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TMI Blog2017 (4) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant by way of inheritance from his mother Smt. Asha Swarup, being the market value as on 1.4.1981 instead of its value as on 31.3.1985 and consequently the cost of the land adopted at the rate of 300/- per sq.yards, instead of 730/- per sq. yards claimed by the appellant is arbitrary, unjust and any rate very inadequate. 4. That the assessee denies his liability to pay interest charged u/s.234A, 234B and 234C of the Act. Your appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal at the time of hearing. 3. The brief facts of the case are that the return of income was filed on 17.8.2011 declaring total income at Rs. 15,36,830/-. The return was processed uls 143(1) of the IT Act and case was selected for scrutiny. Accordingly, notice u/s.143(2) of the I.T. Act, 1961 was issued on 6.8.2012 and notice u/s. 142(1) of the I.T. Act, 1961 was also issued on 21.6.2013 alongwith questionnaire. In compliance to the statutory notices u/s. 143(2)/142(1) of the I.T. Act, 1961, the Assessee's AR attended the proceedings from time to time and filed the required details and documents. During the course of assessment proceedings it was noticed by the AO tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he portion of the property inherited by the assessee Shri Adarsh Kumar Swarup from his mother Smt. Asha Swarup after her death on 16 March 1994 through her will. As stipulated in section 49(1)(ii) reproduced above, the cost of acquisition of the property sold mean the cost for which the last previous owner had acquired the property. In this case, the last previous owner was the assessee's mother Smt. Asha Swarup. She acquired the property from her mother-in-law Smt . Jyotsna Kumari Swarup through later's will after her death on 5 march, 1985. As such the cost of the property sold is to be taken as the fair market value of the property existing in March, 1985 and not as on 01.04.1981 and therefore it requested that the value derived in the valuation report be kindly accepted and not @ 300/- per sq. yd as mentioned by your honour." AO observed that the above contention of the assessee is not correct as the expression "previous owner of the property" pas been defined in the explanation of section 49(1) as discussed above. Therefore, the cost of acquisition of the assessee in respect to the property sold is taken at Rs. 300/- per sq. yd. to the computation of Long Term Capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pies of Sale Deed dated 25.6.2010 in favour of TCMC Developers Ltd., Muzaffarngar, evidencing that the land was part of House NO. 64, Agrasen Vihar for a sum of Rs. 45,60,000/-; copies of sale deed dated 25.6.2010 in favour of Ankit Garg, Muzaffarnagar evidencing that the land was part of House NO. 64, Agrasen Vihar for a sum of Rs. 45,60,000/-; Copy of Will of Smt.Jyotsna Kumari Swarup; Copy of Will of Smt. Asha Swarup; Copy of registered valuer Sh. Rajiv Jain report as on 1.4.1981 evidencing the market value of the land @Rs. 600/- per sq. yard; copy of registered valuer Sh. Rajiv Jain report as on 31.3.1985 evidencing the market value of the land @ Rs. 730/- per sq. yard and copy of house tax assessment and record of the Municipality, Muzaffarngar in respect of the house. Ld. Counsel of the assessee also filed the Brief Synopsis which read as under:- "1. The appellant hails from a well known industrial family of small town Muzaffarnagar where the appellant's family had owned several industries like sugar, vanaspati, distillery, steel and others. 2. The appellant's grandmother, Smt. Jyotsna Kumari Swarup wife of late Lala Gopal Raj Swarup, resident of Ram Bagh, Muzaffar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of Smt. Jyotsna Kumar Swarup because Asha Swarup had also acquired the said property by way of will and because Smt. Jyotsna Kumari Swarup was holding such property before 1st April 1981. Hence in view of section 55(2)(b)(ii) of the Act, the market value of the property has to be taken into consideration as on 1 st April 1981. Even for the purpose of the valuation as on 1 st April 1981, the assessee had worked out the said property by registered valuer Shri Rajiv Jain who worked out the value of the property @ Rs. 600 / - per square yard. 8. The Assessing Officer, instead of the market value worked out by the registered valuer, adopted the market value of the property on the basis of circle rate @ Rs. 300 / - per square yard as on 1 st April 1981 without further benefit of proper indexation as available to the assessee as per the second proviso to section 48 of the Act and Explanation (iii) read with section 2(42A) and Explanation 1(6) of the Act. 9. The appellant filed appeal before the CIT (Appeals) and objected the action of the Assessing Officer. The appellant stated that the market value of the property should have been taken as on 31 st March 1985 when the previous ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , whereas the value depends upon the location of the property also. Property near to the road fetches more value. 10. The Commissioner (Appeals) dismissed the contention of the appellant not only with regard to the date of adoption of market value as on 31 st March 1985 as contended by the appellant and has also rejected the market value of the property as worked out by the registered valuer and instead adopted the value as on 1 st April 1981 on the basis of circle rate as done by the Assessing Officer. 11. However, the CIT (Appeals) in the appeal proceedings alleged that the deduction as allowed by the Assessing Officer in respect of investment of flat u/s 54 of the Act was wrong as he was of the view that u/s 54 of the Act the deduction is available only when the residential house is transferred and not the land appurtenant thereto and for this purpose he relied upon the judgment of Punjab & Haryana High Court in the case of Ashok Sayal vs. CIT in 209 Taxman 376 and the judgment of the Rajasthan High Court in the case of Rajesh Surana vs. CIT in 306 ITR 366 and then enhanced the income of the appellant by way of disallowing the deduction is] s 54 of the Act as allowed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karnataka High Court had examined these expressions while construing the provision of section 54 of the Act in the case of Shri C.N. Anantharaman vs. ACIT in ITA No. 1012/2008 vide its judgment dated 10th October 2014 - copy enclosed. The Hon'ble Karnataka High Court held that the deduction u/s 54 of the Act is also available even if the land, which was appurtenant to the residential house, is sold and it is not necessary that the whole of the residential house should be sold because the legislature has used the words "or" which is distinctive in nature. In the instant case, it is not the case of AO and CIT (Appeals) that the land was not appurtenant to the residential house. The case of the CIT (Appeals) is that the appellant has sold only the land appurtenant to the house and not residential house which, according to the Karnataka High Court, is not a requirement under the law and exemption vi] s 54 of the Act is also available to the land which is appurtenant to the house. The front page of the sale deed itself shows that the land was part of residential house No. 64, Agrasen Vihar, Muzaffarnagar. Therefore, the exemption as claimed and allowed by the Assessing Officer sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property from late Smt. Jyotsna Kumar Swarup and accordingly the cost of acquisition of the property shall be deemed to be the cost for which the previous owner of the property acquired it. As per the Explanation to section 49(1) of the Act, the previous owner of the property means the last previous owner of the property who acquired it by a mode of acquisition other than that referred in clause (iii) of section 49(1) of the IT Act. Hence accordingly the cost in the hands of Smt. Jyotsna Kumar Swarup shall be deemed to be the cost of the property. As Smt. Jyotsna Kumar Swarup was holding the property prior to 1 st April 1981, hence in view of the provision of section 55(2)(b) of the Act the fair market value of the asset as on 1 st day of April 1981 would be the deemed cost of acquisition. The computation of capital gains has been prescribed u/s 48 of the IT Act and it states that capital gains shall be computed by deducting from the full value of the consideration received as a result of the transfer of a capital asset, cost of the acquisition of asset and the cost of any improvement thereto. The second proviso to section 48 of the IT Act further states that if the long t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cially the impugned order passed by the Ld. CIT(A), Paper Book and Brief Synopsis. We find that in this case return of income was filed on 17.8.2011 declaring total income at Rs. 15,36,830/-. The return was processed uls 143(1) of the IT Act and case was selected for scrutiny. Accordingly, notice u/s.143(2) of the I.T. Act, 1961 was issued on 6.8.2012 and notice u/s. 142(1) of the I.T. Act, 1961 was also issued on 21.6.2013 alongwith questionnaire. In compliance to the statutory notices u/s. 143(2)/142(1) of the I.T. Act, 1961, the Assessee's AR attended the proceedings from time to time and filed the required details and documents. During the course of assessment proceedings it was noticed by the AO that during the year under consideration the assessee has sold a plot in two parts, the value as per circle rate of this property was Rs. 91,39,000/- including value of trees 16,000/-. No income in this regard has been shown by the assessee in the return of income. Therefore, vide order sheet entry dated 6.1.2014 the assessee was required to submit the computation of capital gain. In response to thereto the assessee vide his reply dated 10.1.2014 submitted the calculation of Long