9911796707
TMI Blog2014 (12) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Briefly the facts relating to the aforesaid issue are, assessee is an individual. For the AY under consideration, assessee filed his return of income on 07/05/10 admitting total income of Rs. 9,82,040 besides agricultural income of Rs. 5,25,480. As appears from record, survey operations u/s 133A were conducted in case of assessee, his wife Smt. G. Rama Devi, Shri G. Simha Rao, Shri G. Mahendra Rao and Shri G. Sarvotham Rao on 09/03/10. During the survey operation, as stated by AO, assessee admitted that six acres of land situated at Maqta Mehoobpet village, Serilingampalli, RR District was sold to M/s Marlas Developers Pvt. Ltd. for a consideration of Rs. 4.5 crore per acre by himself and other family members in the FYs 2007-08 and 2008-09. AO on examining the agreement of sale-cum-irrevocable power of attorney executed by assessee and other family members, noted that assessee and other family members have entered into the following sale transactions: Date of transaction Deed No. Name of the seller Extent/ Survey No. Sale Consideration (in Rs.) 21/01/2008 21/01/2008 381/2008 Sri G. Raghavender Rao 1 acre.02 guntas S.No.73 & 91 4,72,50,000 21/01/2008 382/2008 382/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the form of share application money, AO relying upon a decision of AAR in case of Jasbeer Singh Sarkaria held that when the entire sale consideration was paid by way of cheque as noted in the agreement of sale-cum-GPA and when the possession has also been handed over the transfer is complete in all respects. Accordingly, AO proceeded to compute the capital gain from sale of land at Rs. 7,14,37,500. Being aggrieved of the addition made by AO, assessee preferred appeal before CIT(A). 4. In course of hearing of appeal, assessee submitted that as per the agreement of sale-cum-GPA dated 31/07/08 with M/s Marlas Developers P. Ltd. (MDPL) the proposal was for sale of land admeasuring acres 1.235 guntas in survey Nos. 83/AA, 84, 91, 94, 95 and 110 at Maqta Mehboobpet Village for a consideration of Rs. 7,14,37,500. It was submitted that as differences cropped up between the assessee and MDPL due to the fact that MDPL failed to pay the agreed consideration of Rs. 7,14,37,500 though, mentioned in the agreement of sale-cum-GPA, assessee did not handover the possession of land to MDPL and because of the continuing dispute ultimately agreement of sale-cum-GPA was cancelled vide registered ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the sale proceeds of land in AY 2008-09. Thus, in sum and substance assessee submitted that none of the ingredients of transfer as envisaged u/s 2(47) having been satisfied no capital gain accrues to assessee. 5. The CIT(A) after considering the submissions of assessee, visa-vis the facts and materials on record, noted that though assessee had entered into agreement of sale-cum-GPA for sale of land to the extent of acre 1.235 guntas to MDPL for a consideration of Rs. 7,14,37,500, but, ultimately the said agreement of sale-cum-GPA was cancelled vide registration cancellation deed dated 20/04/10. CIT(A) noted that AO brought the entire sale consideration of Rs. 7,14,37,500 as capital gain by inferring that transaction of sale was complete by virtue of agreement of sale-cum-GPA 31/07/08 notwithstanding the fact, the agreement of sale-cum-GPA was followed by a cancellation deed and the proof that the sale consideration mentioned in the agreement of sale-cum-GPA was not realized. Further, CIT(A) observed that though AO wanted to put the said transaction through the matrix of provisions of section 2(47) by applying the doctrine of part performance holding that the transaction was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreement of sale-cum-GPA dated 31/07/08. However, from the facts and materials on record, it becomes absolutely clear that though assessee had entered into agreement of sale-cum-GPA but it never received the consideration of Rs. 7,14,37,500 as mentioned in the agreement of sale-cum-GPA. Nothing has been brought on record by AO during the assessment proceeding or even by the learned DR before us to controvert the fact that the cheque No.600873 dated 31/07/08 of HDFC Bank, Banjara Hills as mentioned in the agreement of salecum-GPA was never handed over to assessee nor encashed by assessee. There is also no evidence brought on record by AO to prove that the aforesaid sale consideration was paid by the MPDL to assessee through any other mode. Further, on a perusal of the agreement of sale-cum-GPA dated 31/07/08, a copy of which is placed at page 29 of the assessee's paper book and more particularly clause 3.1 of the said document, clearly brings out the fact that until registration of a regular sale deed in favour of vendee, the vendor shall take care of the outgoings of the scheduled property by way of property tax, ground rent, land revenue, etc., this clearly shows that unti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion here that though in one of the grounds the department has raised the issue of consideration of fresh evidence in violation of rule 46A by CIT(A) but at the time of hearing neither the learned DR made any substantive argument on this issue or brought to our notice the exact nature of evidences considered by CIT(A) in violation of rule 46A. In these circumstances, the claim of the department that CIT(A) has considered fresh evidence in violation of rule 46A cannot be entertained. Accordingly, ground 2 to 5 are dismissed. 