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TMI Blog2010 (7) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... hat to facilitate the sale, plot of land was mentioned, but in fact what was sold was residential house which is fully proved and established with reference to' 'Report of approved valuer 'Receipt for payment of municipal taxes 'Letter of discontinuance of electric connection 'Affidavit of the assessee. 2. The brief facts of the case are that the AO noted from the return filed by the assessee at nil income that the assessee has claimed to have sold residential house in which the assessee was having 1/3rd share on 15th Oct., 2003 and 26th Dec., 2003 for ₹ 29,40,000 and ₹ 46,00,000 respectively. On 15th Oct., 2003, the assessee sold land appurtenant to the house. The 1/3rd share of the assessee in the sale consideration of both the properties worked out to ₹ 25,13,333. Cost of acquisition for both the sales was claimed by the assessee on the basis of valuation report of approved valuer at ₹ 6,42,000, 1/3rd share thereof amounting to ₹ 2,14,000. The assessee has worked out the indexed cost at ₹ 9,90,820 relating to his share for both the sales and the capital gain was arrived at ₹ 15,22,513 after claiming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sold the land. He contended that the residential property was in existence on the impugned land when the land appurtenant to property was sold. For this, he submitted various evidences before the authorities below including the appellate order passed by the Asstt. CIT-II, Agra for the asst. yr. 1972-73 in the case of his father late Shri Hans Raj Kapoor, copy of certificate issued by Lajpat Kunj Association in the name of the assessee's father late Shri Hans Raj Kapoor, copy of the certificate issued by Lajpat Kunj Association issued in the name of the assessee, photocopy of the gas connection in assessee's name showing the address as 32, Khandari Road, Agra, photocopy of the receipt dt. 9th Feb., 2004 for the payment of municipal tax for the same property. The photocopies of all these documents were filed before us also. This all proves that there was residential building. The said property was sold in two parts. Land appurtenant to the property was sold vide sale deed dt. 15th Oct., 2003 and the other part was sold vide sale deed dt. 22nd June, 2003. Merely the assessee mentioned in the sale deed that the assessee has sold the vacant plot of land, it cannot be said that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tension, Agra and not ₹ 7,50,000. For this, our attention was drawn to the copy of purchase deed of the said residential property available in the paper book. 4. Learned Departmental Representative, on the other hand, vehemently contended that the assessee has sold the land through both the sale deeds and this fact cannot be denied. The second sale deed executed by the assessee clearly states that the assessee has sold the vacant plots without any structure after dismantling the structure. This sale deed has been executed by the assessee and has duly been signed by him. Once the assessee has dismantled the structure and sold the vacant plots, one cannot say that the assessee has sold the residential house. This fact is also clear from the fact that the assessee has applied for the disconnection of the electricity on the same very plot. In case the assessee would have sold the house property, the assessee need not to apply for electricity disconnection. There may be a residential building on the plot prior to the entry of the transaction but there was no house property when the second sale took place between the buyer and the assessee. This fact has been mentioned in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c., 2003. 7. In this regard, the relevant provisions of s. 54 lay down as under : Sec. 54. Profit on sale of property used for residence.'(1) Subject to the provisions of sub-s. (2), where, in the case of an assessee being an individual or an HUF, the capital gain arises from the transfer of a 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 house property' (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,' (i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises from the transfer of long-term capital asset being building or land appurtenant thereto and being residential house, the income of which is chargeable under the head 'Income from house property', the assessee is entitled for exemption under s. 54 in case he complies with the conditions stipulated under s. 54 of the Act. The claim of the assessee is that the assessee has sold first land appurtenant to residential house vide sale deed dt. 15th Oct., 2003. There are evidences on record which prove that there was residential building on the land and is used as such even by the father of the assessee, in the asst. yr. 1972-73, late Shri Hans Raj Kapoor. The Lajpat Kunj Association has issued the certificate at that time about the property being occupied by Hans Raj Kapoor. There was gas connection at the same address. The municipal tax has been levied and is being paid. Even in the subsequent sale deed dt. 26th Dec., 2003 also confirms that on the land sold by the assessee the residential building was in existence and the same was dismantled by the assessee when the land was sold vide sale deed dt. 26th Dec., 2003. The land appurtenant to the building, in our opinion, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tence after dismantling the building. This fact is apparent from the copy of the sale deed filed before us. Once the assessee has dismantled the building, the building had been converted into the land and the sales made will be regarded to be the sale of land not of a residential