TMI Blog2015 (5) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... were clubbed in the hands of the assessee, but the investment for purchase of the said properties has come from the independent sources of the daughters and hence it cannot be presumed that assessee is the owner of the properties. Hence in our opinion the assessee having only one residential house is eligible for claiming exemption u/s 54F. We are of the opinion that the CIT erred in determining the short term capital gain on the entire property while computing deduction under the head "capital gain". The long term capital gain has to be calculated on the undivided interest in land i.e. on the land component. Hence we set aside this issue to the file of the AO to rework the capital gain computation. The assessee may be given an opportunity to represent her case, since the assessee has elaborately submitted before us. Denial u/s 54F on ground of that possession of new asset is beyond three years - Respectfully following the decision [2013 (11) TMI 415 - ITAT HYDERABAD ] of the Coordinate Bench of the ITAT, Hyderabad Bench, we set aside the issue to the file of the AO, with a direction to follow this decision of the ITAT in the instant case before us. Addition on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s 54F on the ground that assessee's deposit in Bank a/c made in October 2006 is beyond the due date for filing of ROI - Since the AO has allowed the exemption u/s 54F of the Act as claimed by the assessee after examining the pass book produced by the assessee and verifying the details also, the assessee had made substantial investment within 3 years from the sale of original asset. We also find that the date of filing the return was extended and the amount was deposited. The assessee has produced the notification for extension by the CBDT at page 34 of the paper book. Hence, we are of the opinion that the assessee is eligible for deduction u/s 54F. - Decided partly in favour of appellants. - ITA No. 886/Hyd/2010, ITA No.885/Hyd/2010 - - - Dated:- 30-1-2015 - P. M. Jagtap, AM And Asha Vijayaraghavan, JM,JJ. For the Appellant : Shri A V Raghuram, Adv. For the Respondent : Smt G Aparna Rao, (DR) ORDER Per: Asha Vijayaraghavan,JM. The assessee Smt. S. Uma Devi and Smt. V. Shailaja being sisters, filed return of income for A.Y 2006-07 on 31.10.2006. The assessment was completed u/s 143(3) and the AO accepted the income returned by the assessee. The CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akhapatnam and claimed deduction of ₹ 61,91,673 u/s 54F from the long term capital gain and as per proviso to section 54F(1) deduction is not allowable in case the assessee owns more than one residential house on the date of transfer of original asset. It was further observed by the CIT that as per the assessment record, it can be seen that the assessee owns residential property at Jubilee Hills and also at Pancom Chambers. 4.2 Assessee submitted that during the previous year relevant to the A.Y under consideration, assessee sold long term assets for ₹ 3,22,29,760 and declared long term capital gain of ₹ 2,18,46,264, out of which she invested ₹ 91,34,264 in a new residential property and claimed deduction of ₹ 61,91,673 u/s 54F of the Income Tax Act, 1961 which the CIT did not allow on the ground that assessee owned two residential houses, one at Jubilee Hills and another at Pancom Chambers and that exemption u/s 54F is available for an assessee who owns only one residential property. 4.3 It was submitted that the assessee actually owns only one residential property and not two as presumed by the CIT. The property situated at Suite No.11, Pancom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... she prayed that she is entitled for deduction u/s 54F as claimed by her in the return of income. 4.5 The CIT observed that the amount exemption claimed is ₹ 61,91,673, the ground on which the said exemption claimed was that the assessee had invested ₹ 91,34,588 in residential house at Visakhapatnam. The CIT noticed from the assessee's return that she had disclosed rent from the let-out properties under the head income from house property . Further, u/s 64(1A) of the I.T. Act, 1961, assessee had clubbed in her own hands the rents received from Chennai flat which property stands in the names of her two minor children. Hence the CIT disallowed her claim of exemption u/s 54F as ownership of more than one residential house on the date of transfer of the original asset is laid down u/s 54F (i.e. proviso to sub section (1) as disqualifying factor for the exemption. During the appellate proceedings, the AR submitted that the property situated at Suite No.11 Pancom Chambers, Raj Bhavan Road is a commercial property which was let out for commercial purposes. The user of the property being commercial, it should not be considered as residential house for disqualifying the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for purchase of the said properties has come from the independent sources of the daughters and hence it cannot be presumed that assessee is the owner of the properties. Hence in our opinion the assessee having only one residential house is eligible for claiming exemption u/s 54F. 5. Ground No.4 raised by the assessee is given below: The ld CIT while directing to disallow the claim of deduction u/s 54F erred in giving a finding that the deduction is claimed against short term capital gains without appreciating the fact that the sale of flats included sale of undivided share of land which is a long term capital asset . 5.1 The AO noted that the assessee had treated the capital gains on sale of flats received as long term capital gains. The capital gains on sale of flats received are short term capital gains as the flats were sold by the assessee within financial year 2005- 06 and also the flats received were not appearing in balance sheet as on 31.3.2005. 