9. The next issue as raised in Ground No.6 is in respect of deletion of addition made on account of capital gain on sale of land at Kistareddypet. 10. Briefly the facts are, during the assessment proceeding on the basis of information available on record, AO found that during the relevant PY assessee has sold land admeasuring acre 1.35 guntas in survey Nos. 51,38 & 354 at Kistareddypet village but has not shown capital gain by claiming it as agricultural land. AO by observing that assessee has not furnished any evidence with regard to distance from the municipality as well as cost of acquisition treated the entire sale consideration of Rs. 20,16,400 as capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heru municipality it cannot be treated as capital asset as it is not within eight kilometers of a municipality notified by central govt. The CIT(A) noted that even otherwise also the merger of Kistareddypet Village with GHMC became effective from 16/04/2007 whereas notification for acquisition of land was issued on 18/12/2006. Hence, under any circumstances, the land in question cannot be considered to be coming under the category of capital assets as not only because they are classified as agricultural land and also it is situated beyond eight kilometers from a notified municipality. So far as carrying on of agricultural operation on the said land is concerned, learned CIT(A) observed that not only the certificate issued by the land acquisition officer classify the land as agricultural land but the assessee was actually carrying on agricultural operation on such land which is evident from the agricultural income shown by assessee. Accordingly, CIT(A) held that there will be no capital gain on transfer of such land as it is not a capital asset. Being aggrieved of the aforesaid finding of CIT(A), the Department is in appeal before us. 12. We have considered rival contentions and pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as an agricultural land and is situated beyond eight kilometers of notified municipality on the date of transfer, it cannot be considered as a capital asset so as to attract capital gain. 13. In the result, appeal in ITA No.431/Hyd/13 is partly allowed for statistical purposes. ITA No.433/H/13 in case of Smt G. Rama Devi for AY 2009-10 ITA No.434 & 435/H/13 in case of Shri G. Simha Rao for AY 2008-09 and 2009-10 ITA No.437/H/13 in case of Shri G. Sarvotham Rao for AY 2009-10 ITA No.439/H/13 in case of Sri G. Mahendra Rao for AY 2009-10 14. Two issues arise out of the grounds raised by the department in the aforesaid appeals. The first issue is in respect of assessment of capital gain on sale of land at Maqta Mehaboobpet made by AO but deleted by CIT(A) and second issue is in respect of assessment of capital gain on sale of land at Kistareddypet made by AO but deleted by CIT(A). 15. These issues are materially identical to the issues raised in ITA No.431/Hyd/13 in case of Shri G. Raghavendra Rao. Therefore, following the conclusions drawn in that appeal vide para No.8 in ITA No.431/H/13 (supra), the issue in respect of assessment of capital gain on sale of land at Maqta Meh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,00,00,000 and Rs. 1,13,75,000. AO further observed that from the account maintained by assessee in Dhanlaxmi Bank it was found that the cheque of Rs. 1,13,75,000 was encashed on 28/02/08 whereas no details with regard to encashment of other cheque was not furnished by assessee. From the aforesaid fact, AO concluded that assessee has not utilized the sale consideration of the original asset for construction of the new asset. Accordingly, he concluded that assessee is not entitled for exemption u/s 54F of the Act. Being aggrieved of the rejection of claim u/s 54F assessee preferred appeal before CIT(A). 