Income Tax Appellate Tribunal - Hyderabad
Syed Nawab Hussian, Rr Dist, Hyderabad vs Assessee on 3 January, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA No. A.Y. Appellant Respondent
851/Hyd/2012 2007-08 Sri Syed Nawab Hussain Asst. CIT
Peeramcheruvu Village Circle-8(1)
PAN: CJFPS0603H Hyderabad
852/Hyd/2012 2007-08 Sri Syed Sabeer Hussain Asst. CIT
Peeramcheruvu Village Circle-8(1)
PAN: CMGPS4777N Hyderabad
853/Hyd/2012 2007-08 Sri Syed Pasha Hussain Asst. CIT
Peeramcheruvu Village Circle-8(1)
PAN: CMGPS4725Q Hyderabad
854/Hyd/2012 2007-08 Smt. Afsari Bee Asst. CIT
Peeramcheruvu Village Circle-8(1)
PAN: CNJPS5462A Hyderabad
773/Hyd/2012 2007-08 Sri Syed Yousufuddin Asst. CIT
Peeramcheruvu Village Circle-8(1)
PAN: ABCPW2683G Hyderabad
774/Hyd/2012 2007-08 Sri Syed Ahymed Hussain Asst. CIT
Peeramcheru Village Circle-8(1)
PAN: CBWPS5314J Hyderabad
775/Hyd/2012 2007-08 Sri Syed Nooruddih Asst. CIT
Peeramcheruvu Village Circle-8(1)
PAN: BQGPS4215J Hyderabad
776/Hyd/2012 2007-08 Sri Syed Azizuddin Asst. CIT
Peeramcheruvu Village Circle-8(1)
PAN: CNJPS5462A Hyderabad
777/Hyd/2012 2007-08 Sri Mohammed Khan Asst. CIT
Peeramcheruru Village Circle-8(1)
PAN: BHJPK4159B Hyderabad
778/Hyd/2012 2007-08 Smt. Khurshida Bee Asst. CIT
Peeramcheruvu Village Circle-8(1)
PAN: CNJPS5458J Hyderabad
Appellant by: Sri A.V. Raghuram
Revenue by: Sri V. Ramana Rao &
Sri M.H. Naik
Date of hearing: 03.01.2013
Date of pronouncement: 08.03.2013
ORDER
PER CHANDRA POOJARI, AM:
The above appeals by different assessees are directed against different orders of the CIT(A)-III, Hyderabad for assessment year 2007-08. Since issues involved in these 2 ITA No. 851/Hyd/2012 & Ors Sri Syed Nawab Hussain & Ors.
======================= appeals are common in nature, all these appeals are clubbed and heard together and are being disposed of by this common order for the sake of convenience.
2. The first common issue in ITA Nos. 773, 774, 775, 776 and 777/Hyd/2012 is with regard to disallowance of payment made to brother and sister by the vendors directly without appreciating the fact that it is paid as per Muslim Law and not under the Income-tax Law, though it is a payment by overriding title in view of the Muslim Law.
3. Brief facts of the issue are that during the previous year relevant to assessment year 2007-08, there was sale of ancestral property pertaining to their forefathers. After their demise the land was mutated in the names of these assessees names for the purpose of convenience and brevity. According to the assessees, all the heirs of such forefathers are having pre- existing shares in the ancestral property as per Muslim Law and as such the said amount was reduced from total consideration for computing capital gain. This claim was disallowed by the lower authorities on the ground that payment of a part of sale consideration was paid to 7 sons and 3 daughters on the reason that there is no such provision under the Income-tax Act. According to the assessees these persons are having overriding title on the property. In view of this, payment has been made to the brothers and sisters of the forefathers and it should be allowed as per the opinion of Darul-Ifta Jamia Nizamia.
4. The DR relied on the orders of the lower authorities.
5. We have heard both the parties and perused the material on record. Under section 48 of the Act, cost of certain assets should be considered as deduction while computing capital gain for the purpose of Income-tax Act. The contention of the assessees is that the amount shared with the brothers and 3 ITA No. 851/Hyd/2012 & Ors Sri Syed Nawab Hussain & Ors.
