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Shri. G. Chinnadurai Versus The Income Tax Officer, Income Tax Department, Chennai

2016 (9) TMI 155 - MADRAS HIGH COURT

Reopening of assessment - grant of exemption under Section 54F - Held that:- The expression a residential house used in Section 54, should not be taken to convey the meaning that it refers to a 'single residential' house and if that was the intention of the legislature, the framers of the statute would have used the word one instead of a . In fact, the facts of the case in Smt.V.R.Karpagam (2014 (8) TMI 899 - MADRAS HIGH COURT) is more or less identical to that of the case on hand, which also pe .....

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he light of the above it is held that the petitioner is entitled to the benefit of exemption under Section 54F as claimed by him and the reasons for reopening the assessment for the relevant assessment year is unsustainable. - Decided in favour of assessee. - W.P.No.28409 of 2015, M.P.Nos.1 to 3 of 2015 - Dated:- 29-8-2016 - T. S. Sivagnanam, J. For the Petitioner : Dr. Anita Sumanth For the Respondent : Mr. M. Swaminathan Senior Standing counsel and Ms.V.Pushpa Standing counsel ORDER The petiti .....

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vey under Section 133A of the Act, was conducted in the premises of the petitioner on 31.10.2014, in the course of such survey verification of the genuineness of the claim for deduction as claimed by the petitioner under Section 54F of the Act, which arose out of a sale transaction of the property owned by a partnership firm M/s.Karpagam Studios (hereinafter referred to as the 'firm') in which the petitioner was one of the partners and the petitioner had invested ₹ 2,62,50,000/- in .....

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q.ft., vide agreement dated 29.10.2010. Pursuant to a supplementary agreement, dated 05.09.2013, the allotable built up area was reduced to 8050 sq.ft. The sale proceeds having been fully utilised for the purchase of residential property, the petitioner claimed exemption under Section 54F of the Act. While so, the petitioner received a notice dated 27.03.2015, under Section 148 of the Act, stating that the respondent has reasons to believe that the income chargeable to tax had escaped assessment .....

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stated that the petitioner has invested into five flats out of the sale consideration received, the construction of which was not completed upto 70%. On the relevant date, the petitioner is entitled to claim exemption only for a residential property, construction of which should have been completed within three years from the date of transfer, reckoned as 29.10.2010. In this Writ Petition, the petitioner challenges the notice for reopening along with the reasons recorded by the respondent. 4. T .....

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e Hon'ble Division Bench of this Court in Smt.V.R.Karpagam vs. ITO, reported in (2013) 157 TTJ (Chennai) 887, and the decision in the case of Dr.Smt.P.K.Vasanthi Rangarajan vs. CIT reported in [2012] 23 Taxmann.com 299 (Mad), and the decision of the Hon'ble Division Bench in the case of Commissioner of Income Tax-IX, vs. G.Saroja in TC(Appeal) No.656 of 2015, dated 04.01.2012. The learned counsel referred to the circular of the CBDT, in circular No.1 of 2015, dated 21.01.2015, to submit .....

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the case of Narasimha Raju Rudra Raju, vs. Asst., Commissioner of Income Tax, Hyderabad in ITA No.234/Hyd/12, dated 26.04.2013. 5. The learned Senior Standing counsel for the respondent Department submitted that the petitioner has invested in five different flats in different blocks, out of which one is under joint ownership and therefore, the petitioner has not fulfilled the condition for claiming exemption under Section 54F of the Act, which states that within a period of three years, the ass .....

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icer, 259 [ITR] 19, the petitioner has to participate in the reassessment proceedings. The learned counsel placed reliance on the decision of the Punjab & Haryana High Court in the case of Pawan Arya vs. Commissioner of Income Tax reported in [2011] 11 Taxmann.com 312 (Punjab & Haryana), and the decision of the ITAT Mumbai in Shri Narender Khubchandani vs. Income tax Officer in I.T.A.No.238/Mum/2011, dated 17.12.2014. 6. Heard Dr.Anita Sumanth, learned counsel for the petitioner and Mr.M .....

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the construction of the house within the time limit, the exemption cannot be denied on the ground that construction has not been completed [see CIT vs. Praveen Kumar reported in 290 ITR 90 (Mad)]. However, the onus is on the assessee to produce sufficient material to establish the claim for exemption. In the instant case, the petitioner claimed exemption by stating that they have purchased flats with the built up area of 8050sq.ft., along with an extent of 1807 sq.ft of undivided share in land b .....

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denied exemption on the ground that he has invested in five flats and what would be the effect of the construction having been only partially completed. 8. The legal issue has been considered by the Hon'ble Division Benches of this Court as well as by the ITAT. As factual matrix in Smt.V.R.Karpagam is more or less similar to the case on hand, the same is referred at the first instance. In Smt.V.R.Karpagam (supra), (ITAT), the assessee challenged the order restricting the claim for exemption .....