5.2 In this connection, the assessee submitted that those 10 flats were received by the assessee in exchange of surrender of her right in land. Those flats were sold immediately after they were handed over to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal consideration of flats sold reduced the market value of undivided share of land and arrived at the market value of the superstructure and adopted the same as full value of consideration received in lieu of surrender or right in land, as per the principle enumerated by the Hon'ble Supreme Court. c) As an amount of ₹ 2,43,18,500/- was received by the assessee in exchange of surrender of land admeasuring 1116.0 sq. yards which is a long term asset, the resultant profit has been rightly shown as long term capital gain by the assessee. 5.4 The CIT on this issue has observed, whether the assessee's method of treating the entire sale proceeds of 10 flats as long term capital gains is correct and legally tenable. The material facts are that on 30.12.2002 the assessee had entered into a development agreement with M/s Lumbini Constructions Ltd in respect of her land (jointly held with her sister V. Shailaja) bearing No.6-3-661 at Kapadia Lane, Somajiguda, Hyderabad. The ld CIT extracted Para Nos.3, 6, 7 and 11 from the said agreement as under: 3. That the OWNERS shall grant and allow the DEVELOPER to undertake development and construction of a residential complex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the AR has placed reliance on the decision of the Apex Court in the case of CIT vs. George Henderson Ltd (66 ITR 622), The ld CIT extracted the relevant portion from the above decision as under: The expression full value of the consideration for which the sale, exchange or transfer of the capital asset is made appearing in section 12B(2) meant the market value of the asset transferred and on this ground the Appellate Tribunal was justified in taking the market value of the shares to be the full value of the consideration. We are unable to accept this contention as correct. It is manifest that the consideration for the transfer of capital asset is what the transferor receives in lieu of the asset he parts with, namely, money or money's worth and, therefore, the very asset transferred or parted with cannot be the consideration for the transfer. It follows that the expression full consideration in the main part of section 12B(2) cannot be construed as having a reference to the market value of the asset transferred but the expression only means the full value of the thing received by the transferor in exchange for the capital asset transferred by him. The main part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge as on date of exchange shall have to be ascertained in order to arrive at the figure of consideration. This is entirely untenable. The language used is full value of consideration received or accruing not fair market value. For example, in a case where a property is transferred for money, the full value of consideration becomes the sum of money stated in the sale deed, not the fair market value. In fact in order to curb the practice of glaring understatement of consideration in matters of transfer of capital asset, section 50C had been introduced w.e.f 1.4.2003 and that too in a situation where the consideration stated in the documents is less than the value adopted by the registering authority for the purpose of stamp duty. It has no reference to fair market value. 5.7 We are of the opinion that the CIT erred in determining the short term capital gain on the entire property while computing deduction under the head capital gain . The long term capital gain has to be calculated on the undivided interest in land i.e. on the land component. Hence we set aside this issue to the file of the AO to rework the capital gain computation. The assessee may be given an opportunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitle the assessee from availing benefit under section 54F. Even investment made in purchasing a plot of land for the purpose of construction of a residential house has been held to be an investment satisfying the conditions of section 54F. Though there cannot be any dispute with regard to the above said proposition of law, the assessee is required to prove the actual date of investment and the amount invested towards purchase/construction of the residential house with supporting evidence. Since the primary facts relating to which date should reckoned as the actual date of investment and which is the actual amount of investment have not been properly brought on record in the instant case, the matter is to be remitted back to the file of the Assessing Officer who shall determine the issue with regard to assessee's claim under section 54F afresh after considering all the facts and materials available before him . 6.3 Respectfully following the above decision of the Coordinate Bench of the ITAT, Hyderabad Bench, we set aside the issue to the file of the AO, with a direction to follow the decision of the ITAT in the case of Shri Narasimha Raju (Supra) in the instant case bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn on Andhra Bank, Somajiguda Branch, Hyderabad as interest free deposit out of ₹ 1.00 crores and the balance of ₹ 85.00 lakhs shall be paid to the owners within two weeks from the date of receipts of the Municipal sanction and the Developer shall be entitled to take possession and commence the work after payment of the balance deposit amount within the specified two weeks time, then the owners are at liberty to cancel this agreement. This deposit amount shall be over of the possession of the completed built up areas by the Developer to the owners of their share as per this agreement . 