20. Before the CIT(A), assessee challenging the finding of AO on the following issues: "a) The AO did not deny that the construction period of building was between March, 2007 and June, 2008 b) The AO did not reject the claim of investment of Rs. 1,75,00,000 c) The AO did not deny the sale of land and receipt of sale consideration in January, 2008. d) The AO did not prove that the investments made are exclusively out of other funds. e) The AO did not deny the investments in house property which is supported by an approved valuers report f) As held by various judicial dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that not only the sale consideration of the original asset was deposited in bank account but there are substantial withdrawals from the bank account thereafter which gives credence to the assessee's claim that the sale consideration was utilized for construction of the new asset. Further, there is no dispute to the fact that the assessee has invested in construction of the new asset within the time limit prescribed u/s 54F of the Act. Therefore, in absence of any evidence brought on record by AO to contradict assessee's claim of investment in construction of new house by utilizing the sale proceeds of the original asset the addition made on the basis of presumptions and surmises cannot be sustained. In our view, for the aforesaid reasons the CIT(A) was justified in allowing the claim of assessee u/s 54F. Ground raised by the department is dismissed. 23. The next issue as raised in Ground No.3 is in respect of allowance of cost of acquisition claimed by assessee at Rs. 2,42,853 by the CIT(A). 24. During the assessment proceeding, AO noticed that assessee while computing capital gain has reduced an amount of Rs. 2,42,853 towards cost of acquisition. AO however disallowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y tax, even as per the information in the FY 2008-09. c. Assessee failed to furnish the information to show whether he owned any other residential property at the time of transfer of property and fulfillment of other conditions as regard to the claim of deduction u/s 54F. d. With the property of the dimensions of the order of 23000 sft. had been let out to a college, the assessee has constructed building with an intent to put to use the same in commercial way. e. Relevant evidence/information, on the time period of completion of construction of property not provded." 30. Being aggrieved of disallowance of claim of exemption u/s 54F, assessee preferred appeal before the CIT(A). 31. Before the CIT(A), assessee contesting the findings of AO submitted that the term 'residential house' is not defined in the Act. Hence, it is to be understood, in the parlance of common usage. It was submitted generally a dwelling unit is a place where a person can stay and carry on his day today activities like sleeping, cooking, dining etc. It was submitted that the property in question/investment in which claimed as deduction u/s 54F is a residential house let out to Narayana Junior College fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation on possession of other residential house at the time of transfer of the capital asset, it was submitted as the relevant information could not be furnished at the time of assessment proceeding, it is being produced before the first appellate authority. Further, assessee submitted that the residential building is constructed on a land admeasuring 598 sq.yds. having four floors and pent house which has been valued by the approved valuer at Rs. 1,70,41,001 and out of the total investment, assessee has invested Rs. 1 crore and balance investment was made by his brother Mr. Mahendra Rao. 32. CIT(A) after considering the submissions of the assessee in the context of facts and materials on record observed that as "residential house" has not been defined under the Income-tax Act, the nature of the property has to be decided as per the use of the property. CIT(A) observed that as the building was used for a hostel of a college as dwelling unit for students, it can be considered as a residential property, but, certainly cannot be a commercial property. CIT(A) observed that as the property in question can neither be considered as a residential property or a commercial property as per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property having been determined by the approved valuer at Rs. 1,70,41,000, assessee would be entitled for deduction of an amount of Rs. 85,20,500 u/s 54F. 33. The learned DR submitted before us that there is no dispute to the fact that the entire building has been let out to an educational institution to be used as a hostel. Hence, it cannot be considered as a residential unit as it is not only constructed for a commercial purpose of being used as a hostel but actually it is used as a hostel of a educational institution. Therefore, it cannot be considered as a residential house and consequentially benefit u/s 54F cannot be granted. It was submitted by the learned DR that if CIT(A)'s logic that a building having facility for sleeping, dining and cooking can be considered as a residential house is accepted, then, every hotel/resorts can also be termed as residential house as they provide such facilities. 