Income Tax Appellate Tribunal - Jaipur
Assistant Commissioner Of Income Tax, ... vs Smt. Kulwant Kaur, Alwar on 10 October, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM
vk;dj vihy la-@ITA No. 678/JP/2017
fu/kZkj.k o"kZ@Assessment Year : 2014-15
Assistant Commissioner cuke Smt. Kulwant Kaur,
of Income Tax, Vs. EG-28, Ashiana Garden,
Circle-2, Alwar. Bhiwadi, distt.-Alwar (Raj).
PAN No.: BIAPK 0556 N
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl.CIT)
fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA)
lquokbZ dh rkjh[k@ Date of Hearing : 05/10/2017
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 10/10/2017
vkns'k@ ORDER
PER: BHAGCHAND, A.M. This is the appeal filed by the revenue emanates from the order of the ld. CIT(A), Alwar dated 05/06/2017 for the A.Y. 2014-15.
2. The return of income was filed on 31/07/2014 declaring total income of Rs. 3,02,58,580/-, which includes long term capital gain of Rs.
3,00,41,869/- on sale of property located at Khasra No. 534, village-
Khanpur, Tehsil-Tijara. This property was sold to M/s Pinkcity Heights Pvt.
Ltd. for a sale consideration of Rs. 4.50 crores vide sale deed dated 03/06/2013. The part of the sale consideration was invested in purchase of 2 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur a flat at EG-28, Ashiana Garden, Bhiwadi for Rs. 87.50 lacs and the purchase was effected on 03/7/2013 on which the assessee claimed deduction U/s 54 of the Income Tax Act, 1961 (in short the Act).
3. The ld. CIT(A) granted the relief to the assessee on various additions.
4. Now the revenue is in appeal before the ITAT by taking following grounds:
"1. On the facts and in the circumstances of the case and in law Id.
CIT(A) erred in allowing the claim of deduction of Rs. 87,75,000/- u/s 54 of the IT Act disallowed by the AO for taking into account to compute capital gain as the assessee was not entitled to such claim as per provisions of section 54 of the IT Act 1961.
2. On the facts and circumstances of the case and in law Id. CIT(A) erred in allowing the claim of expenses incurred on sale of property of Rs. 8,00,000/- disallowed by the AO for computing net consideration received, without appreciating the material facts of the case.
3. On the facts and circumstances of the case and in law Id.CIT(A) erred in allowing benefit of the claim of Rs. 39,43,196/- disallowed by AO while computing capital gain indexed cost of construction of house and it improvement the assessee has filed to substantiate its claim with documentary evidence."
5. In the ground No. 1 of the appeal, the issue involved is deleting the addition of Rs. 87.75 lacs on account of deduction claimed by the assessee U/s 54 of the Act, which was disallowed by the Assessing Officer.
3 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur
6. The ld. CIT(A) has granted relief to the assessee by holding as under:-
"5.3 I have perused the assessment order as well as submissions made by the appellant. Following facts have emerged;
1. That the assessee has filed return of income for AY 2014-15 declaring total income of Rs. 3,02,58,580/-.
2. That during the year under consideration the assessee has sold property situated at Village- Khanpur, Tehsil- Tijara for a total consideration of Rs. 4.5 crores.
3. That the assessee has declared long term capital gain of Rs.
3,00,41,869/- on sale of the above mentioned property.
4. That the assessee has further claimed an exemption of Rs.
87,75,000/- u/s 54 of the IT Act on account of investment in a residential property.
5. That the AO has contended that the said property is an agricultural land and sale deed as well as inspector's report has shown that no residential property was there on the land in question. Therefore, the AO has rejected the assessee's claim of deduction u/s 54 of the Act.
6. That the assessee has submitted a number of documents in support of its claim that the property was used as residential property by the assessee prior to its sale. Following documents were produced during appellate proceedings as well as assessment proceedings:-
(i) Electricity Bill:- Since February, 2004 onwards till the sale of the property in February, 2014;
(ii) LPG connection Bill;
(iii) Valuation Report by approved valuer dated 01-06-2013
containing photographs of the property showing residential structure on the land.
4 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur
(iv) PAN card letter dated April 30, 2009 on said address;
(v) Election card date of issue 19-02-2011;
(vi) Ration Card of family of assessee that includes assessee
and her two son.
(vii) Aadhar Card dated 24-02-2013 of assessee at same
address;
(viii) Welcome notice of Axis Bank to confirm the address in name of her son.
