TMI Blog2024 (1) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to allow benefit of cost incurred on construction and improvement of impugned items/assets which are not forming part of the impugned immovable property at the point of time when the same was sold, which is a fact discernible from the registered sale/transfer deed dated 06.12.2015 is extraneous, against the mandate of law, thus not sustainable. Further, from the registered sale deed, it is evident that when the property was sold, it consists only one watchman (chowkidar) room of 8 ft. x 7 ft. i.e., 56 Sq. ft. in existence on the said land, for which the consideration was adopted by the assessee at Rs. 45,000/- in the registered sale/transfer deed, which is not disputed by either party. Copy of the sale/transfer deed is furnished before us in Assessee's PB page no. 25-46. Thus we are of the considered view that the fair market value of the impugned immovable property should be adopted at Rs. 1,20,000/- as on 01.04.1981, which is backed by a corroborative document, as valued by the government approved valuer in absence of any valuation by DVO which should have been proposed by the AO, and also the value of watchman room shall be added at Rs. 45,000/- as declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family of the assessee. We observe that the expenditure incurred w.r.t. flat no. 502 and 503 which are admittedly recognized as converted to single unit for the residence by the assessee should be allowed as expenditure eligible for the calculation of deduction u/s 54 but the expenditure incurred on flat no. 501 and 504 for which no convincing facts or evidence could be brought on record by the assessee that the same are also converted and connected as single unit for the use of assessee and his family as residence, accordingly such expenditure on flat no. 501 504 are liable to be disallowed. Consequently, the total expenditure incurred for Rs. 65,00,000/-, quantum of which was not disputed by the revenue, but in absence of specific details of separate expenses incurred on the said flats individually, we find it appropriate to allow 50% of total expenditure of Rs. 65/- Lac. We, therefore, direct to modify the order of Ld. CIT(A) by allowing the improvement expenditure/investment in the new residential house to the extent of Rs. 32.5/- Lacs on account of portion used by the assessee and his family for their residence and sustained the addition of remaining Rs. 32.5/- Lacs fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration of property in ITR is less than sale consideration reported in form - 26QB and large deduction claimed u/s 54F/54C/54D/54G/54GA . Accordingly, notice under section 143(2) of the Act was issued on 19.09.2016, in response, Assessee's counsel, and assessee himself had attended the office of the Ld. AO from time to time, written compliances were furnished towards the queries raised. During the assessment proceedings, Ld. AO observed that the assessee has sold an immovable property i.e., land and building situated at plot No. 09, ward No. 2, old Nehru Nagar, Bhilai. The total consideration towards the said sale of immovable property was Rs. 2,32,45,000/- which includes cost of land at Rs. 2,32,00,000/- and cost of building at Rs. 45,000/-. As per registered deed the Fair Market Value (FMV) of the said immovable property for the purpose of stamp duty was assessed at Rs. 2,34,10,000/- by the Registering Authority. On perusal of the computation of income, Ld. AO noted that the assessee has computed long term capital gain on transfer of impugned immovable property taking the value at Rs. 2,32,00,000/- instead of Rs. 2,34,10,000/-. The index cost of acquisition, cost of impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities can estimate therefore, there was no justification to adopt Rs. 50,000/- as Fair Market Value by the Ld. CIT(A). In absence of any contrary evidence the value claimed by the assessee should have been accepted, therefore, the addition on account of adopting a different Fair Market Value of the property dehors any corroborative evidence is liable to be vacated. 5.2 Ld. Sr. DR on the contrary strongly supported the view taken by Ld. CIT(A) and requested to sustain the addition accordingly. 5.3 We have considered the rival submission and perused the material available on record. On perusal of the order of Ld. CIT(A), wherein the observations qua the fair market value of the impugned property have been increased from the value adopted by the Ld. AO for Rs. 20,555/- to Rs. 50,000/- by the Ld. CIT(A). For completeness of the facts the observations of Ld. CIT(A) are extracted as under: 5 Ground No.1 of the appeal is against rejection by the AO Fair Market Value of Rs. 5,00,000/- u/s 55(2)(b)(i) of the Act as on 01.04.1981 adopted by the assessee and estimating the same at Rs. 20,555/-. 5.1 The AO discussed the issue stating As seen from Assessee's submissions dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded in the fair market value of the impugned immovable property, since such items were not part of the immovable property at the point of time when it was sold by the assessee which is evident from the registered sale deed. Ld. AO also conducted an enquiry about the initial cost of acquisition from Manager, Durg Jila Grih Nirman Sahkari Samiti Maryadit, Rajnandgaon, who have allotted the impugned plot of land to the assessee, by issuing a notice u/s 133(6) of the Act and the cost of acquisition was informed by the Manager, Durg 'Jila Grih Nirman Samiti' was Rs. 20,555/- in year 1965 and the same was adopted by the Ld. AO as total cost of acquisition of land as on 31.03.1981. Ld. CIT has raised the value to Rs. 50,000/- on estimate basis considering the time gap of 16 years between 01.04.1981 and 1965. Since, the assessee has provided a certificate of valuation from government approved valuer wherein the value of said land has been valued at Rs. 1,20,000/-, we, therefore, can accept the assessee contention based a supporting evidence in the form of report of the Government approved valuer to the extent of value of land, however, site development cost including