34. Learned AR, on the other hand, strongly supporting the finding of CIT(A) submitted that the assessee has constructed the building as a dwelling unit with all the facilities of being used as such. Further, as the building is used as a hostel for students having facility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities, or through physical verification. In absence of these basic facts, the exact nature of property constructed and assessee's eligibility to section 54F cannot be decided conclusively on presumptions. In the aforesaid view of the matter, we are inclined to remit the issue back to the file of the AO for deciding afresh after conducting necessary enquiry. AO must afford reasonable opportunity to assessee to establish his claim by producing necessary evidence to show that the property constructed is a residential house. The ground raised is allowed for statistical purposes. 36. The next issue as raised in ground No.5 is in respect of allowance of assessee's claim of exemption u/s 54B by the CIT(A). 37. Briefly the facts are while computing his income for the impugned assessment year, assessee claimed exemption u/s 54B of the Act in respect of gain arising from sale of agricultural land during the relevant PY. During the assessment proceeding, AO noticed that during the year assessee has sold certain assets in the nature of agricultural land and claimed exemption of the gain derived therefrom on the plea that he has invested the sale proceeds in purchase of agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a valid document wherein the payment of sale consideration is indicated, it may not be relevant to refer to the source of such acquisition as observed by the AO. Further, as contended by the appellant this questions were never raised during the assessment proceedings as such the said ground cannot be considered as a ground for making the disallowance under section 54B. Regarding the reasons for not considering the lands as . agricultural lands by virtue of their location in the proximity of municipality or urban limits the argument of the appellant was that what is required to be considered is the nature of the lands and their usage but not the proximity to the municipality or the urban area and this argument of the appellant appears reasonable and supported by the judicial decisions as relied upon by the appellant (supra) in this regard. It is also relevant to mention that such lands were already certified by the revenue authorities as agricultural lands indicating further that agricultural activities were carried on such lands. Further, as per the ratios of the judicial decisions, the nature of the land is determined by the nature of usage and nature of activities carried on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of being used as agricultural land. As in case of the assessee, the aforesaid condition is satisfied, the assessee is eligible for claiming deduction u/s 54B of the Act. Even otherwise also department has not brought any material to show that land is estimated within the prescribed limits of any notified municipality. Therefore, we do not find any infirmity in the order of CIT(A) which is accordingly upheld. Ground raised by Department is dismissed. 40. In the result, appeal in ITA No.436/H/13 is partly allowed for statistical purposes. ITA No.438/Hyd/2013 by the department in case of Shri G. Mahender Rao 41. Department has raised six grounds. Ground No.1 & 6 are general grounds, hence, not required to be adjudicated. 42. Ground No.2 to 4 relates to the common issue of acceptance of assessee's claim of exemption u/s 54F by the CIT(A). 43. Similar issue has been decided by us in ITA No.436/Hyd/13 vide paras 28 to 35 of this order (supra). As the issue under consideration is materially identical to the issue raised in ITA No.436/Hyd/13, following our decision therein, we remit this issue to the file of AO for deciding afresh. This ground is allowed for statistical pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. 50. We have considered the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. It is evident from record, the AO does not dispute the fact that assessees have substantial agricultural land holding. As per the details submitted before the revenue authorities and which is part of the record, agricultural land holding of the assessees are as under: S.No. Name of the assessee Agricultural land holding 1. G. Raghavender Rao 2008-09 2009-10 Acre 13 and 24 guntas 2. G. Simha Rao 2008-09 2009-10 Acres 13 and 11 guntas 3. G. Rama Devi 2008-09 2009-10 Acres 6 and 12 guntas 4. G. Mahender Rao 2008-09 2009-10 Acres 11 and 33 guntas 5. G. Sarvotham Rao 2008-09 2009-10 Acres 8 and 7 guntas The agricultural income shown by the assessees from such land holding during the assessment years 2008-09 and 2009-10 are as under: S.No. Name of the assessee Agricultural income disclosed 1. G. Raghavender Rao 2008-09 - 5,04,580 2009-10 - 4,73,400 2. G. Simha Rao 2008-09 - 5,12,450 2009-10 - 5,78,400 3. G. Rama Devi 2008-09 - 4,91,260 2009-10 - 4,73,400 4. G. Mahender Rao 2008-09 - 4,21,300 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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