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he said case, High Court had granted relief to the assessee for four flats received by the assessee in exchange of ownership over part of the land with building and four flats, were assessed, as one unit with one door number, whereas in the case of Smt.V.R.Karpagam, it was five flats with different residential units with different door numbers. While considering the said factual issue, the Tribunal was called upon to examine as to whether a residential house should be treated as one residential .....

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other than the new asset. Other clauses also restrict a claim under Section 54F, if an assessee purchased a house or sub-proviso (i) of proviso (a) i.e., owning more than one residential house on the date of transfer of the original asset will come into play only where assessee had within a period of one year before the date of transfer constructed a residential house as mentioned in substantive portion of sub-section (1). New asset is clearly defined in the substantive portion, to mean 'a r .....

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which the expression 'a residential house' is used in Section 54 makes it clear that, it was not the intention of the legislation to convey the meaning that it refers to a single residential house. If that was the intention, they would have used the word 'one'. As in earlier part, the words used are buildings or lands which are plural in number and that is referred to as 'a residential house', the original asset. An asset newly acquired after the sale of the original asse .....

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s the view which is taken by this Court in the aforesaid CIT vs. D.Ananda Basappa case in IT Appeal No.113 of 2004, disposed of on 20th Sept., 2008 (reported at (2009) 223 CTR (Kar) 186; (2009) 20 DTR (Kar) 266-Ed.] 8. Their Lordships have clearly held in the above judgement that 'a residential house' in the context could not be construed as a singular. In the said case also, claim for exemption was with regard to four flats in lieu of share in land, but the claim was under Section 54 of .....

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ative No doubt Hon'ble jurisdictional High court in the case of G.Saroja (supra), did consider the fact that different flats were having one door number. However, this also was not the reason why assessee was held to be eligible for claiming of exemption under Section 54F of the Act. Their Lordships took cue from the decision of Hon'ble Karnataka High Court in the case of Smt.K.G.Rukminiamma (supra). Similar exemption was given by the Hon'ble jurisdictional High Court again in the ca .....

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ms of such agreement, she retained to herself undivided share in the land to an extent of 50% and the balance 50% was to be conveyed to the developer. The consideration for parting with 50% of the undivided land share was in lieu of four flats as well as a sum of ₹ 10 lakhs payable by the developer. The claim for exemption under Section 54, was rejected, affirmed in appeal and further affirmed by the Tribunal and the correctness of these orders were tested by the Hon'ble Division Bench .....

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, the assessee was entitled to claim exemption. The Hon'ble Division Bench agreed with the view expressed in the decision in the case of G.Saroja, and held that the purchase of four flats would not disentitle the assessee for exemption. 10. The learned counsel for the revenue relied on the decision of the Punjab and Haryana High Court in the case of Pawan Arya to sustain the impugned order. In the said case, the assessee claimed exemption on capital gains on sale of flat on the ground of acq .....

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adjacent units and they were combined into one unit having a common kitchen. In the said case, the property sold by the assessee consisted of two garages. However, the sale agreement did not refer to any garages. The Assessing Officer estimated the sale consideration of the garages and assessed the same as long term capital gain. While deciding the correctness of said order, the Tribunal took note of the other decisions and pointed out that in the case of CIT vs. Devdas Naik in ITA No.2483 of 20 .....

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t namely, the Bombay High Court in ITA No.238 of 2011 and on facts, in the said case, and held that the assessment order has computed the sale consideration relating to garages purely on surmises and conjuncture without bringing any material on record to show that the assessee had received any consideration separately for garages, over and above, the amount declared in the development agreement. 12. Before proceeding further, I would like to point out that the facts, which arose for consideratio .....

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one kitchen. Therefore, sans facts a decision cannot be taken. Therefore, we have to look into the type of transaction which had been entered into between the parties. The petitioner and other partners M/s.Karpagam Studio, entered into an agreement to execute a deed of an absolute sale dated 29.10.2010, in respect of the property in Saligramam and Virugambakkam villages and a separate agreement was entered into by the partners individually and the petitioner entered into such an agreement on 29. .....

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in the apartment complex, since the consideration which has passed on, was for agreeing to offer 9500sq.ft., of built up area along with proportionate undivided share. This agreement was followed by a supplementary agreement, dated 5th September 2013, where except for a small reduction in the super built up area by reducing it to 8050sq.ft., and giving the details of the flat numbers, there are no other changes to the principal agreement dated 29.10.2010. 14. Thus, by applying the legal princip .....

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