(ix) Certificate/declaration from Chairman of Municipal Committee, Bhiwadi and Parshad of Ward-4, Municipal Committee, Bhiwadi indicating that the family were living at Khasara No. 534/41, Khanpur, Bhiwadi between 2004 to 2014.
(x) Copy of land agreement dated 25-07-2008 declaring that the said property was given on rent and that the property included a house appurtenant to the land.
5.3.2 I have considered the above mention facts. The moot point in this case is whether the land under consideration was having a residential property or not? It is true that at the time of sale of the property, the appellant has declared it as- agricultural land only. It is submitted by the appellant that such declaration was made to save on stamp duty. However, while filing the return of income before the income tax authorities the appellant has claimed residential property on the land transferred in this case. Therefore, there are -two sets of declaration (i) before the Stamp Duty Authorities where the land has been shown as agricultural property where no residential property has been shown on the land and (ii) before the Income Tax Authorities where a residential property has been shown on the land. In this regard, I have taken into consideration Hon'ble Supreme Court decision on the SLP (2008) 307 ITR (ST) 3, filed in the case of CIT v/s M/s Veerdip Rollers Pvt. Ltd. 323 ITR 341 (Gujarat High Court).
5 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur The Hon'ble Gujarat High Court and Hon'ble Supreme Court has held as under: -
"where it was decided that The value of stock shown in the books of accounts is genuine or not in reference to stock statement submitted to bank has been considered by the Tribunal and considering the fact discussed by Tribunal that Stock shown in books is genuine as supported by books of accounts, we see no reason to hold that the findings of tribunal is perverse . Consequently, the appeal stand dismissed at the admission stage. "
Further Hon'ble Supreme Court -SLP (2008) 307 ITR (ST) 3 has dismissed SLP by revenue against said order In this case appeal by Revenue was dismissed by the Gujarat High Court where tribunal has deleted the addition under section 69 B on account of the difference between the closing stock furnished to bank for avail ins of credit facility and that disclosed in the books of accounts furnished before the Income tax authorities."
As per the above judgment, it is imperative to see which of the declaration made by the appellant is correct? Accordingly, the evidences produced by the appellant during the appellate proceedings and during the assessment proceedings have been considered. It would be prudent to first consider the provision of section 54 of the Act, which the appellant is claimed. The provisions of the section 54 of the IT Act are as under:-
54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property"
(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, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,--
6 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur
(i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be' charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the-cost shall be nil, or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.
(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub- section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset:
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,--
7 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur
(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and
(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
Explanation.--[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] The relevant part of the section talks about the transfer of a long term asset being building or land appurtenant thereto, and being a residential house, the income of which is chargeable under the head income from house property. Therefore, in this case, the important question to be considered is whether there is a residential property or not on the land sold during the year?
The appellant has produced a number of evidences (as mentioned in para 5.3.1 above) in support of its claim that there was indeed a residential property on the land in question between year 2004 to 2014 (the year in which the property was sold). I have also taken into consideration the fact that the said land alongwith the built-up area was given on rent vide rent agreement dated 25-07-2008 on a-rent of Rs. 35,000/- per month. The said rent was received by cheque. Apart from this, plethora of documents produced before the AO and during the appellate proceedings has given credence to the claim of the appellant that a house property was there on the land when it was sold. If the appellant has given a wrong information to the stamp duty authorities for the purpose of sale deed, he is liable to be penalized under the Stamp Duty Act. So far as Income Tax Act is concern, it is my considered view that based on factual matrix of the case the appellant is liable to get benefit u/s 54 of the Act.
Furthermore, A.O's contention that the appellant has not taken permission to construct residential property on the agricultural land is 8 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur also not tenable as is decided in the case of Mahavir Prasad Gupta vs. CIT [20061 5 SOT 355 (Delhi) that even a farmhouse can be a residential house and investment is eligible for benefit of section 54F of the IT Act. Thus there is no prohibition regarding construction of a residential house on agriculture land. CBDT Cir. No. 667 dt. 18.10.1993 (204 ITR (St) 103) has clarified that for the purpose of computing exemption u/s. 54 or 54F, the cost of the plot together with cost of the building will be considered as cost of new asset, provided the acquisition of the plot and also the construction thereon are completed within the period specified in these sections.
Even otherwise, for argument sake, if section 54 is not available then alternately, deduction u/s 54F would be available. The AO cannot deny deduction u/s 54 and section 54F both. If a residential property is proved to be there then section 54 of the Act is applicable and if there is no residential property then deduction u/s 54F of the Act would be available. As, there is no dispute about investment of the sale proceed by the assessee in a residential property.
