Income Tax Appellate Tribunal - Hyderabad
C. Suguna, Hyd, Hyderabad vs Ito, Ward-6(3), Hyd, Hyderabad on 31 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B", HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
I.T.A. No. 687/HYD/2016
Assessment Year: 2006-07
Smt. C. Suguna, The Income Tax Officer,
HYDERABAD Vs Ward-6(3)
[PAN: ADZPC5624Q] HYDERABAD
(Appellant) (Respondent)
For Assessee : Shri G. Kalyandas &
Shri A. Harish, ARs
For Revenue : Smt U. Minichandran, DR
Date of Hearing : 15-12-2016
Date of Pronouncement : 31-01-2017
ORDER
PER B. RAMAKOTAIAH, A.M. :
This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-9, Hyderabad, dated 29-02-2016. The issue in this appeal is whether assessee is eligible for exemption u/s. 54F of the Income Tax Act [Act] as claimed on investment made in purchase of plot and construction of a shed.
2. Briefly stated, assessee has offered capital gains of Rs. 8,19,550/- and claimed investments in a vacant plot purchased for an amount of Rs. 10 Lakhs on 20-08-2005 and construction of 'house' on which the investment was not placed on record.
I.T.A. No. 687/Hyd/2016
:- 2 -: Smt. C. Suguna
Assessing Officer (AO) noticed that assessee has mainly invested in purchase of a residential plot which itself is disputed and was pending regularisation before the authorities. The AO also deputed his Inspector to examine the contention that a 'house' was constructed on the said plot and found that an asbestos structure of 15X5 ft., was constructed as two portions, of which one portion has a locked door and was used as a godown and other portion being small one without a door being used as a watchman shed. This is also a temporary erection which cannot be considered as a residential house. For the contention that municipal authorities have issued municipal tax notice, AO noticed that the structure which was constructed was considered for levy of tax at Rs. 699/- whereas an amount of Rs. 35,641/- was levied for vacant land. He is also noticed that assessee has constructed the said shed on the South-East corner and there is no kitchen to cook food or any other facility so as to consider it as a residential house. Since assessee has invested the amount only in construction of disputed plot, he has denied the benefit u/s. 54F, which is available for purchase of a residential house.
3. Before the Ld.CIT(A), assessee contended the same and relied on various case law. Ld.CIT(A) however, did not agree and dismissed the appeal by stating as under:
"5.1 During the course of appellate proceedings, the appellant contended that even though the area of construction is small on the vacant land, the fact remains that there is a construction on part of the land. The assessee relied on the Board's circular No. 667 dtd. 18.10.1993 and submitted that the amount invested by the appellant towards the cost of plot and also the amount spent for construction ought to be considered for the purpose of exemption u/s. 54F. The assessee further submitted that the requirement of section 54F is that the property should be residential I.T.A. No. 687/Hyd/2016 :- 3 -: Smt. C. Suguna house and it is not necessary that a person should reside in the house to call it residential house. The assessee relied on the following case laws in support of her contentions:
1) Addl. CIT Vs. Narendra Mohan Uniyal (2009 34 SOT 152) Delhi ITAT
2) Amit Gupta Vs. DCIT (2006 6 SOT 403) Delhi ITAT
3) ITO Vs. Rasiklal N Satra (2006 98 ITO 335) Mumbai ITAT
4) Seeta Subrarnanyarn Vs. ACIT (1996 59 ITO 94) Madras Tribunal 5.2 However, the contentions of the assessee are not acceptable, as it is seen from the assessment order that the Assessing Officer has conducted enquiries and found that there was no residential house on the said plot.
Further, it is seen that there is only a small construction at the south east corner of the plot with about 15 feet width and 5 feet length. The roof of the construction is with asbestos sheets and the walls are made with sky ash bricks. The flooring was made with some rough tiles and there was no plastering inside the structure, and there is also no door covering the walls. The Assessing Officer has also annexed a photograph of the vacant land along with the structure to the assessment order; which clearly shows that it is only a small structure with asbestos sheets. Therefore, is my opinion, at no stretch of imagination can this construction be used for any residential purpose and hence this structure cannot be called as a "residential house". The Assessing Officer has also conducted enquiries with municipal authorities and gathered information that an amount of Rs. 699/- has been levied as tax on the construction and the balance of Rs. 35,641/- was levied as tax for the vacant land. Therefore, the assessee's contentions that assessment was made on this property as a residential property and issued notice for payment of tax of Rs. 35,600/- is not on a solid footing. I have also gone through the Board circular No. 667 dtd. 18.10.1993 and as per this circular, 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 plot also. So as per this circular, the issue is with regard to the cost of residential house along with the cost of plot for the purpose of deduction ion u/s. 54. However in this case, there is no residential house constructed and it is only a small structure on a corner of the plot. Therefore, the board circular has no relevance in this case. Further, the legislative intent in providing the exemption u/s. 54F has to be seen wherein the proceeds from capital gains should be utilized in a residential house. This provision has been introduced in order to facilitate construction or purchase of residential house by the assessees. Therefore, the claim of the assessee for exemption u/s. 54F for a small structure without minimum facilities so as to be called as residential house cannot be accepted.
5.3 Further, the facts of the case laws as relied upon by the assessee are different, and distinguishable from the instant case. a) In the case of Add!. CIT Vs. Narendra Mohan Uniyal, the point of contention was regarding the I.T.A. No. 687/Hyd/2016 :- 4 -: Smt. C. Suguna allowing of exemption u/s. 54F for investment in a residential house as well as for the purchase of plot. The contention was not with regard to the issue of whether the structure was eligible for a residence or not. There the construction was a proper residential house. However, in the instant case, the point of contention is with regard to "Residential House" Vs a small structure constructed at the corner of a plot, which cannot be considered as a residential house. b) In the case of Amit Gupta Vs. DCIT Circle _ 6(3), it was held that "if it is capable of being used for the purpose of residence, then requirement of Sec. 54F is satisfied. The fact that the assessee did not actually used the same for his residence would not disentitle him to the claim of exemption u/s. 54F." Thus, it is seen that in this case the issue is whether the assessee has actually used the property for his residential house. However, in the instant case the main dispute is with regard to the fact that whether a small structure without any plastering, doors etc., can be called as a "residential house", c) In the case of ITO Vs. Rasiklal N. Satram, the issue is with regard to the flat at Sion, Mumbai, where the assessee was living along with his family, which was held to be a "residential house". However, in the, instant case, the structure does not have the basic requirements so as to be called as a "residential house". d) In the case of Mrs. Seeta Subramanyam Vs. ACIT, the issue is with regard to the investment of entire net consideration in constructing residential house. There was 110 dispute, whether it is a residential house or not, but in the instant case the main issue is as to whether the structure can be called as residential house or not. Therefore, all the case laws cited by the assessee are on different facts, which are distinguishable from the facts of the instant case and hence cannot be accepted.
5.4 Further, I place reliance on the case of Sunita Oberoi Vs. ITO (IT AT, Agra-TM) 30 OTR 474; 126 TT J 745, wherein it was held that exemption u/s. 54F is allowable only if the new property is used for residential purposes. In the instant case, the structure has no plastering, no door and it is only covered with asbestos sheets which has no basic amenities so as to be used for residential purposes. Thus, this case law is clearly applicable in the instant case.
7. In view of all the above mentioned facts and circumstances. I am of the considered opinion that the Assessing Officer is justified in denying the claim of exemption u/s. 54F and therefore the addition made is upheld".
4. Before us, Ld. Counsel reiterated the submissions made before the authorities and submitted that Municipal Corporation Act defines 'Building' which includes a house, out-house etc., and relied on Section 2(3) of Greater Hyderabad Municipal Corporation I.T.A. No. 687/Hyd/2016 :- 5 -: Smt. C. Suguna Act, 1955. It was further submitted that large number of persons in India do not own a proper house with kitchen and toilet facilities but that does not mean that cannot be considered as a residential house. Similarly, assessee has constructed 'a house' which is to be considered as a residential house. He relied on case law as relied before the Ld.CIT(A). On a query whether assessee has applied for Building Regularisation Scheme (BRS) or Plot Regularisation Scheme (PRS), he fairly admitted that assessee has applied only for PRS and not for BRS.
5. Ld.DR however, relied on the orders of the AO and CIT(A).
6. We have considered the rival contentions and perused the documents placed on record. There is no dispute that assessee has purchased and invested most of the amount in purchase a plot only and claim is also with reference to investment in the said plot. What assessee has constructed is only a shed/godown, without any other incidental and attendant requirements to consider it as a residential house. As noted by the AO, there is no kitchen, no other rooms and most of which is being used as a godown only. The plot on which the said structure was constructed itself is disputed and assessee is before the authorities for regularisation of a plot which was purchased. As pointed out by the AO, there is no plan for construction of a house nor there is any approval from the authorities. Even though, there was municipal tax payment on the said structure as seen from the Municipal Corporation Act, any structure constructed at a plot of land is due for levy of tax. The definition of 'Building' as per Section 2(3) is as under:
"(1)..........
I.T.A. No. 687/Hyd/2016 :- 6 -: Smt. C. Suguna (2)..........
(3) 'building includes a house, out-house, stable, latrine, godown, shed hut, wall fencing, platform and any other structure whether of masonry, bricks, wood, mud, metal or of any other material whatsoever". (4)............."
6.1. As can be seen from the above definition of the Municipal Corporation Act, a godown, shed also forms part of building for the purpose of municipal tax assessment. But that does not mean that a shed/godown constructed becomes a house. The definition of building includes a house, a godown and a shed. Therefore, the Act itself defines the difference between a house, godown/shed. The structure which has constructed by assessee is a godown on which there is no dispute. It cannot be considered as a house in the absence of other attendant features associated with a house. What Section 54F requires is investment in a 'residential house' not even a house. Since the parameters specified are different, the shed/godown constructed by assessee on the said disputed plot cannot be considered as a residential house, even accepting assessee's contention that it is a building.
6.2. In the case of Dr. Vontela Raja Reddy Vs. ACIT in ITA No. 128/Hyd/2013, dt. 02-09-2016, the Co-ordinate Bench has considered similar issue where assessee has constructed a commercial cum residential complex. The ITAT held as under:
"4. Having regard to the rival contentions and the material on record, we find that the assessee has claimed the exemption u/s 54F of the Act, in respect of the investment in the entire 3rd Floor of commercial- cum- residential complex at Ameerpet. The requirement of section 54F of the Act is that the assessee should invest in purchase or construction of a residential house property. Undisputedly, the property purchased is a I.T.A. No. 687/Hyd/2016 :- 7 -: Smt. C. Suguna commercial-cum-residential property. It is also seen from the municipal permission granted for construction of the property that the property purchased by the assessee is not earmarked for residential use. Therefore, the decision on which the assessee has placed reliance upon i.e. in the case of N. Revathi vs. Income Tax Officer (Supra) is not applicable to the case before us as in the said case, the building was constructed for residential use with all amenities like Kitchen, Bathroom etc., which are necessary for residential accommodation and in these circumstances, it was held that even if it is used as a school or for any other commercial purpose, it cannot lose its character as the residential building so as to claim deduction u/s 54F of the Act. In the case before us, as seen from the floor plan annexed to the sale deed, we do not find any bedrooms, kitchen, bathrooms etc., in the area purchased by the assessee. It is a mere bare structure purchased by the assessee and thereafter the assessee has divided the same into small units to give it on lease for commercial use. Therefore, neither has the assessee purchased a residential accommodation, nor has he converted a residential property into a residential -cum- commercial complex. In view of the same we are satisfied that the assessee has not purchased a residential accommodation and is therefore, not eligible for exemption u/s 54F of the Act from the capital gain tax on sale of a property at Jubilee Hills, Hyderabad".
6.3. Respectfully following the above decision, since the shed/godown constructed by assessee cannot be considered as a residential house, the claim of deduction u/s. 54F cannot be allowed. The orders of the authorities on this issue are upheld and assessee's grounds are accordingly rejected.
7. In the result, appeal of assessee is dismissed.
Order pronounced in the open court on 31st January, 2017 Sd/- Sd/-
(P. MADHAVI DEVI) (B. RAMAKOTAIAH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 31st January, 2017
TNMM
I.T.A. No. 687/Hyd/2016
:- 8 -: Smt. C. Suguna
Copy to :
1. Smt. C. Suguna, Hyderabad. C/o. M/s. Kalyandas & Co., Chartered Accountants, 15, Venkateshwara Colony, Narayanaguda, Hyderabad.
2. The Income Tax Officer, Ward-6(3), Hyderabad.
3. CIT (Appeals)-9, Hyderabad.
4. Pr.CIT-6, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.