borewell, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... synopsis on the aforesaid ground, the same is extracted as under: Ground no. 2 1. House was more than about 45 years old. Assessee spent Rs. 15,00,000/- on renovation of house. Renovation started before sanction of bank loan. Expenditure on the renovation incurred out of withdrawals made from assessee's proprietorship concern M/S Bhutani Electricals. Copy of account and PN 102 of PB. 2. Assessee obtained loan of Rs. 15 lakh from UCC) bank. Bank statement at PN 77 of PB. Letter of UCO bank at PN 78 ofPB. 3. Architect's certificate at PN 79 to 81 of PB. 4. Architect certified (PN 80 of PB) that renovation was in progress cost actually incurred was Rs. 22,0(),000/-. Even if bills were not available, certificate of architect substantiates cost claimed by assessee. Total expenses incurred more than bank loan, amount over above Rs. 15 lakh claimed by assessee spent by his wife. 5. These evidences substantiate renovation work quantum thereof 6. Bank loan Since the amount was initially utilized out of own capital withdrawn from the business concern, on receipt of loan, the amount was replenished in the business concern. Exact amount rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent appeal, therefore, the order of Ld. CIT(A) disallowing the entire expenses incurred on renovation of such non-existent building is sustained. Accordingly, the ground no. 2 of the assessee stands disallowed. 7. Ground. No. 3. Regarding restricting amount of investment in residential house property to Rs. 5,00,000/- instead of 65,00,000/- 7.1 Ld. AR on this issue has submitted a written synopsis, extracted as under: Ground no. 3 1. Further expenditure of Rs. 65,00,000/- was incurred as the unit purchased by the assessee was not complete and the 4 flats purchased were converted into one residential unit for use of the entire family. 2. Additional cost allowable Reliance on Rahana Siraj vs CIT (2015) 232 Taxman 327 (Karn.), para 8 of order, all expenses incurred on replacing mosaic flooring with marble flooring, alteration of kitchen, compound wall cost, grill work etc. allowable. Followed in Smt. Kiran Agrawal vs ACIT, ITA no. 233/RPR/2016 dated 29.08.2022, relevant findings on page no.23 to 29, conclusion on page no. 29, para no. 20. 3. Expenditure was incurred through the bank account and copy of relevant extracts of bank statement and bills w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Hon ble Karnatka High Court in the case of Rahana Siraj vs CIT (2015) 232 Taxman 327 (Karn.), the observation of the tribunal are as under: Smt. Kiran Agrawal vs ACIT, ITA no. 233/RPR/2016 dated 29.08.2022, 19. After having given a thoughtful consideration to the aforesaid issue in hand, it transpires that though at the first blush the claim of the assessee for deduction u/s. 54F qua the investment made by her towards interior decoration/additional work or alterations to the new residential house was not maintainable, but then the said issue is squarely covered by the judgment of the Hon ble High Court of Karnataka in the case of M/s. Rahana Siraj (supra). In its aforesaid order it was observed by the Hon ble High Court that even though the assessee had purchased a new asset which is habitable but requires additions, alterations, modifications and improvements, then, the money spent on those aspects would become the cost of the new residential house and would be entitled to the benefit of deduction while computing the amount of capital gain that would exigible to tax in its hands. For the sake of clarity, the relevant observations of the Hon ble High Court are culled out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s 54F of the Act. 20. Considering the aforesaid facts, we are of the considered view that the Assessee's claim for deduction u/s. 54F w.r.t investment made towards furnishing/additions/alteration of the new residential house for rendering the same habitable is in order and as per mandate of law. At the same time, we may herein observe that as the aforesaid claim of the assessee was principally rejected by the AO, therefore, he had no occasion to verify the genuineness and authenticity of the claim of expenditure that was incurred by the assessee. We, thus, in terms of our aforesaid observations though principally concur with the claim of the Ld. AR that that the expenditure incurred by her after purchase of the house for rendering it habitable would be considered as having been incurred for purchase of the said house and would be eligible for deduction u/s 54F, but restore the same to the file of the A.O for the limited purpose of verifying the veracity of the aforesaid claim of the assessee and limit her said claim of deduction to the extent the expenditure in question is incurred for rendering the new residential house habitable. Accordingly, the Ground of appeal No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the contentions raised by Ld. AR without any cogent supporting evidence that all the 4 flats are converted into one residential unit and are in use or to be used by the family of the assessee. 7.6 Under such scenario, we observe that the expenditure incurred w.r.t. flat no. 502 and 503 which are admittedly recognized as converted to single unit for the residence by the assessee should be allowed as expenditure eligible for the calculation of deduction u/s 54 but the expenditure incurred on flat no. 501 and 504 for which no convincing facts or evidence could be brought on record by the assessee that the same are also converted and connected as single unit for the use of assessee and his family as residence, accordingly such expenditure on flat no. 501 504 are liable to be disallowed. Consequently, the total expenditure incurred for Rs. 65,00,000/-, quantum of which was not disputed by the revenue, but in absence of specific details of separate expenses incurred on the said flats individually, we find it appropriate to allow 50% of total expenditure of Rs. 65/- Lac. We, therefore, direct to modify the order of Ld. CIT(A) by allowing the improvement expenditure/investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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