Therefore, it is my considered view that on the basis of plethora of evidences produced both during assessment proceeding as well as during appellate proceeding, the appellant is eligible for deduction u/s 54 of the Act. Accordingly, the AO is directed to compute the taxable capital gain taking into account that the appellant is eligible for deduction u/s 54 of the Act. Accordingly, the ground of the appeal on this issue is partly allowed."
7. While pleading on behalf of the revenue , the ld DR has relied on the order of the Assessing Officer and pleaded that the order of the ld. CIT(A) deserves to be set aside.
8. On the other hand, the ld AR of the assessee has submitted that the ld. CIT(A) has granted relief to the assessee after considering all the relevant facts and circumstances of the case. The Assessing Officer denied 9 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur the benefit to the assessee. He pleaded that the assessee has purchased agricultural land on 09/4/2003. A house was constructed during the period 2002-03 to 2005-06. The assessee was residing with her family in this house from 2004 to February 2014. These facts are established by the documents submitted by the assessee. The assessee has got valuation done of the house as on 10/6/2013. The valuer clearly mentions that there was a one storied house alongwith the boundary wall on this land. The photographs of the house were also taken by the valuer. The assessee had taken electricity connection from February, 2004 to till February, 2014 during the period when the assessee was residing. Necessary evidences in this regard were submitted. LPG connection was also there in the name of son of assessee Manpreet Singh. Necessary evidence in this regard was also submitted before the authorities below. The address in the ration card, Aadhar card of the assessee as well as of her husband were of this property. Income tax notices were also issued on the address of this property. The PAN was also allotted on this address. The assessee was having bank account with the Axix Bank and a certificate was also obtained from ICICI bank with regard to the address. This property was given on rent for Rs. 35,000/- per month. The necessary agreement on this regard was submitted. A certificate of the Chairman of the Municipal Committee was also submitted and finally, the assessee submitted an 10 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur affidavit in this regard. After considering all these documents and evidences, the ld. CIT(A) overruled the observation of the Assessing Officer in this regard and he granted relief to the assessee.
9. We have heard both the sides on this issue. The Assessing Officer disallowed the claim of the assessee U/s 54 of the Act on the basis of report of the Tehsildar and Inspector obtained by the Assessing Officer during the assessment proceedings stating that it was an agricultural land and at the time of inspection, it was an open land. The Assessing Officer observed that the electricity connection and LPG connection cannot be taken as a conclusive evidence and he also observed that no evidence with regard to construction or improvement was furnished. It was also observed that no evidence of contract of demolition of the house was produced and the land was not got converted from agricultural land to non-agricultural. The assessee submitted a valuation report wherein one storied house having boundary wall was mentioned. The valuer has also taken photographs which were also produced during hearing, which are placed at page No. 32 of the paper book. The electric connection and the LPG connection in assessee's name and her sons name respectively also establish that there was a construction on this land and which was being utilized as residence. Necessary evidence placed at page Nos. 33 to 40 of 11 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur the paper book. The ration cards were also on this address. The Aaadhar card of the assessee as well as her husband was also of this address. PAN was also allotted on this address. Even the income tax notices issued by the Assessing Officer were served on this address, which are placed at pages No.41 to 49 of the paper book. The property was on rent for Rs.
35,000/- per month for certain period for which necessary evidence is placed at page No. 51 to 52 of the paper book, which is a rent agreement.
A certificate from the Chairman of the Municipal Committee, Parshad of the Municipal Committee and neighbours of the assessee were also filed, which is placed at page No. 52 to 62 of the paper book. The ld. CIT(A) has granted relief to the assessee after considering all these evidences and he has also observed that even if the property sold is taken as an agricultural land then also the assessee is entitled for benefit U/s 54F of the Act. In the light of these findings and observations of the ld. CIT(A), we hold that the ld. CIT(A) has rightly deleted the addition. We uphold the same.
Accordingly this ground of the revenue's appeal is dismissed.
10. In the ground No. 2, the issue involved is allowing the claim of expenses incurred on sale of property of Rs. 8.00 lacs, which was disallowed by the Assessing Officer. The ld. CIT(A) has granted relief to the assessee by holding as under:
12 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur "6.3 I have perused the assessment order as well as submissions made by the appellant. Following facts have emerged;
1. That the assessee has filed return of income for AY 2014-15 declaring total income of Rs. 3,02,58,580/-.
2. That during the year under consideration the assessee has sold property situated at Village- Khanpur, Tehsil- Tijara for a total consideration of Rs. 4.5 crores.