======================= sisters of the ancestral property is part of the cost of acquisition and due to their share in the property a part of the consideration has been paid to them and the same has to be allowed as deduction while computing capital gain. Receipt for the part of consideration by the brothers and sisters of forefathers was furnished by the assessees and stated that it has been paid in accordance with Muslim Law. The claim of the assessees was that the principles of diversion by overriding title apply to the facts of the case as the assessees were individuals, they are not having full domain over the property and the brothers and sisters also having interest in the property.
6. In our opinion, there is no material to show that the brothers and sisters of the forefathers having any title over the property. The assessees have not placed any document to show that the payments to whom the assessees made have any title over the property. Unless there is a genuine document to the effect of providing overriding title in favour of the recipients of the impugned amount, we are not in a position to hold that the payment is on account of a title over the property. The conduct of the co-owners to whom the payment has been made is not supported by any arrangement either under the Income- tax Act or under Muslim Law. Being so, the assessees are not entitled for deduction towards the payment made to those persons who are said to be having title over the property. Accordingly, it cannot be deducted from the total sale consideration of capital asset. To allow the deduction, there should be title over the property by those claimants. Because the assessees have paid it due to the personal reasons it is only appropriation of consideration and not cost relating to the transfer of asset. This ground in ITA Nos. 773, 774, 775, 776 and 777/Hyd/2012 is rejected.
7. The next ground in ITA Nos. 773, 775, 776 and 778/Hyd/12 (4 appeals) is with regard to non allowability of payment made to sons and 4 ITA No. 851/Hyd/2012 & Ors Sri Syed Nawab Hussain & Ors.
======================= daughters out of the sale consideration of capital asset. This ground is rejected on the same reasons as given in paras 5 and 6 of this order.
8. The next ground in ITA No. 851/Hyd/2012 is with regard to payment to sisters of forefathers. This ground is rejected on the same reasons as given by us in the above paras.
9. The next ground common to all the 10 appeals is treating the land as capital asset though it is situated beyond 8 km from Hyderabad Municipal limits. The contention of the assessee that "this agricultural land was in Rajendra Nagar Mandal and is not a notified areas under
Income-tax Act. Hence such agricultural land are not capital asset as per sec. 2(14) of the Income-tax Act. Hence, capital gains tax is not attracted" was also not accepted due to the following reasons. Here the fact is that the assessee land exists at Peeramcheruvu Village of Rajendra Nagar Mandal, but not Rajendra Nagar Municipality. This land is clearly situated within 8 km from the local limits of Hyderabad Municipal Corporation which is notified area. The assessee failed to produce the evidences that this land is situated in Rajendranagar municipality. This lane is situated at Rajendranagar Mandal and this Rajendranagar Mandal became municipality and merged with Greater Hyderabad Municipal Corporation later on. Furthermore, this land comes under Peeramcheruvu Village which is rural area covered by Hyderabad Municipal Corporation. As per sec. 2(14), the capital asset defines as under:
"(a) in any area which is comprised within the jurisdiction of -
- a municipality (whether known as a municipality, municipal corporation, notified area, committee, town area committee, town committee, or by any other name) or
- a cantonment board and which has a population of not less than 10,000 according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or
(b) in any area within such distance, not being more than 8 5 ITA No. 851/Hyd/2012 & Ors Sri Syed Nawab Hussain & Ors.
======================= kilometres, from the local limits of any -
- municipality, or
- cantonment board referred to in item (a) above, as the Central Government may, -
having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification ill the Official Gazette;"
10. The assessee land is within 8 km of municipality as per (b) above and population also is more than 10,000 as per (a) above, so not to be treated as agricultural land. The Delhi High Court in the case of CIT vs. Surjan Singh (125 Taxman 1075), held that:
"Section 2(14) of the Income-tax Act, 1961 - Capital gains
- capital assets - Assessment year 1974-75 - Whether it is population of municipality, as a whole and not of any part area of it, that has to be taken into account for purpose of section 2(14)(iii)(a) to determine whether property in a particular area is exigible to capital gains - Held, yes - Whether section 2(14)(iii)(a) is applicable to rural area or Union Territory of Delhi, and capital gain arising on transfer of such agricultural land is chargeable to tax - Held, yes -- Whether section 507 of DMC Act, 1957 has any bearing on applicability of section 2(14)(iii)(a) - Held, no".
11. Hence by applying the above decision for the assessee also, section 2(14)(iii)(a) is applicable, since the land is situated in Peeramcheruvu village, which is rural area of Hyderabad Municipal Corporation.
12. We have heard both the parties and perused the material on record. Similar issue came for consideration the case of Smt. Gousia Begum & Ors. vs. DCIT in ITA Nos. 1024 to 1026/Hyd/2011 and ITA Nos. 1268 to 1271/Hyd/2011. The Tribunal vide order dated 16th January, 2012 held as follows:
6 ITA No. 851/Hyd/2012 & OrsSri Syed Nawab Hussain & Ors.
======================= "We have considered the rival submissions. We do not find merit in the contention of the assessee. The land in question giving rise to capital gain was, in fact, urban land though agricultural operations have been carried out on them. The assessee placed before the lower authorities pahani patrika, VRO's Certificate and details of electricity Bill/slab pass Book etc. We have held on that basis in earlier paras that the assessee derived agricultural income. But, the question still remains whether the impugned land come within the meaning of "capital asset". The land is situated at Narsing Village of Rajendra Nagar Mandal, R.R. District which is within the municipal limits of Rajendra Nagar. According to the learned counsel for the assessee, Rajendra Municipality is not notified by the Central Government and therefore the agricultural lands which fall under the jurisdiction of the Rajendra Nagar Mandal cannot be considered as capital asset within the meaning of section 2(14) of the Income-tax Act. But, the fact is that this is urban land akin to the Hyderabad Municipality situated within 8 KM from the local limits of Hyderabad Municipal Corporation. In similar circumstances, the jurisdictional High Court in the case of CIT vs. Bola Ramaiah (174 ITR 154) held that the capital gains arising out of sale of land situated within 8 KM of local limits of Hyderabad Municipality, is liable for tax on capital gains irrespective of the fact whether it falls under the limits of Rajendra Nagar Mandal or otherwise. Further, mere fact that the land in question was agricultural land cannot be a ground to claim for exemption under section 2(14) of the Act as the land is situated within the local limits of Hyderabad Municipal Corporation. Further, it was held recently by the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Smt. Anjana Sehgal (supra) that the expression "from the local limits of any municipality" used in section 2(14)(iii)(b) of the Income-tax Act denotes "any municipality or municipality of the District in which the land is situated". Further, capital gains arising from the transfer of agricultural land situated in municipal or other urban areas or notified adjoining areas will be liable to income-tax. In this view of the matter, and considering the facts and the circumstances of the present case, in our considered view, the lower authorities are justified in determining the land in question, as capital asset liable for income-tax."
13. In view of the above order of the Tribunal, we are inclined to h old that the land in dispute cannot be considered as agricultural land u/s. 2(14)(iii) of the Act. Accordingly, we hold that the order of the Tribunal in the case of Gousia Begum & Others (supra) is applicable on all force and accordingly, this ground of the assessees' is rejected in all the above appeals.
7 ITA No. 851/Hyd/2012 & OrsSri Syed Nawab Hussain & Ors.
=======================
14. The next ground in ITA Nos. 774, 851, 852, 853 and 854/Hyd/12 is with regard to non adjudication of the ground by CIT(A) that capital gain on Inam lands cannot be assessed to tax since there is no cost involved, as held by the Tribunal in the case of Uppala Venkat Rao (83 ITD 273).
15. According to the AR this is Inam land and the assessees incurred no cost on acquisition of this land. Being so, it cannot be considered as capital asset liable for capital gain tax. The learned AR submitted that the assessees raised this ground before the CIT(A) and the CIT(A) not adjudicated the same. The learned AR drew our attention to the copy of order of Mandal Revenue Officer (MRO), Rajendra Nagar Mandal, Rangareddi District dated 4.3.1999, Reference No. 4739/99 which is placed on record. According to this order, the property bearing Sy. No. 21, Peeramcheruvu village an extent of 0.09 acres the nomenclature was changed from Inam to Patta with effect from 4.3.1999. The property was sold in the month of February, 2007. Being so, in the assessment year under consideration the property cannot be treated as Inam land as the character of the land has been changed. Accordingly, this ground is rejected.
16. The next ground in ITA Nos. 773, 774, 775, 777, 778, 851, 852 and 853/Hyd/2012 (8 appeals) is with regard to non-granting of deduction u/s. 54F of the Act.
17. According to the learned counsel for the assessee the assessees herein invested the consideration received on sale of capital asset in construction of new residential building. Being so, the assessees are entitled for deduction u/s. 54F of the Act as the investment is evidenced by the valuation report filed before the lower authorities. The AR submitted that the assessees constructed a new building for which the assessees obtained permission from the Gram Panchayat, Peeramcheru Village, Rajendranagar Mandal and the house was completed within the time allowed by section 54F. The assessees also filed copies of valuation report before the lower 8 ITA No. 851/Hyd/2012 & Ors Sri Syed Nawab Hussain & Ors.
======================= authorities to support that the construction was completed for all practical purposes before 31.7.2007.
18. The learned DR submitted that the assessees not furnished any details for incurring expenditure in construction of new residential building and also there is no evidence to prove that the sale proceeds of the capital asset were utilised for the purpose of construction. Being so, the claims of the assessees were rejected.
19. We have heard both the parties and perused the material on record. According to the assessees' counsel, construction has been completed before the due date of filing of return of income and the building was ready for occupation before 31.7.2007. Only negligible amount of construction was done after 31.7.2007. He drew our attention to the copies of valuation report issued by Sri N. Balaji dated 6.8.2009. A photograph of the building was also produced. The provisions of section 54F read as under:
54F. (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 23[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 45:9 ITA No. 851/Hyd/2012 & Ors
Sri Syed Nawab Hussain & Ors.
======================= [Provided Provided that nothing contained in this sub-section shall apply where--
(a) the assessee,--
(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or
(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or
(iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and
(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property".] Explanation.--For the purposes of this section,--
"net consideration", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.
(2) Where the assessee purchases, within the period of [two years] after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains"
relating to long-term capital assets of the previous year in which such residential house is purchased or constructed.
(3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new 10 ITA No. 851/Hyd/2012 & Ors Sri Syed Nawab Hussain & Ors.
======================= asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains"
relating to long-term capital assets of the previous year in which such new asset is transferred.] [(4) The amount of the net consideration 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,--
(i) the amount by which--
(a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-
section (1), exceeds
(b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and 11 ITA No. 851/Hyd/2012 & Ors Sri Syed Nawab Hussain & Ors.
=======================
(ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid.
20. A bare look of the above provisions shows that the above provisions are incentive provisions intended to augment investment in residential houses. As per these provisions if the assessee within a period of one year before or two years after the date on which the transfer taken place purchases or within a period of three years after that date constructed a residential house then capital gain has to be dealt with in accordance with the provisions of section 54(1)(a) & (b) of the Act. If the assessee constructed any residential house, the assessee is required to place necessary evidence to prove that the construction has been taken place. Before the lower authorities, the assessees furnished copy of permission letter from Gram Panchayat, Peeramcheruvu Village. However, no evidence has been furnished regarding the construction of new house so as to show that the sale proceeds of the land were utilised for the purpose of construction of the new house. In the absence of any material to suggest the construction of the house, out of the sale proceeds of the land, we are not in a position to hold that the assessee is entitled for deduction u/s. 54F of the Act. It is needless to say that when the assessee claims deduction u/s. 54F of the Act, it is incumbent upon the assessee to place necessary evidence in support of its claim. In the present case in spite of the Assessing Officer and the CIT(A) requiring the assessee to furnish necessary evidence for construction of the residential building within the period as enumerated in section 54F of the Act, the assessees failed to produce the same. Being so, when we examine the facts on record to see whether the assessees herein have actually constructed any residential house within the meaning, object and time laid down u/s. 54F of the Act, the material on record does not suggest any construction of the house in terms of section 54F of the Act. The onus lies on the assessees to prove by way of evidence to justify their claim for deduction. In this case, the onus was not discharged by the assessees herein in view of the fact that the assessees could not 12 ITA No. 851/Hyd/2012 & Ors Sri Syed Nawab Hussain & Ors.
======================= furnish the requisite evidence to prove the fact that there was any actual construction within the time stipulated in section 54F of the Act. The assessees have not placed any cogent evidence, so that it can be inferred that actually there was construction of residential building out of the sale proceeds of the s ale of land and also not placed evidence for the purchase of any materials relating to construction of residential building. Merely producing a copy of permission from Gram Panchayat with regard to construction permission that itself cannot discharge the assessees from proving actual construction.
21. We, therefore, are of the considered opinion that the Legislative intent was not achieved. The assessees could not produce any evidence in support of the fact that there was actually any construction within the stipulated time u/s. 54F of the Act. In view of this, we are of the view that the CIT(A) was justified in disallowing the claim of exemption u/s. 54F of the Act in all these cases. Accordingly, the ground relating to allowability of deduction u/s. 54F of the Act is rejected and the orders of the lower authorities are confirmed.
22. The next ground is with regard to non-granting of deduction u/s. 54B of the Act. This issue is in ITA No. 777/Hyd/2012. The grievance of the assessee herein is with regard to non-adjudication of the ground relating to deduction u/s. 54B of the Act with regard to purchase and development of agricultural land at Rs. 18,77,500.
23. We have carefully gone through the ground raised by the assessee before the CIT(A). There is no adjudication by the CIT(A) on this ground. Accordingly, we remit the issue to the file of the CIT(A) to adjudicate the issue afresh in the light of evidence placed before him at the time of proceedings before him specifically agreement of sale dated 10.4.2007 between (1) Mohammed Ali, (2) K. Venkataiah (vendor) and Sri Mohammad Khan (vendee).
24. The next ground in ITA Nos. 773, 775, 776, 777 and 851/Hyd/12 (5 appeals) is with regard to non-deduction of brokerage paid while 13 ITA No. 851/Hyd/2012 & Ors Sri Syed Nawab Hussain & Ors.
======================= computing the capital gains. In these case, the assessee claimed payment of brokerage, as a deduction while computing the capital gain. The CIT(A) not adjudicated this ground in ITA Nos. 773, 775, 776, 777 and 851/Hyd/2012. Therefore, we remit the same to the file of the CIT(A) for fresh consideration to decide the issue in accordance with law.
25. In the result, Sl.
ITA No. Result
No.
1. 773/Hyd/2012 Partly allowed for statistical purposes.
2. 774/Hyd/2012 Dismissed.
3. 775/Hyd/2012 Partly allowed for statistical purposes.
4. 776/Hyd/2012 Partly allowed for statistical purposes.
5. 777/Hyd/2012 Partly allowed for statistical purposes.
6. 778/Hyd/2012 Dismissed
7. 851/Hyd/2012 Partly allowed for statistical purposes.
8. 852/Hyd/2012 Dismissed
9. 853/Hyd/2012 Dismissed
10. 854/Hyd/2012 Dismissed
Order pronounced in open court on 8 th March, 2013.
Sd/-
Sd/ - Sd/-
Sd/ -
(ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated 8 th March, 2013
tprao
Copy forwarded to:
1. Sri Syed Nawab Hussain
2. Sri Syed Sabeer Hussain
3. Sri Syed Pasha Hussain
C/o. M/s. K. Vasant Kumar, A.V. Raghu
4. Smt. Afsari Bee
Ram, P. Vinod & B. Peddi Rajulu,
5. Sri Syed Yousufuddin th
Advocates, Flat No. 610, 6 Floor,
6. Sri Syed Ahmed Hussain
Babukhan Estate, Basheerbagh,
7. Sri Syed Nooruddin
Hyderabad-500 001
8. Sri Syed Azizuddin
9. Sri Mohammed Khan
10. Smt. Khurshida Bee
11. The Asst. CIT, Circle-8(1), Hyderabad.
12. The CIT(A)-III, Hyderabad.
13. The CIT-II, Hyderabad
14. The DR - A Bench, ITAT, Hyderabad.