TMI Blog2022 (2) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... or making the house habitable which includes certain items as per serial No.1 to 16 of the table at para 5.5. of the CIT(A) which in our opinion is not allowable as a deduction for making the house habitable because these are all luxury items.CIT(A) has rightly determined the amount for making the house habitable. Therefore, the assessee is entitled to get the benefit of deduction u/s 54 of the Act to the extent including amount for making the house habitable. The AO shall verify the calculation. The grounds raised by the assessee are accordingly allowed. - ITA No.1367/Del/2020 And ITA No.1794/Del/2020 - - - Dated:- 8-2-2022 - Shri R.K. Panda, Accountant Member And Ms Suchitra Kamble, Judicial Member For the Assessee : Shri Rakesh Garg, Advocate For the Revenue : Shri M.K. Jain, Sr. DR ORDER PER R.K. PANDA, AM: These are cross appeals. The first one is filed by the assessee and the second one is by the Revenue and are directed against the order dated 27th May, 2020 of the CIT(A)-43, New Delhi relating to assessment year 2017-18. For the sake of convenience, these were heard together and are being disposed of by this common order. 2. Facts of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a plot. Furthermore, also at the time of executing the agreement to sell on 2nd September, 2016, the said property was described as a plot. There is no reference whether there was a house in the past or not and the only fact is that at the time of executing the sale deed the capital asset is a plot and, therefore, the exemption claimed by the assessee cannot be allowed. Accordingly, he made an addition of ₹ 6,11,47,309/- under the head Capital gains and rejected the claim of improvement of the house to the tune of ₹ 9,28,079/-. For the purpose of computing indexed cost of acquisition, the AO adopted the cost of acquisition at ₹ 30,48,998/- as against ₹ 74,50,517/- claimed by the assessee on the basis of the valuation report. 4. Before the CIT(A), the assessee made elaborate arguments and submitted that the residential property was acquired in Mumbai and the will of the house property was given during the course of assessment proceedings. The documents relating to purchase of the flat on 14.09.2016 was also furnished evidencing the investment of ₹ 5,66,89,527/- which includes the investment of a sum of ₹ 9,28,079/- to make the house habi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case and has erred in law in denying the indexed cost (CII) of the residential house with land appurtenant thereto owned by the appellant and as claimed at ₹ 74,50,516/- as determined by the Approved Valuer overlooking the provisions of section 55 and 55A, thereby upholding the erroneous computation of capital gains, as computed by the AO, the indexed cost of the property as claimed by the appellant be allowed. 5. Because CIT(A) has failed to appreciate the facts of the case and has erred in law restricting the claim of expenditure of ₹ 9,28,079/- incurred on furnishing and woodwork at ₹ 3,84,965/- which was necessary to incur to make the new asset i.e. house property habitable immediately after purchase the same, the balance deduction of ₹ 5,43,116/- as claimed by the appellant be allowed. 6. Because the jurisdiction over the appellant s case (being an NRI) was with the AO International Tax, initial notice u/s.143(2) itself should have been issued by DCIT/ACIT, International Taxation, no such notice having being issued by him, the entire assessment framed is without jurisdiction, bad in law and be quashed. Revenue s appeal (ITA No.1794 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1959 in the office of Sub-Registrar, Lucknow ; AND 8. Referring to pages 107 to 125 of the paper book, the ld. Counsel for the assessee drew the attention of the Bench to the copy of the sale deed dated 19.01.2017 between the assessee and Shri Vishnu Ballabh Rastogi and Others where the description of the property has been mentioned as part of Plot No.22, Municipal No.23062/02, Radice Road, Gokhaley Marg, Lucknow. Referring to page 95 of the paper book, the ld. Counsel drew the attention of the Bench to the following clause in the agreement to sell. WHEREAS Smt. Laxmi Agarwal wife of Sri Shyam Krishna Agarwal has purchased the Bunglow No. 22 situate at Radice Road (Gokhaley Marg), Lucknow from Sri Amba Prasad vide registered Sale deed dated 19-06-1959 registered in Book No. I Volume 1620 Pages 252/256 at No. 2547 on 22-06- 1959 in the office of Sub-Registrar, Lucknow ; AND 9. The ld. Counsel for the assessee, referring to page 26 of the paper book, drew the attention of the Bench to the water tax and house tax receipt. He submitted that the annual value has been determined by the Municipal authorities at ₹ 7200/- against house No.23/052/2 in the name of Charu Agga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT Pune Bench. 10. The ld. DR, on the other hand, heavily relied on the order of the AO. He submitted that the AO has conclusively proved that the property that was sold by the assessee is only a piece of land and even if any house existed on it, there was no mention of the same in the sale deed, therefore, the assessee is not entitled to deduction u/s 54 of the IT Act. So far as the order of the CIT(A) allowing the claim of deduction u/s 54F is concerned, he submitted that the assessee has not claimed the same in the return of income and, therefore, the ld.CIT(A) was not justified in allowing the benefit of deduction u/s 54F of the IT Act by relying upon fresh evidence from the assessee and without giving an opportunity to the AO. He accordingly submitted that the order of the AO be restored and the grounds raised by the assessee should be dismissed and the grounds raised by the Revenue should be allowed. 11. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A), and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the assessee, in the instant case, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , copy of house tax bills for AY 2016-17 and copy of the valuation report dated 11th April, 2016 before the AO. A conjoint reading of the copy of the sale deed, copy of the agreement to sell and the will of Smt. Lakshmi Aggarwal and Shri Shyam Krishna Aggarwal shows that the assessee had sold 1/4th share in the ancestral residential house property No.2,Radice Road, Gokhale Marg, Lucknow on 21.02.1997 by way of will executed by her grandfather Late Shri Shyam Krishna Aggarwal who breathed his last on 11.02.1997. The said house was being used for residential purposes. The above residential house was purchased by Smt. Lakshmi Aggarwal, w/o Shri Shyam Krishna Aggarwal by one Shri Amba Prasad vide registered sale deed dated 19th September, 1959 which was registered in Book No.1, Volume 1620, pages 252 to 256 at No.2547 on 26th June, 1959. Smt. Lakshmi Aggarwal executed her will dated 30th January, 1990 and Smt. Lakshmi Agarwal breather her last on 27.11.1990 and by virtue of the said will she had bequeathed her property to and in favour of her husband Shri Shyam Krishna Aggarwal. Shri Shyam Krishna Aggarwal breathed his last on 11th February, 1997 leaving behind him two sons, namely, Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, be understood in its popular and non-technical sense. It is not possible to accept the contention that cl. (b) of the Explanation to s. 5(1)(ivc) of the W.T. Act, 1957, defining land appurtenant for the purpose of that clause should be considered equally applicable for the purpose of understanding that expression occurring in s. 54 of the I.T. Act. The Explanation in the WT Act is only for the purpose of s. 5(l)(ivc) because it is specifically stated so. The meaning assigned to that expression in the Urban Ceiling and Regulation Act is also not relevant. The tax authorities will have to determine the extent of land appurtenant to a building transferred, taking into consider a variety of circumstances that may be relevant for the purpose. It is not possible to lay down infallible tests to be applied as the tests would vary depending upon the facts and circumstances of each case. For instance : (1) If the building together with the land is treated as an indivisible unit and enjoyed as such by the persons occupying the building, it is an indication that the entire extent of land is appurtenant to the building ; (2) If the building has extensive lands appurtenant theret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he site on settlement and constructed a three storied building i.e., ground plus two floors. The first and second floors of the building together with the proportionate share in the land on which the building stands is the subject matter of transaction in question. There is no dispute that the building as such was held by the assessee for a period of less than 36 months prior to the date of transfer. However the land was a long term capital asset. The computation of capital gains as is attributable to the building and the land as set out in the assessment order is not disputed. The land has been treated as long term capital asset and the capital gains treated accordingly. There is no dispute about the cost of ' construction of another residential house and such residential house has been constructed within the period stipulated under Section 54. The only dispute relates to the availability of Section 54. 3. The Income Tax Officer is of the view that the capital gains as is attributable to long term capital asset viz land will not qualify for relief under section 54 even though it is a long term capital asset as the building which stood on the same and which was the subject m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the facts and circumstances of the case in negating the appellant claim under Section 54(1) of the Income Tax Act, 1961 ? 2. Whether the Tribunal is justified in law in holding that capital gains is chargeable under Section 45(1) on the facts and circumstances of the case? 8. Learned counsel for the assessee assailing the impugned order contends that it is clear from Section 54(1) of the Act, the benefit under the said provision is available to a transfer of long term capital asset being buildings or lands appurtenant thereto and being a residential house, the income of which is chargeable under the head 'Income from the House Property'. Therefore, the said section cannot be confined only to a residential house and cannot be interpreted to mean it has no application to the land appurtenant to a residential building when the legislature has confirmed the said benefit of an individual family or a Hindu Undivided Family in respect of the buildings or lands appurtenant thereto. The said provision being a beneficiary provision, should be liberally and harmoniously interpreted so as to give the benefit even in respect of land which is appurtenant to residential hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ban Land (Ceiling Regulation) Act are not relevant. In that decision, however, certain tests were laid down to find out whether the vast extent of land sold therein was part of the residential unit so that it may be treated as land appurtenant thereto. Indeed, it was noticed there that in deciding as to whether any land is appurtenant thereto a residential house, the requirements of the persons occupying the building, consistent with their social standing etc., are relevant for the purpose. Thereafter, certain other tests were set out. In Bangalore City, years ago, the style of life was such that persons would purchase property with bungalows having sprawling ground around it and the bungalow and grounds thereto formed one unit. The land around it would not be put to any separate use for that would invade their privacy. If these aspects are borne in mind, we do not think any point is made out in this case to apply the tests laid down in the decision in Zaibunnisa Begum's case. In that case, the Andhra Pradesh High Court was dealing with a land spread over a vast area of about 13,029 sq. yards; whereas in the present case we are concerned with only 56,000 sq. feet i.e. 200' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urd. The land which is adjoining the residential house is entitled to benefit under Section 54(1) of the Act but the land on which the residential house would not be entitled to such benefit, we cannot impute any such intention to the legislature. 13. On the contrary, the legislative intent is manifest. The assessee is entitled to the benefit of Section 54(1) of the Act in respect of land and building. That land may be the land on which the residential house is constructed or the land appurtenant to the residential house. In that view of the matter, the impugned orders passed by the authorities cannot be sustained. Accordingly they are hereby set aside. The appeal is allowed. The substantial questions of law in this appeal are answered in favour of the assessee and against the revenue. 14. Since the assessee, in the instant case, has sold 1/4th share in the property No. 22, Radice Road, Gokhaley Marg, Lucknow and has filed the requisite details before the AO to substantiate that the property that was sold was, in fact, a building with land appurtenant thereto, therefore, respectfully following the decisions cited above, we are of the considered opinion that the assessee is e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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