3. That the assessee has declared long term capital gain of Rs.
3,00,41,869/- on sale of the above mentioned property.
4. That the appellant has claimed a brokerage payment of Rs.
8,00,000/- to the brokers incurred on account of sale of the above mentioned property.
5. That the above brokerage was paid through cheque as is evident from the bank account of the appellant.
6. That the AO has disallowed the payment for want of adequate verification.
6.3.2 I have considered the above mentioned facts. In this regard, I have also taken into consideration the fact that the brokerage payment was made through cheque and details of the recipient was filed during the assessment proceedings also. In this regard, I have also taken into account prevalent brokerage rate in the sale/purchase' of Real Estate. As per Confederation of Real Estate Brokers of India (CREBI), the standard rate of brokerage on sale of real estate is 2%. In this case the appellant has claimed brokerage of Rs. 8 lakhs on the total sale proceed of Rs. 4.5 crores, which is within the range of prevalent brokerage/commission rate in Real Estate. Therefore, it is my considered view that the brokerage paid in this case is reasonable, hence appellant is given the benefit of brokerage paid of Rs. 8,00,000/- while calculating the taxable income under the head 13 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur capital gain. Accordingly, the appellant ground of appeal on this issue is allowed.
11. Now the revenue is in appeal before the ITAT. The ld DR has relied on the order of the Assessing Officer. On the contrary, the ld AR of the assessee has vehemently supported the order of the ld. CIT(A).
12. After hearing both the sides on this issue, we hold that the assessee has paid brokerage expenses of Rs. 8.00 lacs, which approximately 2% of the sale consideration, which appears to be reasonable. This brokerage was paid to three persons and the payments were made by cheques which are verifiable from the bank statement of the assessee. Considering all these facts, we find no fault in the order of the ld. CIT(A) and we sustain the same on this ground. Accordingly, this ground of revenue's appeal stands dismissed.
13. In the ground No. 3, the issue involved is allowing benefit of the claim of Rs. 39,43,196/- disallowed by the A.O. while computing capital gain indexed cost of construction of house and its improvement. The ld.
CIT(A) has granted relief to the assessee by holding as under:
"7.3 I have perused the assessment order as well as submissions made by the appellant. Following facts have emerged;
1. That the assessee has filed return of income for AY 2014-15 declaring total income of Rs. 3,02,58,580/-.
14 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur
2. That during the year under consideration the assessee has sold property situated at Village- Khanpur, Tehsii- Tijara for a total consideration of Rs. 4.5 crores.
3. That the assessee has declared long term capital gain of Rs. 30,00,41,869/- on sale of the above mentioned property.
4. That while calculating the taxable capital gain the appellant has claimed indexed cost of construction and improvement of the property at Rs. 39,43,196/-.
5. That in support of his claim the appellant has filed copy of valuation done by authorized valuer for the cost of construction. The cost of construction given by the approved valuer is valued at Rs. 27,74,275/- (Original cost of construction and improvement).
6. That the appellant has filed the source of such construction vide its submission as is reproduced in para 7.2.
7. That the AO has rejected the claim of assessee on the reason that no house property was constructed on the said land as per sale deed.
7.3.2 Since, it is already held while adjudicating on the ground of appeal no. 2 and 4 above that there was a house property on the said land therefore the appellant is eligible for getting benefit of indexed cost of construction as well as the improvement. Accordingly, the AO is directed to give benefit of indexed cost of construction and improvement while calculating the taxable capital gain. Appellant's ground of appeal on this issue is allowed."
14. Now the revenue is in appeal before the ITAT. The ld DR has relied on the order of the Assessing Officer. On the contrary, the ld AR of the assessee has vehemently supported the order of the ld. CIT(A).
15 ITA 678/JP/2017 ACIT Vs. Smt. Kulwant Kaur
15. We have heard both the sides on this issue. The assessee has claimed deduction of construction and improvement of property at Rs 39,53,196/-. The assessee has submitted a valuation report. The ld.
CIT(A) has granted relief to the assessee after considering all the relevant facts and circumstances of the case, therefore, we find no fault in the order of the ld. CIT(A) and we sustain the same.
16. In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 10/10/2017.
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(Kul Bharat) (BHAGCHAND)
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Tk;iqj@Jaipur
fnukad@Dated:- 10th October, 2017
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The ACIT, Circle-2, Alwar.
2. izR;FkhZ@ The Respondent- Smt. Kulwant Kaur, Bhiwadi, Alwar.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 678/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar