TMI Blog2021 (8) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... a small room measuring 625 sq. ft on one plot of land and even by assuming for sake of argument that such a room qualifies as residential house, can it be held that remaining vacant area measuring 90% approx. of total area will qualify as land appurtenant to proper and convenient enjoyment of such a residential house. In the instant case, where there is 90% approx. of open space and merely 10% of built up area by way of construction of a room, can it be said that assessee has constructed a residential house with land appurtenant thereto. In our considered view, the said matter has clearly escaped the attention of the AO and to that extent, the order so passed is clearly erroneous and prejudicial to the interest of the Revenue. Construction of a room as to whether the same qualifies as a residential house on such contiguous piece of land measuring 612.22 sq.yards - The term 'residential house' has not been given any statutory definition and, thus, has to be assigned meaning as understood in common parlance. As per dictionary meaning, it means abode, a dwelling place or a building for human habitation. A building, in order to be habitable by a human being, is ordinari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly unjustified, bad in law and deserve to be quashed. 2.1 That the learned Assessing Officer passed the assessment order after appreciating all supporting documents and evidences which was just and proper therefore the assessment order passed by the learned assessing officer is neither erroneous nor is prejudicial to the interest of the Revenue. 2.2 That the learned Pr.CIT has gone on assumptions, presumptions, conjecture and surmises which is bad in law. 2.3 That on the facts and in the circumstances of the case, the Id. Principal Commissioner of Income-tax-I, Jaipur grossly erred in not treating plots of land of the assessee appellant as a singular unit with regard to deduction of ₹ 51,35,093/- under section 54F of the Act. 2. At the outset, it is noted that there has been a delay of 34 days in filing the present appeal. As per the affidavit submitted by the assessee, though he received the impugned order dated 18.03.2020 passed by the ld CIT(A) on 21.03.2020, however, due to Covid -19 pandemic and nationwide lockdown imposed by the Government, it was impossible for him to file the appeal within the prescribed limitation. It was further submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby admitted as filed within the extended limitation period. 5. Now, coming to the merits of the case. During the course of hearing, the ld AR submitted that the assessee is an individual, having income from house property, interest, rent, agricultural income, income from partnership firms, long term capital gains, etc. and is regularly filing her income tax returns from time to time. That the return of income for A.Y. 2015-2016 was filed on 31.08.2015 disclosing therein total income at ₹ 68,50,900/-. Long Term Capital Gains at ₹ 43,01,116/- was disclosed by the assessee on account of sale of Land at Siddharth Nagar, Jaipur. Deduction u/s. 54F of the Act was claimed at ₹ 51,35,093/- [723,755 + 44,11,338] on the basis of investment made of ₹ 54,41,816/- [770,816 + 46,71,000]. That the income tax return was selected for Limited Scrutiny vide notice dated 19.09.2016 with the reasons Deduction claimed under the head Capital Gains . During the course of assessment proceedings, the assessee submitted copies of sale deed purchase deed of property sold, copy of receipt no. s 2367 2368 dated 23.10.2013 towards cost of plot [2485781+2320146 = 4805927], cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as assessee/buyer is concerned as it had purchased the afore-said plots as a single residential unit by a single patta and not by different patta s. It was submitted that it is for the assessee to decide as to how she wishes to construct a residential house and what would be the appropriate size of plot of land which would be reasonable for constructing the residential house and how the developer or the local authorities have demarcated or treated the plots of land cannot be held against the assessee. 8. In support, reliance was placed on the following decisions: Hero Cycles Pvt. Ltd. vs. CIT (2015) 379 ITR 347 (SC) Mohammadanif Sultanali Pradhan v. DCIT (ITA 1797/Ahd/2018 dated 06.01.2020) Navin Jolly v. ITO (2020) 6 TMI 514 (Kar) Atul Kochar v. PCIT (2021) 3 TMI 997 (JP) Lata Phulwani v. PCIT (2020) 10 TMI 407 (JP) 9. Regarding the query raised by the Bench during the course of hearing as to whether benefit of deduction u/s. 54F can be extended to Long Term Capital Gains earned on sale of two different properties, it was submitted that firstly long term capital gains from sale of various long term capital assets is to be worked out and thereaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment-receipts issued for plots 0-128 0-149 available on record clearly negate the existence of singularity of any sort as claimed by the assessee. Each plot is a separate plot as the Society has given separate numbers to these two plots as also to other adjacent plots of similar size. In absence of any evidence the assessee's claim of adjacency of the two plots of land to be treated as a singular unit with regard to deduction of ₹ 51,35,093/- u/s 54F of the Act is not justified and is not in accordance with law. The AO accepted the claim thereby committing error and causing prejudice to the interest of revenue. 7.2 As per the letter dated 23-06-2015 of the contractor filed during assessment proceedings, the constructed area is only 625 sq. feet. There is description of the exact construction work or activity. The AO was required to examine whether the construction work is eligible to be considered as a house u/s 54F. In any case, the stated unit has been constructed only on part of one plot. On the other plot, there is no construction, so that plot does not qualify to be treated as part of the land on which there is construction of one residential house in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that all the portions were being continuously used for residence. In the assessee's case, one plot is clearly vacant and uninhabitable/unlivable, and the other plot is only partly usable. In case at number 3, there is clear finding of two residential flats conjoined to make one unit. A vacant plot of land cannot be equated with two conjoined flats. In case at number 4, the property is a building having several units. In the assessee's case one property is a vacant plot of land the other property has part of a unit constructed. The ratio laid down in above cases does not apply to the assessee's case as the facts are clearly distinguishable and have to be independently considered with reference to the requirement of, section 54F. 10. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 27-12-2017 for A.Y. 2015-16 passed by the AO is held erroneous insofar as it is prejudicial to the interests of the revenue for the purpose of section 263 of the I.T. Act. The said order has been passed by the Assessing Officer in a routine and casual manner without verification of the issue of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from capital gains . 