file of the 19 ITA No.619/PUN/2012 Assessing Officer also does not have any merit in absence of any material before us. Ground of appeal No.2 by the assessee is accordingly dismissed.
20. So far as the third ground is concerned, i.e. estimating the cost of acquisition @ Rs.100/- per sq.mtr as on 01-04-1981 for the purpose of indexation as against Rs.200/- per sq.mtr claimed by the assessee we find the Ld.CIT(A) while deciding the issue has dwelt upon the issue at para 6 of the order which reads as under:
"6. The next ground of the appeal relates to not allowing the claim of indexed cost of acquisition while computing the long term capital gains in the assessment order. As per the details placed on record, the cost of the land as on 01/04/1981 was taken on estimate basis @ 150 per sq. mtr., in the individual return filed whereas in the HUF return the same was taken at Rs. 200/- per sq. mtr. on the ground that the cost of the land had doubled due to conversion of part of the agricultural land into N.A. plot. In fact, while taking the cost of acquisition of the land sold, the assessee has doubled the extent of the land sold from 1580 sq. mtrs. to 3240 sq. mtrs. on the ground that in the year 1998, the Town Planning Department has granted N.A. permission to the extent of 21 gunthas only out of the total agricultural land of 45 gunthas and then adopted FMV as on 01.04.1981 at Rs. 100/- per sq. mt.. By taking the extent of land sold at 3240 sq. mt. instead of 1580 sq. mt., the FMV as on 01/04/1981 of the land sold of 1580 sq. mt. got doubled to Rs.200 per sq. mtr. as against of Rs.100 per sq. mtr. estimated by the valuer. The Assessing Officer has not allowed any cost of acquisition while computing the capital gains in the assessment order on the ground that the assessee keeps on changing the cost of acquisition while computing the capital gains. But under the provisions of sec.55(2)(b), cost of acquisition in relation to any capital asset, where the capital asset became the property of the assessee before the 1st day of April, 1981 means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of April, 1981 at the option 'of the assessee. In this case, the assessee has opted for the market value of the property as on 01/04/1981 as it was acquired prior to 01/04/1981. Therefore, the Assessing Officer is not justified in not allowing any cost of acquisition while computing the capital gains in the assessment order on the sole ground that the assessee keeps on changing the cost of acquisition. Now the question is, whether the FMV as on 01/04/1981should be taken at Rs.150/-' per sq. mtr. as claimed by the assessee in his individual return or at Rs. 100/- as per valuation report or at twice the value at Rs.200/- per sq. mtr. (by taking the extent of land twice the extent of land actually sold, which in effect amounts taking the FMV of the land sold at Rs. 200 per sq. mt.) as claimed now. The only reason stated by the assessee for adopting FMV at Rs. 200/- per sq.mt. is that the conversion to NA was given only to 50% of the total 20 ITA No.619/PUN/2012 agricultural land in the year 1998 by Town Planning Authority and therefore, the value should be taken at Rs.200/- per sq. mtr. as on 01/04/1981. This claim of the assessee that the FMV as on 01/04/1981 should be taken Rs.200/- per sq. mt. cannot be accepted as what is relevant to be considered is the FMV of the property as on 01/04/1981 and not in the year 1998 when the conversion was granted by the Town Planning Commission. The conversion in the subsequent year i.e. in the. year 1998 does not enhance the fair market value in the year 1981 and what is to be reckoned is the FMV of the land as on 01/04/1981 which the valuer has estimated @ Rs.100/- per sq. mtr. Therefore, the new claim of the, assessee that the cost of acquisition is Rs.200/- per sq. mt. as on 01/04/1981 is only an afterthought after the issue of notice u/s.148 to the assessee. The cost of acquisition as on 01.04.1981 as estimated at Rs.100/- in the valuer's report also appears to be reasonable given the fact that the land sold in April 2000 fetched Rs.1455/- per sq. mtr. Accordingly, the FMV of the property as on 01/04/1981 is taken at Rs.100/- per sq. mtr. and the capital gains on transfer of the property is worked out as under:-
Net sale consideration as per asst. order Rs.22,43,270 Less : cost of acquisition as on 01-04-1981 is Rs.1,58,000/- @ Rs.100 per sq.mt Indexed cost of acquisition = Rs.1,58,000 x 406/100 Rs.6,41,480/-
-------------------
Long term capital gains Rs.16,01,790/-
Less : Deduction u/s.54F(4) on account of
Amount deposited in capital gain a/c scheme
16,01,790 X 10,19,490
-------------------------------
22,43,270 Rs.7,27,959/-
--------------------
Taxable long term capital gains Rs.8,73,831/-
--------------------
Accordingly, the Assessing Officer is directed to assess the long term capital gains at Rs.8,73,831/- as against Rs.12,23,780/- determined by him in the assessment order. The assessee gets consequential relief of Rs.3,49,949/- (Rs.12,23,780 - 8,73,831). Ground of appeal No.3 is partly allowed."
21. The Ld. Counsel for the assessee could not controvert the findings given by the CIT(A) on this issue. Since the order of the CIT(A) is based on the report of assessee's own valuer who has determined the value at Rs.100/- per sq.mtr as on 01-04-1981, therefore, in view of the reasoned order given by the CIT(A) on this 21 ITA No.619/PUN/2012 issue we find no infirmity in the same. Accordingly, the same is upheld and the ground raised by the assessee is dismissed. All the 3 grounds raised by the assessee are accordingly dismissed.
22. Ground of appeal No.4 relates to levy of interest u/s.234A, 234B and 234C.
23. After hearing both the sides, we are of the considered opinion that levy of interest under the above provisions are mandatory and consequential in nature. Accordingly, this ground by the assessee is dismissed.
24. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open court on 01-02-2017.
Sd/- Sd/- (SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER iq.ks Pune; दनांक Dated : 01st February, 2017. lrh'k
आदे श क' ( त*ल+प अ,े+षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय% ु त(अपील)- The CIT(A)-III, Pune
4. आयकर आय% ु तs / The CIT-III, Pune
5. (वभागीय +त+न,ध, आयकर अपील य अ,धकरण, "ए" iq.ks / DR, ITAT, "A" Pune;
6. गाड0 फाईल / Guard file.
आदे शानुसार/ BY ORDER,स // True Copy // //True Copy// सहायक रिज56ार/Assistant Registrar आयकर अपील य अ,धकरण ,पुणे / ITAT, Pune