9911796707
TMI Blog2016 (1) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee to distinguish them. 4. The learned CIT (Appeals) erred in relying on decisions which are distinguishable on facts and further erred in holding that what the assessee has done is only improvement to existing structure when in fact the plan of the old building and the present built up area clearly demonstrate that new structure is made and thereby erred in denying deduction u/s. 54F. 5. The learned CIT (A) ought to have appreciated the legal position that if two decisions are available on that is favourable to the assessee is to be followed and thereby erred in following the decision against the assessee though there is a decision in favour of the assessee. 6. The learned CIT (Appeals) erred in confirming the addition of Rs. 41,25,000/- holding that the assessee has not established that it is sale consideration and relying on the letter of the purchaser when the department on the other hand is assessing in the hands of buyers of EMMAR properties in Boulder Hills additional incomes as on money payments on the basis of statement of the agent thereby adopting different standards to different assessees. 7. The learned CIT (Appeals) erred in distinguishing the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding additional floors to meet the residential needs of the family. In a welfare state, it is necessary to see that citizens get proper shelter for self and family, as the time passes family needs also increase due to children getting married and looking for privacy and independent place for their nuclear family. It is not possible for the citizens to acquire or construct a large house at one go due to paucity of funds and financial constraints. Then, the assessee tried to build the house in stages based on their own family needs and availability of funds. The additional floors constructed on an existing grounds/first floor of a residential house property form part of residential house property addition to the existing house and are in the nature of new asset". 4.2. The Assessing Officer did not accept assessee's claim for the following reasons: a. As per the sale deed dated 10-02-2005, the property purchased consisted of a house with a built up area of 3,646 Sq . F t . , with ground and first floor. The municipal approved plan showed a kitchen, dining room, two halls, 6 bed rooms and one study room. This showed that the property was full-fledged residential house with all ameni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of property at Bangalore and were in the name of Sri Wahid Hussain, son of assessee. As a result, no nexus had been established between the cash withdrawn from the bank and the construction activity allegedly undertaken by assessee . i. The decisions cited by as se s s e e were distinguishable on facts and therefore, not applicable in the appellant's case. The Assessing Officer also relied on the following decisions for the view that extension of an old building was not eligible for exemption u/s. 54 or u/s. 54F. i. CIT Vs. Pradeep Kumar [290 ITR 90] (Mad): ii. ACIT Vs. T.N. Gopal [121 ITD 352] The Assessing Officer, therefore, rejected the assessee's claim of exemption u/s. 54 and assessed the long term capital gains at Rs. 1,25,95,200/-. 4.3. In the course of the appellate proceedings before Ld.CIT(A), it was submitted that there were factual inaccuracies in the ITI's report, that as per valuation report dated 07-11-2012 obtained by assessee from M/s. Prakash Associates, the area of ground floor was 3,245.15 S q . F t . , first floor was 3,649.62 Sq .F t . , and second floor 3,649.62 Sq. Ft., aggregating to 10544.39 Sq. Ft., whereas as per the assessment order the old ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verifiable even with regard to the alleged additions and extensions. 6.11 Even if the appellant's claims that she had undertaken additions to the house were to be accepted, the claim of deduction u/s 54 would not be admissible in view of several judicial decisions where the courts have held that deduction u/s 54 is not allowable for additions or extensions made to a residential house. In the case of CIT v V Pradeep Kumar [2007] 290 ITR 90 (Mad), the court held that it was clear from the contemporaneous evidence available on record that there were no new residential houses exhibited on the plot in question, that the assessee had undertaken an extension work in the old building in the ground floor and first floor, that from the above finding it was clear that there was no residential house and it was only an extension of the old building and that a mere extension of the existing building will not give benefit to the assessee as contemplated u/s 54F. 6.12 This decision of the High Court was followed in the decision in the case of ACIT v T N Gopal 121 ITO 352 (Chen) (tm) where the assessee had only constructed an additional floor on his existing house property. This decision, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant when the construction began but to be eligible for the deduction, the construction should have been completed after the date of transfer. 