9.4 The CIT held that from the above, it can be seen that the builder had given interest free deposit of ₹ 1.00 crores. As against this the AR produced evidence of refund of ₹ 80.00 lakhs by the assessee, her sister Smt. V. Shailaja and her mother Smt. T. Hemalatha Devi. The mention of the name of the mother is just a token one since her share in the land had further been sub-divided between the two daughters i.e. the present assessee Smt. S. Uma Devi and Smt. V. Shailaja. Hence, moneys as well as moneys' worth falling to the share of Smt. T. Hemalatha Devi have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be considered as sale consideration . 10.1 The next issue is that the assessee had not offered the amounts received towards additional amenities, parking charges, lift, common area etc. on sale of flats. 10.2 On this the assessee submitted that with regard to the amounts received towards additional amenities, the sale consideration mentioned in the sale deeds and work order agreement is inclusive of the cost of various amenities like parking etc, provided to the prospective buyers besides cost of flat which can be verified from the sale deed and work order was made use of in respect of all the 10 flats sold by the assessee. All the amounts received by the assessee towards sale of flats, including work order charges and receipts on account of other amenities have been clubbed together while working out the total consideration received. Assessee also enclosed a statement indicating the amounts received under various heads and how the same have been treated for arriving at the total sale consideration. A perusal of this statement will reveal that the consideration taken for sale of flats is all inclusive of sale price as well as amenities. Hence it is incorrect to assume th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion charges, cost of solar water heating system, which was in turn to be defrayed to respective agencies. Hence, the same cannot be considered as sale consideration. The ld CIT (A) seems to have ignored the statement of sale consideration received, which was filed before him. The assessee did include amount received towards electricity and water charges (Rs.1,10,000 per flat) from 8 flat owners, amount of ₹ 1,62,500 received towards solar system from 8 flat owners and ₹ 1,50,000 towards corpus fund from three flat owners which in turn, were defrayed to respective agencies. Those flat owners who have not paid their contribution to the assessee have directly paid their respective shares to the concerned agencies. Hence these amounts should not form part of sale consideration of the flats sold. Hence this ground of appeal preferred by the assessee is allowed. 11. Ground No.10 is as follows: The ld CIT erred in directing to bring to tax the amount of ₹ 5,00,000 claimed as cost of acquisition of shares, being amount paid to the consultant for advising on the matter of purchase and sale of shares, inspite of providing all the details and evidences for such expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with the transfer of the shares in question. Moreover, the assessee has not produced any solitary evidence as to the nature of advice rendered. Hence, the CIT (A) held that the claim of deduction of ₹ 5.00 lakhs is not admissible . 11.5 The assessee reiterated the submissions made before the AO and the ld CIT. It was submitted that the said expenditure was incurred by the assessee for advice rendered both at the time of purchase of shares and at the time of sale of shares. Thus, the expenditure incurred for advice rendered at the time of purchase forms part of the cost of the shares. Similarly the expenditure incurred for advice on sale of shares forms part of cost of sales of the shares before they are transferred. Unless both transfers viz., transfer in the name of the assessee while purchasing and transfer in the name of the purchaser while selling, the transaction is not complete and the resultant gain or loss would not arise. Thus the aforesaid expenditure is wholly and exclusively incurred in connection with transfer as contemplated u/s 48(1) of the Act and hence allowable. 11.6 We have heard both the parties and perused the record. We find no infirmity with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r investment in new residential house property. Since money has no colour, what is required by law is that assessee should use his/her own funds for investment in order to claim exemption u/s 54F which the assessee has done. - Assessee's turnover from sale of securities was ₹ 35,87,875.05 and share of profit, which is business income only from partnership firm M/s Pioneer Oxygen was ₹ 29,48,881.08. But put together amounted to ₹ 65,36,866 which exceeded ₹ 40.00 lakhs. Hence the assessee was required to get its books of accounts audited u/s 44AB of I.T. Act, 1961. 14. The ld DR relied on the order of the CIT. 15. We have heard both parties. Since the AO has allowed the exemption u/s 54F of the Act as claimed by the assessee after examining the pass book produced by the assessee and verifying the details also, the assessee had made substantial investment within 3 years from the sale of original asset. We also find that the date of filing the return was extended and the amount was deposited. The assessee has produced the notification for extension by the CBDT at page 34 of the paper book. Hence, we are of the opinion that the assessee is eligible f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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