Term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income, there are two house properties with the assessee apart from new property purchased during the year, which are as under:- Delhi Kothi 5,55,504/- Mussorie Flat 4,77,500/- AO also observed that as per proviso of section 54F(1) nothing contained in this sub-section shall apply where the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset. Therefore, 'the assessee is not entitled for deduction u/s 54F of the Income Tax Act, 1961 as the assessee already owned two residential houses. Vide order sheet entry dated 3.2.2014 the assessee was required to justify his claim of section 54F in spite of having two residential house at Delhi and flat at Mussoorie. In response of which the assessee vide his reply dated 14.2.2014 submitted that the investment of Rs. 60,70,000/- made in the purchase of house property would fall under section 54 as section 54F is not applicable to the facts of the case. After considering the reply of the assessee and the documents submitted the claim of the assessee u/s 54(1) is accepted and assessment was completed at 24,60,130/- being taxable Long Term Capital Gain vide AO's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tres land in two parts for a sum of Rs. 91,39,000/- on 25th June 2010. In the assessment, the Assessing Officer has also allowed deduction for the investment made in a flat is u/s 54 of the Incometax Act, 1961 (the Act) for a sum of Rs. 60,27,000/-, whereas for the balance amount the Assessing Officer worked out the capital gain at Rs. 6,35,870/-. During the course of assessment, the assessee had claimed that no tax on capital gain on sale of the land is chargeable to tax because the market value of the land on the date of acquisition of land by previous owner, i.e. Smt. Asha Swarup in terms of section 49 of the Act on 31 st March 1985 (being the date of death of Smt. Jyotsna Kumari Swarup) worked out by the registered valuer at Rs. 730/- per square yard and after indexation, nothing remains chargeable to tax. However, the Assessing Officer was of the view that in view of the Explanation to Section 49(1) of the Act, the cost of acquisition has to be seen not in the hands of Mrs. Asha Swarup but in the hands of Smt. Jyotsna Kumar Swarup because Asha Swarup had also acquired the said property by way of will and because Smt. Jyotsna Kumari Swarup was holding such property before 1st A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcle rate @ Rs. 300/- per square yard as on 1st April 1981 without further benefit of proper indexation as available to the assessee as per the second proviso to section 48 of the Act and Explanation (iii) read with section 2(42A) and Explanation 1(6) of the Act. The assessee filed appeal before the CIT (Appeals) and objected the action of the Assessing Officer. The assessee stated that the market value of the property should have been taken as on 31 st March 1985 when the previous owner of the property Smt. Asha Swarup had acquired and not on 1 st April 1981 and secondly stated that even otherwise the value of the property as on 1 st April 1981 had been adopted by the Assessing Officer on the basis of circle rate is wrong and it should have been taken as worked out by the registered valuer @ Rs. 600/- per square yard because the circle rates are fixed for a particular large area of the locality without taking into consideration the exact location of the property, whereas the value depends upon the location of the property also. Property near to the road fetches more value. The Commissioner (Appeals) dismissed the contention of the assessee not only with regard to the date of adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Rajesh Surana (supra), the Hori'ble Rajasthan High Court was examining the issue u/s 53 and not 54 of the Act. In the said case also, the said assessee had sold the plot of land with a garage and in those very facts the Rajasthan High Court held that in the absence of basic amenities it was not a house but plot of land only and then disallowed the exemption u/s 53 of the Act. 8.5 As regards asseessee's s case is concerned, it is brought to our notice that the said land, which was sold by the assessee, was forming part of the residential house No. 64, Agrasen Vihar (Ram Bagh) , Muzaffarnagar (having a Municipal No. 65, Bagh Kambalwala) and all the property was duly assessed to house-tax and was selfoccupied by the occupants viz. the assessee and other family members. U/s 54 of the Act, the legislature has used the expression "being buildings or lands appurtenant thereto and being a residential house". 8.6 I further find that the Hon'ble Karnataka High Court had examined these expressions while construing the provision of section 54 of the Act in the case of Shri C.N. Anantharaman vs. ACIT in ITA No. 1012/2008 vide its judgment dated 10th October 2014 has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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