6.18 The same principle has also been upheld in the case of Shantaben P. Gandhi v CIT [1981] 129 ITR 218 (Guj) where the assessee had completed the construction in March, 1968 whereas the transfer took place in March, 1970. The court held that to claim exemption under section 54, the construction of the new house should be within two years after the transfer of the existing house and that the exemption is not available where the new construction is made before the transfer or sale of the existing house. 6.19 in the appellant's case, the new asset consisted of a house that had been purchased more than a year prior to the sale of the original asset and the appellant was, therefore, not eligible for deduction u/s. 54 on its' acquisition. The investment claimed for deduction had been incurred on making additions to the new asset which was not eligible for deduction. Further, even such construction (on additions) had been completed before the sale of the original asset and was, therefore, not eligible for deduction u/s 54. 6.20 The AR has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Commissioner (Appeals) that Inspector working under the Assessing Officer, has submitted his report without stepping into the building by simply taking photographs and therefore the same cannot be relied upon. However, the Commissioner (Appeals) has brushed aside this submission and has placed heavy reliance on the municipal permissions (which the Appellant did not obtain) which cannot determine the fact whether the construction has taken place or not. 2. The Appellant, submits that the building in Jubilee Hills was purchased on 10.02.2005, and it was recorded in the Sale Deed that the total plinth area constructed was to the extent of 3646 sft on the ground and first floor (about 1823 sft each on' ground and first floors, on land admeasuring 961 square yards). The Appellant demolished this structure and has build a house containing ground plus two floors consisting of 10,544.39 sq.feet (3245.15 sft in the Ground floor, 3649.62 sft in the first floor and 3649.62 sft in the second floor). Unfortunately, the Appellant did not obtain any municipal permission for this construction nor has applied for any 'Building regularization and therefore is unable to establish, the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant on the above property; and (iii) pass such other order (s) as the Hon'ble Tribunal deems fit and proper in the interest of justice. Hyderabad, 21.08.2015 x x x x x x Appellant Ld. Counsel relied on Co-ordinate Bench decision in the case of DCIT Vs. Sri Vidyasagar Dontineni in ITA Nos. 632 & 1238/Hyd/2013, dt. 28-01-2015 by ITAT 'A' Bench allowing the claim u/s. 54 on the reason that construction was completed later to the sale of property giving rise to capital gains, even though construction started much earlier. 8. In reply Ld DR supported the orders of AO and CIT(A). Further, Ld. DR had filed written submissions as under: 1. As per the claim of the ld.AR made before the Bench, the assessee extended the built up space of an existing house from 3,646 sft to approximately 10,000 sft and therefore the AR claims the assessee is eligible for exemption u/s.54 on capital gains arising from sale of original asset. 2. However, the facts of the case do not support assessee's case. The facts of the assessee's case are that ---Sale of the original asset took place on 19-03-2010. (i.e., sale took place after acquisition of supposedly new asset. Old/original as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 139J in an account in any such b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeds or in other words before the transfer of the original asset. 4. In the course of hearing on 20/08/2015, the Id .AR made submission that the assessee can claim exemption u/s.54 despite the fact the assessee did not transfer the original asset as on the date of acquisition of the new asset. For this purpose he relied on the judgment of Hyderabad Bench of ITAT in the case of DCIT vs. Sri Vidyasagar Dontineni in ITA No's 632 & 1238/Hyd/2013, wherein it was held (paragraph 8.1) that the assessee would be eligible to claim exemption u/s.54 even if investment is made (as an extension) in a house whose construction commenced much before the specified period, provided the investment is made during the specified period. In this case law it is further held in para 8.1 in page 10 that "what is relevant for claim of deduction u/s.54 is (1) the date of completion and (2) period of investment". Whereas this case law is not applicable to the facts of the case because in this said case, the ITAT reiterated that even though the construction commenced before the specified period but renovation work has to be commenced and completed within the specified period. The specified period in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (old house) because most of the renovation/extension work of the old house had been completed even before the date of transfer of the original asset (19-03-2010). If at all the assessee claims that she is entitled to exemption u/s.54, she would be eligible to claim such exemption on the capital gains funds appropriated, subsequent to the date of transfer of the original asset, for the purposes of the construction of the new asset (i.e., even extension of the old house). Paragraphs 1 to 3 of the above written submissions stand on one side of the argument and paragraphs 4 to 5 stand on another Side of the argument while without causing prejudice to each side of the arguments. That means the arguments given in paragraphs 4 to 5 are not dependent upon the arguments given in paragraphs 1 to 3 meaning thereby that the arguments given in paragraphs 4 to 5 still hold good irrespective of the fate of arguments in paragraphs in 1 to 3. It is requested that the above written submissions may be reproduced and be made part of the appellate Order to be passed by the Hon'ble ITAT, Hyderabad". 