15. In the aforesaid facts, the issue that arises for consideration is whether the mandate of claim of deduction u/s 54F as so made by the assessee has been properly examined by the AO or not. For the purposes of claim of deduction u/s 54F, what is required to be fulfilled and duly examined by the AO, being the mandatory conditions, are firstly, whether there is transfer of any long term capital asset, not being a residential house, secondly, whether the assessee has within a period of three years, after the date on which transfer of original asset took place, appropriated the net sales consideration from sale of the original asset and constructed one residential house in India. 16. In the instant case, the assessee has transferred two plots of land, both being long term capital assets and not being residential house. There has been no dispute which has been raised by the ld PCIT in the impugned order in terms of the said condition not been fulfilled by the assessee or not been duly examined by the AO. Thus, the first mandatory condition for claiming deduction u/s 54F of the Act is taken as duly fulfilled and examined by the AO and is thus, not the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e construction thereon, are completed within the period specified in these sections. 18. In the instant case, there are, thus, two aspects of the matter which require due and proper examination. Firstly, the appropriation of net sale consideration from the sale of the original assets towards the purchase of plots of land on which residential house can be constructed, and secondly, appropriation of net sale consideration from the sale of the original assets towards actually carrying out construction of residential house thereon, both within the prescribed time period. The emphasis is equally on both appropriation/utilization of net sales consideration and constriction of residential house in India. The dominant objective being the construction of residential house in India, the purchase of plot of land has to be coupled with construction of residential house thereon and where the funds are utilized towards merely purchase of plot of land meant for residential purposes and there has been no actual construction of residential house thereon, the mandate of the law cannot be said to be fulfilled as the investment would be in form of a plot of land and not in a residential house. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as she had purchased the aforesaid plots as a single residential unit by a single patta and not by different patta s. It was accordingly submitted that there cannot be any dispute that net sale consideration has been appropriated towards the purchase of the aforesaid two plots of land constituting a single residential unit and the claim of deduction has been wrongly restricted to one plot of land. 21. In light of aforesaid contentions, we find that the issues, in context of the satisfaction of the second condition, which has been specifically raised for our consideration is what would be an appropriate size of plot of land on which residential house can be built and can two plots of land be combined into one to construct one residential house thereon or not. In our understanding, the mandate of law and the dominant objective is very clear - the assessee has to construct one residential house in India within the specified period. Therefore, the plot of land should be such which enables the assessee to construct and enjoy the fruits of one residential house. It is the prerogative and individual wisdom of the assessee to decide the locality and size/area of the plot of land wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contiguous piece of land which has been duly taken on record and examined by the Assessing officer. It is assessee s prerogative to buy these two plots of land forming one contiguous piece of land for the purposes of constructing a residential house. These purchases are duly supported by a single allotment letter issued by the developer and payment receipts demonstrating discharge of consideration by the assessee. 23. Having said that, we find that the ld PCIT has returned a finding that both the plots are vacant with a very small portion on one plot having a small room measuring 625 sq. ft and on the other plot, there is no construction so that latter plot doesn t qualify as part of land on which construction has been carried on. We are also intrigued by the said fact given that the assessee has decided to purchase the contiguous piece of land measuring 612.22 sq yards equivalent to 5509.98 sq. ft approx and has merely carried out construction of one room measuring 625 sq. ft thereon on one plot of land. The said undisputed facts lead us to another facet of the matter which has apparently escaped the attention of the AO in terms of the extent of vacant land or open space whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction of the building. The dispute is with regard to the area of the land which is required for convenient enjoyment of 254.94 sq.mts of residential house. The area of the land which is required for convenient enjoyment of the house has to be determined with regard to the social status and profession, etc. of the individual assessee, profession, etc. An agriculturist may require a reasonable extent of land for housing their cattle, agricultural implements, etc. An industrialist may require car sheds to park his cars, servant quarters. etc. Moreover, the locality where the land also needs to be considered. In villages, one may have vast extent of land for garden, play ground, etc. However, such things may not be possible in urban cities. Therefore, the land appurtenant to the residential house has to be determined with regard to the locality where the residential house is situated, the social status of the individual assessee, profession of the individual and other factors for proper and convenient enjoyment of the residential house. This Tribunal is of the considered opinion that 5 cents of land determined by the CIT(A) is very less in the State of Kerala. The State of Kerala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n submission has stated that a single dwelling unit comprising one room, toilet and kitchen was constructed wherein a chowidar is presently residing and taking the same into consideration, the ld PCIT has returned a finding that both the plots are vacant except a small portion of one plot wherein a small room has been constructed and has therefore directed the AO to restrict the claim to one plot of land subject to verifying construction measuring 625 sq ft as to whether the same qualifies as a residential house in accordance with law. 26. During the course of hearing before us, the ld AR has reiterated the earlier submissions and stated that there is no dispute that the construction has been done in such a manner that it constitutes a single residential unit and it is again the wisdom of the assessee whether she wants to built a single room residential unit or multiple room residential units and so long as even a single room qualifies as a residential house, the assessee qualifies for deduction u/s 54F of the Act. 27. As held by the Courts from time to time, the term 'residential house' has not been given any statutory definition and, thus, has to be assigned meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X
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