property nor of land appurtenant to a residential property. The assessee, therefore, in our opinion, will not be entitled for the exemption under s. 54 of the Act on the capital gain arising on the sale of the land which has been sold after dismantling the building vide sale deed dt. 26th Dec., 2003. The assessee can get the exemption on the capital gain arising thereon either under s. 54F provided he complies with the conditions stated therein or under s. 54EC. There is no dispute to the fact that the assessee has invested a sum of ₹ 7,00,000 in the eligible investment entitled for deduction under s. 54EC and accordingly the assessee was allowed deduction under s. 54EC by the AO. 10. The other dispute before us relates to the computation of the capital gain. Sec. 48 of the Act states that the income chargeable under the head Capital gain shall be computed while deducting from the full value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s owner in constructing the property or in dismantling the property that will be part of the cost of improvement over the land. The assessee has not claimed the expenses incurred in dismantling the construction. As on 1st April, 1981, the building was in existence over the plot. Therefore, in our opinion fair market value of the capital assets for the purpose of computation of the capital gain should be taken to be the fair market value of the land as well as the construction thereon. The AO was not correct in taking the fair market value only of the land. The fair market value of the constructed property including land appurtenant as on 1st April, 1981 was ₹ 6,42,000, 1/3rd share of which was ₹ 2,14,000, the indexed cost has to be applied to ₹ 2,14,000. We, accordingly, set aside the order of the CIT(A) and direct the AO to recompute the capital gain after taking the indexed cost on ₹ 2,14,000. The indexed cost so arrived be allocated between the two transactions on the basis of the area of the land. The assessee should be allowed exemption under s. 54 out of the capital gain so computed on the sale of the land appurtenant vide sale deed dt. 15th Oct., 2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee claimed exemption under s. 54. The assessee has also claimed exemption under s. 54F against the capital gain arising on sale of the asset vide sale deed dt. 26th Dec., 2003 in respect of investment made in Flat No. 104, Friends Paradise, Agra on 31st March, 2004. So far the issue about the claim of exemption under s. 54 is concerned, both the learned Authorised Representative and learned Departmental Representative have agreed that whatever view this Tribunal may take in the case of assessee's brother Shri Subhash Chand Kapoor, the same view may be taken in the case of the assessee. We have already dealt with this issue in the case of assessee's brother Shri Subhash Chand Kapoor in ITA No. 663/Agra/2008. In that case, we have held in the preceding paras that the assessee is entitled for the deduction under s. 54 of the Act on the sale of land appurtenant in respect of the investment made in the purchase of the residential flat in Pushpanjali Tower. We have also, in that case, directed the AO to take the fair market value of the constructed property including the land appurtenant thereto as on 1st April, 1981 at ₹ 2,14,000 for applying the indexed cost therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under s. 45 : Provided that nothing contained in this sub-section shall apply where' (a) the assessee,' (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head 'Income from house property'. Explanation : For the purposes of this section, 'net consideration', in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-s. (1), then,' (i) the amount by which' (a) the amount of capital gain arising from the transfer of the original asset not charged under s. 45 on the basis of the cost of the new asset as provided in cl. (a) or, as the case may be, cl. (b) of sub-s. (1), exceeds (b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-s. (1) been the cost of the new asset, shall be charged under s. 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid. 19. We noted that, on the basis of the interpretation of s. 54F(2), the CIT(A) took the view that the assessee is not eligible for exemption under s. 54F. According to him, the assessee purchased the residential property at Pushpanjali Tower Extension, Agra o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of the original asset. On the date of the transfer of original asset the assessee was owning only Flat No. 405, Pushpanjali Tower Extension as the property sold vide sale deed dt. 26th Oct., 2003 (original asset) got converted into a plot as held by us and by the Department. 21. The learned Authorised Representative vehemently pointed out that the assessee has not purchased any residential house other than the new asset within a period of one year after the date of transfer of the original asset. In our opinion, purchase of Flat No. 405, Pushpanjali Tower Extension on 15th Oct., 2003 will not disentitle the assessee for exemption as per proviso to s. 54F(1) as this house has been purchased prior to the transfer of the original asset. The assessee has also not constructed any residential house other than the new asset within a period of three years after the date of transfer of the original asset. There is difference in the construction and purchase of residential house. The purchase of Flat No. 405, Pushpanjali Tower Extension cannot be regarded to be construction of the residential house by the assessee. We have also gone through s. 54F(2). This section also, in our opi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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