9. We have considered the rival contentions. As can be seen from the above, it is the contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a residential house u/s. 54F. There was no evidence or contemporaneous documents available to show that there were constructions. The submission of assessee about the construction of residential house was not based on any valid material. Therefore, assessee was not entitled to the benefit of Section 54F'. 9.3. Following the decision of the jurisdictional High Court in the above case, the ITAT, Chennai in the Third Member case of ACIT Vs. T.N. Gopal [121 ITD 352] has held that exemption u/s. 54F could not be allowed on additional construction in the existing house property. Same extension of existing building will not give any benefit to assessee u/s. 54F. 10. Thus, the above judicial principles establish that assessee would be entitled to deduction u/s. 54/54F only when a new residential unit comes into existence and mere extension of existing building will not give the benefit. Even though the construction could start much before the sale of property giving rise to Long Term Capital Gain, what is relevant is the completion of house and investment made by assessee within the specified period as per the provisions of the Act. 11. Keeping the above principles in mind, if we ana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the present area is almost like a rectangle. From where the additional area has come in the revised plans placed on record was not explained when questioned. Therefore, as requested by assessee, only site inspection can confirm whether assessee has indeed constructed altogether a new house or only made extension to the old bulding. The variations noted above also require deeper examination physically. Therefore, AO is directed to give an opportunity to assessee, take the technical people like Valuation Officers of the department and examine whether the structure as claimed by assessee is old or new, so as to consider the eligibility of deduction u/s. 54. 12. Incidental to the above, as seen from the valuation report on the basis of which assessee claimed investment of Rs. 1,37,07,707/- on total area of 10,544.39 Sq. Ft., this area of 10,544 also includes the old area of 3,649 sq.ft. Therefore, technically speaking, the investment in the new building as per assessee's own valuation report would not be more than Rs. 89,63,500/- (Approximately, worked out on the basis of additional area @ 1300/per sq.ft). Therefore, it is also required to be examined as to how much assessee has inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the amount is eligible for deduction, keeping in mind the observations made above. In case the amounts are invested/claimed to have invested by the funds of assessee's son, AO is also directed to examine the source of funds of those amounts so as to determine the exact amount of investment in the house. 15. Next issue to be examined is whether the house was completed as on 19-03-2010 as contended by AO or subsequently, as contended by assessee? This can also verified not only on physical inspection of building but also various investments and bills being maintained by assessee for construction of the house. We make it clear that it is for assessee to establish that the house is a new house and investment was made after the capital gain has accrued i.e., after 19-03-2010. In view of this, without giving any clear opinion on the contentions of either party, we are of the opinion that the matter requires thorough examination by the AO afresh to establish the facts first. Needless to say that assessee should be given due opportunity to substantiate her contentions and AO should deal with them in the order. There should not be any occasion to complain, like what assessee has complai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is some nexus with the sale property. There is no evidence placed on record that these amounts were deposited in the bank account was an advance received in cash. Generally, whenever there is a property transaction, some amount is paid by way of cheque if there is any agreement of sale and if there is any cash dealings, cash is paid separately. As seen from the bank a/c, there was no such credit of cheque payments in the month of November, 2009, there were only some deposits by way of instruments i.e., cheques on 3rd December, 2009 to an extent of Rs. 10 Lakhs which is not part of sale consideration, which was received by a single cheque/transfer on 23-03-2010 to an extent of Rs. 1,53,60,000/- i.e., cleared after property was registered on 19-03-2010. There was cash deposits on 22nd February, 24th February and 25th February to an extent of Rs. 4.25 Lakhs, 5 Lakhs and 10 Lakhs respectively on these dates. Here also there is no nexus established with reference to the sale transaction being contended by assessee. In view of this, we are unable to accept assessee's contentions that assessee has received any consideration in cash over and above the amount, which was originally returned ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
